In the last hour of the 2012 Florida legislative session in Tallahassee on March 9, the Senate enacted its version of motor vehicle personal injury protection insurance reform (HB119). These regulations mean a reduction of car insurance rates over time.
Governor Rick Scott’s signature on the bill could mean the first significant change to the no-fault personal injury protection system, which has been in place since the early 1970s.
These changes to Personal Injury Protection (PIP) came after calls from Scott to the state legislature to enact regulations that eliminate fraud, limit attorney’s fees, and narrow providers who can participate in the insurance reimbursement program.
Scott is likely to sign HB 119, which would ensure that judges could not increase attorney’s fees in PIP lawsuits. HB 119 would additionally reduce the maximum allowable limit on non-emergency services from $10,000 to $2,500 and would exclude death benefits from the $10,000 cap and cap it separately at $5,000.
Albert Williams, chair of finance and economics, and professor at the H. Wayne Huizenga School of Business and Entreprenuership, said while caps on attorney’s fees are a major portion of regulation, the state legislature also needs to consider how transparency factors into any auto insurance policy.
“If there is a clear path that demonstrates where funding comes from, and where funding is going, it then becomes easier to determine where, when, why and how fraud is occurring. If there is transparency throughout all aspects of the auto insurance industry, it becomes easier to pinpoint where the issues are, which, in turn, will make it easier for the state legislature to regulate the industry,” said Williams.
The House version of the bill, which was not passed, would have allowed insurance companies to use examinations under oath to help reduce fraud. It also would have placed a statutory limit of seven days, after an accident, that a patient could seek care. Further, it would have placed a limit on a judge’s capability to increase attorney’s fees in PIP lawsuits and set a cap on the fees.
Rainier Regueiro, first-year law student, said he is in support of the House’s version, but is at least content with the fact that the state legislature has taken some measures to curb fraud in the auto insurance industry.
“The House bill is closer to what we need with regard to regulation of attorney’s fees. In the recent past, attorney referral services has saturated the insurance lawsuit industry, which has led to both overload in the court system and an increase in auto insurance fraud,” said Regueiro.
The Senate version, in contrast, does not allow for examination submission to reduce fraud, places a statutory limit on claims of 14 days, and does not set a cap on attorney’s fees.
Anthony Campenni, first-year law student, said he is in support of the Senate’s version.
“Any article of legislation that will reduce insurance fraud will assist in tackling the issue of inflated insurance rates. While I understand the House’s desire to place a statutory limit on the fees that attorneys can collect as a result of PIP lawsuits, any cap needs additional investigation beyond the terms of one legislative session before enactment,” said Campenni.
Williams said the real issues are whether or not HB 119 provides for the right type of regulation and how HB 119 will be enforced.
“While the focus of HB 119 is to decrease the level of auto insurance fraud by regulation, there is also a free enterprise system that must be protected and preserved. What we’ve learned from the financial crisis of 2008 and the events that followed is that lack of enforcement of regulations often lead to inconsistencies in the system, one of which is fraud,” said Williams.
Proponents of HB 119 argue that these regulations are necessary because the system has been riddled with fraud for decades, as confirmed by the National Insurance Crime Bureau, which has labeled Florida the top state for staged automobile accidents.
While the Florida Office of Insurance Regulation is directed to evaluate the impact of the legislation within two months, early estimates indicate that in addition to savings on auto insurance policies, auto insurance claims will decrease by at least 10 percent.
Williams said that while the implementation of HB 119 might decrease the cost of auto insurance, there are other factors to consider that keep the cost of auto insurance high in the state.
Williams said, “While this HB 119 focuses on PIP, there are other areas of auto insurance policy that need reformation. For example, fraudulent destruction, which is prevalent in South Florida, increases insurance. HB 119 is a good start, but their needs to be more of the right regulation if the objective is to decrease significantly the cost of auto insurance.”