The no-fault deadline decision

In 2006, Florida legislators will make the biggest decision affecting automobile insurance that any legislature has had to make in 35 years, specifically, whether to re-enact or sunset the Florida Motor Vehicle No-Fault Law, and the legislature is speedily approaching the end of its May sessions.

The sunset provision of the 2003 Florida Motor Vehicle Insurance Affordability Act requires the 2006 Legislature to decide if the No-Fault Law is broken beyond repair and therefore should sunset, or if further reforms might fix the system.

In 1971, Florida was operating under an At-Fault, Tort Law, which had problems so serious that it became only the second state in the country to enact a No-Fault Law. Under the Law, Personal Injury Protection Insurance provides (a) medical, (b) disability, and (c) funeral benefits for insured persons injured in automobile accidents. Most importantly, these benefits are made available no matter who was at-fault (negligent) in the accident.

The law also provides that Floridians who are not seriously injured and do not meet a “threshold” requirement, can’t file a lawsuit to recover for “pain and suffering.” The intent of this provision is to reduce lawsuits that are filed after minor accidents.

There is general agreement that the No-Fault Law worked as it was intended for many years–providing PIP insurance to those who needed benefits while alleviating Florida’s court system of the burden of excessive litigation. So what happened?

Within the past seven years, a few unscrupulous doctors and attorneys began to abuse the No-Fault Law with excessive and unreasonable billing for medical services and excessive and unreasonable attorney’s fees. As a result, in 1999, the 15th Statewide Grand Jury and the Florida Division of Insurance Fraud confirmed rampant fraud existed in Florida’s No-Fault Insurance system. In 2001 and 2003, the Florida legislature has attempted to resolve the fraud problem with marginal success.

The two driving forces that are behind No-Fault/PIP insurance fraud and abuse are: (1) billing for medical services that are not reasonable, related or necessary for automobile accident injuries that may or may not exist, and (2) an excessive amount of PIP litigation resulting in attorney’s fees that are awarded in lawsuits that are filed when insurance companies fight back against the excessive billing. If we want to maintain a working No-Fault system in Florida, the legislature must address these two forces with substantial and meaningful reforms that will have a real impact on the fraud and abuse.

Specific recommendations include:

Medical Expenses:

– Similar to other health care coverage, create a comprehensive fee schedule that removes the uncertainty from the “reasonable” standard.

– Provide a treatment protocol for soft tissue injuries that removes the uncertainty from the “necessary” standard.

– Increase the civil and criminal penalties for fraudulent and abusive billing for unreasonable and unnecessary medical services.

Attorney’s Fees:

– Codify the Offer of Judgment statute as being applicable to PIP cases.

– Prohibit the use of attorney fee multipliers.

– Provide for a mandatory Alternate Dispute Resolution process.

What if no-fault sunsets?
The Florida Office of Insurance Regulation reports that in 2004, the insurance industry paid $1.3 billion to or on behalf of Floridians injured in automobile accidents.

First, if the No-Fault Law sunsets these benefits will no longer be available. Although automobile insurance premiums will go down, health insurance premiums will go up as the burden of paying accident treatment claims shifts to health insurers. Floridians without health insurance involved in automobile accidents would not receive benefits and would have to recover from the at-fault party or seek indigent care, which will have to be covered by taxpayers.

Second, with no threshold requirement, any accident victim would have the right to file a lawsuit for “pain and suffering.” Legislators would have to enact strict laws to control excessive litigation abuses. Would Florida return to the Pre-1971 era with its court congestion and numerous law suits? No one knows for sure, but as you may know Florida has an abundance of attorneys–just check your Yellow Pages.

If we can statutorily establish provisions that address the medical treatment and attorney fee problems, we will return the No-Fault Law to its original legislative intent. All Floridians will be better served, and the few fraud and abuse perpetrators will be put out of business.

Haven’t we waited long enough for comprehensive No-Fault/PIP reforms? We have a duty to Florida drivers to steer our lawmakers in the right direction … beginning right now.

Grimsley is general counsel for United Automobile Insurance Group in North Miami Beach, Fla. He is also president of the Florida Property and Casualty Association, a trade group representing Florida-based property and casualty insurance companies.