Auto Insurance

For some Florida lawyers, small courtroom wins for clients mean huge fees for themselves Lawsuits against auto insurers can be lucrative

By Sally Kestin and John Maines, staff writers
Orlando Sentinel, January 21, 2011

In Palm Beach County, a lawsuit ended in a judgment of $1, but the prevailing attorneys collected $5,500 in fees.

In Broward County, a $3,700 dispute meant a payout of about $90,000 for the winning lawyers.

Thousands of lawsuits like these are being filed against insurance companies in Florida over medical bills from auto accidents. Disputes over a few hundred dollars or less can mean huge payouts for the attorneys doing the suing, and, according to state regulators, higher premiums for all Florida drivers.

In South Florida, lawyers have fought insurers in court over $2.53, $1.19 and even one penny. The attorneys say they're keeping insurance companies honest and blame them for the costly courtroom battles.

"These [insurers] are denying claims for no valid reason," said Cris Boyar of Margate, who devotes nearly all of his law practice to insurance disputes. "They create this massive amount of litigation."

Florida insurance regulators say the filing of lawsuits is out of control, and efforts to change the system are being proposed in Tallahassee.

Florida's largest auto insurer, State Farm, is "seeing more suits than we ever have," said Russ Kile, claim-section manager.

And United Automobile Insurance Co., has spent about $80million in the state during the past four years fighting lawsuits.

"In the end, the public pays for this," said CEO Richard Parrillo.

The lawsuits result from the personal-injury-protection insurance that all Florida drivers are required by law to buy. The insurance, commonly known as PIP, kicks in when the policyholder or others are injured in a car accident and covers up to $10,000 in medical expenses, lost wages and death benefits.

Established in the 1970s, Florida's no-fault system was supposed to ensure that accident victims are treated promptly and limit lawsuits by eliminating the need to prove who caused the crash.

According to the insurance industry, it helped open the floodgates for suits over medical bills.

"If anything, it's caused more lawsuits," said Ron Poindexter, director of the industry-funded National Insurance Crime Bureau in Florida and three other states. "It's a public feeding trough."

Many PIP claims end up in court because the insurers underpay what may be owed or deny payment on bills they think are not legitimate. Insurers say they are sometimes slow to pay or cut off benefits because accident victims and medical providers file so many fraudulent claims. Florida leads the nation in accidents staged to cash in on PIP benefits, according to the NICB.

In Broward County, more than 23,500 PIP-related suits have been filed against insurance companies since 2006 — one-third of those to recover amounts less than $500, a Sun Sentinel analysis of court data found.

The number of PIP suits filed in Orange County Court is also on the rise.

According to court records, 6,643 PIP suits have been filed in the past five years in court in Orange County, going from 969 cases in 2006 to 1,637 in 2010 — a 69percent increase in that five-year period.

Sometimes, the cases are consolidated by the court against a particular insurer. In 2007, about 280 cases brought by Altamonte Springs Imaging against State Farm Fire and Casualty Co. were consolidated into one. In each of those cases, Altamonte Springs Imaging alleged that State Farm underpaid benefits and recovered about $100,000 from the insurer. In August, Altamonte Springs Imaging's attorney, Todd E. Copeland, was awarded nearly $134,000 for attorney's fees, costs and interest for his work on all the cases.

Fees drive suits?

Insurers say the motive in many suits is the fees lawyers hope to collect. Those bringing suit are entitled to fees if they win. Insurers can collect fees only if they prove a case is frivolous or the other side rejects an offer to settle for an amount near what is recovered.

The cases are filed mainly in county court, where the maximum claim is $15,000, but there's no limit on how much the attorneys can make. Some suits drag on for years. Attorneys filing the suits say that insurers prolong the cases and drive the fees up.

State Farm lost a lawsuit in Central Florida about a decade ago that became the "poster child" for PIP suits, said Chris Neal, a spokesman for the insurer. Heidi Kraengel claimed a 1995 car accident left her with jaw discomfort but did not seek medical treatment for it for three months, and State Farm denied her claim.

