9.3 PIP Deductibles, Calculations and the Florida Verbal Threshold

1. Deductible Application & Mathematical Calculations

Insurers must offer policyholders the option to purchase PIP with deductibles of $250, $500, or $1,000 (F.S. § 627.739). The deductible applies exclusively to the named insured and dependent resident relatives; it never applies to injured guest passengers or pedestrians.

How Deductibles Apply to Claims

Florida Statutes stipulate that the deductible is subtracted from total eligible medical and wage-loss expenses before applying the statutory reimbursement percentages (80% for medical, 60% for lost wages).

$\text{Eligible Medical Expenses} = \text{Total Medical Expenses} - \text{Deductible}$ $\text{Insurer Medical Payout} = \text{Eligible Medical Expenses} \times 80\%$

Worked Calculation Example

• Policy Limits: $10,000 PIP, $1,000 Deductible, EMC certified.
• Accident Losses: $7,000 in reasonable medical expenses, $2,000 in lost wages.

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2. The Florida Verbal Threshold & Tort Exemption (F.S. § 627.737)

In exchange for receiving mandatory first-party PIP benefits regardless of fault, motor vehicle owners who maintain PIP coverage are granted a limited tort exemption protecting them from civil lawsuits by injured third parties.

Under F.S. § 627.737, an injured person cannot sue the at-fault driver for non-economic damages (pain, suffering, mental anguish, inconvenience, and loss of capacity for the enjoyment of life) unless the injury pierces the statutory verbal threshold.

The Four Verbal Threshold Exceptions

To recover non-economic damages in a personal injury lawsuit, the plaintiff must prove that the injury resulted in at least one of the following four criteria:

1. Significant and permanent loss of an important bodily function. (e.g., loss of vision, loss of use of a limb, permanent spinal paralysis).
2. Permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement. (Documented by treating physicians as an objective, permanent anatomical impairment).
3. Significant and permanent scarring or disfigurement. (Severe facial lacerations, extensive surgical scars, or physical deformities).
4. Death.

                                  TORT RECOVERY IN FLORIDA
                                             │
                     ┌───────────────────────┴───────────────────────┐
                     ▼                                               ▼
             ECONOMIC DAMAGES                                NON-ECONOMIC DAMAGES
        (Medical Bills, Lost Wages)                     (Pain, Suffering, Anguish)
• Unpaid 20% medical copayment                  • Strictly prohibited by tort exemption
• Unpaid 40% lost wage gap                      • ALLOWED ONLY IF VERBAL THRESHOLD PIERCED:
• Expenses exceeding $10,000 limit                1. Permanent loss of bodily function
• Recoverable without meeting threshold           2. Permanent injury (medical probability)
                                                  3. Significant permanent scarring
                                                  4. Death

Exam Trap: Economic Losses Can Always Be Sued For!

The verbal threshold applies only to non-economic damages (pain and suffering). An injured party can sue the at-fault driver for unpaid economic damages (such as the 20% medical copay, the 40% wage loss, and any medical bills exceeding the $10,000 PIP limit) without meeting the verbal threshold! Even for a minor bruise with zero permanent injury, the claimant can file a lawsuit against the at-fault driver to recover out-of-pocket economic losses.

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Summary Comparison: Florida No-Fault PIP Matrix

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3. The Statutory Basis for the Deductible Rules

The deductible mechanics above are not policy drafting; they come from F.S. § 627.739, and the exam tests the statute rather than any carrier's form.

• Offered amounts. The insurer must offer deductibles of $250, $500 and $1,000 to each applicant and to each policyholder at renewal.
• Who the deductible may bind. The named insured may elect a deductible for the named insured alone, or for the named insured and dependent resident relatives. It may not be applied to any other person covered by the policy — the passenger, the pedestrian and the non-dependent household member all take benefits from the first dollar.
• How it is applied. The deductible is applied to 100 percent of the expenses and losses described in F.S. § 627.736 before the percentages are taken. After the deductible is satisfied, the insured remains eligible for up to the full $10,000 in benefits. Applying the 80 percent first and then subtracting the deductible produces a smaller, incorrect payment and is a classic exam distractor.
• The death benefit is untouchable. The deductible may not reduce the $5,000 death benefit under F.S. § 627.736(1)(c).
• The wage-loss buyback. The insurer must also offer a policy that excludes loss of gross income and loss of earning capacity, with an appropriate premium reduction. When that election is on file, the adjuster pays medical and household services only — a fact that must be verified on the declarations before a wage claim is denied.

4. What the Tort Exemption Does and Does Not Bar

F.S. § 627.737(1) exempts an owner, registrant, operator or occupant of a vehicle with the required security from tort liability for damages because of bodily injury to the extent that personal injury protection benefits are payable. Section 627.737(2) then removes that exemption for non-economic damages — pain, suffering, mental anguish and inconvenience — only where the injury consists in whole or in part of one of the four statutory categories.

Three limits on the threshold decide real files:

1. It applies only to non-economic damages. Economic losses that exceed the personal injury protection limits — the unpaid 20 percent of medical bills, wage loss beyond the cap, future care — are recoverable in tort without meeting the threshold.
2. It does not touch property damage. Florida never made property damage claims no-fault, so a vehicle damage claim against the at-fault driver proceeds normally.
3. It is a medical-proof question, not a billing question. The size of the medical bill is irrelevant; the threshold turns on a physician's opinion, within a reasonable degree of medical probability, that the injury falls in one of the four categories. A $40,000 soft-tissue file with no permanency opinion does not open the tort claim, and a modest file with a clear permanency opinion does.