Posted: 3/20/2012

PIP Gets a Makeover

The personal injury protection system in Florida is diseased with fraud and abuse. First-term Gov. Rick Scott wanted to kill PIP, calling it a “$900 million tax on Floridians.” And why wouldn’t he? In a December report released by the Florida’s Office of the Insurance Consumer Advocate, it was noted that insurers were hit with $2.3 billion in direct losses in 2010, up from $1.6 billion just five years prior. This jump was despite the fact that the state saw a drop in its accident rate while the number of total drivers remained steady.

This isn’t a new issue in Florida, but it is one that we have been chipping away at for years, and at the stroke of midnight on March 9, a big chunk of the problem toppled into the ocean.

NAMIC supported the sunset of PIP in 2006 then again in 2007. Both of those attempts at repeal fell short, so it isn’t shocking to learn that this go-around has been a long and arduous process. Liz Reynolds, our state affairs manager for the Southeast, described this latest whirl at reforming PIP as a “brutal, long-fought battle in both the House and Senate.”

We had many supporters for PIP reform this time, including, of course, the governor, but also CFO Jeff Atwater, Insurance Commissioner Kevin McCarty, and the state’s insurance consumer advocate Robin Westcott as well as many state senators and representatives. This very well could be the first time in Florida history that the governor, CFO, insurance commissioner, and the industry have worked together for the same cause. It was a great change of pace from the Charlie Crist regime … the former governor who makes our Florida members and retirees smile every time they see him on a billboard these days for “Morgan & Morgan, personal injury attorneys.”

When Gov. Scott signs the bill, Floridians will be required to maintain the $10,000 minimum coverage, but it caps payouts for claimants with nonemergency medical conditions at $2,500. The legislative factions compromised on the amount of time accident victims have to seek treatment after a crash – the original bill set a three-day window; the bill that passed gives 14 days. Some casualties of the PIP battle include acupuncturists and massage therapists who won’t be on victims’ service provider list as these two groups will no longer be included in PIP coverage.

Under the old rule, insurers were given 30 days to pay a claim, even if fraud was suspected. No wiggle room was granted on the timeframe for payment. But 30 days is definitely not enough time to investigate a suspicion of fraud, which legislators finally “got.” With the new law, insurers will have three times as long.

Of course we knew we were going to have to go nose to nose with the “Crist crowd” in the trial bar, a nightmare in and of itself. While the final bill did not place caps on attorney fees, attorneys now will be prohibited from incorporating contingency fee multipliers when calculating their charges. Plaintiffs and defendants in a lawsuit will also be able to ask the judge to examine and certify that the attorney fees fall within the state’s standards.

The legislation does contain rate rollback language requiring insurers to submit an application to reduce their rates by 10 percent by Oct. 1 and by 25 percent by Jan. 1, 2014. The reduction was approved with the belief that the new PIP law will lower fraud and abuse reducing loss costs so insurance companies can lower their premiums. It sounds logical, but nothing is ever logical when dealing with thieves and fraudsters.

NAMIC will host a webinar March 29 featuring Reynolds and Perry Cone, a Tallahassee lawyer and former insurance general counsel, who will review the new PIP law and other legislation that was adopted by the Florida Legislature this year.

There’s an old saying, “don’t cut off your nose to spite your face.” While it’s not everything our industry wanted – and the bill contains some language we’d prefer it didn’t – it is a significant leap toward fixing a broken system. At the end of the day, the provisions in the bill should make Florida drivers happy, and it is something we and our policyholders can live with … at least for now.