INSURANCE: No-fault's end? A quiet, big deal

For a better Florida: Issues facing the 2007 Legislature

Published February 18, 2007

TALLAHASSEE - Fix it or flush it.

Then-Senate President Jim King gave those orders back in 2003 about state laws that dictate how much automobile insurance coverage drivers need to buy.

The Legislature did neither, leaving in place Florida's "no-fault" auto insurance law, which for the last 36 years has required Florida drivers to buy policies to cover their injuries in car crashes no matter who is at fault.

Now, it's ultimatum time again. The no-fault law, also known as personal injury protection (PIP), is scheduled to expire on Oct. 1. Few issues the Legislature considers this year will have greater direct impact on the lives and pocketbooks of average Floridians.

Yet, many believe the issue will be a low priority for the Legislature this year. Why? Because even insurance companies can't agree on what ought to be done and because the issue has inspired no public outcry one way or the other.

"I haven't come to any firm conclusions about any effort to revive the existing (no-fault) system," said Rep. Don Brown, a DeFuniak Springs Republican who chairs the House Insurance Committee. Brown said he was responsible in 2003 for crafting the October deadline that drops the no-fault law. He said creating the deadline was supposed to force special interests to work together on efforts to update the law.

So far, it hasn't worked.

Quiet death, maybe

Practically speaking, if the Legislature does nothing, on Oct. 1 drivers would only be required to carry auto insurance policies covering $10,000 worth of property damage.

The big question: Who will pay for medical injuries in car crashes? That will depend on who is at fault and what other kind of auto coverage drivers buy.

Nobody really knows what the Oct. 1 change will ultimately mean for consumers' pocketbooks. The National Association of Insurance Commissioners' 2004 review of auto insurance found that the average auto insurance premium in Florida was $1,150, compared to the nationwide average of $959. Florida's premiums were among the highest in the country but were lower than Alaska, New Jersey, New York, Rhode Island, Louisiana and the District of Columbia.

No-fault insurance originated in the 1970s as a way to keep car crash disputes out of the court system. Injured drivers get most of their medical bills covered but, in return, they can't sue unless they suffer permanent injuries. Florida is one of dozen states that still has a no-fault law.

Proponents of the no-fault law say it keeps fender benders and minor crashes from clogging the courts and ensures everyone gets paid in a timely manner. Under no-fault policies, insurers pay 80 percent of medical expenses and 60 percent of lost wages as well as a $5,000 death benefit.

Time for oversight

There is a downside. Under the no-fault law, auto insurers, feeling pressure to meet state deadlines mandating prompt payment, have too little time to investigate fishy claims. Plus, injuries that cause lasting damage still lead to lawsuits. And while $10,000 took care of most crash injuries in the late 1970s, with inflation and the rising cost of medical care, injuries are more often surpassing that cap.

Trial attorneys and the health care industry say the state should mandate some sort of injury coverage, because so many Floridians, especially the working poor, don't have any type of health insurance. That means the state's no-fault law is the only assurance that hospitals tending crash victims will get paid. About 40 percent of crash victims who end up in hospitals and trauma centers have no health insurance, the Florida Hospital Association says.

Yet, for drivers who already have good health insurance, state law requires them to carry auto insurance for injuries that their health insurance would also cover.

A fraud problem

Also, Florida has a fraud problem. The numbers of no-fault policyholders claiming pricey and often invisible "soft tissue" injuries, like strained backs, and the number of faked car wrecks continue to inundate prosecutors, especially in South Florida. Fraud costs drivers, because insurers, who say they aren't equipped to handle fraud the way medical insurers are, pass that cost on to policyholders.

"These are economically desperate people, they prey upon immigrants in Miami," said Maj. John Askins, a law enforcer in the Division of Insurance Fraud for the chief financial officer.

Askins said Florida needs more money for more prosecutors and investigators to catch fraudsters. Last year, the Florida Legislature passed a law that did just that. It extended the deadline for when the no-fault law would vanish and added more money for prosecuting fraud. But then-Gov. Jeb Bush said it wasn't enough. He vetoed the legislation and told the insurers, trial attorneys and health care industry to work harder to come to an agreement on a policy that would cut down on fraud, not just pay to police it.

Both Gov. Charlie Crist and Chief Financial Officer Alex Sink are reviewing the issue and have yet to weigh in, their spokesmen said.

The Legislature passed some antifraud measures in 2003, and some Democrats like Sen. Steve Geller of Hallandale Beach would prefer to keep no-fault insurance and allow the antifraud package to "work its way through the system."

Seeking payment

Doctors and hospitals want to make sure they're paid; they want some sort of mandated injury coverage. The hospital association has pitched an idea to require that drivers buy a narrower type of medical coverage from their auto insurers that would cover only emergency care. Both Sen. J.D. Alexander, R-Lake Wales, and Rep. Brown called the idea interesting.

Lawyers want to make sure their case load, fees and ability to sue aren't disturbed. The Florida Justice Association would like the Legislature to require that all drivers buy bodily injury policies, which protect drivers from lawsuits in the event that they hit somebody else. More than 40 states mandate that kind of coverage.

Insurers don't want to be forced to pay, or overpay, for every single little auto injury in Florida, including the fake ones. Many want no-fault to disappear, although a few, like Geico and Florida Farm Bureau, want to keep it. The state's largest auto insurer, State Farm, says it would be in favor of the state mandating bodily injury policy.

The big difference this year is that populism is reverberating throughout the capital, following a special session that beat up on the insurance industry. Many lobbyists who are advocating the end of no-fault are the same people who defended property insurance hikes.

"Because of the property insurance situation, I don't really know what (lawmakers) might do," said William Stander, assistant vice president for Property Casualty Insurers Association of America, a group that wants no-fault to vanish if the Legislature doesn't make changes to it like setting fees for medical services or capping attorneys' fees.

Paul Jess with the Florida Justice Association pointed out that if the Legislature does nothing and allows the no-fault law to lapse, it would be akin to saying that cars are more important than people, since drivers would only be required to buy auto policies that cover potential property damage.

"It's ironic that we have to be financially responsible to fix your property, but we don't have to be financially responsible to fix you."

Times Researcher Carolyn Edds contributed to this report.