THE FLORIDA LAW BLOG

WHY DO WE HAVE PIP IN FLORIDA?

Did the Florida Legislature loose sight of the reason we have PIP?

The personal injury protection (PIP) law was adopted in 1972 to make sure anyone injured in an auto accident would quickly get money to treat their injuries. The legislation provided that a driver’s insurance company pay up to $10,000 to cover medical bills and lost wages after an accident, no matter who is at fault.

The public policy in support of having PIP is expressed in Florida Statute Section 627.737 Tort exemption; limitation on right to damages. The intent was to limit injury lawsuits in Florida to the extent of personal injury protection benefits paid. The statute reads as follows:

627.737 Tort exemption: "Every owner, registrant, operator, or occupant of a motor vehicle with respect to which security has been provided as required by ss. 627.730-627.7405, and every person or organization legally responsible for her or his acts or omissions, is hereby exempted from tort liability for damages because of bodily injury, sickness, or disease arising out of the ownership, operation, maintenance, or use of such motor vehicle in this state to the extent that the benefits described in s. 627.736(1) are payable for such injury, or would be payable but for any exclusion authorized by ss. 627.730-627.7405, under any insurance policy or other method of security complying with the requirements of s. 627.733, or by an owner personally liable under s. 627.733 for the payment of such benefits, unless a person is entitled to maintain an action for pain, suffering, mental anguish, and inconvenience for such injury under the provisions of subsection (2)."

The need for this exemption, and the PIP statute is based upon the fact that Florida does not require mandatory bodily injury liability insurance. Florida is a No Fault State. Everyone with auto insurance (not including motorcycle policies) is required to carry PIP (Personal Injury Protection). It typically covers 80% of your medical bills and 60% of your lost wages up to $10,000.00. You can buy medical payments coverage to fill in the 20% gap and you can also buy extended PIP coverage. If you want to save money, you can get wage exclusions on the PIP or a PIP deductible.

What most people aren't aware of is that BI (bodily injury) coverage is not mandatory in Florida so someone can hit you with "full coverage" and be without BI coverage. Mandatory BI coverage is required in many states, but not in Florida. So "full coverage" equals PIP and Property Damage.

A much needed amendment to the new 2012 PIP bill was proposed during this session that would have added mandatory BI (bodily injury coverage) in Florida, however that amendment was shot down. The insurance company lobby prevailed again, as they would prefer not to have mandatory BI coverage in this state, and now have successfully limited PIP coverage with the new bill passed last Friday evening. Perhaps the legislature has lost sight of the needs of the people of Florida, as well as the intent of the PIP staute, and corresponding limitation of liability, and handed the insurance industry a nice gift for 2012 at the expense of the citizens of this state.

 

HOW AND WHY INCORPORATE YOUR SMALL BUSINESS

HOW AND WHY SHOULD YOU INCORPORATE YOUR SMALL BUSINESS

by Charles D. Scott, Esquire

Why Incorporate?

Deciding how a business is structured is one of the most important decisions you will make for your new or existing business. Incorporation may be essential, however for some, it may be an unnecessary decision, and so each business should carefully assess the benefits of incorporation before filing corporation papers.

A businesses, whether large, small, new, or existing, can benefit from incorporating. Corporations and LLCs are both separate legal entities (business structures) that enjoy certain protections under the law and important benefits. Most people form a legal business structure to safeguard their personal assets. There are several advantages of forming a corporation or Limited Liability Company (LLC) which include:

•Perpetual Existence - Corporations and LLCs have perpetual existence, even if the owner dies or management changes, however a sole proprietorship or partnership ends if an owner dies or leaves the business. As a separate entity, the corporation exists independent from the shareholders/owners and its employees. Regardless of what happens to the shareholders, or the directors, or the employees, the corporation continues to exist in perpetuity until a time the directors and shareholders decide to dissolve the corporation. Incorporation also prevents the ability of a minority shareholder from dissolving a business without cause.

