THE CASE FOR MANDATORY MOTOR VEHICLE LIABILITY INSURANCE

Orlando, Florida

By Melvin B. Wright
July 23, 2007

Almost every day I hear the same thing from prospective clients when we ask about their automobile insurance. "Oh, I have full coverage." Many are surprised to learn how little that means in Florida. Many others are surprised to learn that the driver at fault for their accident was legally operating an automobile with no liability insurance to cover people they injured in the accident. In the most tragic cases, severely injured clients are shell-shocked to learn that motorists are very likely to be injured by an uninsured or underinsured driver in Florida when involved in an accident.

Florida Law
The Florida Motor Vehicle No-Fault Law¹ currently requires individual owners of non-commercial motor vehicles to carry at least $10,000 of personal injury protection insurance (known as "PIP benefits") and at least $10,000 of property damage liability coverage. In addition, the Financial Responsibility Law² requires vehicle owners and operators to maintain bodily injury liability (known in the industry as "BI") coverage of $10,000 per person/$20,000 per accident, but this requirement is triggered only after an accident or conviction of certain serious traffic offenses. Most Florida family cars, therefore, are not required to have BI coverage and are only required to have PIP and property damage coverage.

Commercial motor vehicles in Florida are currently required to carry mandatory BI coverage in varying amounts, depending on the type or weight of the vehicle³. But there are far more individually owned motor vehicles on Florida highways than commercial vehicles.

Total Vehicles On Florida Highways
Since the Financial Responsibility Law in Florida is so lenient, it is entirely permissible for a car to operate on streets and highways with no liability insurance at all. In fact, it is not only permitted, but it happens in large numbers every day. According to the Florida Department of Highway Safety & Motor Vehicle's statistics, estimates are that there are approximately 15 million passenger cars registered to operate on Florida highways in 2006-2007.

The Uninsured

For purposes of BI coverage, even car owners who buy the mandatory minimum PIP and property damage coverage for their automobile are uninsured. It is difficult to determine how many automobiles are on Florida highways with absolutely no liability coverage.

 

According to journalists who have interviewed him, Gunars Mansons, vice-president of the trade association, Specialty Agents, about 4 million of the 12 million, automobile owners who buy insurance for their cars buy only the mandatory minimum PIP and property damage coverage⁴. This means that one in three automobile owners buy no BI coverage at all. Worse yet, if the Florida Motor Vehicle No-Fault Law expires in October 2007 as currently scheduled, he expects that most of those 4 million automobile owners will buy no insurance at all.

In 2002, the Florida Department of Highway Safety & Motor Vehicles reported that about 80% of the 10.3 million non-commercial motor vehicles registered in Florida had PIP⁵ coverage. That leaves about 18%, or almost 2 million, totally uninsured. Add this to the number of automobile owners who buy the mandatory coverage but decline to buy voluntary additional BI coverage, and approximately 6 million automobiles are being operated at any given time on Florida roads with no BI coverage at all.

Rental Cars
The number of rental cars on U.S. highways is staggering. These rental cars are often being operated by people unfamiliar with automobiles they've rented and the roads upon which they are traveling. The automobile rental industry is a multi-billion dollar industry with an enormous economic impact, particularly in states, like Florida, in which tourism is big business.

First Research, a leading industry intelligence and research company, reports that the auto rental and leasing industry in the United States includes 5,000 companies with combined annual revenues of about $50 billion. These companies include automobile rental businesses like Hertz, Enterprise, Vanguard, Avis, U-Haul, and Dollar Thrifty. The 50 largest companies hold more than 80 percent of the market, so the industry is highly concentrated with the biggest companies having the greatest power and influence. Economies of scale in acquiring vehicles and customers allows the big companies to virtually control the market. The smaller companies typically operate a single rental location, but can only compete effectively with larger companies by providing better service, alternative products, or lower prices. According to First Research, individual rental locations typically have annual revenues of about $1 million, but may have revenues of over $10 million.

According to Answers.com, the car rental industry is thriving, notwithstanding the terrorist attacks of September 11, 2001 which initially negatively impacted air travel and tourism. Industry revenues were $17.9 billion in 2002, slightly higher than 1999 revenues, and projections for growth are strong. There were 1.64 million automobiles in rental car industry fleets in 2002. That number has surely grown higher in the past five years.

