Florida Insurance Law Blog : Florida Insurance Lawyer & Attorney : Mark Nation Law Firm : Orlando, Longwood, Gainesville

In West Bend Mutual Insurance Company v. Higgins, _____ So.2d _____ (Fla. 5th DCA March 27, 2009), the insured brought a first-party bad faith case against West Bend pursuant to Florida Statute Section 624.155.  The insured sought discovery of the claims file from the underlying case, including attorney-client material generated in the underlying case. 

The 5th DCA precluded discovery of the attorney-client materials, holding that generally, attorney-client protected documents remain privileged in the first-party bad faith context.  However, the court recognized that there are statutory and implied waivers of the attorney client privilege.  One such implied waiver is a litigants reliance on "advice of counsel" defense which the court stated was not implicated in this appeal. 

Often through thorough questioning of the adjuster, or with a good set of requests for admissions, the attorney for the insured will be able to get the adjuster to admit that he or she did in fact rely on the advice of counsel in making certain decisions in the handling of the case.  It is unclear if that alone will result in a waiver of the privilege.  Clearly, the privilege will be waived if the defendant actually interposes the defense of advice of counsel, or third-parties in its attorneys from the underlying case. 

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In Pawtucket Mutual Insurance Company v. Manganelli, 34 FLW D386 (Fla. 4th DCA February 18, 2009), Pawtucket provided uninsured motorists coverage to the Manganelli's who had been injured in a car accident.  Under the UM policy, the Manganelli's requested to arbitrate their UM claim with Pawtucket.  The policy provided that such arbitration take place where the insureds "live."  Pawtucket claimed that the Manganelli's lived in New Hampshire, while the Manganelli's stated  they lived in Palm Beach, Florida. 

The Manganelli's filed a declaratory judgment action seeking a declaration that they indeed "lived" in Palm Beach County and that the arbitration should take place there.  The trial court ruled in the Manganelli's favor, and they moved for attorneys fees under Florida Statutes Section 627.428 and 627.727(8).  The trial court granted the Manganelli's request for fees, and Pawtucket appealed. 

The 4th DCA affirmed, ruling that the award of attorneys fees was appropriate where the carrier wrongfully caused the insured to resort to litigation to resolve a conflict.  According to the court, "[t]hough Pawtucket did not deny coverage per se, by maintaining that arbitration had to take place in New Hampshire, it forced Manganelli to engage in litigation unnecessarily in the face of Manganelli's insistence that he 'lived' in Palm Beach County." 

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In Citizens Property Insurance Corporation v. Cuban-Hebrew Congregation of Miami, Inc., 34 FLW D333 (Fla. 3rd DCA February 11, 2009), the insured property was damaged by wind, and Citizens paid what it believed was the appropriate amount under its policy.  Thereafter, the insured filed suit against Citizens for breach of the insurance contract for underpaying the claim.  The trial court compelled appraisal pursuant to the appraisal clause.  

The appraisal ultimately resulted in an additional payment from Citizens to its insured of $106,646.27.  The trial court granted the insured attorneys fees under Florida Statute Section 627.428.  Citizens appealed the grant of attorneys fees.  The 3rd DCA affirmed the award of attorneys fees stating:

In this case Citizens had underpaid the insured by $106,646.27.  The insured filed suit on the policy.  This was followed by the appraisal and culminated in the judgment in favor of the insured for the additional sum.  We affirm the award of attorney's fees on authority of Travelers Indemnity Insurance Co. of Illinois v. Meadows MRI, LLP, 900 So.2d 676, 679 (Fla. 4th DCA 2005). 

For other cases in this blog on the award of attorney's fees after appraisal, click on the tag, "Attorney's Fees" below. 

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Recently, Florida's Fourth District Court of Appeals reversed a First Party Bad Faith verdict and judgment. In United Automobile Insurance Company v. Colon, Ms. Colon sued her PIP insurer for bad faith claims handling in failing to pay her doctors under her PIP policy. Although she disclaimed any non-economic damages for emotional distress, the insured claimed that the carrier's failure to pay PIP benefits caused her problems with doctors who refused to compromise the amount of her bills or render further medical services. However, the insured offered no particular amount of damages related to the problems she had with her providers. The jury returned a general verdict for bad faith damages of $60,000.

The 4th DCA noted that "[i]t has long been accepted in Florida that a party claiming economic losses must produce evidence justifying a definite amount.... Economic damages may not be founded on jury speculation or guesswork and must rest on some reasonable factual basis." The DCA then held that: "As the background shows, plaintiff offered no evidence on which to justify any amount of economic damages resulting from the carrier's bad faith conduct. Because of the lack of such evidence, the carrier is entitled to judgment in its favor on plaintiff's claim for bad faith damages."

While I don't know from the facts of this case whether the plaintiff could have done so, this case points out the necessity to prove up economic damages in a first party bad faith case. Economic damages in a case such as Colon might include impairment of credit which can be proved up by expert testimony. A plaintiff in a first party bad faith action may also be entitled to non-economic damages, even in the absence of economic damages. 

