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Insurance Chief Raises Possibility Of Flushing No-Fault

Leon County Judge John Cooper on June 30, 2022, in a screen grab from The Florida Channel.
Wikimedia Commons
The Florida Channel
Leon County Judge John Cooper on June 30, 2022, in a screen grab from The Florida Channel.

The state insurance commissioner said Wednesday the time might be right to end Florida's "no-fault" auto insurance system, but lawmakers aren't expected to focus on such a change during the 2016 legislative session.

Insurance Commissioner Kevin McCarty, appearing at a Florida Chamber of Commerce Insurance Summit at Disney's Grand Floridian Resort, tossed out the idea of, "Let's just repeal PIP and do nothing," as a way to further reduce fraud in the personal-injury protection coverage system.

While some lawmakers have suggested replacing PIP with a requirement for bodily-injury coverage, McCarty said most motorists already have such coverage. As a result, lawmakers might not have to do anything to replace PIP, which is also commonly known as no-fault.

"I'm not so sure that I'm ready to move to a more litigious auto system, but I think one thing to consider, particularly if we get an adverse decision on PIP, let's fix it or flush it," McCarty said. "We have done everything to fix PIP you could have possibly have done. We've had seven sessions on PIP. … A $10,000 benefit, really. Is it worth this amount?"

Under the no-fault system, motorists are required to carry personal-injury protection coverage that includes $10,000 in medical benefits.

When lawmakers crafted legislation in 2012 to reduce fraud in the system, average motorists in Florida were paying $180 a year for the personal-injury protection portion of their auto coverage, according to the Office of Insurance Regulation. The state agency in January estimated the average no-fault annual payment stood around $125.

The law, which set benchmarks for insurers to lower rates on personal-injury protection coverage, continues to face legal challenges. It required people involved in crashes to seek treatment within 14 days and allowed up to $10,000 in benefits for emergency medical conditions, while putting a $2,500 cap on non-emergency conditions.

A Leon County circuit judge in 2013 ruled the law illegally prevented injured people from using PIP coverage to pay for treatment by acupuncturists and massage therapists and limited the services from chiropractors. The ruling was eventually overturned. Still, some lawmakers believe the law will eventually fail a court challenge and have suggested the state replace PIP with bodily-injury coverage.

State Chief Financial Officer Jeff Atwater and Gov. Rick Scott championed the 2012 changes, saying that fraud, primarily in the Tampa and Miami regions, had resulted in the cost of auto-insurance coverage spiking for Floridians.

Atwater said Wednesday he wants to be convinced before calling for additional changes.

"Two years after the passage of the PIP legislation, it's time for the insurance industry to bring forward evidence that shows whether or not rates are going to come down," Atwater said in a prepared statement. "If consumers aren't going to get the relief the legislation intended, then the time to repeal has arrived."

An Office of Insurance Regulation report in January said the average medical cost paid through PIP claims has dropped 14 percent statewide from 2011 to the first three quarters of 2014, with the average payment down 28.7 percent in South Florida in the same time. But the numbers are still considered too preliminary to show the full impact of the law.

McCarty said ending no-fault wouldn't impact many motorists, as "only a handful of people" buy just the minimum coverage, while those engaged in fraud would look for other outlets.

"We talk about the whack-a-mole. Fraud is rampant in this state," McCarty said. "Fraud looks for its weakest link. And if you eliminate (PIP), even if for just two years, in two years you would cut the pipeline off of PIP. You'd cut the supply of capital going into PIP."

But PIP doesn't appear to be a priority for lawmakers as they hold committee meetings in preparation for the 2016 legislative session, which starts in January.

House Insurance & Banking Chairman John Wood, R-Winter Haven, said Wednesday he expects to address reform to workers' compensation insurance, continue efforts to reduce the size of Citizens Property Insurance Corp. and deal with the proliferation of "assignment of benefits" lawsuits. Such lawsuits involve disputes about homeowners signing over policy benefits to contractors.

Rep. Larry Lee, a Port St. Lucie Democrat who is an insurance agent and member of Wood's subcommittee, said Wednesday that lawsuits involving Citizens and water-damage claims are a good example of the increase in assignment of benefits cases.

"If the consumers could understand how some of these things we deal with, that we wrestle with in the Legislature, impact their premiums, they would have a better understanding of why we make certain decisions," Lee said.

Lawmakers have been reluctant to tackle the assignment of benefits issue, but pressure has been growing.

The insurance industry argues for reform, saying the system allows contractors to set costs and demand payment for work. The building industry contends that assignment of benefits helps property owners quickly hire contractors who can perform emergency repairs and later seek payment from insurers.

On Monday, a three-judge panel of the 1st District Court of Appeal in Tallahassee, in rejecting a court challenge involving an assignment of benefit case, said it is up to state lawmakers --- not the court system --- to tackle the controversial issue.

"We again conclude … that it is for the legislative branch to consider this public policy problem, not the courts, at this juncture,'' said the ruling, written by Judge Scott Makar and joined by judges Stephanie Ray and Ross Bilbrey. "Legislative review provides a more detailed inquiry into the current situation in the industry and greater flexibility in achieving meaningful reforms, if deemed necessary. On the other hand, courts are ill-equipped to pass judgment on the merits of the policy debate at hand, and less likely to be able to formulate a remedy that is mutually beneficial to insureds and insurers."