Forum Concludes Reform of Fla. No-Fault System a Must

Far from being merely an insurance industry concern, no-fault fraud in Florida is a problem that affects every auto insurance consumer in the state. According to the National Association of Independent Insurers (NAII), experts at a recent NAII-sponsoered meeting to review the beleaguered system agreed that the current system should be reformed or repealed.

“The personal injury protection (PIP) fraud problem in Dade County is horrific. In Miami, more than 80 percent of PIP claims are fraudulent,” said Bob Neumann, director of the Florida Department of Insurance’s fraud division. “What we’re seeing in South Florida is no different than what organized crime does in Detroit.”

Neumann, who has been in law enforcement for more than 30 years, including a stint with the FBI, said Florida’s criminal justice system is not equipped to handle the flood of fraud cases in the state, and that legislative reform is needed to stem the tide of fraud.

From 1994 to the present, the Division of Fraud has made 815 fraud arrests, more than half of which were related to PIP fraud. The arrests included more than 200 patients, 37 “runners,” 24 clinic employees, 26 clinic owners, and 14 doctors. One operation racked up more than $2 million in fraudulent claims. But simply arresting the perpetrators doesn’t solve the problem, he said. “As in organized crime, if the boss is arrested, someone else steps in to take his place,” Neumann noted.

In the Miami area, PIP fraud has become a growth industry, with crooked chiropractors working hand in glove with “runners,” who steer accident victims to their clinics for “treatment.” Clinics that once paid runners $300 are now offering them $1,000 to tap into an unlimited pool of individuals who are not being treated for anything, while the clinic bills the insurance company.

The problem is exacerbated by the fact that under current Florida law, insurance fraud is rarely punishable by jail time. “And until these crooks see jail, we’re not going to have a major impact on the problem,” Neumann said. Among the more egregious examples: a former police officer who now runs a clinic buying police reports to solicit “patients,” and a bus driver who fraudulently claimed brain damage, collected more than $750,000, and ended up doing community service as punishment.

Although the Florida legislature passed reform legislation in 1998 and 2001, the law did not address the issues of attorney fee multipliers and expanding the dispute resolution process, two elements that could turn the tide of no-fault fraud.

Under current law, attorneys representing plaintiffs in auto injury cases are eligible to have their fees multiplied by several factors if the cases they handle are determined by a judge to so qualify. This discourages settlements and tends to encourage more litigation and extremely high attorney fees. For example, one insurer attending the forum had received notification from an attorney about suit being filed from a 1999 accident, claiming the insurer owed the doctor $9.47 – and that the attorney’s pretrial fee was almost $2,000.

Other elements that could help fine-tune fraud legislation include the implementation of a full fee schedule, managed care, requiring a demand letter on reductions or denial, and expanded time for insurers to launch an investigation on suspected fraudulent claims, Neumann said.

Neumann noted the fraud division is backing four legislative proposals to fix Florida no-fault:

• Making PIP solicitation a second-degree felony punishable by 10 years in jail;
• Making direct PIP solicitation within 60 days of an accident a third-degree felony punishable by five years in jail;
• Making PIP solicitation after 60 days a third-degree felony if solicitation is in person or by phone at the person’s residence; and
• Making the planning and staging of auto accidents a second-degree felony.

Insurers participating in the forum agreed that unless legislative reform is forthcoming, many companies could stop writing PIP coverage in Florida altogether. “Our members agree that the Florida no-fault is workable if it can be adequately reformed, including measures aimed at significantly reducing the abuse and fraud which is so prevalent in the current system.”

Taylor said the insurance industry is encouraged by Florida Sen. Jim King’s recent appointment of Senators J.D. Alexander and Lesley Miller as chair and vice chair of his select committee on auto insurance and PIP reform. “The fact that such committed and experienced legislators are aware of the PIP fraud problem and are determined to find a solution is a significant opportunity for reform,” he added.

Topics Florida Fraud