Articles Posted in Insurance Law

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maze.jpgUninsured/Underinsured Motorist (UM) insurance coverage in Florida, located in F.S. 627.727, is first party insurance to compensate insureds for economic losses (e.g., medical expenses and lost wages) and non-economic damages (e.g., pain & suffering) resulting from motor vehicle accidents. Although it must be offered by every carrier authorized to sell motor vehicle insurance in Florida, unlike PIP and property damage liability it is not mandatory, so it can be rejected.

Besides the statute, a good place to start to gain an understanding of UM coverage is the Supreme Court of Florida case Mullis v. State Farm Mut. Auto. Ins. Co., 252 So.2d 229 (Fla. 1971). While the court majority provides a thorough overview of UM law, the holding itself is limited to whether or not a resident relative injured while operating a vehicle owned by another resident relative, but not covered under the UM policy, is entitled to UM benefits. The explicit terms of the insurance policy excluded coverage under these circumstances. The trial court agreed that the exclusion defeated plaintiffs’ cause of action and the First District Court affirmed, on appeal, citing in support its decision in United States Fidelity & Guaranty Co. v. Webb, Fla.App. 1966, 191 So.2d 869. The Supreme Court decided that the exclusion was contrary to the UM statute and, thus, uneforceable. It explained:

Whenever bodily injury is inflicted upon named insured or insured members of his family by the negligence of an uninsured motorist, under whatever conditions, locations, or circumstances, any of such insureds happen to be in at the time, they are covered by uninsured motorist liability insurance issued pursuant to requirements of Section 627.0851. They may be pedestrians at the time of such injury, they may be riding in motor vehicles of others or in public conveyances and they may occupy motor vehicles (including Honda motorcycles) owned by but which are not “insured automobiles” of named insured.

The court pointed out that this level of coverage is not extended to “other persons potentially covered who are not in the class of the named insured and relatives resident” in the named insured’s household. Importantly,

“These latter are protected only if they receive bodily injury due to the negligence of an uninsured motorist while they occupy the insured automobile of the named insured with his permission or consent.”

CAVEAT: After Mullis, the legislature amended section 627.727, Florida Statutes (1989), to allow insurers to offer limitations on the coverage provided by uninsured motorist coverage if certain statutorily mandated notice requirements are met. See, Carbonell v. Automobile Ins. Co., 562 So. 2d 437 (Fla 3rd DCA 1990).Specifically, the current version of subsection (9)(d) of section 627.727 provides:

The uninsured motorist coverage provided by the policy does not apply to the named insured or family members residing in her or his household who are injured while occupying any vehicle owned by such insureds for which uninsured motorist coverage was not purchased.

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law books.jpgHave you ever wondered why insurance companies settle claims? The answer is not because they are kind and generous. The reason is because it is often cheaper for them than the potential alternatives. In other words, carriers settle in order to save money.

What would happen if one of those alternatives, the one that is the most threatening of all to insurance companies, is watered down so as to lose much of its practical value? The answer is simple: carriers will be less likely to settle claims when they could and should do so.

There are two types of optional (i.e., non-mandatory) coverages available under every Florida-issued motor vehicle insurance policy that compensate those damaged by the negligence of others for economic (e.g., lost wages and medical expenses) and non-economic (e.g., pain & suffering) losses. One is BI or bodily injury insurance, the other is UM or uninsured/underinsured motorist coverage. (UM: Florida Statute 627.727.)

Through legislation and court opinions, a body of law has developed in Florida with the purpose of compelling insurance companies to act in good faith towards their insureds (i.e., their premium paying customers). In the context of BI and UM insurance, this means that carriers must settle claims when it could and should do so based on the circumstances. The punishment for failing to do so, i.e., acting in bad faith, is that the carriers may be responsible for paying court judgments in excess of policy limits. This can be an extremely compelling threat. Consider this UM example: the insured, who has contracted for a $100,000 UM policy, is severely injured in a rear end crash caused by an uninsured drunk driver. Past and anticipated future medical expenses and lost wages exceed $500,000, while the victim will experience a lifetime of daily pain and suffering from her severe injuries. In spite of knowing all this, the UM carrier refuses to tender the $100,000 to its insured. Unwilling to accept a lesser amount from the carrier, the insured sues and obtains a jury verdict (subsequently turned into a final judgment) in the amount of $1,500,000. In other words, after considering the same facts available to the UM carrier, a jury has decided that the insured’s damages are 15 times greater than her UM policy limits.

Until recently, it was thought that the insured could then proceed to collect the $1,500,000 by proving bad faith against the carrier in a separate civil suit. Importantly, damages, already determined in the underlying civil suit, did not have to be established again. Unfortunately, this is where things may be changing for the worse for premium-paying insureds.
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dollars.jpgThe Florida Legislature has made Personal Injury Protection (PIP) insurance a mandatory coverage for all owners of operational motor vehicles. It is coverage that is designed to pay up to $10,000 in medical expenses and/or lost wages incurred by the insured regardless of fault, hence, the reason why it is commonly called “no-fault” insurance. In some instances, the coverage will apply to others, such as some resident relatives and pedestrians.

