ACTION
ANALYST
STAFF
DIRECTOR
Orig. Comm.: Insurance Committee
14 Y, 4 N
Tinney
Cooper
1) Commerce Council

Tinney
Randle
2)



3)



4)



5)




SUMMARY ANALYSIS
All sections of law comprising the No-Fault/PIP laws are scheduled to repeal October 1, 2007 unless reenacted
by the Legislature during its 2006 regular session. The bill makes the following major changes to the current
No-Fault/PIP laws:
Amends the law authorizing civil remedies against insurers for specified actions to require both a first and
third party to give an auto insurer 60 days notice before filing a civil action, including allegations of bad
faith. Increases PIP benefits by $10,000 specifically for catastrophic injuries sustained in a car crash if the
injuries require treatment in an emergency room, trauma center, or as a hospital patient. Eliminates the application of a contingency risk multiplier to awards of attorney fees stemming from No-
Fault/PIP claims. Amends provisions relating to a demand letter sent by an insured (or assignee of an insured) to an
insurer by:
1) subjecting an insurer to triple damages for engaging in the unfair trade practice of failing to
pay valid claims until the insurer receives a pre-suit demand letter;
2) authorizing the court to apply a multiplier to its award of attorney fees under the lodestar
method when an unfair trade practice of denying claims has been established; and
3) requiring the Attorney General to investigate and initiate actions against an insurer in
these limited situations. Postpones the pending repeal of the No-Fault Law, from October 1, 2007 until October 1, 2012.

The bill creates law and makes other changes to existing law to:
Require motorcyclists, aged 16 to 20, to purchase medical payments coverage and property damage
liability coverage in the amount of $10,000 per coverage; and Amends various other laws relating to matters and criminal activities involving insurance fraud.

There is a fiscal impact to the private sector associated with implementing the bill. The bill currently does not
create a fiscal impact to the public sector. See the Fiscal Analysis & Economic Impact section of the analysis
for more detailed information.

The bill takes effect October 1, 2006.
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FULL ANALYSIS

I. SUBSTANTIVE ANALYSIS

A. HOUSE PRINCIPLES ANALYSIS:

Ensure Lower TaxesAn additional fine of $180 is added by the bill to the cost for a driver to reinstate
his or her driver license following a conviction of specified crimes relating to motor vehicle insurance
fraud.

Provide Limited GovernmentThe bill maintains the basic premise of Floridas Motor Vehicle No-
Fault Insurance Law by reenacting and amending several provisions relating to policyholder benefits
and legal actions resulting from auto claims.

Safeguard Individual Liberty and Promote Personal ResponsibilityFloridas laws still will require
all registered drivers to purchase a basic level of personal injury protection (PIP) and property damage
(PD) auto insurance to protect both the vehicle driver and other persons in the event of an auto
accident. Under the bill, motorcyclists, aged 16 to 20 also will be required to purchase similar vehicle
insurance coverage to pay for their own injuries and for damages caused to the property of others.

B. EFFECT OF PROPOSED CHANGES:
Background
1


In 1971, Florida became the second state in the country to adopt a no-fault automobile insurance plan.
2

The no-fault reform was offered as a viable replacement for the tort system as a means to quickly and
efficiently compensate injured parties in auto accidents regardless of fault. Several sections in the
Florida Insurance Code comprise Floridas Motor Vehicle No-Fault Insurance Law.
3
All those sections
of law are scheduled to repeal October 1, 2007 unless reenacted by the Legislature during its 2006
regular session, provided the reenactment takes effect for policies issued on or after October 1, 2007.
4


Floridas Motor Vehicle No-Fault Insurance Law (Current Provisions, Mandatory and Optional
Coverages, Tort Threshold, Financial Responsibility)

