Category Archives: Fla. Stat. 627.736 (2012)

1st DCA Upholds Allstate Use of Medical Fee Schedules

In an opinion filed March 18, 2015, Florida’s First District Court of Appeal held that language in an Allstate Insurance Co. policy gave sufficient notice to an assignee of its election to use Medicare fee schedules to limit benefit reimbursements under a PIP policy. Stand-Up MRI of Tallahassee, an assignee of 14 named insureds, sued Allstate in county court, contending that Allstate’s alleged failure to give adequate notice was contrary to the Florida Supreme Court’s decision in Geico v. Virtual Imaging. The trial court agreed with Stand-Up MRI and certified a question of great public importance to the Appellate Court.

In Virtual Imaging, as here, an MRI provider had supplied services and then disputed the insurer’s authority to limit reimbursements under Medicare fee schedules. Pursuant to the Florida PIP statute, automobile insurers are required to provide PIP coverage for 80 percent of all “reasonable expenses” for medically necessary services.

The dispute here centers on whether Allstate’s policy language provided adequate notice of its election to limit reimbursements via the Medicare fee schedules or if, as Stand-Up MRI contends, the policy fails because it is ambiguous. Allstate points to the following language in the policy as having satisfied the Virtual Imaging notice requirement:

In accordance with the Florida Motor Vehicle No-Fault Law, [Allstate] will pay to or on behalf of the injured person the following benefits. . . .

Medical Expenses

Eighty percent of reasonable expenses for medically necessary … services. …

Any amounts payable under this coverage shall be subject to any and all limitations, authorized by section 627.736, or any other provisions of the Florida Motor Vehicle No-Fault Law, as enacted, amended or otherwise continued in the law, including, but not limited to, all fee schedules.

The appellate court agreed with Allstate, concluding that the policy gives sufficient notice of its election to limit reimbursements by use of the fee schedules. In making its decision, the court pointed to language in the policy stating that reimbursements “shall” be subject to the limitations of §627.736, including “all fee schedules.”

Section 627.736(5)(a) 2 refers to Medicare fee schedule-based limitations and provides that insurers “may limit reimbursement to 80 percent of the … schedule of maximum charges.” Thus, concluded the court, the notice requirement was satisfied by Allstate’s language limiting “any amounts payable” to the fee schedule-based limitations found in the statute.

Furthermore, the court also distinguished the language in Allstate’s policy from that found deficient in Virtual Imaging. There, the Florida Supreme Court concluded that Geico’s policy failed to “indicate in any way” that it intended to limit its reimbursement amounts using the fee schedules. Here, Allstate’s policy expressly limits reimbursements by “all fee schedules” in the statute, satisfying the Virtual Imaging notice requirement.

Stand-Up MRI also contended that Allstate’s use of the phrase “subject to . . . all fee schedules” fails to provide sufficient notice that reimbursements will always be limited by the fee schedules, arguing that “subject to” means only that Allstate had the option to limit reimbursements per the Medicare fee schedule , not that it would so limit reimbursements. The court, however, found no such ambiguity, stating that the language of the policy makes reimbursements subordinate to the fee schedule in “rather unmistakable terms.”

In sum, the court concluded that Allstate’s policy language gave legally sufficient notice to its insureds of its election to use the Medicare fee schedules as required by Virtual Imaging. The trial court’s decision was reversed and the case remanded for further proceedings.

The cases cited are listed below for reference.

Allstate Fire and Casualty Ins. v. Stand-Up MRI of Tallahassee, Case No. 1D14-1213, et al., 1st DCA Fla. (March 18, 2015).

Geico Gen. Ins. Co. v. Virtual Imaging Servs. Inc., 141 So. 3d 147 (Fla. 2013).

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Filed under Fla. Stat. 627.736 (2012), The Statutory "Fee Schedules"

Auto Insurers Warn that Driverless Cars May Affect Profitability

While driverless cars could be hitting the roads in as little as five years from now, many auto insurers are worried about the far-reaching implications this autonomous technology could have on their industry’s bottom line. According to the Insurance Information Institute (III), the industry brought in $107.4 billion in passenger-car auto insurance premiums in 2013, the latest year for which figures are available.

In a March 3rd Wall Street Journal article, “The Driverless Car, Officially, Is a Risk,” it was reported that three insurance suppliers as well as an auto parts manufacturer have already cautioned investors in their most recent annual reports that the dawn of the self-driving vehicle and its technology may greatly affect their business model in the future.

