Even if they enjoy the seemingly endless variety of cutesy television commercials advertising it, few Floridians really like paying the quarterly auto insurance bills that will soon show up in their mailboxes. At about $1,200 a year, Florida drivers pay more than people anywhere else in the Southeast.
If they want to ease the pain of paying for auto insurance, Florida’s lawmakers should investigate ways to crack down on excessive lawyers’ fees and fraud associated with an important auto insurance feature called personal injury protection (PIP).
Although PIP is a decent idea, it’s not working well in Florida.
In most states, whenever two cars get into an accident, the motorists, their insurers and (if necessary) courts determine who caused it. Once this is done, the “at fault” party’s insurance company pays damages to the person harmed.
In Florida and eight other states, however, drivers must carry insurance (at least $10,000 worth here) that lets them make claims against their own insurers for a portion of their injury-related medical bills regardless of who’s at fault.
Typically, injured Floridians can’t sue other motorists unless there are very large medical bills or evidence of gross negligence. Theoretically, the PIP system thus has advantages — injured drivers can get some benefits paid quickly even when another driver has no insurance, and with fewer court costs, insurers can spend more on benefits.
Florida’s version of PIP, however, doesn’t succeed in keeping legal costs down. The main problem is a “multiplier” given to attorneys who win PIP cases. Lawyers get paid 250 percent of ordinary fees when they take PIP cases and win. This type of fee award, originally created to encourage lawyers to take on civil rights cases, was never intended to apply to ordinary disputes between insurers and their customers.
Even when insurance companies act unfairly, there’s no reason to think there’s a special need to ensure that customers can find legal representation. Florida certainly has enough personal injury lawyers, and when they take PIP cases they shouldn’t get paid more than lawyers who do other types of work.
In addition, the state evidently has a high incidence of outright fraud. Even though traffic safety has increased by most measures — fewer fatal accidents, among other things — the number of claims made under PIP increased 46.2 percent between the second quarter of 2008 and the third quarter of 2010 alone. Auto-insurance investigators counted almost 1,500 suspect claims in Florida. Storefront clinics — one of which billed for seven visits by somebody who was in prison and never visited the clinic in question — account for a large portion of this fraud.
To combat this tidal wave of fraud, Florida needs more investigators, tougher penalties and stronger laws. No amount of law enforcement will stop every criminal, but given the extreme nature of Florida’s problem, it makes sense to try harder to enforce existing laws and crack down on dishonest medical professionals, lawyers and others who drive up insurance rates for everyone.
The system underlying PIP will never be perfect. Some auto-related cases surely belong in court, and whatever laws get passed, some fraud will occur. In the long term, Florida may want to look for ways to make PIP coverage optional for people who have health insurance that covers the same things.
But for now at least, the Legislature would do well to consider some serious reforms to the state’s PIP system, such as removing the special bounty for lawyers.
Eli Lehrer ([email protected]) is vice president of Washington, D.C., operations for The Heartland Institute and director of its Center on Finance, Insurance and Real Estate.