Under current law, motorists are required to purchase personal injury protection (PIP) and property
damage (PD) liability coverages. The no-fault coverage, referred to as PIP, provides $10,000 of
coverage for the following: payment of 80 percent of reasonable medical expenses, 60 percent for
disability and lost wages, plus a $5,000 death benefit. These benefits cover bodily injury sustained in a
motor vehicle accident, without regard to fault.
5
Personal injury protection covers the named insured,
relatives residing in the same household, persons operating the insured motor vehicle, passengers in
the insured motor vehicle, and persons struck by the insured motor vehicle.
6
This coverage also
provides the policyholder with immunity from liability for economic damages (medical expenses) up to
the $10,000 policy limits and for non-economic damages (pain and suffering) for most injuries.
7



1
A detailed history of the No-Fault Law, its current provisions, and other similar information is available in Review of Floridas No-Fault
Automobile Insurance Law; House Insurance Committee; February 2006; available at:
http://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?PublicationType=Committees&CommitteeId=2246&Session=2006&
DocumentType=Reports&FileName=Review%20of%20FL%20auto%20ins%20law.pdf
; viewed March 24, 2006.
2
Chapter 71-252, Laws of Florida.
3
The affected sections are: ss. 627.730, 627.731, 627.732, 627.733, 627.734, 627.736, 627.737, 627.739, 627.7401, 627.7403, and
627.7405, F.S. Insurers are authorized to provide, in all policies issued or renewed after October 1, 2006, that such policies may
terminate on or after October 1, 2007.
4
Chapter 2003-411, LOF, s. 19.

5
Section 627.736(1), F.S., 2005.
6
Id.
7
Section 627.736(3), F.S., 2005.

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Specifically, the immunity provision protects the insured from tort actions by others (and conversely, the
insured may not bring suit to recover damages) for pain, suffering, mental anguish, and inconvenience
arising out of the vehicle accident, except in the following cases:

1. significant and permanent loss of an important bodily function;
2. permanent injury within a reasonable degree of medical probability, other than scarring or
disfigurement;
3. significant and permanent scarring or disfigurement; or
4. death.

This is known as the verbal threshold which means that suits for pain and suffering may commence
only if injuries meet these levels of seriousness.
8


Current law also requires vehicle owners to obtain $10,000 in property damage (PD) liability coverage
which pays for the physical damage expenses caused by the insured to third parties in the accident.
Additionally, under Floridas Financial Responsibility law, motorists must provide proof of ability to pay
monetary damages for bodily injury liability (BI) and PD liability after motor vehicle accidents or serious
traffic violations. The minimum amounts of liability coverage are $10,000 in the event of injury to one
person, $20,000 for injury to two or more persons, and $10,000 property damage, or $30,000 combined
single limits.
9


Many drivers purchase optional coverages in addition to mandatory insurance including bodily injury
liability, uninsured motorist, collision, comprehensive, medical payments, towing, rental reimbursement
and accidental death and dismemberment. Insurers may not require motorists to purchase any of these
optional coverages.
10


The Legislature has amended the No-Fault Law at least 50 times since the law was enacted in 1971,
however, the law has not been reorganized during the 35 year period since its enactment.
11
Since the
mid-1990s, lawmakers, insurers, and others have become aware that fraud and abuse are seen
frequently in PIP claims. As recently as 2001 and 2003, the Legislature acted to curtail fraud in auto
insurance claims.
12
However, according to insurers and investigators of the Division of Insurance Fraud
of the Department of Financial Services (DFS), these reforms have not gone far enough in resolving
the problems within the no-fault system which include fraud, abuse, inappropriate medical treatment,
inflated claims, inadequate compensation to victims, increased premiums, and the proliferation of law
suits.
13


As a result of these concerns, in 2003 the Legislature repealed the Florida Motor Vehicle No-Fault Law,
effective October 1, 2007, unless reenacted by the Legislature during the 2006 Regular Session and
such reenactment takes effect for policies issued or renewed on or after October 1, 2006.
14
In
preparation for the pending repeal of the No-Fault Law, both the Senate and the House of
Representatives directed their respective standing committees having jurisdiction over insurance
matters to review the laws before their scheduled repeal.

In the House, the Insurance Committee completed the review, including dedicating all or most of three
committee meetings to hearing from parties interested in the future of the No-Fault Law. A report of the

8
Section 62