Proposals for settlement in PIP Cases: Should U.S. Security Ins. Co. v. Cahuasqui be overturned?

• Author: Heath, Robert N., Jr.
• Position: Personal injury protection

In U.S. Security Ins. Co. v. Cahuasqui, 760 So. 2d 1101 (Fla. 3d DCA 2000), the Third District Court of Appeal held for the first time that a proposal for settlement served pursuant to F.S. [sections] 768.79 and Fla. R. Civ. P. 1.442 is applicable to personal injury protection (PIP) cases. Thus, for the first time in Florida, an insured bringing an action against his or her insurance company for denial of PIP benefits faces the unsettling prospect of having to pay substantial attorneys' fees and costs if the claim is unsuccessful. This article will discuss the unique nature of the PIP statute in Florida, why Cahuasqui conflicts with the statute, and why the decision should be overturned on appeal.

History of the PIP Statute

The Florida Legislature enacted the no-fault insurance statute in 1973.(1) Prior to the enactment of no-fault in Florida, injured parties could sue in tort regardless of the amount of the claim and the permanency of their injuries. The PIP statute provided immunity for certain tort claims in exchange for a different system of insurance coverage. When the constitutionality of the no-fault statute was challenged, the Florida Supreme Court upheld it and explained that, in exchange for the loss of the right to recover for pain and suffering in cases in which the statutory threshold is not met, the injured party is "assured a speedy payment of his medical bills and compensation for lost income from his own insurer, even when the injured party himself was at fault."(2) The Supreme Court reasoned that the legislature had provided an acceptable right in exchange for the rights taken away by the new statute. In subsequent decisions, Florida courts held that the purpose behind the PIP statute was to provide the injured party "swift and virtually automatic payment so that the injured insured may get on with his life without undue financial interruption.(3) Thus, if not for the "swift and virtually automatic payment" of a claimant's medical bills, the no-fault statute would be unconstitutional.

Nature of PIP Litigation

PIP cases by their very definition involve disputes over small amounts, frequently in the hundreds of dollars. The damages in such cases do not generally justify hiring counsel to litigate with the insurance company, despite the merits of the issues involved. The PIP statute, however, provides that in any dispute brought against an insurer under its provisions, "the provisions of [sections] 627.428 shall apply."(4) Section 627.428(1) provides that:

[U]pon the rendition of a judgment or decree in any courts of this state against an insurer and in favor of any named or omnibus insured ... the trial court ... shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which recovery is had.

Thus, the legislature gave the PIP claimant a powerful weapon with which to fight an insurer's denial of benefits by requiring that the successful claimant's attorneys' fees be paid by the insurance company. However, the significance of the provision is realized in the fact that the reverse is not true. An unsuccessful claimant of PIP benefits is not required to pay the insurance company's attorneys' fees. The Florida Supreme Court recognized the uniqueness of the statutory scheme, terming it a "one way street offering the potential for attorneys' fees only to the insured or beneficiary."(5)

Recent Decisions

In 2000, the Florida Supreme Court decided two PIP cases which further solidified the strong policy behind the PIP statute. In...