Florida Battles Car Insurance Fraud

Richard Burnett | Sentinel Staff Writer
Posted June 23, 2006

Florida's political leaders collided this spring over what to do about auto-insurance fraud.

Legislative proposals fell by the wayside or were vetoed by the governor. A few small measures await his signature. Meanwhile, a survey released this week indicates the problem here is as bad as ever.

Six cities in Florida -- more than from any other state -- made the latest ranking of the 25 cities with the most questionable auto-insurance claims last year, according to the National Insurance Crime Bureau, an insurance-industry group based in New York.

With 244 suspect cases in 2005 and early 2006, Orlando came in sixth, up two spots in this year's study, which is conducted annually. Miami came in third, with 588 cases. Tampa, Hialeah, Fort Lauderdale and Jacksonville also made the top 25 metro areas.

Industry officials say Florida has done a much better job recently of prosecuting auto fraud -- its conviction rate has been tops in the U.S. in recent years. But the problem refuses to go away.

"Florida has some of the worst auto-insurance fraud problems of any state," said Frank Quiggle, a spokesman for the Coalition Against Insurance Fraud, a watchdog group that comprises consumer advocates, insurers and law enforcement agencies.

"The fraud fighters have mounted an energetic response," he said, "but they need more effective tools to encourage prosecutions and increase the odds of conviction."

Florida's no-fault insurance law is widely blamed for the problem. It requires all car owners to carry $10,000 in personal-injury coverage, and it requires insurers to pay claims up to that amount regardless of who's at fault in an accident.

When the law was passed in 1971, it was intended to reduce the number of personal-injury lawsuits and a glut of uninsured drivers seeking medical treatment.

But insurers say the personal-injury protection, or PIP, law created a system that fraud rings have easily exploited over the years, staging accidents, operating sham injury-treatment clinics, and filing billions of dollars' worth of bogus medical claims. Such operations employ "runners" who recruit participants for staged collisions, and hire corrupt clinics to process the bogus medical claims.

Certain provisions of the Florida law are particularly troublesome, insurers say, such as the requirement that personal-injury claims must be paid within 30 days, which gives insurers little time to investigate suspicious cases.

Auto-insurance fraud generates losses of about $30 billion annually, including more than $1 billion a year in Florida alone, according to industry estimates. Those losses result in higher premiums for all auto-insurance customers, the industry says -- an additional $250 or more a year per customer.

A dozen other states also have PIP laws, and most of them have run into similar problems. Colorado, for example, repealed its PIP law three years ago, with mixed results: Auto-insurance rates fell an average of 20 percent or more, and new insurers entered the market, but health-insurance rates increased as hospitals ended up treating more uninsured motorists.

Insurers and consumer advocates have found some rare common ground in criticizing Florida's no-fault program. Both have pushed for legislation that would close the law's loopholes, step up enforcement efforts, and toughen sentences for those convicted of fraud.

The original PIP law was "a great idea -- to make people more responsible for their medical care," said Walter Dartland, a former assistant state attorney general who is now director of the Tallahassee-based Consumer Federation of the Southeast, a nonprofit advocacy group.

"But now all these people are jumping in and treating it like a gold mine, filing claim after claim for $10,000," he said. "Florida PIP law is just not going to work, unless we have strong anti-fraud efforts to root these people out, strong requirements as to who can provide PIP services, and mandatory sentencing -- not probation -- so they won't keep ripping people off."

Florida lawmakers have considered reforming or even killing the no-fault system. Five years ago, the Legislature stiffened penalties for those convicted of fraud, and tightened licensing requirements for injury clinics.

Legislators took up the issue again this year, with the no-fault law set to automatically expire in October 2007. They passed a controversial reform bill that would have extended the no-fault provisions to 2009 while providing some additional money to improve enforcement. Gov. Jeb Bush vetoed the measure, however, saying it didn't go far enough. With the law scheduled to sunset in about 15 months, the Legislature is expected to revisit the issue next spring.

Several other anti-fraud bills with ties to the no-fault program still await Bush's signature. One would try to bar the so-called runners from gaining access to police reports showing the names of traffic-accident victims. Another would toughen penalties for "paper accident fraud" -- an increasingly popular crime that relies on forged documents and claims involving fictitious accidents.

Florida regulators say they have made progress in fighting the problem. Hundreds of arrests have knocked many perpetrators out of action in recent years.

Almost 300 people have been jailed since mid-2005 on auto-fraud charges, up 43 percent from the previous 12-month period, according to the latest figures from the Florida Department of Financial Services. More than 200 cases resulted in convictions, up 150 percent from the year before, state officials say.

Regulators acknowledge, however, that only a small fraction of the fraudsters out there are getting caught and convicted: According to the National Insurance Crime Bureau's latest figures, insurers identified almost 1,400 suspect auto-insurance claims in Florida in the past year.

"All law enforcement faces the same challenge -- you are never going to catch everyone," said Nine Banister, spokeswoman for the Department of Financial Services. "Personal-injury fraud is especially perplexing, in that the schemes often involve so many people."