Insured Woman Had No Right to $10,000 in Uninsured Motorist Benefits; Money Went to Hospital’s Claim of Lien

GEICO Gen. Ins. Co. v. Hoy (Fla. 2d DCA 2013)

A woman with automobile insurance providing $10,000 in per person uninsured/underinsured motorist coverage (“UM”) was treated at a hospital for injuries she sustained in an automobile accident with an uninsured motorist. The woman was discharged from the hospital owing it $39,000, and the hospital filed a claim of lien in that amount in the public records.

The woman signed a release for the $10,000 UM benefits in favor of her insurer and, in exchange, the insurer issued a check in the amount of $10,000. The hospital advised the insurer that it would agree to accept $5,000 of the $10,000 in UM benefits to permit the woman and her husband to have the remaining $5,000 and to satisfy its claim of lien in full. Although the woman thus collected $5,000, she sued her insurer for fraud in the inducement (among other things), claiming that the insurer had misinformed her about the amount she would receive in exchange for signing the release.

The matter went to trial and on appeal the second district ruled that the trial court should have granted the insurer’s motion for directed verdict since the woman failed to establish the damages element of her claim. The court explained that the woman sustained no loss in reliance on the alleged misrepresentation because the hospital had a lien entitling it to receive the entire $10,000 UM benefit and, therefore, the woman technically received $5,000 to which she had no right.

Chiropractic Clinic is Withheld Insurance Benefits for Failure to Comply with Florida Health Care Clinic Act (FHCCA)

State Farm Fire & Cas. Co. v. Silver Star Health & Rehab (11th Cir. 2013)

An insurer paid a chiropractic clinic $151,000 for treatments provided to its insureds, but withheld an additional $86,000 on the basis that the clinic’s failure to comply with the licensing requirements of the Florida Health Care Clinic Act (“FHCCA”) rendered the treatments unlawfully provided.  The insurer then prevailed in a suit for declaratory relief and unjust enrichment.  The clinic appealed, but the Eleventh Circuit affirmed, ruling, inter alia, that a court in a civil action may determine whether there has been a violation of a FHCCA licensing requirement.

South Carolina Supreme Court Expands Definition of “Occurrence” – Auto Owners Ins. v. Rhodes

Just last week, the South Carolina Supreme Court issued a significant ruling regarding its state’s occurrence law.  In Auto-Owners Ins. Co. v. Rhodes, No. 2009-143546, 2013 WL 5348381 (S.C. Sept. 25, 2013), the Court enlarged South Carolina’s already expansive view of “occurrence” in property damage cases but, at the same time, may have placed limitations for calculating the number of occurrences.  To summarize their ruling, the Court held that the expansive view of “occurrence” applies to “progressive” property damage cases where the damage is further removed from the conduct of the insured.  The facts of the case help clarify the ruling.

In Rhodes, the insured constructed three outdoor advertising billboards.  One billboard fell across Interstate 77 causing significant property damage to a landowner’s property.  Shortly thereafter, the insured was ordered by the SCDOT to remove the two remaining billboards.  The SCDOT also  revoked the landowner’s permit to maintain signs on the property as a result of the accident.  As could be expected, the landowner sued the insured for damages resulting from the fallen billboard as well as the removal of the two other billboards and revocation of its permit.  The insured tender the complaint to Auto Owners Insurance Company for coverage under a commercial general liability (CGL) policy.  Auto Owners filed a declaratory action for a determination of whether there was coverage under the policy.

In the declaratory action, Auto Owners conceded that the fall of the first billboard was an “occurrence” under the policy but argued that the removal of the other two billboards was not since the removal was a separate, unrelated incident.  The South Carolina Supreme Court disagreed.  The Court used an expansive “but for” test and held that, “but for” the fallen billboard, the SCDOT would not have required that the other two signs be removed. Accordingly, the Court viewed the entire situation as one occurrence with “progressive” damage.  Specifically, the Court held that “we view the fallen sign and the removal of the remaining two signs under a continuum of an ‘occurrence,’ as this is analogous to the CGL cases involving ‘continuous or repeated exposure to substantially the same general harmful conditions.’”  As a result, Auto Owners was required to indemnify the insured for the entire complaint.

Interestingly, Rhodes will likely have positive effects for both insurers and insureds in South Carolina.  The positive effects for insureds is obvious, there will likely be an influx of “progressive” damage type claims where damages are far removed from the original accident.  In other words, more alleged damages by insureds will likely be covered.

Conversely, however, there may be a silver lining for insurers from this case.  Notably, the Court held that the falling of the first billboard and the subsequent removal of the other two billboards was a “single occurrence” because the signs were simultaneously constructed.  As most insurers recognize, insurance policies often have different per occurrence and aggregate policy limits that apply depending on the number of occurrences.  Usually, the more occurrences, the higher the limits are.  Thus, in situations that involve high-dollar damages with obvious coverage and potential multiple occurrences, insurers will be able to point to Rhodes to argue that subsequent damages are all part of one related incident and, thus, only one occurrence.

