Florida House renews debate over ending no-fault auto insurance system

Legislation would replace personal-injury protection with mandatory bodily injury coverage

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TALLAHASEE, Fla. – Florida’s no-fault auto insurance system is again on the chopping block in the Legislature, despite industry concerns the proposed change wouldn’t lower premiums as backers contend and could increase lawsuits and health-insurance rates.

The House Insurance & Banking Subcommittee on Tuesday backed a measure (HB 771) that would replace a requirement that motorists carry personal-injury protection coverage ---key to the no-fault system --- with mandatory bodily injury coverage.

The House proposal also would require auto insurers to offer medical-payments coverage, known as “MedPay,” to consumers, taking a position the Senate has backed in the past. Such coverage could help pay medical bills if motorists are involved in accidents.

“We know that the PIP system is broken,” bill sponsor Erin Grall, R-Vero Beach, said. “There is extreme value in transitioning to a new system without adding additional layers of policy that may not be necessary.”

But in advancing the proposal, House members said more work is needed on the proposed MedPay coverage and issues related to “bad faith” lawsuits against insurers.

Subcommittee Chairman Bryon Donalds, R-Naples, said he wanted to see where the proposal goes as PIP is now being used as a “quasi-health care system.”

“For people in our state who just simply carry PIP just to get their insurance on the road, PIP in and of itself is not enough to deal with actual accidents when they occur on the roadways of Florida,” Donalds said. “If we actually look at the actuarial risks associated with auto accidents, no matter how else you feel about any other measure of this bill, it is clear that PIP is simply not enough.”

Bad-faith cases involve allegations that insurers have not properly looked out for the interests of their customers. Insurers and business groups have long lobbied to curb bad-faith cases.

A Senate proposal (SB 924) seeking to address bad-faith cases was postponed Tuesday because of a lack of time during a Senate Banking and Insurance Committee meeting.

Under the no-fault system, drivers are required to carry personal-injury protection, or PIP, coverage to help pay medical bills after accidents. Motorists are required to carry $10,000 in PIP coverage, an amount unchanged since 1979.

Lawmakers in both chambers have floated the idea of ending the no-fault system almost annually since trying to reform PIP sin 2012.

The House and Senate proposals would move away from the PIP requirement and, starting Jan. 1, mandate that motorists carry bodily injury coverage. The bills would require a minimum of $25,000 in bodily injury coverage for the injury or death of one person and $50,000 for injuries or deaths of two or more people. The proposals also would retain an existing $10,000 financial responsibility requirement for property damage.

Policyholders would also be given a chance to reject medical payments coverage starting at $5,000, with deductibles from zero to $500.

Grall said with the average cost of accidents under bodily injury about $15,500, there shouldn’t be an increase in lawsuits.

“I believe that the conversation around bad faith actually becomes de minimis because there is more time to investigate a claim, determine whether or not an individual is going to have damages that reached that $25,000 (bodily injury proposed) threshold,” Grall said.

The bill, however, drew concerns from representatives of the insurance and health-care industries.

Robert Reyes, a lobbyist for Allstate Insurance Company, argued there would be an increase in litigation without bad-faith changes.

Bonnie Gordon, senior counsel for GEICO Insurance, said while the time has come to move away from PIP, a concern is that MedPay coverage would eventually become mandatory.

“That will ultimately turn MedPay into PIP by another name,” Gordon said.

But not everyone was opposed to mandatory MedPay coverage.

“By having only an optional MedPay, you're disincentivizing physicians from taking emergency room call providing those specialty services that are needed to treat these patients,” said Chris Nuland, a lobbyist for the Florida Chapter of the American College of Surgeons. “There is an undisputed cost shift here from the property or automobile insurance to the health insurance. The number of people who no longer can afford those health policies also goes up and will lead to an increase in the number of uninsured health patients.”

A 2016 report by the Florida Office of Insurance Regulation projected that drivers would see a 5.6 percent savings by shifting to a bodily-injury coverage requirement. A study two years later by the actuarial consulting firm Milliman showed an average increase in premiums of $67, or a 5.3 percent increase.

Grall said motorists should see an 8 percent to 9 percent savings.

Doug Bell, a lobbyist for Progressive Insurance, said its estimates indicated motorists could see premiums increase $312 to $348 a year under the change from PIP to bodily injury coverage.

In voting against the measure, Rep. Thad Altman, R-Indialantic, said he couldn’t support a bill opposed by health-care providers.

“They’re front line and center on this issue,” Altman said.

Rep. Al Jacquet, D-Riviera Beach, said the change to bodily injury coverage could be considered as providing more coverage.

“Someone mentioned that PIP was the only option that some folks had for health coverage,” Jacquet said. “So, if $10,000 is their only option for health coverage, I think $25,000 is a much better health coverage than $10,000.”

A similar measure in the Senate (SB 378) has cleared one committee and awaits an appearance before the Banking and Insurance Committee.