Articles Posted in Insurance Law

I have blogged here ad nauseam about the continual conflict between insurance companies and their insureds over claims. While carriers insist upon receiving premium payments timely, their all too common approach to the claims process is delay and deny.

Carriers have at their disposal a bag of tools designed to effectuate this delay/deny business model. Examination Under Oath (EUO) (an oral examination conducted under oath by an insurance company of an insured making a claim under a policy), Independent Medical Examination (IME), appraisal, policy application misrepresentation, refusal to cooperate are just some of the tools at their disposal. Some are statutorily prescribed, others are a matter of contract.

An insurance policy is a contract. While statutes control various rights and obligations between carriers and insureds, the terms of the insurance policy determine many others.

Courts frequently become embroiled in conflicts involving the application of contested policy provisions. One such conflict of significance was fought out in State Farm v. Curran, (Fla. 2014). The Florida Supreme Court framed the conflict as follows:

WHEN AN INSURED BREACHES A COMPULSORY MEDICAL EXAMINATION PROVISION IN AN UNINSURED MOTORIST CONTRACT, DOES THE INSURED FORFEIT BENEFITS UNDER THE CONTRACT WITHOUT REGARD TO PREJUDICE? IF PREJUDICE MUST BE CONSIDERED, WHO BEARS THE BURDEN OF PLEADING AND PROVING THAT ISSUE?

Curran, State Farm’s insured, sustained catastrophic injuries in a vehicle crash. Because the at-fault party’s insurance coverage was inadequate, Curran demanded from State Farm the $100,000 in UM available under his own policy. He gave State Farm thirty days to tender the money, estimating his damages to be $3.5 million because she suffered from reflex sympathetic dystrophy syndrome (RSD) type 1. On the 29th day, State Farm demanded that Curran undergo a Compulsory Medical Exam (CME) pursuant to the terms of the policy. Curran refused and proceeded to sue State Farm. A jury trial culminated in an award of $4,650,589 in damages to Curran.
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Florida Statute 624.155 provides a civil remedy for persons damaged by an insurer’s failure to settle claims in good faith. The remedy can include an award of damages in excess of the insured’s policy limits, attorney’s fees and litigation costs. This threat is the spur that motivates insurance companies to handle claims properly. (Side note: Insurance companies hate that their insureds have this stick at hand to keep them in line. Each legislative session for the past few years, Republican legislators friendly with the insurance industry have sponsored legislation to eliminate or water down the law. Thankfully, each effort has failed. Unfortunately, they will continue trying.)

The law was recently put to the test in Perdido Sun Condominium Association, Inc. v. Citizens Property Insurance Corporation, 129 So.2d 1210 (Fla. 1st DCA 2014).

Citizens is an insurer created by the legislature for the public purpose of providing “affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to do so.” § 627.351(6)(a)1., Fla. Stat. As a creature of statute, Citizens’ operations, procedures, duties, and legal status are governed by section 627.351(6), Florida Statutes.

After its insured property was damaged by a hurricane in 2004, Perdido Sun made a claim on its insurance policy with Citizens. Perdido Sun was not satisfied with the amount of Citizens’ eventual payment on the claim and filed a breach of contract action to recover additional sums under the insurance contract. Perdido Sun prevailed on the breach of contract claim.

Based on the result in the breach of contract case, Perdido Sun filed a second lawsuit against Citizens for the civil remedy provided in section 624.155(1)(b)1., Florida Statutes, a statutory “bad faith” claim. Citizens asserted that it was immune from suit under section 627.351(6)(s)1., Florida Statutes, and that a statutory bad-faith action under section 624.155 was not among the specifically listed exceptions to this immunity. § 627.351(6)(s)1., a.-e., Fla. Stat.
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Many people, including some personal injury lawyers, believe that UM insurance always provides coverage when the insured is not at fault and there is no other insurance to cover the losses. This is wrong.

