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Insurance Coverage and Bad Faith

Win for Florida Insurance Carriers on PIP Calculations

Win for Florida Insurance Carriers on PIP Calculations

The Supreme Court of Florida issued a significant decision regarding the calculation of personal injury protection (PIP) benefits in MRI Associates of Tampa, Inc., etc. v. State Farm Mutual Automobile Insurance Company; SC18-1390 (Fla. 2021). The Court found that an insurer may elect to cap its personal injury protection benefits (PIP) based on the schedule of maximum charges and also consider separate statutory factors for determining the reasonableness of charges.

MRI Associates submitted bills to State Farm for medical services provided to individuals insured under State Farm’s PIP policy and Florida’s “No-Fault” Law. The parties disagreed on the amounts payable and the calculation method used to determine reasonable charges for reimbursement. State Farm relied on the language from its policy that allowed it to cap its payments at 80% of the schedule of maximum charges. MRI Associates argued that State Farm must elect either the schedule of maximum charges method under section 627.736(5)(a)(1), Florida Statutes (2013), or the reasonable charge method under section 627.736(5)(a) and that, because its policy includes both, State Farm relies on an “unlawful hybrid method” of reimbursement calculation. Because it cannot elect both calculation methods, MRI Associates continued, State Farm must only use the reasonable charge method and not cap its payments.

A declaratory action was filed and the trial court ruled in MRI Associates’ favor, determining that State Farm’s policy did not lawfully invoke the schedule of maximum charges. On appeal, the Second District Court of Appeal reversed the trial court’s decision, but certified a question of great public importance.

The Supreme Court agreed with the Second District, finding that the “schedule of maximum charges” and the “reasonable charge” methods are not mutually exclusive. The Court cited the permissive nature of the revised statutory notice language in section 627.736(5)(a)(5) as evidence that it does not constrain the insurer to only one method of calculation. Instead, the Court found that policy provisions that limit reimbursement based on the schedule of maximum charges are simply an optional method of capping reimbursement – establishing a ceiling but not a floor.

The decision is a victory for insurers that have sought clarity on this issue following the revision of Florida’s “No-Fault” Law in 2012. Providers have exploited this perceived ambiguity of calculation methods, which has led to burdensome litigation.