Before the policy is written, an insurance application must be completed. Insurance companies rely on the information provided in the application to set premium rates. The greater the risk, the higher the premium. Risk is determined by a number of factors, including the age and driving record of the applicant, and the number of potential individuals covered under the policy.

Section 627.409 Florida Statutes outlines the circumstances which allow insurance carriers to deny coverage. The statute reads as follows:

627.409 Representations in applications; warranties.–
(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and is not a warranty. A misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if any of the following apply:
(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.

(2) A breach or violation by the insured of any warranty, condition, or provision of any wet marine or transportation insurance policy, contract of insurance, endorsement, or application therefor does not void the policy or contract, or constitute a defense to a loss thereon, unless such breach or violation increased the hazard by any means within the control of the insured.
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car-insurance-policy.jpgThe term “Full Coverage” means different things to different people.

For a vehicle to be registered in Florida, Florida law requires the owner to maintain nothing more than Personal Injury Protection (“PIP”) and Property Damage Liability insurance. PIP covers 80% of medical expenses and/or 60% of wage losses up to a total of $10,000, while Property Damage Liability pays for the damage or loss of property caused by the at-fault driver or owner of the motor vehicle. (The minimum coverage limit for PD Liability is $10,000.)

Neither of these coverages compensates anyone for bodily injury losses, also known as non-economic or pain & suffering damages.

Only Bodily Injury Liability (“BI”) insurance and Uninsured/Underinsured Motorist (“UM/UIM”) insurance compensate for non-economic damages. Neither of these coverages is mandatory, which means that a policy containing one or both of the them costs more than the basic PIP/PD Liability policy. Because of the additional cost, many people forego the coverages.
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drunk.jpgPIP (Personal Injury Protection) and health insurance will cover most motor vehicle-related medical expenses. However, these insurance policies are subject to deductibles and copays, leaving insureds with out-of-pocket medical expenses even under the best circumstances. An exception applies when the insured is a victim of a DUI crash.

The exception is contained in Florida Statute Section 624.128:

Crime victims exemption.–Any other provision of the Florida Statutes to the contrary notwithstanding, the deductible or copayment provision of any insurance policy shall not be applicable to a person determined eligible pursuant to the Florida Crimes Compensation Act, excluding s. 960.28.

The DUI crash victim must apply for crime compensation with and be found eligible by the Office of the Attorney General, Division of Victim Services. (Here is a link to the Victim Compensation Claim Form.) A victim found eligible will be notified by the Office of the Attorney General. The victim should then present the notice of eligibility to the appropriate insurance companies to obtain the waiver.
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greed.jpgIn 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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dollars.jpgFor those who think that all politicians are alike, that it doesn’t matter who is elected, think again. One need only look at what happened in the Florida legislature on Friday, March 9, 2012, to debunk the notion.

Tea-party darling Florida Governor Rick Scott and his right-wing Republican cohorts rammed through an anti-consumer, pro-insurance industry motor vehicle insurance law to rival any in the nation. It is so anti-consumer that even 8 Republican senators voted against it. Unfortunately, the bill passed in the Florida Senate by one vote.

The new law, effective January 1, 2013, deals with PIP (Personal Injury Protection) insurance. (Here’s a link to the law, House Bill 119.)

PIP is a form of insurance that covers medical and lost wages arising out of motor vehicle accidents. The current PIP law covers a total of $10,000 in medical expenses and lost wages subject to a deductible, if any, chosen by the policy holder. Whether and how much is paid in medical expenses is based on the reasonableness and necessity of the medical care.

The new law adds more hurdles to obtaining the full $10,000 in medical coverage.

  • If an insured fails to seek medical treatment within 14 days of the accident, PIP will not pay any medical expenses. None. It is not unusual for injuries to manifest themselves worthy of medical care more than 14 days after an accident. It is also not unusual for people with real injuries but busy schedules to need more than 14 days to obtain medical care. Factor in the difficulty of obtaining an appointment with a doctor and we anticipate that this provision will eliminate coverage for many policy holders.
  • Unless the medical treatment is for an “Emergency Medical Condition,” PIP payments will be limited to $2,500. (EMC is defined in the new legislation as: (a) Serious jeopardy to patient health; (b) Serious impairment to bodily function; (c) Serious dysfunction of any bodily organ or part.) This provision will likely spawn significant litigation from medical providers, especially for hospital emergency room services. Nonetheless, it is clearly a high standard that will reduce PIP payments in most cases.

Undoubtedly, the overall impact of the legislation will be to reduce PIP medical payments. Ironically, the legislation does not impose a mandatory reduction in insurance premiums.

Profits over people. And the beat goes on….
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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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dollars.jpgAs 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)

law books.jpgMost 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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