Articles Posted in Insurance Law

In March, I blogged about Florida’s new PIP law that had been approved by the Florida Legislature on March 9, 2012. (New Florida PIP Law (Effective 1/1/13) Hammers Consumers.) I believe that many aspects of the law are anti-consumer, however, I limited my blog conversation to an issue concerning medical benefits.

Another aspect of which I disapprove concerns the award of attorney fees to insureds’ attorneys when carriers wrongly deny benefits, in other words, breach the insurance contract. The new law sharply limits the fees.

One of the most powerful tools insureds have to force carriers to honor contracts is the threat of having to pay sizable attorney’s fees. Accordingly, limiting the fees reduces the leverage consumers have against their insurance companies. This is an important subject.

From time to time, I will reproduce in my blog letters and articles written by other people. I am reproducing here a letter on the subject of fees written by my good friend and superb South Florida lawyer Cris Evan Boyar. The letter was published in the April 1, 2012 issue of The Florida Bar News:

Don’t Cap Fees
For 100 years our Legislature recognized that unless something was done to level the playing field between the insurer and their policyholders, the insurers could deny claim after claim with impunity. Recognizing the unfairness of the system that forces Floridians to buy PIP coverage and the financial disparity between the insurer and its policyholders, the Legislature enacted a law that sanctions the insurer by forcing the insurer to pay their policyholders’ attorneys’ fees if the policyholder prevails. These legal fees are paid only if there is a determination the insurance company wrongfully denied the claim.
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Insurance companies make money by paying out less in claims than they receive in premiums. As long as premium rates are fairly regulated, healthy competition exists within the industry to keep rates in check, and carriers operate in good faith with regard to the claim process, there is nothing wrong with carriers making respectable profits.

Insurance premiums are regulated by the state government. Arguably, the carriers’ rate requests are given too much deference by the governing authorities. Considering the carriers’ financial resources and the pro-business/anti-consumer climate in Tallahassee, with a Governor Scott and the House and Senate in Republican hands, this is not a surprise.

Competition among carriers is brisk, although it is curious how similar their rates are and how the premiums are always at or near the maximum levels allowed by law.

All carriers try to pay as little as possible on all claims. The carriers that seek this outcome through fair and honest dealings should not be faulted. There is nothing wrong with thorough and expeditious fact gathering and inquiry.

Unfortunately, not all carriers handle claims in good faith.

An insurance policy is a contract been the insured and the insurer/carrier. Certain obligations are imposed on each party to the insurance contract. The insured must pay the premium and cooperate in the claims process, while the carrier must process claims in good faith and pay the proper amount on legitimate claims.

One of the tools at the disposal of carriers to gather information about claims is the Examination Under Oath, or EUO. An EUO is an oral examination conducted under oath by an insurance company of an insured making a claim under a policy. A carrier’s right to conduct the EUO is a matter of agreement between the insurer and the insured. Its terms will be set forth in the insurance policy.
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As the 2012 Florida legislative session is about to begin, Corporate Florida is rolling out its guns to prepare for its annual assault on the civil justice system. Although packaged as an effort to benefit consumers, make no mistake that the true goal is to maximize corporate profits at the expense of people. Profits over People.

PIP is one of the main targets in Corporate Florida’s high powered sights this session.

Associated Industries of Florida is one of Corporate Florida’s most aggressive players in the never ending war between profits and rights. It was in the forefront of the assault on Florida’s workers’ compensation system that has resulted in less support for injured workers today than 10 to 20 years ago. PIP is next.

On November 28, 2011, the Miami Herald published an editorial by a vice president for governmental affairs at Associated Industries, in which various proposals were made for revamping the PIP system. I will respond to each proposal.

Proposal: “Allow insurance companies adequate time to investigate suspicious claims.”
Response: Under current Florida law, PIP insurance companies have at least 65 days to investigate claims before a lawsuit for breach of contract can be filed. This alone is adequate time to investigate a claim, but in reality carriers have much more time to investigate because in everyday practice PIP lawsuits are rarely filed within six months of an accident. During this period of time, carriers have many ways to investigate claims, including examining insureds under oath and having medical exams performed by hand chosen doctors.

