It may be called no-fault, but car crash victims who sue insurance companies over personal injury coverage and lose can be required to pay the insurers’ legal fees in some cases, the Florida Supreme Court has ruled.
The justices ruled 5-2 that insurers may be entitled to the fees, often many times larger than claims, if victims earlier had rejected settlement offers. The high court unanimously decided, however, the fees cannot be ordered if the settlement offers are ambiguous.
“It’s a giant loss for every insured motorist in Florida,” said Don Hockman, senior partner of a law firm that represented an Orange County woman in the case against State Farm Mutual Automobile Insurance Co.
State Farm lawyer Kenneth Hazouri disagreed. He called the decision a win for consumers because it gives insurers an important tool to discourage fraudulent claims that can cost them millions of dollars every year.
“Who’s going to pay for that? The consuming public through increased premiums,” Hazouri said.
In a sharp dissent, Justice Harry Lee Anstead, wrote that the majority opinion will undermine no-fault, which is designed to quickly help injured parties no matter who is to blame. Justice Peggy Quince concurred.
“One can only hope that the Legislature will recognize that its work has been undone, and act promptly to restore the balance of rights of citizen-insureds,” Anstead wrote.
He contended the majority had “essentially eviscerated” part of the no-fault law that exempts claimants from paying insurers’ legal fees.
That provision only applies if insurers had not offered settlements before they were sued, Justice Raoul Cantero wrote for the majority. Otherwise, a general “offer of judgment” law calls for legal fees to be paid by any losing party in many cases.
The opinion upheld a series of appellate decisions including one that nevertheless reversed the award of $23,199 in legal fees to State Farm. Shannon Nichols, who claimed she had been injured in a 1996 crash but lost her lawsuit, didn’t have to pay because State Farm’s settlement offer was ambiguous, the 5th District Court of Appeal ruled.
An insurer is entitled to fees when it wins a no-fault case only if the insured recovers nothing at trial or had rejected an offer at least one-third greater than damages awarded, Cantero wrote.
“In other words …, the plaintiff either must have a very weak case, or must reject a very generous offer,” Cantero wrote.
That still will have a chilling effect on legitimate claims because few attorneys are willing to represent clients who stand to lose so much and gain very little, Hockman said.
Trial judges have been ordering losing plaintiffs to pay the fees since the first apppellate ruling in 2000, Hazouri noted.
“There hasn’t been any chilling,” he said. “Lawsuits are being filed all the time.”
Basic Personal Injury Protection, or PIP, that all motorists must purchase provides a maximum of $10,000 for medical expenses and lost wages. Legal fees can be much more.
“It may be the death knell for PIP,” Hockman said.
PIP may be on the way out, anyway, after a veto Wednesday by Gov. Jeb Bush. The no-fault law is set to expire on Oct. 1, 2007 unless re-enacted. Bush vetoed a bill that would have extended the deadline until Jan. 1, 2009 because it lacked cost-saving and anti-fraud provisions.
Some insurers including State Farm have lobbied to let no-fault expire unless modified to reduce fraud. The Legislature will have one more opportunity to deal with it next year before the 2007 deadline.
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