Gov. Jeb Bush has vetoed SB 2114, a bill passed by the Florida Legislature, that would have extended the state’s no-fault auto insurance law for an additional two years. The PIP law will sunset Oct. 1, 2007, when Florida will return to a traditional tort system for settling auto claims.
The governor’s announcement ends three weeks of speculation about how he would react to SB 2114, which was enacted a week before the Legislature adjourned on May 5.
According to the American Insurance Association, after amending the law more than 50 times since no-fault was first instituted in Florida in 1971, in 2003, the Legislature passed and the governor signed a bill repealing the no-fault law, effective Oct. 1, 2007. The veto of SB 2114 means the repeal date will remain the same.
Soon after SB 2114 was approved, industry associations contacted the governor’s office to voice their opposition to the bill and urged Bush to veto it.
“Gov. Bush saw the issue the way AIA did: Without significant reform, the no-fault law was not worth saving,” Cecil Pearce, AIA vice president, Southeast Region said. “AIA and others in the industry have for several years urged legislators to pass substantive reforms aimed at removing the ongoing, growing fraud and abuse from the no-fault’s personal injury protection system. Otherwise, the true beneficiaries of no-fault continue to be trial lawyers and shady medical providers, not consumers.
“AIA came to the conclusion last fall that key reforms necessary to fix the system, such as attorney fee reform and a medical fee schedule, were not achievable this session,” Pearce explained. “That view turned out to be correct. Instead, the Legislature decided to delay the law’s effective repeal date to Jan. 1, 2009.”
The National Association of Mutual Insurance Companies agreed, calling the governor a “courageous leader.”
“In vetoing Senate Bill 2114, Gov. Bush has shown us that a courageous leader isn’t afraid to back away from making a tough decision,” David Reddick, NAMIC senior State Affairs manager said.
As enacted, Senate Bill 2114 extended the sunset provision to Jan. 1, 2009, appropriated $1 million to fight insurance fraud and simplified the crash reports. The bill passed the Senate 38 to 0 and the House on a 118 to 1 vote, the lone opponent being Rep. Don Brown, R- DeFuniak Springs.
From the outset, Reddick said NAMIC opposed any attempts to try to amend the current no-fault statute.
“It became clear to us and to our members early in the legislative process that amendments being offered by other stakeholders would not bring about true reform of the current no-fault system,” Reddick said. “Our members hoped lawmakers would come to the realization that after 35 years, the current system was broken and couldn’t be fixed, but the legislation that was sent to the governor didn’t solve the problem.”
Reddick said one reason why lawmakers finally agreed to extend the no-fault sunset two years was because they became sidetracked with amendments to Senate Bill 1980, the comprehensive property insurance bill to bail out Citizens Property Insurance Corporation, the state’s insurer of last resort.
“There’s no question lawmakers faced a challenging task with Senate Bill 1980, and that they produced a pretty good bill, but the problems with the no-fault system deserved that same kind of attention,” Reddick said.
Reddick said the next challenge for insurers will be getting policyholders ready to move to a tort-based system of auto insurance. Under the current law, renewal notices describing how the new system will work will begin being sent out this October.
“Educating a generation and a half of drivers who have lived under the current no-fault system will be a challenge, but one that our members will be looking forward to,” Reddick said.
“We commend Gov. Bush for being true to his word and vetoing no-fault legislation that did not contain substantial reforms,” said William Stander, assistant vice president and regional manager for Property Casualty Insurers Association of America. Senate Bill 2114 did absolutely nothing other than perpetuate a system that, according to the Fifteenth Statewide Grand Jury, is riddled with fraud and abuse.”
Just last fall, the Florida Senate Banking and Insurance Committee conducted a study of the no-fault law to assess the system. The report looked at affordability, availability, provision of benefits including litigation costs, adequacy of coverage and loss costs. It concluded that Florida’s no-fault system had serious problems. The report noted that high medical costs and utilization of medical services continue to drive personal injury protection (PIP) costs. In addition, incidents of PIP fraud and abuse, primarily involving health care fraud are at an all time high.
Although the system has serious problems, PCI worked diligently to identify and pass meaningful reforms that would restore no-fault to its original purpose. “We believed the time had not yet come to scrap the no-fault system in favor of a traditional tort-based system,” said Stander. “PCI called for a medical fee schedule and utilization controls, attorneys’ fee reform, strengthening the verbal threshold, bad faith reform and many other important revisions. However, we were very clear that simply re-enacting no-fault without making significant reforms would only perpetuate the problems. Due to the utter lack of reforms in the legislation, we urged Gov. Bush to veto the bill.”
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