Companies usually regard their annual report’s risk-factor disclosures as a place to point out potential difficulties and disruptions and to protect against their liability—not as a prediction of what’s to come. But the fact that driverless cars have been mentioned in several annual reports is telling.

According to the WSJ article, Cincinnati Financial Corp., which produces about a quarter of its premiums from commercial and consumer auto policies, warned its forecasts could be flawed due to “Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products.”

In addition, Mercury General Corp. said that “the advent of driverless cars and usage-based insurance could materially alter the way that automobile insurance is marketed, priced, and underwritten.” The company provides most of its auto coverage in California.

Industry analysts believe a variety of consequences could result by taking the driver out of the equation:

  • Insurers may sell fewer individual policies
  • Insurers may have to cover fewer accidents
  • Technologically-advanced cars may cost more to repair
  • Some of the expense from consumer auto insurance may shift to commercial liability policies as more automakers and software firms face litigation for accidents
  • Larger policyholders could have more bargaining power than many small ones, potentially putting more pressure on premium revenue

The Insurance Information Institute also addressed this topic on its website. According to the III’s recently-updated report, driverless cars are viewed by the organization as one natural outgrowth from a multitude of advances in safety technology.

Numerous developers of driverless cars are concerned that regulatory matters and costs could delay their launches to market, but in any event, these technologies are still moving forward.

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Filed under Fla. Stat. 627.736 (2012)

The High Cost of Auto Insurance Fraud

Auto insurance fraud hits drivers’ wallets hard, not only with the apparent increase in premiums, but also indirectly, through higher costs that are eventually passed down to consumers. A recent story on Fox Business reported about the heavy toll this type of fraud takes on many Americans.

According to the National Insurance Crime Bureau’s (NICB) 2013 report, 78,024 suspected cases of auto insurance fraud were reported nationwide in 2012, an increase of 12.7% from 2011 to 2012. Those numbers helped to raise a three-year total—from 2010 through 2012—to more than 209,000 questionable claims (QCs).

Out of all the types of insurance fraud, auto insurance makes up the largest piece of the fraud pie, the NICB says. There were 4.5 times more questionable auto insurance claims than homeowners’ personal property QC’s (17,183), and almost 17.5 times more than the third highest category—workers’ compensation, including employers’ liability.

Industry studies have estimated that almost a quarter of the bodily injury claims related to auto accidents are false.  In addition, there is almost a 10 percent fraud rate for property and casualty claims made against auto insurance.

This adds up to about $200-$300 per year in extra costs on each auto insurance premium.  But, these are just considered the direct costs.  As far as indirect costs, the Texas Department of Insurance estimates that they add up to about $1,000 per family each year.  These costs are the portion of inflated expenses that businesses have to pay to insurers as a result fraudulent crime. This portion translates into increased costs of goods and services that are passed along to consumers.

In addition, hard fraud, or when the insurable event is fabricated outright or a staged accident, appears to be on the rise and feeds into auxiliary hazards of auto insurance fraud.  Because staged car crashes often exploit people who happen to be in the wrong place at the wrong time, these victims unintentionally become involved in the accidents or in the subsequent series of events, which can have severe consequences such as injury or even death.

According to the Fox News story, there have been numerous incidents where staged accidents have spiraled out of control, resulting in critical injuries and fatalities.  Although the instigators of these types of accidents have been prosecuted, it does not end the motivation to engage in auto insurance fraud.

Overall, the Coalition Against Insurance Fraud estimates that the total cost of fraudulent claims is in the range of $80 billion annually. The group has found that claims tend to rise during difficult economic times, which was evident during the recent recession.

The NICB has a toll free hotline to report fraud anonymously for further investigation.  The number is 1-800-835-6422 or 1-800-TEL-NICB.

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Filed under Fla. Stat. 627.736 (2012), Insurance Fraud

Court Order Issued in PIP Case Alleging Exorbitant Hospital Fees

On February 20, 2015, Judge James S. Moody, Jr., of the U.S. District Court, Middle District of Florida, issued a ruling in the case Herrera, et al. v. JFK Medical Center, et al. That suit, brought in 2014 by four Florida drivers, alleges that the defendant hospitals are exhausting Personal Injury Protection (PIP) benefits by grossly overcharging for services—at up to 65 times what Medicare pays. The lawsuit names JFK Medical Center in Atlantis, Memorial Hospital Jacksonville, North Florida Regional Medical Center in Gainesville, and HCA Holdings, Inc. as defendants.

