A Senate committee voted 10:0 to scrap the state's no-fault personal injury protection (PIP) system on Tuesday, but its chairman said further efforts this session likely depend on what happens in the courts. While the future of PIP in the Sunshine State remains to be seen, it is worth examining whether this would actually solve the problems plaguing Floridians.

PIP was originally implemented as a means of combatting auto insurance fraud. The underlying premise was that an injured party would obtain coverage for medical expenses from his or her own carrier rather than the at-fault party. On paper, this seemingly was a good idea to reduce fraud and litigation expenses. Thus, a number of states adopted the system.

Over the years, PIP became an opportunistic coverage for fraudsters to exploit. Despite many attempts to “fix” Florida's no-fault law, fraud became more prevalent. Complicating matters were the trial lawyers, some of whom found a cottage industry with “PIP demands” and “PIP suits” that lined their pockets while driving up costs for consumers.

In 2012, the most recent iteration of Florida's PIP reform was introduced with promises of eliminating fraud while reducing premiums for consumers. Unfortunately, the results have not panned out, being further complicated with predictable litigation, resulting in the Florida legislature now considering a repeal of the PIP law.

This begs the question of whether such an action would benefit Florida consumers. Much like the ballyhooed gun control debate, the reality is that laws not addressing the fundamental underlying problem, such as societal violence, won't fix anything.

The issue in Florida isn't whether PIP coverage exists. Rather, it is the culture of fraud that has become so prevalent in the state. Eliminating PIP accomplishes one thing; moving the fraud from first party to third-party coverage.

Let's consider how the staged accident might look in a state with no PIP coverage. A capper will stage an accident using two cars. Car #1, the “bullet”, will have state mandated liability coverage through an insurance carrier. Car #2, also known as the” target,” will have three occupants. Car #1 allegedly hits car two, the driver of car one admits fault and the capper will direct the three “injured” claimants to a local attorney. The attorney will send the “injured parties” to a doctor who will perform “medical treatment.” The medical bills will then be sent to the liability carrier with a demand for the policy limits.

In the current system, this scam already occurs; it's just that the medical bills get paid quicker and directly to the medical providers. The attorneys still make their demands for “pain and suffering” because the no fault threshold designed to prevent such frivolous lawsuits has no teeth and is rarely, if ever, enforced by the courts.

The only change will be that the attorney becomes the broker of the settlement for medical bills, paying the doctor at the time of settlement for a potentially reduced amount.

While the third party focused fraud may be new to Florida should PIP be repealed, it is common place in tort states. The result is that Floridians will still pay an exorbitant amount for insurance. The premium now paid for PIP will simply be transferred, driving up costs for bodily injury and uninsured motorist coverage's. The likelihood of a net premium reduction would be highly unlikely, while costs associated with third party litigation would rise dramatically.

Not to say things can't be done; they can. What the legislature needs to examine are real and meaningful solutions to address the underlying problem. Now consider the following:

1) Eliminate PIP. While this creates its own new set of challenges, it is one less coverage that will be prone to fraud. That said, there will simply be a transfer of fraud from PIP to BI and UM line coverage's, so any savings will be dubious, at best.

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. Include a “loser pays” provision that applies to not only the plaintiff but their counsel.

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 new legislation could 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, a shortsighted solution that doesn't address the underlying problem of fraud will not succeed in accomplishing the desired goals.

Christopher Tidball is a claims consultant, speaker and the author of multiple claims improvement books including Re-Adjusted: 20 Essential Rules to Take Your Organization from Ordinary to Extraordinary and Blocking & Tackling: The Playbook for the Winning Claims Organization. He is a veteran of the insurance industry, having served in various adjusting, management and leadership roles. To learn more, please visit www.christidball.com.

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