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Repeal no-fault law, say insurers

While they say costs of personal injury protection claims have shot up, trial lawyers say three years later, reforms are working.

By TOM ZUCCO
Published March 4, 2006

Insurance companies and others who want Florida's no-fault auto insurance law to lapse may not be in the driver's seat. But a study released Friday pushed their cause.

A report by the national Insurance Research Council shows the insurer costs to pay personal injury protection claims jumped 18 percent in the past three years, about twice the rate of inflation. In other words, insurers say, the law that requires coverage for uninsured motorists and accident victims isn't working.

But the study was immediately called into question by the group that wants Florida's no-fault law extended.

The study showed that as claim costs increased, the seriousness of injuries declined. In the meantime, the study said, the use of chiropractors and lawyers rose dramatically.

Florida's no-fault law (also known as personal injury protection, or PIP) requires auto insurers to provide a minimum of $10,000 coverage for people injured in an auto accident for medical care and additional coverage for such things as lost wages and funeral expenses.

The law, which has been on the books for 35 years, is scheduled to expire in 2007 unless the Legislature re-enacts it this session.

The Florida Insurance Council, which includes 14 of the top 15 insurance companies that write auto insurance, favors letting the law expire. They argue the system is rife with fraud and abuse, causing the average Florida family to pay at least $250 a year more than it should for auto insurance.

"The status quo - simple re-enactment of the current law - is unacceptable," said Sam Miller, FIC executive vice president.

Abuse is the leading factor in higher costs for personal injury protection coverage in Florida, Miller said. As a result, Florida's PIP premium is about 70 percent higher than 17 states with similar coverage and Florida's consumers are footing the bill.

Miller said auto insurers such as State Farm and Nationwide favor repeal of the law, while most other insurers can live with re-enactment, but with significant reform.

But there is considerable opposition to any major tinkering with the law, most notably from the Academy of Florida Trial Lawyers, the Florida Medical Association, the Florida Association of Insurance Agents and the Florida Hospital Association.

"We're united in the belief that the current system is working," said Glenn Klausman, vice chairman of the Florida Trial Lawyers auto insurance subcommittee.

Klausman said legislative reforms in 2003 not only eliminated about two-thirds of the lawsuits, but greatly benefited the insurance industry.

"Every month you pick up the paper and read that an insurance company has announced record profits," he said.

Fraud such as staged accidents and doctors billing for patients they didn't see remains a problem. The question is how big of a problem.

"The insurance industry claims that 90 percent of the bills are fraud," Klausman said, "and that's ridiculous. They consider that a doctor charging $100 when they think it should've been $50 is fraud.

"Their definition of fraud is anything they don't agree with."

Klausman also attacked the Insurance Research Council study, saying much of the data may have come from claims filed before the 2003 reforms.

"They are claims from 2001 and 2002 that weren't settled until 2004 or 2005," he said. "After 2003, the world changed."

He also argued that shifting the $1-billion in annual medical costs from auto insurance to private health insurance would drive up the cost of health insurance for employers and workers. One example is Colorado, which saw its health insurance costs rise sharply after repealing its no-fault laws.

Those who want to save no-fault insurance claim the loss of PIP coverage will create a financial burden for hospitals and emergency room doctors, which, under federal law, must treat all medical emergencies, regardless of ability to pay. Each year, an estimated 112,000 Floridians involved in automobile accidents are treated in emergency rooms.

"PIP is really the best protection," Klausman said, "for people who have to live paycheck to paycheck."

The insurance industry disputes that, saying coverage is only $10,000. It also says the reforms enacted in 2003 didn't go far enough.

A series of bills scheduled to come before the Senate propose to re-enact the law, but with changes designed to reduce medical care and litigation costs and curb fraud.

Sen. Steven Geller, D-Hallandale, vice chairman of the Senate Banking and Insurance Committee, has said he expects the Legislature will extend the law two to three years to gauge the full effects of the reforms.

[Last modified March 4, 2006, 01:46:12]