TALLAHASSEE — Amid a flood of assignment of benefits schemes that have insurance companies stretched thin, auto insurance reform is being sought to guarantee justice for those injured in car crashes, but this reform has been met with a great deal of pushback from insurers. 

The PIP (personal injury protection) mandate, which is designed to protect the injured and hold responsible the at-fault parties, was recently pushed to be repealed, which would have removed the need for drivers to have PIP insurance, and in its place would have required a minimum coverage for at-fault coverage.

William Large, President of Florida Justice Reform Institute, believes that PIP and Bad Faith reform go hand-in-hand.
William Large, President of Florida Justice Reform Institute, believes that PIP and Bad Faith reform go hand-in-hand. | Florida Justice Reform Institute

"PIP is a no-fault system, it was advocated for by a well-known law professor who went about the country in the late 1960s and early 70s and said 'there's too many auto accidents and we should remove liability from the auto accident equation and replace it with a no-fault system,' and in Florida, that is known as PIP," William Large, president as the Florida Justice Reform Institute, told Florida Record. "At its height, about 30 state adopted a similar no-fault system and the idea was if there was a car accident, principles of fault would not be implicated, but rather  the no-fault insurance would pay on a claim."

In Florida, Large said, the limits for PIP are $10,000, which can become a challenge when considering that when the insurer is required to pay, there are often baseless litigations associated with the no-fault cases and attorneys' fees awards, a very similar set of factors to the assignment of benefits situation.

"There have been numerous attempts to fix PIP," Large said. "The Florida Justice Reform Institute believes if you're going to try to repeal PIP and go to a liability based system, there is something else that also needs to be fixed."  

That other element is third-party bad faith, which is when an insurance company fails to pay a claim that they should have paid. 

"Oftentimes, bad faith lawsuits involve a first party, the insured. A third party is someone that is injured by the insured. In Florida, we have a problem with third-party bad faith litigation," Large said. 

"It usually presents itself when three factors are present. [They are] 1) low insurance policy limits, such as an insurance policy that might be $25,000 per incident and $50,000 in aggregate; 2) extraordinary damages, such as a death, a paraplegic or a quadriplegic; and 3) clear liability."

Large added that the combination of these three usually means the plaintiff's attorney is not willing to settle for low limits. Instead, they want to move forward with a liability case in order to get a big verdict, which, in a case with massive damages, could easily be a multimillion-dollar verdict, creating a problem.

"They want to potentially get a $10 million verdict on a $25,000 policy," Large said. "When that happens, the issue is who pays the difference between the gap. Either the insured would pay that or the insurer would pay it. In the third-party bad faith case, what they are trying to do is claim that the insurance company mishandled the claim in the liability phase and they should be the entity responsible for paying that gap."

In Florida, many cases fit this scenario, causing insurance companies that are trying to settle these cases as quickly as possible to avoid paying the exorbitant gap, which would be created by a larger liability case. The problem with H.B. 19, Large noted, was that it tried to repeal PIP without addressing the issue of third-party bad faith

"They [insurers] realize there is liability, they realize they are on the hook for their promise, and that promise if for the policy limit," Large said. "We believe that system needs to be reformed if you are going to repeal PIP and move to a pure liability system. Repeal PIP, but you also must fix third party bad faith."

Numerous attorneys and experts declined to speak with Florida Record due to the sensitivity of the topic and the complications that allowing counsel comment could potentially cause. 

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