Exploring Personal Injury Protection Reforms

Before 1972, if you suffered bodily injury in a car crash, you might need to show that you could pay your medical costs before treatment was given.  You might hire an attorney to sue the culprit for damages and after your eventual victory; you would split the damages award one-third to the attorney and two-thirds to you.  If you lose neither you nor your attorney would be compensated.  At least this was the case in Florida.

Before 1972, some injured people lacking cash for medical care might not get adequate treatment, and some attorneys would be unwilling to take on bodily injury cases where just a small award could be expected.

To make sure medical care was available to those injured in an automobile mishap, the Florida Legislature obligated auto insurers to offer “no fault” personal injury protection (PIP) coverage capped at $10,000 per person.  Damage to cars and other property was to be settled in the conventional way — between insurance company adjusters or sometimes through the courts.  The no-fault approach to personal injury avoided delaying medical care until litigation settled who must pay and how much.  No-fault also avoided costly litigation to find that answer.

Despite only $10,000 being available for medical care, no limit applied to fees of attorneys who perched between the injured party and the insurance company.  Their fees mount hourly and since a court will order the insurance company to pay them.  But if you lose in litigation against the insurance company, neither you nor your attorney needs to pay the insurance company.  This so called “one-way fee” regime can vastly outweigh the medical costs that the insurance companies must cover.  There are instances where courts awarded the plaintiff a few hundred dollars but awarded their attorney $39,000.   These outrageous legal fees inflate Florida consumers’ auto insurance premiums.

By 2010, Florida’s no-fault personal injury protection degenerated into a powerful magnet for staged car crashes.  A team of criminals would pack themselves into a car and then crash into someone else.  The criminals would feign injuries of a kind that could be treated by their attorney’s favorite providers of massage, adjustments, acupuncture, or similar treatments, up to the full $10,000 of coverage.  Fleets of cars occupied by criminals produced steady, staged-crash income to share among the parties, and the criminals’ attorney earned hefty hourly fees for making sure insurance companies could not prevent each criminal from receiving medical care up to the maximum allowed.

Aside from being a blatant fraud and making Florida’s roadways unsafe, staged crashes increased the auto insurance premiums for Floridians.  Fraudulent claims and legal fees helped push PIP insurance to as much as $1,000 in some areas.  In 2012 the Florida Legislature tried to halt the PIP travesty by excluding some post-crash care that had become most prone to abuse.  A judge rejected that provider exclusion but stayed his own ruling. The reforms did help, at least to some degree.

Some Florida legislators are eager to extend the PIP reforms.  They propose that “drivers would have to carry what’s called bodily injury liability, which covers injuries to the other party if you cause the accident.  About 70 percent of drivers carry BI coverage now.”  In Colorado, the average annual premium dropped by 32% when “no fault” was replaced by full coverage (including bodily injury coverage).

Mandatory bodily injury coverage could address injuries of those not at fault.  Establishing fault can take substantial time and deploying combative teams of attorneys to find that answer can cost far more than the medical costs at issue.  But today, injured parties do not need to wait.

The emergency care landscape changed in 1986 when the Federal Emergency Medical Treatment and Labor Act (EMTALA) passed in 1986.  EMTALA requires every hospital receiving Medicare payments (i.e. almost every hospital) to provide emergency treatment to any patient who presents themselves at the Emergency Room. Under EMTALA, the hospital is obligated provide the emergency treatment needed and to stabilize the patient’s condition regardless of the person’s ability to pay.  So, every person injured in an automobile accident can have access to care.  The cost for emergency care provided to a crash victim can be funded from the bodily injury award and remitted to the hospital. The legislature should give the new PIP law time to work or make modest changes to weed out fraud.

If the legislature wants to further reduce costs for the automobile insurance consumer, tackling one-way legal fees is necessary and mandatory arbitration would be a suitable way to do that.  In addition, arbitration could be a relatively fast and low-cost alternative widely used to reduce litigation costs and speed settlements.  Arbitrators with a clinical background could specialize in bodily injury treatment and quickly attain the skill and insight needed to settle cases in ways acceptable to people and insurance companies.

Mandatory bodily Injury coverage and mandatory arbitration could align monetary incentives and efficiency.  These options should be considered, but only if PIP fraud problems continue to linger.

Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research

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