As No-Fault Insurance Ends in Florida, Find Out What's Next

By Randy Diamond, The Palm Beach Post, Fla.

Oct. 1--Florida's no-fault auto insurance system has expired -- at least for now.

Lawmakers are working to revive the system, and there are plenty of people who believe Personal Injury Protection -- known as PIP -- or some comparable system will be resurrected. But not everyone supports it, and there is no guarantee.

At least one bill that would institute a revised auto insurance system has been drafted. Legislators will meet in Tallahassee for a special session to trim state spending beginning Wednesday, and insiders predict no-fault could be added to the agenda.

It won't be easy. To come up with a system to replace no fault and implement it, a lot of things have to happen first. Procedural things. Political things. Legal things. And yes, business things.

But since business is going to happen regardless, you might be wondering how this will affect you. Does it matter whether no-fault continues or whether Florida returns to a tort system after nearly 40 years? Do you need to buy different insurance? Have policies actually expired?

Here is a quick look at everything involving no-fault.

QUESTION: What is no-fault?

ANSWER: Simply put, no-fault insurance eliminates fault in auto accidents regarding medical expenses and lost wages. Each person injured in an auto accident collects medical and lost wages from their own insurance company. Pain-and-suffering lawsuits are also supposed to be limited to people with serious injuries.

The money that would normally be paid out in accident settlements is instead supposed to go to cover medical and lost wages. That coverage is known as Personal Injury Protection or PIP. Because of a lack of lawsuits, insurance rates were supposed to be kept low. It hasn't worked out that way.

Q: Why did no-fault expire?

A: Florida lawmakers acknowledge problems with the system but have been unable to make anything more than minor modifications to it. During the 2003 legislative session, legislators agreed that no-fault's last day would be Sept. 30, 2007, unless extended. The idea was to force lawmakers to fix the system. But lawmakers couldn't agree to changes and instead decided last year to extend no-fault until Jan. 1, 2009. Gov. Jeb Bush vetoed the extension.

Q: What happens with the expiration of no-fault system?

A: Anyone whose policy was set to renew in the first few days of October will find themselves without PIP unless and until a new law is passed. Policies renew on a staggered basis, throughout the year, so it's a relatively small group, if the law is reinstated. Auto insurers send out notices at least 45 days in advance and many, including Florida's largest, State Farm Mutual Auto Insurance Co., have not included PIP as part of renewed coverage. However, those insurers will be required to add the coverage if no-fault continues and motorists will be surcharged.

Q: Who would pay medical bill from auto accidents?

A: Health insurance would cover auto accidents for people who have it. That could result in an increase in health insurance rates. In addition, those without health insurance would not be covered and could be denied non-emergency room treatment unless they were willing to pay out of pocket. Hospitals say they stand to lose $350 million in revenue if no-fault ends because 40 percent of those treated at hospitals from accidents don't have health insurance.

Q: Would I save money if no fault permanently expires?

A: Insurance companies say rates would go down for many motorists because no-fault would no longer would be a mandatory part of an insurance policy. For example, State Farm Mutual Auto Insurance Co., Florida's largest insurer, estimates rate reductions of about 16 percent. Drivers who want optional medical coverage for auto accidents can pay extra and get it.

Q: How does the legislature plan to fix no-fault?

A: Insurers say the proposed legislation will do little to fix the problem and motorists should continue to expect high insurance rates and lots of fraud. Legislators say they are making major changes to the system by putting in a fee schedule for medical providers that should limit medical costs. They are also reserving $5,000 of the $10,000 in medical benefits injured persons receive for emergency doctors. The idea is to encourage doctors to staff emergency rooms.

Q: What about snowbirds?

A: People living in Florida for less than 90 days -- tourists -- are covered by the auto insurance laws of their own states. Seasonal residents living here more than 90 days are covered under Florida law. But if the insurance benefits are more generous in their home state, than those benefits apply. Live more than 90 days in Florida and you are covered under Florida law. Is there anything unusual about Florida's system? Florida is one of only three states that doesn't require drivers to purchase bodily injury protection. This means that if you are ever in a serious accident caused by an at-fault driver there may be no one to sue. Your only option would be to recover benefits from your own insurer using coverage for being hit by the underinsured or uninsured. That coverage also is optional, so you have to have purchased it in advance to use it.

Q: How did no-fault develop?

A: Once the automobile became part of American life, laws developed to compensate those injured in auto accidents. By the 1950s, mandatory insurance laws began to replace financial responsibility laws. But by the 1960s, many of the shortcomings of the legal system to resolve disputes began to arise in Florida and other states.

Auto insurance rates were skyrocketing and the state legislature concluded it was because insurers were paying too much to settle trivial claims by injured persons and their lawyers. The legislature opted to developed a new system, called no-fault insurance.

Florida become the second state in the nation, behind Massachusetts, to implement no-fault insurance on Jan., 1, 1972.

Q: Do other states have no-fault systems?

A: Twelve states are considered no-fault states. The other 38 are considered tort states meaning there is no bar on accident lawsuits. Several tort states, however, require auto insurers to provide medical benefits under their policies.

Q: Why do some trial lawyers favor extending no-fault in Florida?

A: Florida's threshold for pain and suffering lawsuits is almost always pierced by trial lawyers. Trial lawyers make money on fees for suing insurance companies over disputed medical bills, sometimes tens of thousands of dollars. There is no state-sanctioned fee schedule for lawyers. Judges make the decision as to how much lawyers will earn.

Q: How significant are Florida's problems with no fault?

A: Florida's insurance rates are sixth-highest in the nation. Major loopholes exist in the law that allow pain and suffering lawsuits to proceed, generally without restriction. Injured parties must receive a doctor or chiropractor certification that they have suffered a permanent injury, but the "permanent" injury doesn't have to be serious.

Because there is no fee schedule for medical providers and hospitals, medical bills paid by auto insurers are often beyond what would be paid by health insurers. Fraud is also rampant in the system. A 2000 state grand jury found with trial lawyers and medical providers working together to bolster accident lawsuits. Staged accident rings are another problem with patients being paid by clinic owners to receive non-existence or unnecessary medical treatment.

Q: Are benefits adequate for major injuries?

A: The $10,000 combined maximum in benefits has not been raised since 1978. A brief hospital stay from an accident could easily exhaust benefits. Lawsuits thus become common to recover medical expenses and lost wages, defeating the whole no-fault concept.

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