•Personal asset protection - corporation and LLC companies allow owners to separate and protect their personal assets. If the corporation is properly structured and managed, the owners should have limited liability for business debts and obligations. Incorporating or forming a Limited Liability Company (LLC) allows you to conduct your business without worrying that you might lose your home, car, or personal savings because of a business liability. Any debt or liability against a corporation does not open the doors of shareholders' assets to the creditor(s). The shareholder's liability in any corporate debt or liability is limited to what the shareholder invested (unless there is fraud). This is contrasted to a sole proprietorship or general partnership, in which the owner(s) and/or general partners remain completely liable for any debt or liability placed against the business. If a business is unable to pay a debt, the creditor can attack the assets of an owner or partner until the debt is satisfied. In a corporation, a creditor can only go after the share holder to the extent the shareholder invested into the corporation (unless there is fraud). This allows the corporation to make business decisions without the risk of endangering the personal assets of its shareholders beyond what was invested.

•Protects Your Business Name - once you have registered a corporation in the name of your business, others may not file the exact corporation name or LLC name in your state.

•Credibility - when your business has "Inc." or "LLC" at the end of your business name it adds credibility and tells others that they are doing business with an incorporated company and not just an individual.

•Tax Considerations - In a sole proprietorship or partnership, the taxable income of the business flows directly to the owner and/or partners and are taxed based upon the individual's income tax bracket. However, because a corporation is considered a separate entity, the taxable income of a corporation is taxed first under a corporate tax. If the corporation then distributes the remaining income to the shareholders, that income is taxed again at the individual's income tax bracket, hence, double-taxation. A small businesses can avoid double-taxation by incorporating as an S-corporation or filing as a Limited Liability Company (LLC). These options allow the taxable income to flow directly to the shareholders/members without being taxed twice, while at the same time, maintaining the benefits of incorporation. Because corporate returns tend to be more accurate than sole proprietors, the IRS has typically audited a much higher percentage of sole proprietor tax filings than corporate filings.

•Expense Deductions - Corporations and LLCs can deduct normal business expenses, including salaries, before profits are passed through to the owners.

• Liquidity - when an owner or partner needs to leave the business, incorporation allows the free transferability of interest from one person to another. In contrast to a partnership, a partner cannot transfer his/her interest in a business to another without the express consent of all other partners. If a partner still decides to leave the partnership against the will of the other partners, the partnership is automatically dissolved. Incorporation removes this limitation by allowing shareholders/owners to freely transfer his interest to another without the unanimous consent of all other shareholders.

How to Incorporate?

Once you decide to establish a corporation of LLC, in Florida the Division of Corporations serves as the state´s central location for business entity filings. The Division renders two broad functional services: (1) formalizes the legal standing of a business or activity by accepting and indexing the filing or registration, and (2) supplies information and certification regarding the filings and activities of record. Florida´s Division of Corporations is the most active corporate filing entity in the country.

If you elect a corporation, then you must first select a name and find out if your desired corporate name is available, then submit "articles of incorporation" or "articles of organization" if you want to set up an LLC company, to the Florida Department of State with the appropriate fee. The articles must follow a specific format, and contain certain minimum required elements, not limited to the name of the corporation or LLC, the address that will be the principal place of business, the name and address of the registered agent, the name and address of each manager or managing member (if an LLC), the purpose of the corporation, the number of shares of stock that the corporation is authorized to issue, the names and address of the officers and directors of the corporation, the name and address of the incorporator, and the effective date of the corporation or LLC company. You must also submit a cover letter and the required filing fee.

The State of Florida operates a web site that is very helpful in learning more about establishing a corporation or LLC company, and will allow you to check and see if a particular corporate name is available. That web site is www.sunbiz.org.

 

THE EFFECT OF BANKRUPTCY ON A PERSONAL INJURY CASE

There are occasions when a personal injury claim is pending and the injured party files for bankruptcy during the course of representation. It is essential that a bankruptcy filing be brought to the attention of your injury lawyer immediately, as it will have a significant impact on the handling of your injury claim.

