Policy Documents

Florida’s Motor Vehicle No-Fault Law

Florida Senate Committee on Banking and Insurance –
November 1, 2005

In 1971, Florida became the second state in the country to adopt a no-fault automobile insurance plan which took effect January 1, 1972. From a policy perspective, the no-fault plan was offered as a viable replacement for the tort reparations system as a means to quickly and efficiently compensate injured parties in auto accidents regardless of fault. The principle underlying no-fault automobile insurance laws is a trade-off of one benefit for another, by assuring payment of medical, disability (wage loss) and death benefits, regardless of fault, in return for a limitation on the right to sue for non-economic damages (pain and suffering). Currently, twelve states, including Florida, have some form of no-fault provision.

The legislative objectives of the no-fault law were enumerated by the Florida Supreme Court in 1974 in Lasky v. State Farm Insurance Company. The Court opined that the no-fault law was intended to:

• assure that persons injured in vehicular accidents would be directly compensated by their own insurer, even if the injured party was at fault, thus avoiding dire financial circumstances with the “possibility of  swelling the public relief rolls;”
• lessen court congestion and delays in court calendars by limiting the number of law suits; 
• lower automobile insurance premiums; and 
• end the inequities of recovery under the traditional tort system.

In the ensuing 34 years, the Legislature has periodically revised the no-fault law, courts have interpreted its key provisions, and various constituent groups have analyzed its impact upon Florida motorists. 

In 2001 and 2003, the Legislature enacted significant no-fault reforms; however, according to many stakeholders, these reforms have not gone far enough in resolving the problems within the no-fault system which include fraud, abuse, inappropriate medical treatment, inflated claims, inadequate compensation to victims, increased premiums, and the proliferation of law suits.

As a result of these concerns, the 2003 Legislature in Special Session “A” passed legislation providing that effective October 1, 2007, the Motor Vehicle No-Fault Law is repealed, unless reenacted by the Legislature during the 2006 Regular Session and such reenactment becomes law to take effect for policies issued or renewed on or after October 1, 2006. The law authorized insurers to provide, in all policies issued or renewed after October 1, 2006, that such policies may terminate on or after October 1, 2007.

As policymakers and stakeholders continue to debate the cost and effectiveness of the no-fault system and whether it should be allowed to “sunset,” a more thorough understanding of how well the system is functioning is critically important. The objectives of this report are to: 

• review the legislative history of Florida’s motor vehicle no-fault insurance system, analyze the early court decisions interpreting the constitutionality of the law’s provisions, and outline the current motor vehicle coverages;
• assess how well Florida’s no-fault system is working according to the following criteria: availability of motor vehicle insurance; compliance with mandatory vehicle insurance laws; efforts to combat motor vehicle fraud and abuse; affordability of motor vehicle insurance; profitability of motor vehicle insurance companies; adequacy of mandatory coverages; and personal injury protection (PIP) and bodily injury (BI) liability loss costs in Florida and other states; 
• examine medical costs, fee schedules and treatment protocols in Florida and other states; 
• review attorney involvement in PIP and BI auto insurance claims;
• review additional PIP issues; 
• discuss the effect of repealing no-fault in Florida;
• examine the tort-based auto insurance states and the laws in the 11 other no-fault states; and
• offer conclusions and recommendations.