The plaintiffs, injured in separate motor vehicle accidents, received emergency radiological services at the named HCA-operated defendant hospitals. The services were covered by the plaintiffs’ PIP insurance. The plaintiffs allege that they were charged an “exorbitant” rate for these services, thereby prematurely exhausting their PIP benefits and leaving them with medical expenses in excess of what they would otherwise have to pay.

Plaintiffs allege causes of action for violation of the Florida Deceptive Unfair Trade Practices Act (“FDUTPA”), breach of contract, and breach of the implied covenant of good faith and fair dealing. Plaintiffs sought to have the case certified as a class action.

At a February 17, 2015 hearing, the defendants made motions to dismiss the plaintiffs’ complaint and motions to strike the class allegations. Judge Moody granted the motions in part and denied them in part, as discussed below.

First, HCA argued in its motion to dismiss that, since it is the ultimate parent company of the hospitals, it has no direct liability for the hospitals’ actions. The court, however, held that plaintiffs’ had sufficiently pled a cause of action when they pled that HCA is directly involved in setting and enforcing hospital guidelines and that the hospitals acted as agents of HCA.

Second, the defendants argued that plaintiffs FDUTPA claims fail because plaintiffs cannot allege that HCA was engaged in “trade or commerce” as required by the statute. Recognizing that other courts have held that the types of allegations the plaintiffs are making support a FDUTPA claim, the court held that plaintiffs may proceed to attempt to prove their case.

Third, plaintiffs allege breach of contract based on incorporation of the PIP statute into plaintiffs’ contracts with the hospitals. Because the PIP statute requires that only “reasonable” amounts may be charged, plaintiffs allege that defendants breached the contracts by charging unreasonable rates. The court concluded that plaintiffs may incorporate the PIP statute’s reasonable requirement into the contracts and therefore proceed with the breach of contract claim.

Third, in Count III of their amended complaint, plaintiffs allege that the defendant hospitals breached their duty of good faith and fair dealing by charging them unreasonable rates for medical services. Because plaintiffs failed to allege that an express term of the contract had been breached, the court granted the defendants’ motion to dismiss for failure to state a claim.

Finally, defendants moved to strike the class allegations because individual issues predominate. The court agreed that, given the nature of the claims and individual factual inquiries required, the individualized issues are predominant and the suit cannot proceed as a class action. As a result of that ruling, only one of the plaintiffs—Marisela Herrera—may proceed with the action. The remaining plaintiffs were dismissed without prejudiced to file separate, individual actions.

Click on the link to view the court order in Marisela Herrera et al., v. JFK Medical Center Limited Partnership, et al., Case No. 8:14-cv-2327-T-30TBM in U.S. District Court for the Middle District of Florida.

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Filed under Case Law, Fla. Stat. 627.736 (2012)

Hialeah Police Crack Down on Drivers with Fake Insurance Cards

On February 12, 2015, authorities in Hialeah, Hialeah Gardens, and Medley clamped down on drivers carrying fake insurance cards, according to a news report on CBS Miami.

Officers stopped randomly-selected cars and asked drivers for their license, registration, and proof of insurance. Police then contacted the insurance companies to verify coverage. If the card turned out to be fraudulent, the driver was arrested.

Two drivers were arrested for carrying fake insurance cards, while 27 other arrests were made for various traffic violations.

According to the National Insurance Crime Bureau, the use of fake insurance cards has become a national epidemic.  “If you have a printer and you have a computer, you can download a fake insurance card and it looks real,” said Hialeah Police spokesman Carl Zogby.

The use of fake or fraudulent insurance cards affects legal Florida drivers when an uninsured driver is involved in a motor vehicle accident, according to the report. The costs incurred in these accidents are eventually passed on to legal drivers in the form of higher insurance rates.

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Filed under Fla. Stat. 627.736 (2012), Insurance Fraud

Drugged Drivers Increase as Drunk Driving Drops

Although the nationwide effort to raise awareness about the dangers of drunk driving have been fruitful, two recent studies show that there is a troubling escalation in the use of marijuana and prescription drugs behind the wheel that could jeopardize the progress to make roads safer. The ground-breaking studies were recently released by the National Highway Traffic Safety Administration (NHTSA).

