The advent of paper IMEs in no-fault claims: win they be a solution or a problem?

• Author: Clermont, Woody R.

In 1971, Florida made monumental changes in the way that automobile insurance claims were handled; the legislature enacted the Automobile Reparations Reform Act. (1) The purpose of this act was to provide Floridians with no-fault insurance that would provide swift payments of certain types of claims, without regard to fault. Written into the statute for the benefit of the insurers was a section designed to control the cost of personal injury protection (PIP) claims, known as an independent medical examination (IME), contained in F.S. [section]627.736(7)(a). (2) Insurers could require their insured to attend a compulsory medical examination with a doctor of their choosing. If an insured unreasonably refused to attend, an insurer could withdraw from providing coverage and would no longer be liable for subsequent benefits under F.S. [section]627.736(7)(b). (3)

Many medical providers, however, began using a practice known as bulk billing. Providers would treat the claimants for billed amounts near the policy limits, then submit the bills all at once before an insurer was notified of the loss. Bulk billing deprived many insurers of their opportunity to obtain the proof they needed to contest the validity of any rendered treatment. It also deprived insurers of their statutory rights to rescind coverage, due to an insured's unreasonable failure to cooperate with the IME requirement. In response to an increasingly powerful insurance lobby, the PIP statute has been amended numerous times over the years. The amendments have placed greater and greater restrictions on treatment providers to curb the aforementioned abusive practices of bulk billing, skirting the IME requirement, and impeding the natural course of an insurer's claim investigation process. (4) Some of these reactionary changes have led to dramatic improvements, (5) and others have called into question whether the no-fault law truly still serves its original purpose and remains constitutional. (6)

At the present, only 12 states mandate no-fault insurance: Delaware, Florida, Hawaii, Kansas, Massachusetts, Michigan, Minnesota, New York, North Dakota, Oregon, Utah, and Texas. (7) No-fault insurance may be rejected by motorists in the "choice" states of Kentucky, Pennsylvania, and New Jersey. (8) Could there be a reason why 35 other states choose not to offer no-fault insurance at all? Perhaps Florida motor vehicle owners may find that the current quid pro quo is not what Floridians originally "bargained" for. With the advent of legislative and judicial approval of insurers coming to rely on "paper IMEs," the present-day version of PIP may be an unconstitutional deprivation of certain rights.

The Origins of Florida PIP

In 1971, Massachusetts became the first state to pass legislation that brought no-fault automobile insurance to its citizens. Later that year, Florida became the second state to do so. (9) After this time, as many as 20 states came to require no-fault insurance, but five subsequently went on to repeal those requirements. (10) The Florida Legislature, in coming to its decision to provide no-fault insurance for Florida citizens, elected to do so to accomplish several public policy goals: 1) assure that persons injured in vehicular accidents would be directly compensated by their own insurer, even if the injured party was at fault; (11) 2) lessen court congestion and delays in court calendars by limiting the number of law suits; (12) 3) end the inequities of recovery under the traditional tort system; (13) and 4) lower automobile insurance premiums. (14)

In exchange, an accompanying tort exemption was enacted. (15) This exemption would allow liability insurers to strike down any claims for reimbursement of bills for medical treatment rendered greater than 20 percent. The exemption also applied to claims for noneconomic damages (pain and suffering) submitted to carriers under the bodily injury portion of the liability policy that could not pass a threshold requirement--suffering loss of a limb, permanent loss of a bodily function, permanent injury within a reasonable degree of medical probability, or permanent scarring or disfigurement. (16) In 1971, the legislature had similarly attempted to create no-fault insurance with respect to claims for property damage. (17)

The Florida Supreme Court addressed the constitutionality of the no-fault property damage statute in the case of Kluger v. White, 281 So. 2d 1 (Fla. 1973). The provisions of F.S. [section]627.783 provided that motorists could elect basic coverage (liability only) and full coverage (liability and no-fault insurance). (18) A damaged party involved in an automobile accident could not pursue a property damage claim against an at-fault tortfeasor unless the amount of damages exceeded $550. Kluger's car would cost $774.95 to repair, but that exceeded the fair market value (FMV) of the car, which was only $250. Her damages had to be limited to the FMV by law (19) and, thus, were below the monetary threshold, barring her recovery. (20) The Florida Supreme Court held that depriving her of due process accordable to the $250 FMV amount violated her equal protection rights under Fla. Const. art. I, [section]2, and the U.S. Const. amend. XIV, [section]1. In so doing, the legislature deprived her of access to courts under Fla. Const. art. I, [section]21. (21) The Florida Supreme Court subsequently held that F.S. [section]627.738 was unconstitutional as written, because the legislature eliminated a constitutionally protected remedy without providing a reasonable alternative. (22)