You can read the entire case here.

Don’t Call an Argument “Ridiculous” Unless You’re Right; A Pedestrian that Was Struck by a Vehicle Deemed an “Occupant”

Although not a Florida case, I found this case from the Sixth Circuit very interesting for two reasons.  First, the claimant made a very creative argument in order to be entitled to first-party coverage.  Second, the case highlights the fact that you never want to call someone else’s argument “ridiculous” because you might draw the ire of the court.

In Bennett v. State Farm (6th Circuit 2013), a pedestrian was struck by a vehicle covered by State Farm auto insurance.  The parties stipulated that after the pedestrian was struck, she landed on the hood of the car where she sustained further injuries.  In making a very creative argument, the issue came down to whether the pedestrian was an “occupant” of the vehicle—as that term is defined by State Farm’s policy—at the time she was on the vehicle’s hood.  The policy defined “occupying” as “in, on, entering or alighting from.”

Counsel for State Farm called the claimant’s unique argument “ridiculous.”  The U.S. Court of Appeals for the Sixth Circuit did not agree and, further, did not appreciate counsel’s uncivil tone.  Specifically, the court held that the definition of “occupying” clearly covered the pedestrian that was “on” the car’s hood when she was injured.   It stated:

Here, as a matter of ordinary English usage, one might be skeptical that Bennett was an “occupant” of the Fusion during the time she was on its hood. Occupants are normally inside vehicles, not on them. But the parties to a contract can define its terms as they wish; and State Farm has done so here. Its policy for the Fusion defines “occupying” as “in, on, entering or alighting from.” And the parties have stipulated that Bennett was on the Fusion—specifically, on its hood—and that she “suffered further bodily injuries” while she was there.

Further, the court chastised State Farm’s attorney for calling the argument ridiculous because, simply, she was wrong.

There are good reasons not to call an opponent’s argument “ridiculous,” which is what State Farm calls Barbara Bennett’s principal argument here. The reasons include civility; the near-certainty that overstatement will only push the reader away (especially when, as here, the hyperbole begins on page one of the brief); and that, even where the record supports an extreme modifier, “the better practice is usually to lay out the facts and let the court reach its own conclusions.” But here the biggest reason is more simple: the argument that State Farm derides as ridiculous is instead correct.

Boom.  The opinion can be viewed in its entirety here.

Insurance Company and Insurance Agent Were Deemed Same Entity Regarding Notice Requirements

In Siguenza v. Citizens Prop. Ins. Corp. (Fla. 3d DCA 2013), the insurer, Citizens, denied a claim based on late notice and insured sued for breach of contract, testifying that she gave prompt notice directly to insurance company.

Citizens contradicted testimony through affidavit, prompting insured to file affidavit clarifying that she gave prompt notice to insurance agent. The court granted summary judgment in insurer’s favor, finding the insured’s subsequent affidavit in contradiction with her testimony. Appellate court reversed, ruling a material question of fact existed regarding timeliness of loss since insured considered the insurance company and the insurance agent to be the same entity and since the policy provided that prompt notice could be given to either one.

Turning Over Uninsured Motorist Rejection Form After Suit Was Not Confession of Judgment

Contreras v. Century Ins. Co. (Fla. 5th DCA 2011)

Petitioner, Contreras, seeks certiorari review of a decision and opinion of the Seminole County Circuit Court, sitting in its appellate capacity, affirming the county court’s final judgment in favor of an insurer in the declaratory judgment action filed by Petitioner and a decision to award appellate attorney’s fees to Respondent.  The 5th DCA held that the circuit court did not err in affirming the county court’s final judgment in favor of the insurer’s right to obtain a signed uninsured motorist rejection form because turning over the form after suit was filed did not constitute a confession of judgment as a matter of law.  As to the award of fees, the court stated that the appellate issue did not meet the threshold for section 57.105 and vacated the order.

A Bad Faith Action is Not Ripe Until Liability and Damages are Established

One area of insurance coverage that we receive questions about is the issue of when a bad faith action can be filed.  The Florida Supreme Court has held  that a bad faith lawsuit is not ripe until there has been a determination that the insured is liable and the extent of the plaintiff’s damages.  In Blanchard v. State Farm Mut. Auto Ins. Co., 575 So.2d 1289, 1291 (Fla. 1991) the Court held:

If an uninsured motorist is not liable to the insured for damages arising from an accident, then the insurer has not acted in bad faith in refusing to settle the claim. Thus, an insured’s underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. It follows that an insured’s claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.

