Personal Injury Protection Bills Crash in Florida

Apr 27, 2011

The following article was published in Property Casualty360º on April 26, 2011:

PIP Bills Crash in Florida

By Joan E. Collier

How could it all come crashing down?

Florida CFO Jeff Atwater was on board. So was Insurance Commissioner Kevin McCarty. The Coalition Against Insurance Fraud, the newly formed Sunshine Alliance to Erase Fraud, every state insurance organization, and even some consumer groups were supporters.

However, on April 25, the hard-fought battle to curb auto insurance fraud in Florida came to a sudden stop.

By a 9-8 vote, the House Health and Human Services Committee defeated the merged HB 967 and HB 1411, legislation designed to beat back the fraudulent auto insurance claims that cost Florida policyholders collectively $1 billion a year. This, despite testimony from CFO Atwater the day before the House committee hearing during which he stated that rates could go up another 30 percent if the state does not get a handle on auto fraud. 

Also on April 25, the Senate Judiciary Committee adjourned its last scheduled committee hearing without acting on SB 1930 and SB 1694, its versions of the personal injury protection (PIP) bills. Previously, on April 12, the Senate Banking and Insurance Committee approved SB 1930 with a 7-4 vote and SB 1694 with a 6-5 vote.

While the bills had encountered some bumps as they moved through committees, proponents were hopeful that the mass of data and studies demonstrating the costs to consumers and insurers alike would persuade lawmakers to enact reforms.

“This is incredibly disappointing,” said Florida Insurance Council Executive Vice President Sam Miller, following Monday’s actions. “We know this would have reduced auto insurance rates.

“It is very clear that so much of what is being done in PIP clinics is fraud, and it is costing the honest consumers $1 billion a year,” Miller said. “There are folks making millions of dollars on this and they worked like the dickens to defeat these bills.”

Hard Numbers Revealed Problem

Research data appeared to support the calls to action.

Atwater wrote leaders of both chambers in mid-April that his office documented “staggering increases in auto insurance premiums in Florida,” which “correlates directly to the PIP fraud epidemic spreading throughout our state.”

A survey of auto insurers conducted by the Florida Office of Insurance Regulation revealed that closed PIP claims rose 40 percent between 2006 and 2010 and payouts by insurers rose 66 percent. The study further showed that between 2008 and 2010 the average number of medical procedures associated with PIP claims billed by medical clinics rose 173 percent.

In the May issue of Florida Underwriter, Lynne McChristian, who represents the Insurance Information Institute in Florida, wrote, “The average [Florida] driver’s fraud tax in 2010 was about $49 per vehicle. Absent any measures to put the brakes on the trend, the fraud tax could rise to nearly $84 this year.” Because the aggregate fraud tax keeps on trucking, that trend line means an estimated increase in the aggregate “fraud tax” of more than 72 percent by the end of this year as compared to 2010.

Armed with this information, insurers, the regulator, and many elected officials sought to address the problem in Florida’s 2011 legislative session.

SB 1930/HB 1411 were designed to crack down on staged accidents and medical clinic fraud. The Coalition Against Insurance Fraud noted that the legislation would:

  • Increase penalties for medical providers who knowingly submit false and fraudulent applications for clinics that treat crash victims;
  • Require that the names and addresses of all passengers involved in a crash are reported on the crash report;
  • Forbid medical providers from seeking payments from policyholders when an insurer denies the provider’s claim because of suspected fraud;
  • Give insurers more time to investigate suspicious claims;
  • Provide discounts for consumers who use honest, insurer-recommended clinics; and
  • Create a state authority under the CFO to fund auto-fraud investigations and prosecutions without raising taxes.

Trial Lawyers Object

SB 1694/HB 967 focused on attorney fees and insurer procedures. The legislation provided that attorney’s fees in PIP cases be calculated without regard to a contingency risk multiplier, an effort to ensure that attorneys handling PIP claims did not receive more in legal fees than motorists receive in medical benefits from the claims. They also limited the amount of recoverable attorney’s fees.

The trial bar rose to object—vehemently.

Paul Jess, general counsel for the Florida Justice Association, which represents plaintiff’s attorneys, said the legislation was “basically creating opportunities for the insurance companies to deny and delay claims and create hurdles for health care providers from being paid on legitimate claims and legitimate bills.”

Supporters are not giving up. The Senate could, procedurally, revive its bills, although it is unlikely to do so given the House’s action. There also is the possibility that some of the provisions could be added to different bills.

If that does not happen, there is always next year.

“We will absolutely be back next session with a vengeance,” Miller said. “They haven’t seen anything yet.” 

Page 2 of 2