Articles Posted in Insurance Law

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bankruptcy-300x300Every citizen of this state should know that the only thing compelling personal injury liability insurance companies to voluntarily pay claims is the threat of being sued for bad faith.

Liability insurance companies have a legal obligation to act in the best interests of their insureds. Boston Old Colony Ins. Co. v. Gutierrez, 386 So.2d 783 (Fla. 1980) (An insurer who assumes the defense of the insured also assumes a duty to act in good faith and with due regard to the interests of the insured.) More specifically, in actions by third parties against the insured, the insurer must act in good faith and be diligent in its effort to negotiate a settlement within policy limits. Auto Mutual Indemnity Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938). If the carrier fails to do so and a final judgment is entered against its insured for an amount in excess of the policy limit, in a subsequent bad faith action the carrier may be forced to satisfy the excess judgment and pay attorney’s fees and costs. The excess can be many multiples of the policy limit, sometimes in the millions of dollars. The reasoning behind bad faith jurisprudence is that the carrier, by failing to adjust the claim in good faith, has exposed its policyholder to an otherwise avoidable financial burden.

Insurance carriers want to believe that Chapter 7 discharges extinguish their bad faith liability because the insured is not harmed by or liable for the excess verdict. In Camp v. St. Paul Fire & Marine Ins. Co., 616 So.2d 12 (Fla., 1993), the Florida Supreme Court ruled otherwise.

There are three types of bankruptcies, Chapter 7, 11, and 13.

  • Chapter 7. This chapter of the Bankruptcy Code involves liquidation” – the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.
  • Chapter 11. This chapter of the Bankruptcy Code generally provides for reorganization, usually involving a corporation or partnership. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in chapter 11.
  • Chapter 13. This chapter of the Bankruptcy Code provides for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.

Camp involved a medical malpractice case where the injured party obtained a three million dollar verdict after the the carrier failed to settle the case for the defendant doctor’s $250,000 insurance policy limit. Before the verdict was rendered, the defendant doctor filed for Chapter 7 bankruptcy. This put an automatic stay on the malpractice proceedings. While the case was under the stay order, the bankruptcy court granted a discharge that shielded the doctor from personal liability for any claims pending against him as of the date of his bankruptcy filing. Thereafter, the bankruptcy court authorized Camp, the injured party, to proceed with her lawsuit for the purpose of liquidating her claim in the bankruptcy case. (She requested relief from the stay by filing a motion under Bankruptcy Rules 4001 and 9014, showing cause as specified in 11 U.S.C. Sec. 362(d).) At the same time, however, the bankruptcy court specifically ruled that the doctor would be not be personally liable for any judgment Camp obtained against him in her state court lawsuit.

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massage-200x300Personal Injury Protection (PIP) is mandatory insurance coverage for Florida motor vehicle owners. It covers a limited amount of medical expenses and lost wages, typically $10,000 total.

The PIP statute,  s. 627.736, is particular as to which types of medical providers may seek reimbursement. In Geico General Insurance Co. v. Beacon Healthcare Center, Inc. (Fla. 3rd DCA; opinion filed February 26, 2020), the court confirmed that “a person who is licensed as a massage therapist, but not licensed as a physical therapist,” may not be reimbursed by PIP.

A number of GEICO insureds sought treatment at Beacon Healthcare Center, Inc. During their initial consultations, the treating physician (and Beacon’s medical director) prescribed therapy modalities that were provided by massage therapists who held massage therapy licenses, but did not hold licenses in physical therapy. The massage therapists were not directly supervised on site by either a licensed physical therapist or by a medical physician when they performed the treatments.

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legal-documentI have written many times before that maintaining Uninsured Motorist (UM)/Underinsured Motorist (UIM) coverage is an important way of providing a level of protection to self and others from the negative consequences of a serious motor vehicle accident. The coverage is outlined in Section 627.727, Florida Statutes.

To the extent of policy limits, UM covers losses sustained by the insured, passengers, and family members caused by a party who fails to maintain Bodily Injury (BI) insurance. Hit-and-run and “phantom vehicle” scenarios also fall under UM coverage. UIM covers losses that exceed the limits of coverage available under the at-fault party’s BI insurance. Neither UM/UIM nor BI are mandatory coverages under Florida law.

A component of UM/UIM is stacked v. non-stacked coverage. These are the similarities and differences between the two:

Aggregating Policy Limits. When people think of stacked UM/UIM, aggregation is the first concept that comes to mind. Aggregation is the act of combing the coverage limits of two or more stacked UM/UIM policies. For example, if the insured owns two vehicles with $100,000 of per person stacked UM/UIM coverage on each, a combined $200,000 in coverage is available. If stacked coverage is maintained on one but not the other, even if the other has non-stacked UM/UIM, aggregation is not available.