The client should not file a Chapter 7 bankruptcy unless they are willing to give up the claim entirely, including any entitlement to payment of future medical expenses, which is explained in more detail below.

Failure to disclose a pending personal injury claim in your bankruptcy filing is a criminal offense known as bankruptcy fraud.

There are two "Chapters of the Bankruptcy Code (Title ii U.S.C.) under which individuals usually seek relief. Below a summary of their impact on personal injury claims. 

CHAPTER7

If there is not a surplus beyond all debt, the injured party has no standing to participate in the settlement process, nor to object to the amount of the settlement. The trustees have very little incentive to push for maximum recovery, they are only liquidators. An additional complication when a Chapter 7 bankruptcy case is filed is that the medical expenses incurred after the filing of the bankruptcy are not dischargeable in the bankruptcy case. Bankruptcy only discharges debts in existence when the case is commenced. While those medical expenses will be an administrative expense of the bankruptcy estate to be paid out of any settlement as necessary to support and prove the claim, the bankruptcy trustee will be attempting to minimize payment to all medical providers in order to maximize payment to pre-petition creditors who are the beneficiaries of the bankruptcy estate. He has no incentive to negotiate a release of personal liability to the injured - just to settle claims against his estate as cheaply as possible. Insurance defense attorneys are trained to do bankruptcy checks because if the injured party filed bankruptcy and didn't disclose the cause of action, the defense attorney can move for dismissal on the day of trial for improper party plaintiff often after the statute has run for refiling.  Since it is too late for the bankruptcy trustee to refile, his only recourse is to sue the debtor for non-disclosure, move to revoke has discharge, and possibly refer the case to the F.B.I. for criminal charges for bankruptcy fraud.

 CHAPTER 13

Chapter 13 is considered the "wage earner's reorganization" and is available only to individuals, not corporations. (There are three other reorganizations: generally Chapter 9 is for government units: Chapter II is for corporations or individuals with extraordinarily large debts, usually engaged In business; Chapter 12 is for family farmers or family fishermen with regular annual income.)

 

If a client has an actionable personal injury claim but they are in collection or being sued by creditors, a Chapter 13 bankruptcy case is ordinarily the best solution. The client is protected by the "automatic stay" of bankruptcy from all collection actions.

Instead of the cause or action being turned over to a trustee, as it is in Chapter 7, the Chapter 13 debtor chooses and retains counsel and through the bankruptcy attorney, that counsel is approved by the bankruptcy court to represent both the interests of the debtor and of the bankruptcy estate/Chapter 13 trustee. Once personal injury counsel has been approved by the bankruptcy court the case proceeds normally, with day to day litigation decisions generally being made by the client and personal injury counsel. Day-to-day litigation decisions should be made by the debtor and litigation counsel and it does not normally require that a motion for court approval of litigation actions be made until a proposed settlement has been reached.

 

When the client and personal injury counsel agree that a binding offer should be accepted, that acceptance must be expressly subject to bankruptcy court approval. (a motion for approval of the settlement). Normally at the same time a motion to approve the fees of personal injury counsel is also filed. It is very unusual for the judge to deny either motion. Bankruptcy judges do not want to discourage personal injury counsel from representing debtors in bankruptcy and generally approve the contingency contract and costs as agreed and incurred unless the bankruptcy judge finds those to be unfair under the factual circumstances. At the time personal injury counsel is authorized by the bankruptcy judge to represent the debtor and the bankruptcy estate, the order normally says that personal injury counsel's fees and costs shall be such as the bankruptcy court shall determine. Fees and costs awarded are always within the discretion of the bankruptcy judge. Upon separate motion the Bankruptcy Court will determine distribution of the rest of the proceeds between the debtor and the bankruptcy estate.

