Filed Under:Carrier Innovations, Regulation/Legislation

Opinion: What the Florida Legislature Should Have Done

Editor's Note: In this article, Christopher Tidballl expounds upon some key points in his latest "Blocking & Tackling" blog post.

The problem with the recent “fix” to the Florida no-fault statute is that it does not address the root cause of the problems, which run quite deep. As the legislature dove into auto insurance no-fault during its recent session, the focus was on personal injury protection (PIP) being the crux of the problem.

While this coverage played a role, consider that staged accidents in California, which is not a no fault state, significantly predate the rise of such sham accidents in the Sunshine State. The difference between the two states is that PIP made it easier and faster to cash in.

Setting the Stage

My insurance career began in California, as an auto claims field adjuster in south central Los Angeles, then the nation’s epicenter for staged accidents. The scams were simple, involving an “insured” striking a vehicle with several occupants whose claims were brokered by a “capper” to unscrupulous attorneys. Medical bills were then driven up, with demands presented. The entire process took somewhere between three and six months.

In Florida, the game became much easier. No fault afforded an instant opportunity to present for treatment and run up medical bills with a $10,000 dollar blank check divvied up amongst the doctor, lawyer, and capper with the scraps going to the pawns, or “accident victims”.    Complicating matters for insurers is the “no fault” tort threshold that should have precluded payments for pain and suffering.  But in its current watered down state, it is as worthless as the paper upon which it is written. 

What the legislature failed to do in their quest to solve the staged accident epidemic is forsake true insurance reform for PIP reform, which will not work.

Certainly there are things that can be done to rein in out of control PIP costs, and this new law applies a band-aid in the form of a time parameter for which treatment must be obtained from a defined type of provider. Of course, unscrupulous providers will have no qualms about changing dates of service, just as medical documents from unethical providers have historically been altered to suit the needs of unscrupulous attorneys and claimants.

When the legislature took up insurance reform, the hope was that it would be true reform of both tort and no fault statutes. When it comes to auto, both are interrelated and for those who have never handled auto claims, as may be the case with many lawmakers, sometimes hard to truly comprehend.

Looks Can Be Deceiving

From a historical perspective, no-fault looked good on paper. When a party is hurt in an accident, they go after their own coverage instead of fighting with another’s insurance company. The underlying premise was that costs would go down as the result of decreased litigation. Such was not the case in Florida, no other “no fault” states.

The first thing to recognize that that most states mandating PIP coverage are not truly “no fault.” The lone exception is Michigan, which provides this coverage with a strong prohibition against third-party litigation. Other states, including Florida, have so-called thresholds that are so watered down they may as well not even exist.

As a result, PIP coverage has become very costly while never achieving its goal of reduced bodily injury litigation. This fact has led several states including Georgia, Connecticut and Colorado to abolish this mandate.

Another state, Pennsylvania, gives customers the choice of purchasing auto no-fault or having the right to sue.

Ain't No Sunshine

The escalating cost of insurance in Florida has many facets, with arguably the biggest challenges being fraud. According to the Insurance Information Institute (I.I.I.), the “fraud tax” levied on Florida drivers was $549 million in 2010 and was expected to double in 2011. This fraud comes in all shapes and sizes from staged accidents to burying deductibles to claiming injuries that are nothing more than pre-existing conditions. Holistically, these scams involve much more than singular line coverage, such as PIP.

Florida has also become a national hotbed for staged accidents. PIP costs associated with staged accidents increased 77 percent from 2009 to 2010, while billings for services not rendered increased 32 percent, according to I.I.I. estimates. Again, the propensity for staged accidents in the Sunshine State is not the result of PIP, but rather because of a holistically broken system of which PIP is a part. The failure to recognize this by the legislature is precisely why its “fixes” consistently fail to solve the problem.

It is important to recognize that Florida is just one of 13 states to mandate no-fault coverage, yet all states see staged accidents or other forms of fraud. California is a tort state with no PIP coverage and consistently ranks among the leaders in staged accidents.

While the legislature made another attempt to fix the problem, its solution once again shows that they may not truly understand what the problem really is, or perhaps they are relying from advice of lobbyists who don’t want solutions to adversely impact their special interests.

In case you were wondering, here are my thoughts on ways to fix Florida’s broken system:

1) Eliminate PIP. While this creates its own new set of challenges, it is one less coverage that will ultimately save consumers money.

2) Keep PIP but strictly enforce the tort threshold with language modeled after Michigan, which will eliminate the frivolous soft tissue cases clogging our courts.

3) Modify the negligence law so that parties more than 50 percent at fault for a loss are barred from recovering damages.

4) Bar uninsured motorists from recovery of non-economic damages, a solution effectively implemented in a number of states.

5) Cap attorney fees.

6) Cap tort damages.

7) Allow “bad faith” only in the rare situations in which an insurer truly does not honor their fiduciary duties.

8) Allow a reasonable amount of time to investigate suspicious claims.

9) Give law enforcement the teeth necessary to pursue fraudsters while holding insurers harmless during their investigations.

10) Enact caps associated with Medicare and workers’ compensation, on treatment for soft tissue injuries, which comprise the vast majority of cases clogging our courts.

While we don’t know what—if any—impact this new law will have two things are certain: First, staged accidents will continue at an alarming rate. Second, consumers will see no reduction in their auto insurance premiums. Just as every prior attempt to “fix” Florida’s broken system has failed, the language of this latest iteration also lacks a true solution.


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