If You Drive, You Must Read This

Sep 6, 2007

By Russell Ray, Tampa Tribune, Fla.

Sep. 7--TAMPA -- In less than a month, Florida's 36-year-old no-fault auto insurance law will die.

Legislators tangled for months over whether to preserve Florida's no-fault system, but they were unable to break their deadlock over proposed reforms. The law, which is set to expire Oct. 1, is almost certain to sunset now that legislative leaders have delayed the special session that was slated to begin this month.

However, Florida motorists should not take no-fault's passing lightly, insurance experts warn.

The reason: Coverage of medical bills for those injured in auto accidents will no longer be guaranteed -- especially for motorists who carry no medical insurance.

Florida motorists should start weighing their options and making decisions before Oct. 1, when the law that requires Florida drivers to carry at least $10,000 of personal injury protection coverage, commonly called "PIP," sunsets.

"You need to be prepared to be sued by another driver in the event you are at fault," said Sam Miller, spokesman for the Florida Insurance Council, an industry trade group.

After Oct. 1, Florida drivers still will be required to carry at least $10,000 of property damage liability coverage, which covers damage to your vehicle. If you have a car loan or lease a vehicle, such coverage still will be mandatory.

Although it won't be required, drivers without health insurance would be wise to purchase alternate medical benefits coverage under their auto policies to replace the benefits of PIP coverage, experts say. The type of coverage motorists should choose will depend on their current coverage as well as options offered by their insurance company.

"Options are going to vary from company to company," Miller said.

The state Office of Insurance Regulation is urging insurers to send notices to customers informing them of the coverages and limits that should be considered and the potential risks linked to no-fault's end, including potential delays in compensation under a fault-based system.

"You will have to go through the court process to get payment of your medical bills," said Russel Lazega, a Miami lawyer who wrote the legal book on Florida's no-fault law, which serves as the official source of reference for the Legislature and the courts.

PIP was widely faulted for being vulnerable to fraud and is expiring because legislators were unable to agree on remedies during the regular legislative session this year.

Critics of the no-fault law contend that unscrupulous doctors and clinics took advantage of the system by billing for unnecessary and expensive medical procedures to get the full $10,000 of coverage guaranteed for every accident. That's why some big auto insurers, including State Farm and Allstate, have lobbied hard for the sunset of no-fault.

What Can You Do To Prepare?

To prepare for the end of mandatory medical coverage, industry experts say Florida motorists should do two things soon: Review current policies to see what type of other medical coverage they have and call their insurance agents to discuss new coverage options and costs before Oct. 1.

"I'd start checking your health insurance to make sure you've got good health coverage," Lazega said.

If you don't, you could get caught in an accident with no medical coverage, he warns.

The following types of auto insurance coverage, say experts, will become increasingly important for motorists after no-fault sunsets, experts say:

--If you don't have it already, bodily injury coverage is worth considering adding after Oct. 1, when medical care for those injured in an accident will be covered by the motorist at fault. Bodily injury pays for injuries you caused and protects you in the case of lawsuits. Without it, you may have to reach into your own pocket to pay those expenses.

--To cover your injuries, you should consider purchasing medical-payments coverage, especially if you don't have health insurance. Benefits and limits of such coverage, which pays regardless of fault, will vary, depending on each insurance carrier.

--Uninsured motorist coverage, which pays for injuries to you and your passengers if the accident is caused by an uninsured motorist, is another type of coverage that is expected to become increasingly important in Florida's post-PIP world.

That's because 4 million of Florida's 12 million drivers currently carry only the mandatory PIP coverage, according to the state Department of Highway Safety and Motor Vehicles. Many of those drivers probably won't purchase PIP coverage if they're not required to, experts predict, and that could mean the risk of being involved in an accident with an uninsured driver will climb in the state after the PIP law sunsets.

Crash Scenarios Vary

So, what will happen if you are hit by a negligent driver after Oct. 1? Who will pay for the cost of your medical care?

The answer will be different for every accident, depending on your coverage and the coverage carried by the negligent motorist.

If the driver who caused the accident is uninsured, your medical-payments coverage or uninsured motorist coverage can be used to pay your medical costs while your insurance company attempts to recover the costs from the at-fault driver.

If, however, your auto insurance doesn't carry any medical benefits, your health insurance -- if you have it -- will pay your medical bills. If you don't have any health insurance, chances are you'll have to pay for your medical treatment out of your own pocket -- or sue liable parties.

If you have medical-payments coverage but no bodily injury coverage and you cause an accident, your injuries will be taken care of up to the limit of your medical-payments coverage. You also could be liable for the injuries of those in other vehicles, however. As a result, the cost of covering the medical costs of those injuries could be borne by you, not your insurance company.

The demise of PIP will be mourned by some and celebrated by others.

PIP 'Pays Within 30 Days'

Lazega, the Miami lawyer who wrote the law book on Florida's no-fault law, argues that motorists should continue to carry PIP coverage, because it covers medical costs and lost wages, and pays out a death benefit. The cost: about $13 a month on average.

When PIP sunsets, the lawyer said, many Florida motorists will end up paying more for auto insurance because they will have to buy multiple coverages such as medical-payments and bodily injury to replace the benefits of PIP.

"Those of us who are responsible are going to have to buy a whole lot more insurance," Lazega said. "PIP is very effective coverage. It pays within 30 days. Under medical-payments, you don't have that protection."

Rates for replacement coverage such as medical-payments and bodily injury are expected to rise as demand for those options increases along with risk.

"The issue has been mischaracterized as a way to save consumers money," Lazega said. "That is really a fallacy."

Some critics say PIP duplicates coverage provided by drivers' bodily injury and medical-payments coverage. The added cost isn't necessary, they argue.

Dropping the mandatory PIP coverage will save customers money, said Justin Glover, spokesman for State Farm, the state's largest auto insurer. For State Farm customers, annual savings will average 16 percent, Glover said.

The savings should grow, Glover predicted, because the elimination of the PIP requirement will give insurers more control over payments for medical treatment.

That's what happened in Colorado, which dropped its no-fault system in 2003, Glover said. Since then, State Farm has lowered its auto insurance rates several times in Colorado. Auto insurance rates in that state have declined, on average, 15 percent since no-fault's end, according to Colorado regulators.

"The expectation is, over time, you'll pay even less as we see costs come down," Glover said. "We expect costs to come down because we've seen it happen in Colorado."

Reporter Russell Ray can be reached at (813) 259-7870 or [email protected].

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