Liability Limitations of Rental Car Companies
With all this economic power has come political influence. In 2005, the industry's lobbyists and advocates convinced the Florida legislature to amend Florida's Financial Responsibility Law, the same law that requires certain coverages for individuals and commercial motor vehicles. This amendment was designed to modify the long standing dangerous instrumentality doctrine established by case precedent in Florida holding automobile owners responsible for accidents when they permit others to drive them. See e.g., Anderson v. Southern Cotton Oil Co., 74 So. 975 (Fla. 1917); Allstate Insurance Co. v. Fowler, 480 So.2d 1287 (Fla. 1985); Enterprise Leasing Company v. Almon, 559 So.2d 214 (Fla. 1990). The 2005 amendment limits the liability of this 50 billion dollar a year industry to a mere $ 100,000 per injured person, with a limited exception for only additional economic damages.

Also in 2005, President George W. Bush signed a new federal highway bill, the Graves Amendment⁶, the intent of which was to completely eliminate vicarious liability of a car rental company for injuries cause by its renters nationwide. Florida courts and judges are faced with the task of determining whether the law has its intended effect given Florida's financial responsibility law, and rulings have been somewhat mixed. As anyone in Florida knows, many renters are from other states, and even foreign countries, and may not have their own bodily injury liability coverage for accidents that occur in automobiles they rent in Florida. Moreover, an injured Florida resident may encounter difficulty exercising jurisdiction over a foreign defendant or locating them to serve them with a complaint for injuries in Florida courts.

Responsibility Should Be Placed Where It Belongs
The most recent statistics available from the Florida Department of Highway Safety & Motor Vehicles indicate that approximately 270,000 traffic accidents occurred in Florida in a single year in 2005. That was about 736 accidents each day. And there were over 3,500 deaths in Florida and over 230,000 injuries in Florida in those accidents. Remember, all of that was in a single year. The Centers for Disease Control and Prevention recently reported that automobile accidents are the leading cause of death of teenagers in the United States, accounting for 36% of all teen deaths. That means that over one-third of the deaths of teenagers in this country occur in automobile accidents. According to the Insurance Institute for Highway Safety statistics from 2005, Florida was second in the nation in total deaths from motor vehicle accidents in the U.S. The National Traffic and Highway Safety Administration studies consistently find automobile accidents to be a leading cause of death of Americans of all ages, genders, and races.

Given the number of uninsured individual automobile owners and drivers on Florida roads, it is all too often that a driver at fault for serious injuries or death will have no bodily injury liability insurance to compensate innocent injured victims or their families. When the many victims of these accidents learn that the drivers were uninsured or that the rental car company or owner may not be responsible, they are surprised that the law allows anyone to operate on Florida highways without liability insurance.

It is time to put the responsibility where it belongs. It is time to mandate that individual automobile owners carry a reasonable minimum amount of bodily injury liability coverage in exchange for the privilege of operating their motor vehicles on Florida streets and highways. It is also time to amend Florida's Financial Responsibility Law to make clear, if it does not already, that it is intended to assure that the multi-billion dollar rental car industry is accountable for the injuries caused by its fleets on Florida roads, just as the Graves Amendment specifically allows. It is also time to amend the Financial Responsibility Law to increase the liability of rental car companies from the current low minimum levels and to require that adequate supplemental liability coverage limits be purchased anytime a car is rented in Florida.

It is only fair for the State of Florida and its citizens to expect responsibility and accountability from those granted the privilege of placing automobiles on Florida streets and highways. Indeed, it is unfair to injured Floridians for their own elected representatives to limit or eliminate the responsibility of motor vehicle owners and rental companies.

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¹ 627.730-627.7405, Fla. Stat.
² 324.021, Fla. Stat.
³ 627.7415, Fla. Stat.
⁴"State To Stop Checking For Auto Insurance Once PIP Expires", South Florida Business Journal, June 1, 2007.
⁵See Senate Staff Analysis And Economic Impact Statement, CS/CB 704, February 12, 2002.
⁶49 U.S.C. 30106.

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