In Lasky v. State Farm Ins. Co., 296 0So. 2d 9 (Fla. 1974), appellants raised similar arguments contending they were deprived of their rights guaranteed under the Florida and U.S. constitutions, because F.S. [section][section]627.736 and 627.737 denied the parties access to courts--a violation against equal protection. Nonetheless, the Florida Supreme Court upheld the constitutionality of the Florida no-fault PIP law. (23) To do so, the court struck the portion of the statute, which imposed a $1,000 threshold. (24) In this way, it was able to distinguish its treatment of PIP law from Kluger. (25) The court held that

[i]n exchange for the loss of a former right to recover--upon proving the other party to be at fault--for pain and suffering, etc., in cases where the thresholds of the statute are not met, the injured party is assured a speedy payment of his medical bills and compensation for lost income from his own insurer, even where the injured party was himself clearly at fault. (26) In so doing, the Florida Supreme Court sent a clear signal to the public: PIP is constitutional and it is here to stay. (27)

The First District Court of Appeal, in Dunmore v. Interstate Fire Ins. Co., 301 So. 2d 502 (Fla. 1st DCA 1974), recognized that the quid pro quo turned on the assurance of a swift and speedy payment of medical bills and lost wages. Dunmore had submitted an application for PIP benefits, but the insurer denied the claim. Dunmore filed suit and secured a default judgment, which was later set aside by the trial court. The insurer acknowledged that it was responsible for making the payments, but argued that attorneys' fees, as provided by F.S. [section]627.736, were not due. The district court held that the insurer was responsible for the paying the attorneys' fees and costs as "[t]o rule otherwise would render the recently enacted 'no-fault' insurance statute a 'no-pay' plan--a result we are sure was not intended by the legislature." (28) For the nearly three decades that would follow, it would seem that the decisions of the Florida courts had followed in line with Dunmore's reasoning that a reasonable alternative to the rights that Florida citizens lost, required that PIP did not devolve into a "no-pay" plan.

The Initial Prohibition Against "No Pay"

The Third District Court of Appeal in Government Employees Ins. Co. v. Gonzalez, 512 So. 2d 269 (Fla. 3d DCA 1987), continued to reiterate the mandate that an insurer cannot unreasonably delay and avoid its burden to pay claims timely. Gonzalez had been seriously hurt in an automobile crash, and the hospital had a lien for its bills, but Gonzalez's attorney requested GEICO reserve the entirety of the $10,000 in PIP benefits for the payment of Gonzalez's lost wages. GEICO could not disregard a hospital lien, (29) nor could it disregard a request to reserve benefits for lost wages. The district court observed that GEICO could have made a check payable to both the insured and hospital or filed an interpleader action within the 30 days (30) to resolve the dilemma. (31) The Third District concluded that the purpose of the legislative scheme is to "provide swift and virtually automatic payment so that the injured insured may get on with his life without undue financial interruption" and that an insurer "cannot be permitted simply to stonewall its insured by retaining --and drawing interest upon--payments to which it is admittedly not entitled." (32)

Eight years later, in Crooks v. State Farm Mut. Auto. Ins. Co., 659 So. 2d 1266, 1268 (Fla. 3d DCA 1995), the Third District was faced with a situation in which a bicyclist named Michael Crooks had been struck by a motorist insured by State Farm. State Farm refused to honor the claim, insisting that Crooks first submit an approved "in-house" PIP application form to State Farm, but Crooks failed to do so. Crooks filed suit after three months. State Farm quickly paid the claim thereafter and argued that the breach was technical and that no attorneys' fees were due. Citing Dunmore, the Third District reversed the trial court, holding that to create an exception by allowing State Farm to refuse to honor the claim for failure to use its approved form, contravened the intent of the statute which is to "guarantee swift payment of PIP...