Kraengel filed suit in Seminole County, and a jury ruled in her favor. The $12,000 award resulted in nearly $600,000 for Kraengel's attorneys.

"After that, lawyers got extremely aggressive with these suits because they can be really lucrative," Neal said.

As Copeland sees it, insurance companies haven't played by the rules. They underpay on PIP claims and find different ways to interpret the law to get around paying the full amount.

"The majority of the time, they get away with underpaying people," he said.

Copeland, an Orlando attorney who has spent years meeting with legislators and speaking before committees about PIP and auto insurance, said he understands why there may be public outrage at such cases when they are viewed in a vacuum.

"If you just saw that, that's how you would react," Copeland admits. "People may think, 'That doesn't seem fair. That doesn't seem right.'"

But Copeland says it's often not just a single case. It's one business bringing hundreds of the claims against a single insurance company.

'It's a sick system'

United Auto, which insures mostly high-risk, low-income drivers, has been sued more than any other insurer in Broward — more than 5,900 times since 2006. PIP lawyers said United brings on the suits by denying large numbers of claims.

The company is the 17th-largest auto insurer in Florida but ranks No.4 in consumer complaints, state data show. The insurer was fined $250,000 in 2009 for violations that included failure to comply with PIP-benefit requirements.

United aggressively investigates claims for what it considers widespread fraud, and Parrillo, the CEO, has been outspoken about what he says are fee-driven lawsuits.

"It's a sick system," Parrillo said.

United lost one suit in Miami-Dade County in 2008 for $2.53. The attorney's fees: $13,370.

The insurer won on appeal, with a three-judge panel finding that it was "a classic example of a lawsuit brought painfully for no other justification than the award of attorney's fees."

PIP lawyers acknowledge the suits can be lucrative, and some attorneys handle almost nothing but the suits. In Broward, five law firms are responsible for 40percent of the suits filed in the past five years — more than 9,500 cases.

A Sun Sentinel review of PIP suits found that many involve treatment for neck and back injuries by clinics specializing in auto accidents, doctors, chiropractors and MRI centers.

The patient signs over benefits to the treatment providers, who then bill the insurance company. If the claims are not paid within 30days, the provider must send a "demand letter" giving the insurer another 30days before a suit can be filed.

State Farm pays the vast majority of its claims on time but risks a lawsuit when the insurer delays payment to investigate suspicious bills, Kile said.

"When you start having questions, that's where we have the problems," he said.

Insurers said it's common to be sued two or three times per accident victim, once for each provider. The patients, meanwhile, "sometimes don't even know a suit has been filed," said Dawn Jayma, an attorney at United.

Attorneys submit bills for their work once a case is decided. Their fees are based on the lawyer's background and experience and are settled by both parties out of court or determined by a judge at a fee hearing.

A Broward case against United involved a $2,000 award and $160,000 in attorney's fees and costs. The attorney who brought the suit said United dragged it out.

Regardless of who is responsible, the fees in some cases are out of whack, regulators say.

"Even though it's a $10,000 benefit, you see costs and fees going well beyond that," said Robin Westcott, with the Office of Insurance Regulation.

Insurers: Cap suits

The Florida Legislature in 2003 limited legal fees in workers-compensation cases — up to 20percent of the benefits secured. Insurers support a cap in PIP suits, but lawyers warn that would give insurance companies an unfair advantage and lead them to deny more claims.

Florida Deputy Insurance Commissioner Belinda Miller expects legislators to take up PIP changes when they convene in March.

"The cost of this coverage is going up," she said. "I think it's going to be hard to keep insurance affordable to everybody."

Amy Pavuk of the Orlando Sentinel contributed to this report.

6,643

PIP suits have been filed in the past 5 years in court in Orange County.

969

cases in 2006.

1,637

cases in 2010.

69% increase in that 5-year period.


 

http://www.iihs.org/externaldata/srdata/docs/sr4511.pdf