How Would the End of Florida’s “No Fault” Law Affect My Auto Insurance?
It was 1979. Disco was on the way out and “no-fault” insurance was on the way in. In an effort to reduce the adversarial nature of the claims process, Florida adopted a new concept in insurance at the time called “no-fault” coverage.
The concept was simple. “No-fault” insurance was invented to reduce the friction between the insured and the insurance company. In addition, it provides coverage regardless of who was to blame. By eliminating the back-and-forth previously required to receive payment to cover medical bills, “no-fault” focused on proving money quickly for medical treatment.
As the decades ticked by, fraudsters began finding ways to exploit the system. False claims and staged accidents plagued the industry. And Florida became known as the capital of “no-fault” fraud.
New legislation in 2012 sought to resolve the fraud issue. It was about this time. However, notice was taken by plaintiff attorneys. They, among others, noticed that although “no-fault” made the claims process generally smoother, the $10,000 limit available hadn’t changed in nearly three decades.
Five years later in 2017, new legislation was brought forth to eliminate the “no-fault” system in the State of Florida. The anti-“no-fault” group argues, although $10,000 may have been adequate in 1979, today insureds are grossly underinsured. Should the Florida Congress agree, your automobile insurance may be impacted.
What is “No-Fault” Insurance?
The Florida “no-fault” system was intended to make the insurance claims process more streamlined. Under Florida law, each driver must carry $10,000 of Personal Injury Protection (PIP), otherwise known as “no-fault”.
The $10,000 in medical and disability benefits is for the benefit of insured driver, regardless of who may be at fault. Since determining who was at fault isn’t required, the funds are available immediately to the insured after an automobile accident. This makes the claim filing process quicker as you only need to work with your insurer instead of the other driver and their insurance
Deep within the Florida Statutes, more specifically statute 627.736, you will find the specifics of what PIP will pay. After all deductibles are met, PIP will pay 80 percent of the cost for:
- Dental work
- Nursing costs
- Hospital costs
Of course, any of these costs must be associated with automobile accident. In addition, they must be emergency related to obtain access to the $10,000 limit. If immediate attention is not required, the limit of medical payment available is reduced to $2,500. The PIP allotment may also be used for:
- 60% of lost earnings
- Mileage reimbursement for physician visits
- $5,000 death benefit (above the $10,000 medical benefit)
It is worthwhile noting that unlike some other states, the PIP law in Florida does not cover acupuncture or massage therapy. Another important reminder is treatment must be received within 14 days of your accident. If you fail to meet this deadline, you will be responsible for the medical costs, unless you get them covered later if you win a personal injury lawsuit.
Proposed Changes and Their Impact
With a general understanding of what “no-fault” insurance providers, proposals in both the Senate and House seek to repeal and replace the system altogether. From a coverage standpoint, as an insured, you would no longer be required to carry PIP coverage. However, instead each insured driver would be required to maintain $25,000 in bodily injury or death per person, $50,000 for bodily injury or death to two or more people.
This change would have widespread implications. The “no-fault” system has medical payments made within 30 days. Lost wages are paid out every two weeks. Replacement with the bodily injury coverage would make victims of accidents seek to recoup monies from the at fault party. Depending on the scenario, this could mean more claims end up in court.
On the surface, it may appear such a change increase the premiums of the State’s insureds. However, it is being argued that with the elimination of “no-fault” insurance, the State would see the elimination of “no-fault” fraud.
When the State implemented new rules in 2012 restricting how “no-fault” may be used and delivered, the annual average premium for “no-fault” dropped over 28%. Proponents of new legislature argue eliminating “no-fault” would result in additional savings to policyholders citing bodily injury coverage for a higher amount is less expensive.
The Law of Unintended Consequences
Regardless of what side of the issue you stand on, it is certain there will be unintended consequences. Keeping “no-fault” in place in a marketplace where premiums are rising may result in motorists carrying lower limits on other coverages, opening up financial gaps in insurance coverage.
Replacing “no-fault” with a bodily injury system may make claims a much more litigious affair. If claim payments are delayed, injured parties may turn to their health insurance for coverage, which could increase health insurance rates. And vendors such as hospitals, physicians, and ambulatory services who rely on “no-faults” quick payment mechanism may need to consider alternative payment levels to maintain cash flow.
Whatever the outcome, your automobile insurance will be affected in some way. Only until the final version of a reform bill is signed by the Governor will we know the impact.
Until then, to learn more about “no-fault” and other automobile insurance coverages, contact the experts at demontinsurance.com or at (850) 942-7760. Our licensed insurance experts will be happy to answer any questions you have.