UM/UIM Coverage Following the Owner. With one exception, both stacked and non-stacked UM/UIM follow the insured. The lone exception is when the non-stacked insured is occupying another owned vehicle. Coverage will be denied. The exception is allowed by s.627.727(9), Florida Statutes. Otherwise, both stacked and non-stacked coverage follow the owner, whether struck as a pedestrian 1000 miles from the insured vehicle, while riding a bicycle, or occupying a friend’s car. The stacked insured is covered even if occupying another owned vehicle.

UM/UIM Coverage Following the Vehicle. Both stacked and non-stacked UM/UIM cover the insured vehicle.

For more than 50 years, UM/UIM has been considered an important component of a system fabricated to provide a basic level of insurance protection to the public. This is why, in 1971, in the case of Mullis v. State Farm Mut. Auto. Ins., the Florida Supreme Court came down hard against an exclusion in a UM policy. (In Mullis, the insurance carrier sought to deny UM benefits to the son of the named insured, his father, with whom he was residing at the time he was injured by an uninsured motorist while operating a motorcycle.) Through its words, the Supreme Court cemented a mindset towards UM/UIM that remains influential still:

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Pie-Chart-300x246It is common for medical bills incurred in Florida personal injury cases to be paid by health insurance. Some people injured in accidents also receive private disability insurance benefits. Most health and disability insurance policies afford insurance carriers subrogation or reimbursement rights against the insured who has recovered all or part of the insurance payments from a tortfeasor (the at-fault party). This means that the carrier has the right to be repaid some or all of the insurance benefits paid out.

How much must be repaid depends in large measure on the law governing the relationship between the insurer and insured. Self-funded employer policies are governed by ERISA. Non-ERISA policies and fully-insured employer policies fall under the authority of section 768.76(4), Florida Statutes. This blog addresses reimbursement under the Florida Statute.

Section 768.76(4) reads as follows:

A provider of collateral sources that has a right of subrogation or reimbursement that has complied with this section shall have a right of reimbursement from a claimant to whom it has provided collateral sources if such claimant has recovered all or part of such collateral sources from a tortfeasor. Such provider’s right of reimbursement shall be limited to the actual amount of collateral sources recovered by the claimant from a tortfeasor, minus its pro rata share of costs and attorney’s fees incurred by the claimant in recovering such collateral sources from the tortfeasor. In determining the provider’s pro rata share of those costs and attorney’s fees, the provider shall have deducted from its recovery a percentage amount equal to the percentage of the judgment or settlement which is for costs and attorney’s fees.

Most statutes require some sort of judicial intervention to establish their parameters. In Magsipoc v. Larsen, 639 So.2d 1038 (Fla. 5th DCA 1994), the application of section (4) was considered on appeal in a wrongful death case involving the repayment of health insurance benefits to the carrier.

Before dying after nearly drowning in a pool, a young child in the Magsipoc case received extensive medical care in an effort to save her life. Health insurance paid all of the medical expenses and costs (totaling $472,000). Thereafter, the child’s parents sued the pool owners on behalf of themselves and their daughter’s estate.

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motorway-300x224Florida is one of only a handful of states that operates under a No-Fault system for paying medical expenses incurred in connection with motor vehicle accidents. Florida’s No-Fault Law, commonly referred to as “PIP” (personally injury protection, is contained in sections 627-730-627.7405 of the Florida Statutes. There is a dollar limit as to how much is covered under the No-Fault Law. Section 627.736(1) provides as follows:

REQUIRED BENEFITS.—An insurance policy complying with the security requirements of s. 627.733 must provide personal injury protection to the named insured, relatives residing in the same household, persons operating the insured motor vehicle, passengers in the motor vehicle, and other persons struck by the motor vehicle and suffering bodily injury while not an occupant of a self-propelled vehicle, subject to subsection (2) and paragraph (4)(e), to a limit of $10,000 in medical and disability benefits and $5,000 in death benefits resulting from bodily injury, sickness, disease, or death arising out of the ownership, maintenance, or use of a motor vehicle….