In Chapter 7 bankruptcy cases, unless the cause of action is exempt under law such as a Worker's Compensation claim, upon commencement of the case the cause of action is given over to the bankruptcy trustee as the representative of the creditors. The injured plaintiff may remain injured, but he or she is no longer the proper party plaintiff. The real party in interest is the bankruptcy trustee acting on behalf of the "bankruptcy estate", who has complete authority to pursue the litigation and negotiate settlements. Any settlement is subject to the bankruptcy judges approval, which is rarely withheld. The original injured plaintiff has no standing to object to any settlement unless they can convince the judge that there should be sufficient recovery to pay all creditors in full, with some surplus repayable to the injured original plaintiff (a difficult burden to prove). This means all creditors must get paid in full, including such unusual debts as deficiencies on foreclosed real estate.

 

MISCONCEPTIONS ABOUT UM INSURANCE COVERAGE

What Most People Don’t understand about UM insurance.

There are two common misconceptions about UM, also known as un-insured or under-insured motorist insurance coverage.

First Many insurance agents discourage people from purchasing UM coverage and tell their customers that UM is not necessary or they can save a little money by not purchasing this coverage. For the most part UM is not an expensive addition to your policy premium compared to liability coverage or collision coverage, neither of which cover your injury in the event of an accident with an uninsured or underinsured motorist. The real reason agents discourage buying UM is that it is a very affordable coverage and a great bargain for the client, but not a good deal for the insurance company.

Second Many people who do have UM coverage don’t want to pursue a claim against their own insurance carrier, or don’t understand how or why they would have a claim under their UM coverage.

In Florida the only insurance that is mandatory is PIP (Personal Injury Protection which covers 80% of your medical bills and 60% of your lost wages after an accident regardless of fault up to $10,000.00. Right now PIP is being overhauled in the Florida Legislature and may change drastically after this week, unless our law makers in Tallahassee are unable to reach some agreement.

If you are involved in an accident in which the at fault driver either has no liability insurance coverage or is under-insured with regard to bodily injury liability, you may find that there is no coverage for your injury, or insufficient coverage for your injury, other than the minimum PIP coverage as required by law.

If your injury is serious, your medical bills may well exceed $10,000.00, and if you have a serious or permanent injury you may be entitled to compensation for those injuries from the at fault driver that caused the accident. You would expect the at fault driver to have liability insurance to cover your loss, but in Florida there is no requirement that any driver carry bodily injury liability insurance. In the current economy, many drivers elect the minimum required insurance coverage of PIP and property damage, and forego purchasing liability coverage.

To add insult to injury, if the at fault driver is in such a financial condition that he or she cannot afford liability insurance coverage, then they probably don’t have any assets to speak of, which means that filing a lawsuit against them would not be of any benefit either, as any judgement you might achieve in court would likely be uncollectible.

Uninsured motorist coverage then takes the place of the bodily injury coverage the at fault driver failed to carry, or supplements the inadequate or under-insured coverage of the at-fault driver.

The injured person can pursue a claim against their UM coverage in the same manner that they would have pursued their claim against the un-insured or under-insured driver.

In the case of an under-insured driver, for example, the at fault driver carried $10,000 in liability, but your loss is in excess of this amount, you would first pursue a claim against the at fault driver for the limits of their liability coverage, then pursue a claim under your own UM coverage for the remaining value of your injury claim. In the case of an un-insured driver, your claim is under your own UM from the outset once it is determined that the at fault driver has no liability insurance.

Clients are often hesitant to pursue a claim against their own insurance company when the accident is not their fault, however this would defeat the whole purpose of having UM coverage. It is like having homeowners insurance and not wanting to file a claim after your house burns down. It makes no sense not to utilize a coverage that you paid for, which will cover your loss.

Making a claim under your uninsured motorist coverage is not any easier, or simpler than making a claim against the at fault driver. Most insurance companies do not simply pay out the benefit available under your UM coverage and require that you prove your claim, normally with the assistance of a lawyer, in the same manner as you would against the at fault driver. Clients normally find their own insurance company fighting them for the UM benefits they paid for, and offering settlements under the UM coverage that are far less than the value of the claim.