The first study, which is the latest version of NHTSA’s Roadside Survey of Alcohol and Drug Use by Drivers, found that the number of drivers with alcohol in their system has declined by nearly one-third since 2007 and by more than three-quarters since 1973. However, figures also revealed that the number of drivers using marijuana or other illegal drugs jumped to almost one in four drivers who test positive for at least one drug that could affect road safety. According to the data, the number of weekend nighttime drivers with evidence of drugs in their system climbed from 16.3 percent in 2007 to 20 percent in 2014, while the number of drivers with marijuana in their system grew by nearly 50 percent.

The study, which has been conducted five times in the last 40 years, gathers data from anonymous voluntary participants throughout the U.S.

The second NHTSA survey, which is the largest of its kind ever conducted, assessed whether driver use of marijuana is tied to greater risk of crashes.  The study not only found that marijuana users are more likely to be involved in accidents, but revealed that this increased risk may partially be attributed to the demographics of marijuana users—in particular young men—who are more likely to be part of a group that is at higher risk of crashes overall.

The study also found that drivers who had been drinking above the 0.08 percent legal limit had about 4 times the risk of crashing as sober drivers, and those with blood alcohol levels at 0.15 percent or higher had 12 times the risk.

Conducted in Virginia Beach, Va., the study gathered data over a 20-month period from more than 3,000 drivers who were involved in crashes, in addition to a comparison group of 6,000 drivers who did not crash.

Results from the NHTSA surveys are consistent with a June study by Public Health Reports, a recent article in Claims Journal pointed out. This study, which was funded by Public Health Law Research program of the Robert Wood Johnson Foundation, found that the profile of a ‘drugged driver’ has changed considerably since 1993. Not only are more drivers testing positive for prescription drugs, cannabis, and multiple drugs, they are increasingly likely to be older than 50. The study noted almost 60 percent of marijuana-only users were younger than 30 years old, but 39 percent of prescription drug users were 50 years old or older.

“America made drunk driving a national issue and while there is no victory as long as a single American dies in an alcohol-related crash, a one-third reduction in alcohol use over just seven years shows how a focused effort and cooperation among the federal government, states and communities, law enforcement, safety advocates and industry can make an enormous difference,” said NHTSA Administrator Mark Rosekind. “At the same time, the latest Roadside Survey raises significant questions about drug use and highway safety. The rising prevalence of marijuana and other drugs is a challenge to everyone who is dedicated to saving lives and reducing crashes.”

A series of additional studies to further understand the risk of drugged driving is being planned by the NHTSA, including the Washington State Roadside Survey, which will assess risk in a state where marijuana has recently been legalized, and a simulator study with the National Institute on Drug Abuse to assess how drivers under the influence of drugs behave behind the wheel.

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Filed under Fla. Stat. 627.736 (2012)

11th Circuit Appellate Division Rules Insurer’s Adjuster Notes not Discoverable

On January 5, 2015, the Appellate Division of the Eleventh Judicial Circuit in and for Miami-Dade County issued a ruling reversing the lower court’s order compelling production of the insurer’s pre-litigation documents.  The court held that such documents are not discoverable in a first-party coverage lawsuit between the insured and the insurer.

In 2011, respondent Yesenia Romero sued State Farm for PIP benefits, alleging State Farm breached the insurance contract and violated the Florida PIP statute in not paying for claims resulting from a 2009 motor vehicle accident. Romero filed a request for State Farm’s “entire claims file concerning the case,” including all of the adjuster’s notes made prior to the pre-suit demand letter.  State Farm objected to the production, asserting work-product privilege.

A hearing on the issue was held in the trial court.  Following an in camera inspection of the adjuster’s notes, the judge determined that they were not protected under the work-product doctrine because they were not prepared in anticipation of litigation.  The court ordered State Farm to produce all the adjuster’s notes.  State Farm sought to have the appellate division quash the order.

In its analysis, the appellate division noted that all three levels of Florida’s judiciary, including its own court, have said that an insurance company’s claims file documents are not discoverable in a first-party coverage and damages lawsuit between an insurer and the insured. The court cited a Third District case, Castle Key v. Benitez, in concluding that “where the insured is not seeking a bad faith claim, but rather seeks relief for breach of contract,” the insurer’s claims file documents are not discoverable.

In this case, where the plaintiff was alleging breach of contract and not bad faith, the appellate division determined that the trial court erred in ordering State Farm to produce the documents and therefore quashed the trials court’s order.

State Farm v. Yesenia Romero, Case No. 13-48 AP (Fla. 11th Circuit January 5, 2015).

Castle Key Ins. Co. v. Benitez, 124 So. 3d 379 (Fla. 3d DCA 2013).

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Filed under Case Law, Fla. Stat. 627.736 (2012)