The 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.
It is reasonable that insurance companies should be allowed to deny coverage for unknown risks, such as an undisclosed resident relative who would otherwise be covered under the policy for injuries sustained in an accident had the risk been known. Based on a mistake or a purposeful misrepresentation in the insurance application, which failed to disclose this individual, the carrier did not charge a premium commensurate with the risk. In other words, the carrier was not given the opportunity to charge a premium for this risk.
More problematic and what we consider unreasonable, is the denial of coverage to an individual for whom a premium was charged where the carrier learns of other risks for which premiums were not charged. Unfortunately, Florida appears to allow carriers to do just that. See United Auto. Ins. v. Salgado , No. 3D07-461 (Fla. App. 8/5/2009) (Fla. App., 2009).
There seems to be no logic or fairness to the denial of coverage under this scenario. If a premium was paid on behalf of the person for whom the claim is being made, why should coverage be denied to that individual even though the person for whom a premium was not charged is not entitled to make a claim? Coverage should and always is denied to the unlisted individual, so, in reality, the insurance company is never at a greater risk than for the premium it has charged.
What we have is the carrier writing a policy and charging a premium. If no claim is made, the carrier pockets the premium. If a claim is made and an application mistake or misrepresentation is disclosed, the policy is null and void Ab initio (from the beginning), in which case the carrier does not pay the claim. If the policy has not run full term, the outstanding pro rata share of the premium will be returned to the insured, but the carrier pockets part of the premium without having to pay a claim.
Like casinos, carriers never lose. No claim made, no payout. Claim made, but application defect discovered, no payout.
What a scam.
Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.
Contact us at 866-785-GALE or by email to learn your rights.