The Question on Interest Calculations in Personal Injury Protection Cases

Written by Ryan W. Reese

There has been much debate regarding how much interest is owed on overdue or underpaid benefits. This interest question is governed by two statutes for Personal Injury Protection (“PIP”) cases: section 627.736(4)(d) and section 55.03 for the Florida Statutes. There are quoted below:

All overdue payments bear simple interest at the rate established under s. 55.03 or the rate established in the insurance contract, whichever is greater, for the quarter in which the payment became overdue, calculated from the date the insurer was furnished with written notice of the amount of covered loss. Interest is due at the time payment of the overdue claim is made.

§ 627.736(4)(d), Fla. Stat.

(1) On December 1, March 1, June 1, and September 1 of each year, the Chief Financial Officer shall set the rate of interest that shall be payable on judgments or decrees for the calendar quarter beginning January 1 and adjust the rate quarterly on April 1, July 1, and October 1 by averaging the discount rate of the Federal Reserve Bank of New York for the preceding 12 months, then adding 400 basis points to the averaged federal discount rate. The Chief Financial Officer shall inform the clerk of the courts and chief judge for each judicial circuit of the rate that has been established for the upcoming quarter. The interest rate established by the Chief Financial Officer shall take effect on the first day of each following calendar quarter. Judgments obtained on or after January 1, 1995, shall use the previous statutory rate for time periods before January 1, 1995, for which interest is due and shall apply the rate set by the Chief Financial Officer for time periods after January 1, 1995, for which interest is due. Nothing contained herein shall affect a rate of interest established by written contract or obligation.

. . . .

(3) The interest rate is established at the time a judgment is obtained and such interest rate shall be adjusted annually on January 1 of each year in accordance with the interest rate in effect on that date as set by the Chief Financial Officer until the judgment is paid, except for judgments entered by the clerk of the court pursuant to ss. 55.141, 61.14, 938.29, and 938.30, which shall not be adjusted annually.

§ 55.03, Fla. Stat. (sections 2 and 4 omitted for brevity).

Under the recent Fourth DCA ruling in Precision Diagnostic, Inc., v. Progressive American Insurance Company, the interest question is brought into sharp focus. 46 Fla. L. Weekly D2282d (Fla. 4th DCA October 20, 2021). A brief backstory of the case can be found in a quote from the case:

Precision billed Progressive for benefits provided to the insured. Progressive paid $1,373.04 within the thirty-day timeframe required by section 627.736(4)(b). Due to a miscalculation, Progressive owed an additional $400 to Precision in benefit payments. It is undisputed that Progressive erred in the original amount owed to Precision. Progressive re-adjusted the bill and issued an additional payment to Precision on the 1,234th day after the bill was received. Progressive also included a payment of $64.50 in interest on the overdue benefit payment.

Id. Precision later sued stating that Progressive underpaid by $6.13 based on the quarterly fluctuating interest rate provided by §§ 627.736(4)(d) and 55.03. At trial, Progressive denied Precision’s math and stated the unpaid interest was actually $4.17, claiming the interest “was to be calculated at a set rate ‘for the quarter in which the payment became overdue.’” Id. (quoting § 627.736(4)(d), Fla. Stat.).

The trial court found that the interest was properly paid and the requirement of an insurer to “recalculate interest every three months would lead to an absurd result.” Id. In an odd turn of events, the trial court also found that the doctrine of de minis non curat lex (the law does not care for small things) applied to this case; thereby, precluding the lawsuit over a purported $4.17 of miscalculated interest.

When this case was appealed, the Fourth DCA found that both parties were incorrect in their interpretation of the statutes. Instead, the court detailed the interplay between the two statutes is as follows:

Section 627.736(4)(d) requires that the interest rate be established by section 55.03 for the quarter in which payment became overdue. Section 55.03(1) requires that the Chief Financial Officer set the rate of interest quarterly. Subsection 55.03(3) then requires that the interest rate adjust annually on January 1 of each year until the judgment is paid. Therefore, according to an annually adjusting interest rate, the correct total amount of interest due to Precision was $68.67, with an underpayment by Progressive of $4.17.

In other words, the initial interest rate is set when the payment becomes overdue, but is not fixed at that rate indefinitely. Instead, the interest is adjusted on January 1st of every year until the overdue interest is paid. So, if payment for benefits became overdue in October, the October quarter interest rates would apply until January 1st of the following year, at which the rate would be adjusted to the January 1st interest rates. The interest rates would continue to adjust every subsequent year’s January 1st interest rates if the amount is still due and owing.

Despite the effort into clarifying sections 627.736(4)(d) and 55.03, the Fourth DCA would then agree with the trial court that the $4.17 interest was de minimus, and opined “that the present case was brought not for the de minimis interest, but rather for the award of attorney’s fees.” While this case may, perhaps, close the door on the question of interest in PIP cases, it may yet open the door to more de minis non curat lex arguments in the future.

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