Carriers have the right to deny claims that they feel are suspicious. If a claim is denied, an insured may drop the claim or file suit. Through legal proceedings, each side has the chance to fairly present its case to a judge and jury. What’s unfair about that?

Proposal: “Cap attorney fees in no-fault cases to eliminate the incentive for frivolous litigation.”
Response: This is a shell-game proposal. Carrier’s know that fee caps will discourage lawyers from pursuing legitimate claims. It is a ploy the insurance industry has used with great success in gutting the rights of workers’ compensation claimants. Carriers also know that there is no such thing as a frivolous lawsuits crisis, only a successful propaganda campaign to make the public believe there is. As I have blogged here before – Debunking The Myth About Frivolous Lawsuits (Florida) – Installment #1; Debunking The Myth About Frivolous Lawsuits (Florida) – Installment #2 ; South Florida Trial Lawyer – Tort Reform (“Deform) & What It Means – the concept that lawyers can make money pursuing frivolous claims defies logic and reason. As every lay person who has battled with an insurance carrier knows, it is hard enough to succeed with legitimate claims much less bogus claims. The civil justice system has created numerous filters to weed out even weak cases, so the notion that baseless cases somehow make it through the filter system is nothing short of disingenuous. Quite simply, Corporate America does not like being answerable to individuals in courts of law. The frivolous lawsuits fallacy is nothing short of a concerted campaign to bar the courthouse doors against individuals seeking redress. Profits over People.
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(Also read this blog: DCA Limits EUO Abuse)

Most Florida-issued insurance policies allow carriers to examine their insureds and omnibus insureds* (individuals unnamed but covered under a policy) under oath during the claim process. Any failure by the insured to cooperate with this condition of the policy may result in a denial of coverage.

In every EUO, carriers look for ways to deny and limit claims. For example, questions will be asked seeking to uncover substantive misrepresentations in the insurance application. Carriers also try to frighten insureds into dropping claims. One popular tactic is by indicating that the EUO is being conducted by the company’s “Special Investigatve Unit,” an effort to make the procedure look like a law enforcement action.

Other tactics include:

• Scheduling EUOs during work hours on short notice
• Requiring personal attendance at obscure, inconvenient, and far away locations (e.g., Blue Lagoon Drive, in Miami)
• Videotaping the EUO
• Seeking contact information of every possible witness
• Behaving rudely
• Asking endless irrelevant questions that invade privacy and make what should be a 15 minute examination last hours

Thankfully, there are limits on the carrier.

The claimant may have his/her lawyer present during the EUO. Moreover, since the EUO is not controlled by the Florida Rules of Civil Procedure or the Florida Rules of Evidence, like a deposition would be, the claimant and lawyer are far less constrained in their conduct. For example, they may confer during the questioning.
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From our experience, most Florida motor vehicle owners are not familiar with the many different types of coverages that are available, for the asking and at a price, under a standard vehicle insurance policy.

Preliminarily, it should be understood that, in Florida, for a vehicle to be lawfully registered, the only mandatory coverages are PIP (limited medical and lost wages) and Property Damage – Liability (covers damage to the other person’s property caused by the at-fault party). (Florida, a state with, in my opinion, primitive notions of right and wrong, is in the minority with regard to mandatory coverages. Other states, by making Bodily Injury – Liability mandatory, seemingly value life and limb more than property. Not so Florida, whose motor vehicle insurance vehicle laws create an environment the equivalent of the Wild West, where each man is responsible for his own safety and welfare without protection from the authorities.) Since these are the minimum requirements, a policy that covers nothing more is also the least expensive policy that can be purchased.* It is also the policy of choice for a large percentage of Florida motorists.
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Uninsured/Underinsured vehicle insurance, described in Florida Statute 627.727, is first party insurance that covers non-economic damages (e.g., pain & suffering), economic losses (e.g., lost wages) and medical expenses realized by insureds through the negligence of uninsured or underinsured (i.e., losses exceed policy limits) owners and operators of motor vehicles. In Florida, where a high percentage of vehicle owners do not maintain bodily injury (BI) coverage or, if they do, only carry it up to a limit of $10,000, having UM/UIM is the only sure way of providing some degree of economic protection against the catastrophic losses a serious motor vehicle accident can cause.

