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You Can Drop PIP -- for Now: Many Drivers Are Confused About What Auto Coverage They Need Until the No-Fault Law Returns in January

Oct 13, 2007

By Beatrice E. Garcia, The Miami Herald

Oct. 14--Gainsco Auto Insurance, which sells nonstandard coverage

Some drivers breathed a sigh of relief that Florida's no-fault auto insurance law will return in January.

Others are just happy they can skip buying some coverages until the new year.

But the bottom line for both camps: Buying extra coverage to cover medical bills from an auto accident is up to each driver. But agents, insurers and attorneys say consumers should review their policies and make sure they have sufficient insurance to cover their needs.

The new no-fault law, signed by Gov. Charlie Crist Thursday, will require drivers to buy at least $10,000 in personal injury protection, or PIP, starting Jan. 1.

Consumers who pay for their own health insurance or have it provided through work could save some money by not purchasing PIP for three months.

Paul Jess, president of the Florida Justice Association and lobbyist for the trial attorneys, has temporarily dropped his PIP coverage because he has health insurance.

But Jess urges every driver to carry adequate bodily injury liability, which covers medical bills for another driver and passengers if you cause an accident, and uninsured motorist coverage, which pays your bills if you have an accident with a driver that carries no insurance.

Some consumers like Jose Peralta of Miami would prefer not to buy personal injury protection at all to save the money: "Anything that's cheaper is good for me because I'm retired and have a fixed income." But he knows he will have to add it when his policy renews next year.

Insurers have to notify their policyholders by Nov. 15 that PIP coverage will be added to their policies come January and the policy premium will increase -- generally about $200 a year.

"A lot of policies are being sold without PIP," says Michael Johnston, Southeast region president for Gainsco Auto Insurance, a Texas-based company that sells nonstandard coverage throughout Florida.

"We're selling the minimum required. People became informed pretty quickly and many realized they didn't have to buy PIP," he adds, noting the company is offering medical payments coverage that drivers can buy right now if they don't have health insurance to cover medical care after an accident.

"Those drivers that purchase insurance only because they have to will want to wait until Jan. 1 to buy PIP, no matter what you explain to them. Those that want protection ask more questions, and want to keep their PIP and already have bodily injury coverage," said Arnie Vasquez, who owns All Motors Insurance Agency in Miami.

Vasquez is also the president of the Specialty Agents of Florida, a trade group that represents many agents who are with the non-standard auto insurers, those that tend to cover younger drivers, ones with bad credit histories or spotty driving records. These agents were big proponents of revamping and renewing the no-fault auto insurance law.

Pablo Conde, president of A&A Underwriters, an agency in West Miami-Dade, says many business owners aren't big fans of PIP.

Although the coverage will again be required on commercial vehicles starting Jan. 1, businesses have to carry workers compensation insurance, which covers injuries on the job, including auto accidents.

"Many say they don't really need it, even though PIP benefits would cover the first $10,000 in medical bills" for an employee involved in a car accident at work and then workers comp benefits kick in, says Conde.

To register a vehicle in Florida, drivers still are required to have property damage liability, which covers damage done to another person's car or property in an accident.

Once the new law was signed, insurers were again required to notify the Department of Highway Safety and Motor Vehicles when a driver cancels a policy or lets it lapse so the license can be suspended. There's a $150 fee to reinstate a driver's license. That fine jumps to $250 for a second offense and $500 if a license is revoked within a three-year period.

Ironically, drivers who had their licenses suspended before Oct. 1 for not carrying PIP and property damage insurance as required by the old law got a gift when the law expired. The suspension was rescinded. But they aren't in the clear entirely.

With the new law in place, Dave Westberry, deputy executive director for DHSMV, says the agency can now actively track those drivers who aren't carrying property damage coverage.

Westberry says it has been this enforcement mechanism that has allowed Florida to have a relatively low number of uninsured drivers -- about 5 percent last month out of the more than 15 million drivers in the state.

Alex Chavez, district manager for AAA Auto Club South in Miami-Dade, one of the largest independent insurance agencies serving consumers, says there's definitely confusion among customers about these three months. But it's not chaotic yet.

"Many are asking about extra coverages. We're explaining to them what [the law requires] now and what will be needed in January," he said.

But Chavez expects more consumer confusion if they're involved in an accident before year-end and realize the no-fault provision of the new auto insurance law doesn't apply until Jan. 1.

Under a no-fault system, insurers will pay for damages to a vehicle and cover the initial medical -- here in Florida that's what PIP covers -- without deciding who caused the accident. If an insurer later establishes that its policyholder isn't responsible for the accident, it will sue the other driver's insurer to recover what it had paid or for additional damages.

The benefit of such a system for drivers is that they are shielded from lawsuits for relatively minor accidents and their damages are paid quickly by their insurers.

But under Florida's new no-fault law, the tort immunity doesn't kick in until Jan. 1. So any accident, even a minor one, could result in a lawsuit and a court battle.

Jess noted that one provision in the new law states that if both drivers are carrying PIP, then the tort immunity applies to them for an accident. Yet, Jess believes the constitutionality of that provision could be challenged. The upside is that since it's in place for less than three months, a court challenge may never materialize.

David Durkee, a partner with the Coral Gables law firm of Roberts & Durkee who has represented auto accident victims, says also without the no-fault law in effect, the higher standard it maintains for proving a permanent injury is gone until Jan. 1.

"A person could be encouraged to file lawsuit if they're involved in an accident and they have to cover medical bills and lost wages," says Durkee.


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