When the driver of an uninsured or underinsured (UIM) vehicle causes an accident, UM/UIM should kick in to compensate for losses such as wage loss, medical expenses, and pain and suffering. This is prescribed by Section 627.727(1) Florida Statutes, which provides, in pertinent part, as follows:

No motor vehicle liability insurance policy which provides bodily injury liability coverage shall be delivered or issued for delivery in this state with respect to any specifically insured or identified motor vehicle registered or principally garaged in this state unless uninsured motor vehicle coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. (Italics provided)

Crashes without the wrongdoing of another driver do occur. Our office was recently retained by a woman who struck a tree after swerving her car to avoid hitting a dog that had suddenly entered the roadway. She sustained severe whiplash and a blow to the head which caused her to lose consciousness. She was rushed to the hospital by ambulance and admitted for testing and overnight observation. Her car was totaled. The accident was not her fault.
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Whenever an insured makes a claim, one of the first things every insurance company does is try to figure out ways to deny the claim. Common methods are to assert that the loss is not covered under the policy or that the insured has failed to cooperate with the carrier. Another popular practice is to rescind the insurance contract based on charges of misrepresentation, omission, concealment of fact or incorrect statement in an application for insurance. This method is authorized by Section 627.409(1) of the Florida Statutes, and can even be based on non-intentional misstatements.

While the law does not favor the forfeiture of rights under an insurance policy, see Johnson v. Life Insurance Company of Georgia, 52 So.2d 813, 815 (Fla. 1951), beating back 627.409 charges can be difficult. To prevail under 627.409, the carrier need only show any of the following:

(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.

(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy or contract, would not have issued it at the same premium rate, would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss.

These are not especially difficult standards for carriers to meet. Moreover, while carriers sometimes prey on the vulnerable by rescinding based on flimsy or non-existent evidence, not expecting the insured to fight back, more frequently their evidence contains some modicum of substance. Notwithstanding these hurdles, insureds do have a fighting chance under Florida law.

Waiver. “[W]hen an insurer has knowledge of the existence of facts justifying a forfeiture of the policy, any unequivocal act which recognizes the continued existence of the policy or which is wholly inconsistent with a forfeiture, will constitute a waiver thereof.” Johnson at 815. The elements of waiver are: (1) the existence at the time of the waiver of a right, privilege, advantage, or benefit which may be waived; (2) the actual or constructive knowledge of the right; and (3) the intention to relinquish the right. Capital Bank v. Needle, 596 So.2d 1134 (Fla. 4th DCA 1992); Taylor v. Kenco Chemical & Mfg. Corp., 465 So.2d 581 (Fla. 1st DCA 1985).

Johnson involved a life insurance policy. Following the insured’s death, the carrier sought to rescind the policy based on misrepresentation. It was clear that the insurance application contained material misrepresentations concerning the insured’s health and medical treatment before issuance of the policy. It was also uncontroverted that the insurance agent became aware of the misrepresentations only two months after the date of the issuance of the policy, yet the carrier continued to accept and collect premiums with constructive notice of these facts. (The carrier did not challenge that the knowledge acquired by the agent was imputable to it, the principal, even though the agent might not have communicated the information to the company. On this issue, the Johnson court wrote: “[U]nder the circumstances here present the knowledge of the agent is imputable to his principal whether disclosed by him to it or not, and the company will be bound by such knowledge. See National Life & Accident Ins. Co., Inc., v. Travis et al., Tex. Civ.App., 128 S.W.2d 867; Poole v. Travelers Ins. Co. et al., 130 Fla. 806, 179 So. 138.”)

Failing to take acts necessary to effectuate rescission. In Leonardo v. State Farm Fire & Casualty Company, 675 So.2d 176 (Fla. 4th DCA 1996), a case involving a theft policy, the court of appeal reversed summary judgment for the carrier in a rescission case because, in part, the carrier did not remit, or even make a tender of, any premiums paid by the insured for the allegedly void policy. (The appeal court also reversed on waiver grounds, because State Farm continued to bill the insured and accept payment of premiums for a considerable period of time after denying his claim, and after notifying him of its intent to void the policy.)
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