The takeaway is the following rule: “Absent a determination of the existence of liability … and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.”  The Florida Supreme Court later clarified:

Blanchard is properly read to mean that the “determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the [insured’s] damages” are elements of a cause of action for bad faith. Once those elements exist, there is no impediment as a matter of law to a recovery of damages for violation of section 624.155(1)(b)1 dating from the date of a proven violation

Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1275 (Fla. 2000).  This rule has been dubbed the “Favorable Resolution Requirement.”

This rule undoubtedly makes sense.  An insurance company cannot be found to act in bad faith to settle on behalf of its insured until the insured is found liable.  For this reason, the Florida Supreme Court has made liability and damages an element of bad faith.  See Vest, 753 So. 2d at 1275.

Since Blanchard, other cases have debated what constitutes this “Favorable Resolution Requirement” and, for example, have found that resolutions such as a settlement, see Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th DCA 1994), and appraisal awards in uninsured motorist cases (UM), see Hunt v. State Farm Fla. Ins. Co., Case No. 2D11-6484 (Fla. 2d DCA April 5, 2013), suffice.

Insureds and Insurers Behaving Badly – Insured Who Left During EUO Given a Second Chance

First Home Ins. Co. v. Fleurimond, (Fla. 1st DCA 2010)

Upon written request for an EUO relating to a claim for damage to a home under a homeowners policy, an insured appeared without counsel, but left in the middle of the EUO after, he claimed, the examiner badgered and yelled at him. Upon retaining counsel, the insured offered to resume the EUO, but the insurer refused, stating that it was too late. Upon the insured’s filing suit demanding an appraisal, the insurer opposed the demand citing breach of policy obligations for failure to comply with the cooperation provisions. The 1st DCA affirmed the lower court’s ruling in favor of the insured, partly because the insured partially attended the first EUO and offered to resume the EUO before the suit was filed.

Appraisal is Only Covered Under Ordinance and Law Coverage if Loss Actually Occurs During Policy Period

Jossfolk v. United Prop. & Cas. Ins. Co. (Fla. 4th DCA 2013)

The roof of an insured structure was damaged and submitted for appraisal. A neutral appraisal entered an award on damages, but stated that Ordinance and Law coverage (which represents the cost of bringing any structure into compliance with applicable ordinances or laws) had not been appraised. The insurer made payment to the insured based upon the award and the insured then applied for a roofing repair permit from the City of Weston, claiming that 34% of the roof area needed repair. The City of Weston rejected the permit since the repair exceeded the area allowed by the building code to be repaired without requiring replacement of the entire roof system. The insured then asked the insurer to pay for the entire roof repair under Ordinance and Law Coverage, but the insurer declined to increase payment.

As a result, the insured filed a declaratory judgment action, seeking a ruling that the insurer must participate in an appraisal for Ordinance and Law coverage. A trial court entered final summary judgment in favor of the insured, noting the insurer’s argument that the appraiser had denied Ordinance and Law coverage. On appeal, the fourth district disagreed, concluding that Ordinance and Law coverage is not recoverable until it is incurred. Stated differently, the fourth district ruled that because no Ordinance and Law Coverage was incurred at the time of the original appraisal, the appraisal never appraised Ordinance and Law Coverage.

Property Insurer Was Not Permitted to Limit Sinkhole Coverage to Less Than Dwelling Coverage Limit

Fla. Farm Bureau Cas. Ins. Co. v. State of Fla., Office of Ins. Regulation (1st DCA 2013)

At issue in this case is the proper interpretation of Florida Statute § 627.706(1), which provides that:

Every insurer authorized to transact property insurance in this state must provide coverage for a catastrophic ground cover collapse. The insurer shall make available, for an appropriate additional premium, coverage for sinkhole losses on any structure … to the extent provided in the form to which the coverage attaches…. A policy for residential property insurance may include a deductible amount applicable to sinkhole losses equal to 1 percent, 2 percent, 5 percent, or 10 percent of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount.

Relying on this statute, the Office disapproved of a property insurer’s proposed amendment to its endorsement form limiting sinkhole coverage to 25% of the overall coverage amount for the insured dwelling. The Office’s reasoning was that the statutory phrase “to the extent provided in the form to which the coverage attaches” refers to the base property insurance property and, consequently, requires insurers to offer sinkhole loss coverage in an amount equal to the dwelling coverage limit.

The property insurer appealed, arguing that this interpretation was clearly erroneous and that the form to which sinkhole loss coverage attaches is really the policy endorsement setting out the extent (limit) of such coverage, which lies solely with the discretion of the insurer. The first district affirmed, concluding that the defining the term “form” to mean the base policy is within the permissible range of interpretations and thus not clearly erroneous: “Because the deductibles are tied to casualty coverage limits in the base policy, it is reasonable to conclude that the amount of sinkhole loss coverage is intended to be the same as the amount of casualty coverage provided for in the base policy.”