Florida jurisprudence allows individuals involved in accidents to seek damages for pain, suffering, mental anguish, and inconvenience because of bodily injury. These are known as non-economic damages. Florida’s No-Fault Law makes obtaining these damages in motor vehicle crash cases more difficult than in other types of accident cases. This is because of the unique requirements outlined in s. 627.737(2):

In any action of tort brought against the owner, registrant, operator, or occupant of a motor vehicle with respect to which security has been provided as required by ss. 627.730-627.7405, or against any person or organization legally responsible for her or his acts or omissions, a plaintiff may recover damages in tort for pain, suffering, mental anguish, and inconvenience because of bodily injury, sickness, or disease arising out of the ownership, maintenance, operation, or use of such motor vehicle only in the event that the injury or disease consists in whole or in part of:

(a) Significant and permanent loss of an important bodily function.
(b) Permanent injury within a reasonable degree of medical probability, other than scarring or disfigurement.
(c) Significant and permanent scarring or disfigurement.
(d) Death.
The primary battleground in the fight for non-economic damages is part (b), which involves more subjectivity than parts (a), (c), and (d). Typical examples include claims of back, neck, and knee pain. Defendants argue that there hasn’t been an injury or that an injury, as visualized in diagnostic testing such as x-rays and MRI imaging, is preexisting and unrelated to the accident.

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IMG_5345-225x300We are representing a gentleman who was struck by a pickup truck just before sunrise while walking to a bus stop on his way to work. The driver turned quickly without warning from a main road onto a small side street while our client was halfway across after looking both ways before proceeding. Our client spent two weeks in the hospital in intensive care. The driver of the vehicle was charged with failing to yield the right of way.

We learned that the vehicle was purchased by an administratively dissolved corporation and loaned by the sole officer and shareholder of that defunct corporation to the driver for personal use. While the dissolved corporation did not maintain personal injury liability insurance, our investigation determined that the officer/sole shareholder (O/SS) owned unencumbered real estate worth in excess of $1,000,000, almost enough to cover our client’s medical expenses, lost income, and personal injuries. (We made this asset determination by searching the public records and by obtaining an asset affidavit from the O/SS. The driver of the vehicle is uninsured and does not have assets of any meaningful value.)

Through experience and legal research, we have concluded, based on two intertwining legal theories, that the O/SS is likely personally liable for our client’s significant damages.

Section 607.0204, Florida Statutes (2019), part of the Business Corporation Act, provides as follows:

Liability for preincorporation transactions.—All persons purporting to act as or on behalf of a corporation, knowing that there was no incorporation under this chapter, are jointly and severally liable for all liabilities created while so acting.

For us to be able to impose personal liability on the O/SS under this statute, we must show that he knew or should have known that the corporation was dissolved when he acted. Presley v. Ponce Plaza Associates, 723 So. 2d 328 (Fla. 3rd DCA 1998) and Harry Rich Corp. v. Feinberg, 518 So.2d 377 (Fla. 3d DCA 1987). Given that the gentleman was the sole officer and shareholder of the corporation, which had been administratively dissolved years before the vehicle was purchased, we feel confident in being able to make that proof.

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maze1-300x225Once a case involving personal injuries has been settled or resolved by the payment of a final judgment, the injured party will receive no more money from the closed matter to cover any later incurred expenses such as those for medical care. This rule applies in both civil and workers’ compensation cases.

The question often arises as to whether health insurance will cover post-resolution incurred expenses. The answer depends on the type of coverage available. Medicare, for example, will not cover expenses for which a person has been compensated in an underlying personal injury or workers’ compensation case unless a pre-determined portion of the compensation is first exhausted. The amount that must be exhausted is set forth in what is known as a Medicare Set Aside Arrangement. In contrast, medical benefits available through the Veterans Administration are not subject to being offset against funds recovered in the underlying accident case. These are the two extremes. Health insurance benefits provided through ERISA plans and the Affordable Care Act fall somewhere in between.

A majority, albeit dwindling, number of Americans receive group health insurance through their employers. (The trend is for employers to reduce employee work hours to avoid having to provide group health insurance.) The rights and duties of insureds and insurers under these plans is governed by a federal law known as ERISA (Employee Retirement Income Security Act), see 29 U.S.C. §§ 1001-1461. Many other individuals are covered by individual insurance policies mandated by the Affordable Care Act (ACA), also known as “Obamacare.” Even though ERISA plans must meet certain ACA requirements, in various other important respects the plans are less consumer friendly than individual ACA policies, which are governed by Florida law for Florida issued policies. Two of the most significant differences involve challenging the denial of claims and carrier subrogation rights.

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motorway-300x224Personal Injury Protection (PIP), or “No-Fault,” is a type of Florida motor vehicle insurance available to a “named insured, relatives residing in the same household, persons operating the insured motor vehicle, passengers in the motor vehicle, and other persons struck by the motor vehicle and suffering bodily injury while not an occupant of a self-propelled vehicle.” See, section 627.736(1), Florida Statutes. Subject to policy limits (usually $10,000) and deductibles, PIP covers 80% of medical expenses and 60% of lost wages.