UM/UIM can be stacked or non-stacked. The most well known function of stacked coverage is to increase policy limits for owners of multiple vehicles insured under the same insurance policy. For example, the owner of three vehicles insured under the same policy, with stacked UM/UIM coverage with limits of $100,000 per vehicle, really has $300,000 worth of coverage for the the types of losses described in the paragraph above.

Stacked coverage serves another valuable function.

It is not unusual for owners of multiple vehicles to have some or all of their vehicles covered under separate policies. This can be problematic because most insurance policies issued in Florida exclude the extension of UM/UIM when the accident happens in a vehicle “owned by an insured but not insured under this policy.” In other words, the UM/UIM on one vehicle does not transfer to another vehicle owned by the same person.

Having stacked UM/UIM on even one of the insured vehicles overcomes the exclusion. In the example above, $100,000 is available to the insured no matter which vehicle the insured was occupying during the accident. Another way of thinking of it is that stacked UM/UIM follows the insured everywhere. Non-stacked coverage does not.

Florida insurance law can be a puzzle. It is best to seek the advice of legal counsel before and after an accident to learn your rights.
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As a Plaintiffs’ personal injury law firm, we deal with insurance companies every day. Thanks to current Florida law, insurance companies are duty bound to act in the best interests of their insureds, the individuals and companies who pay for insurance coverage. Acting in the best interests of an insured sometimes means that an insurance company should tender its insured’s policy limits to the injured party. If done timely, the tender will keep the insured from being exposed to a court judgment in excess of his/her or its policy limits.

With Governor Scott and a solid majority of right-wing Republicans, in the Florida House and Senate, in control of lawmaking in Florida, during the upcoming legislative session, scheduled to begin in January, 2012, the insurance industry will be proposing legislation to end their duty to act in good faith. In fact, one bill, HB 427 has already been proposed, by Rep. Kathleen Passidomo (R-Naples).

This is a serious topic, about which I have and will continue to blog at length, with far reaching ramifications. Ironically, those who are the most at risk by the proposed legislation are the very same constitutents who generally support right-wing policies, wealthy individuals and corporations.

Reproduced here is a well written article on the subject by Steven Marino, a prominent South Florida “bad faith” attorney, which was published in the Sunday (10/23/11) Miami Herald.
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By Stephen A. Marino Jr.
Special to The Miami Herald
You’re in good hands. Your insurer is on your side, because it’s like a good neighbor. Some companies live up to their slogans, but some use promises to induce Floridians to entrust their livelihoods and businesses to companies offering liability insurance.

When the paperwork is signed and the premiums are paid, it’s all smiles and handshakes. But if the small business owner is a few days late on a premium payment, or makes a mistake on the policy application, coverage is terminated. But what happens if the insurance company makes a mistake?

Florida law has long recognized an insurance company’s fiduciary obligation to protect its policyholder from a judgment exceeding the limits of the policy. Since at least 1938, Florida courts have clearly expressed that an insurer must act honestly and in good faith toward the insured. The reasoning is simple: An insurance company writes a contract that gives it complete control over the defense and settlement of a claim against the policyholder, and must therefore use “the same degree of diligence as a person of ordinary care and prudence should exercise in the management of his own business.”

The insurance company insists that it make the decisions, so Florida law requires that it do so while acting in the best interest of its insured. If the insurance company makes a mistake, and the result is a liability judgment against the policyholder, the law places the responsibility for the judgment on the insurance company, not the small business.
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Florida’s motor vehicle insurance laws can be hard to comprehend.

A case in point: Personal Injury Protection (PIP) and Property Damage – Liability are the only required coverages for an owner to lawfully operate a vehicle on Florida’s streets and highways. (PIP pays 80% of medical bills and 60% of lost wages for the insured up to $10,000, while Property Damage – Liability pays to repair or replace the other owner’s motor vehicle.) With these coverages, the owner is able to register a vehicle and purchase a license plate.

Surprisingly, however, in the event of a motor vehicle accident involving injury or death, having the minimum mandatory coverages will not prevent the at-fault party from having her drivers license and all vehicle registrations suspended. Sections 316.066(3)(a)1 and 324.051(2)(a) Florida Statutes.

The only type of coverage that will prevent these suspensions is Bodily Injury liability (a/k/a BI). Section 324.021 (7) Florida Statutes.
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