Generally, PIP carriers cannot recoup these payments from entities such as at-fault drivers and health insurance. Section 627.7405(1) is the exception to the rule. It reads as follows:

Notwithstanding ss. 627.730–627.7405, an insurer providing personal injury protection benefits on a private passenger motor vehicle shall have, to the extent of any personal injury protection benefits paid to any person as a benefit arising out of such private passenger motor vehicle insurance, a right of reimbursement against the owner or the insurer of the owner of a commercial motor vehicle, if the benefits paid result from such person having been an occupant of the commercial motor vehicle or having been struck by the commercial motor vehicle while not an occupant of any self-propelled vehicle.

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crushed-vehicle-300x207With few exceptions, section 440.11, Florida Statutes grants immunity from tort liability to employers and the co-employees of Florida workers injured in the course and scope of their employment. In most cases, the doctrine precludes relief outside of the workers’ compensation system.

Florida’s dangerous instrumentality doctrine is a common law doctrine which provides that the owner of an inherently dangerous tool is liable for any injuries caused by that tool’s operation. The Florida Supreme Court in Southern Cotton Oil Co. v. Anderson, 80 Fla. 441, 469 (Fla. 1920), extended the doctrine to motor vehicles, holding that owners may be held accountable for any damages suffered by third parties as the result of the negligent operation of their vehicles, when they are driven by others with their knowledge and consent. This doctrine imposes strict vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another. (Other examples of dangerous instruments include: Newton v. Caterpillar Financial Services (multi-terrain loader); (Rippy v. Shepard) (farm tractor); (Harding v. Allen-Laux, Inc.) (forklift); (Halifax Paving, Inc. v. Scott & Jobalia Const. Co.) (crane); Meister v. Fisher, 462 So.2d 1071 (Fla. 1984) (golf cart); Sherrill v. Corbett Cranes Services, 656 So.2d 181 (Fla. 5th DCA 1995) (crane); Lewis v. Sims Crane Service Inc., 498 So.2d 573 (Fla. 3d DCA 1986) (construction hoist); Eagle Stevedores, Inc. v. Thomas, 145 So.2d 551 (Fla. 3d DCA 1962) (tow-motor).

It is not uncommon for employers to use such dangerous instrumentalities in the workplace that are owned by others. This raises the question of whether the owner of a dangerous instrumentality shares the same immunity as employers and co-employees. In Smith v. Ryder Truck Rentals, Inc., 182 So.2d 422 (Fla. 1966), workers’ compensation immunity was extended to Ryder, the owner of two motorcycles involved in a crash that were leased to the employer. The Florida Supreme Court declared that the motorcycles in effect had become working tools of the employer, much like a fellow employee. Smith was subsequently relied on by the Supreme Court in Halifax Paving, Inc. v. Scott & Jobalia Const. Co., 565 So. 2d 1346 (Fla., 1990), to extend immunity to the owner of a crane who merely loaned the equipment to the employer as a matter of courtesy.

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law-books-300x238Florida Motor Vehicle No-Fault insurance (“Personal Injury Protection” or “PIP”) is a form of medical insurance used for motor vehicle crashes. It is mandatory on vehicles registered in Florida. It covers owners, certain family members and passengers, and pedestrians. The typical policy limit is $10,000 reduced by deductibles ranging from $500 to $2,000.

PIP does not compensate the insured or anyone else for pain and suffering damages. This type of compensation comes from bodily injury (BI) and uninsured/underinsured motorist (UM/UIM) insurance. Florida is one of only a handful of states that does not require drivers to maintain BI insurance. (Besides PIP, the only other type of mandatory vehicle insurance is Property Damage — Liability. It pays for damage to the personal property of others.) Because BI and UM/UIM cost extra, a large percentage of Florida operators do not maintain them.

Neither BI nor UM/UIM cover medical expenses that are “paid or payable” by PIP. This is known as the PIP offset (or setoff). Example of a “paid” scenario and its consequences: $20,000 BI policy limit. $15,000 medical bill, reduced by the Medicare “Allowable” formula to $10,000. Assuming no deductible, PIP pays  $8,000, or 80%, leaving a $2,000 balance. Hence, the limit of liability to the at fault driver’s insurance company, the BI carrier, for past medical expenses, is $2,000 instead of $15,000. Accordingly, instead of offering $20,000 to settle the BI case, which approximates its exposure without the offset, the carrier may only offer $5,000 or $6,000. (These numbers are hypotheticals based on a typical case. In some instances, a case with $15,000 in medical charges, even with the PIP offset, can be worth hundreds of thousands of dollars, if not millions, depending on the injuries.)

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