The insurance company's agent is a fiduciary to the insured.  An insured pursuing a first party bad faith claim should always evaluate the propriety of adding a claim for the agent's breach of fiduciary duty.  The elements of a claim for breach of fiduciary duty are: the existence of a fiduciary duty, and the breach of that duty such that it is the proximate cause of the plaintiff's damages.  In Gracey v. Eaker, 837 So. 2d 348, 353 (Fla. 2002)., the Florida Supreme Court held that the victim of a breach of fiduciary duty is entitled to non-economic damages, even in the absence of economic damages.
 

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Generally, in order to take out a life insurance policy on someone, you must have an "insurable interest" in the life of that person.  "Insurable interest" is defined in our Florida Statutes at Section 627.404.  However, Stranger-Originated Life Insurance (STOLI) transactions involve a plan to initiate or originate a life insurance policy for the benefit of investors who seek to profit from purchasing life insurance on a stranger.  Many, if not most, of these transactions involve using fraudulent means such as misrepresentation, falsification, or omission of material facts on the life insurance application.  (Under Florida's "incontestability" statute, Section 627.455, an insurance company cannot void a policy for application misstatements after the policy has been in effect for more than two years – even fraudulent misstatements.)

The Office of Insurance Regulation report documents that many of these STOLI transactions involve life insurance on seniors, and sets forth in the report many of the adverse consequences that can occur.  A copy of the Florida Office of Insurance Regulation STOLI report can be downloaded by clicking here. 

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My client, a water extraction/remediation firm, was retained by a condominium association to assist with a large water loss. The water extraction firm agreed to perform the work, and the association assigned to it any claims against the condo association’s insurer in the event the insurer failed to pay – which is exactly what happened. (Many of my clients who are vendors take this type of assignment so that they can pursue the insurance claim and the insured does not have to go to the trouble).

This is another case where the insurer has not technically "denied" the claim.  They have simply done nothing after having the claim for months.  Suit was filed this week against the condo associations insurer for breach of contract.

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In Michael Johnson v. GEICO, _____ F. 3rd _____ (11th Cir. March 11, 2009), the 11th Circuit affirmed a summary judgment in favor of GEICO, after its insureds sued for GEICO’s bad faith failure to settle.

On May 24, 2003, Michael Johnson was involved in a fatal accident. The driver of the other car, Woody Staley, Jr., was taken to the hospital from the scene; his passenger died at the scene. Johnson carried bodily injury liability limits of $10,000 per person/ $20,000 per accident with GEICO. Staley carried uninsured motorist limits of $10,000/$20,000, also with GEICO.

Johnson reported the accident to GEICO on May 25, 2003. When Johnson reported the accident to GEICO, he advised GEICO that at least one witness to the accident said that Johnson had run a red light. Johnson said he thought he had a green light, and contested liability.

On May 29, within 5 days of learning of the accident, GEICO’s UM adjuster advised Staley’s attorney that it would tender its Uninsured Motorists limits. (It is unclear from the opinion if this tender is to Staley or the passenger’s estate). On June 3, Staley’s attorney sent a letter to Johnson’s BI adjuster at GEICO requesting certain information within 30 days. Staley’s attorney did not request tender of the BI policy limits.

The accident report did not become available until June 9. The accident report stated that Johnson had run the red light. The accident report assessed Staley’s injuries as “non-incapacitating.” On June 12, 18 days after learning of the accident, GEICO authorized the payment of GEICO’s BI limits to the passenger’s estate.

On June 12, GEICO’s BI adjuster learned that Staley was still in the hospital, in ICU and on a respirator. On June 27, GEICO’s BI adjuster learned that Staley had died. On that date, GEICO authorized its BI adjuster to contact Staley’s attorney and offer the BI limits to settle the case. The adjuster tried to reach Staley’s attorney by phone twice that day with no luck. When the adjuster finally spoke to Staley’s attorney, on July 1, the attorney advised that suit had been filed that day and that tender of the policy limits would not be accepted.

A wrongful death judgment in excess of $2,000,000 was entered against the Johnsons – GEICO’s insureds. Thereafter, Johnson filed suit against GEICO for bad faith failure to negotiate a settlement for GEICO’s policy limits. The trial court determined that in light of GEICO’s quick turnaround between learning of the accident and tender – 33 days – no reasonable jury could conclude that GEICO had committed bad faith.

Johnson argued that given the fact that GEICO immediately tendered its UM limits to Staley (which is excess over the BI limits), and knew of the extent of Staley’s injuries as early as June 12, GEICO should have tendered its limits earlier. The 11th Circuit disagreed, holding that:

After viewing all the evidence in the light most favorable to Insureds, we conclude that insufficient evidence of bad faith was proffered to take this case to a jury. The record shows that liability was contested initially by Johnson. GEICO’s BI adjuster moved quickly to determine liability. Staley’s counsel made a 30-day demand for policy information; GEICO responded in far fewer days. Even though no facts suggested Staley needed immediate funds and no settlement demand was made, GEICO offered the policy limits within that 30-day period and just 33 days of the accident date. In light of the information known to GEICO and the totality of the circumstances, no reasonable jury could find that GEICO breached its duty of good faith.”

With regard to the impact which the resolution of the UM claim had on the BI claim, the Court stated:

the UM claim was a claim based on the insurance contract between Staley and GEICO; the BI claim was based on the insurance contract between Insureds and GEICO. The two contracts and the two claims files were unrelated….The inquiry here is whether GEICO acted reasonably in handling the BI claim in the light of the totality of circumstances.”

A copy of the Johnson opinion in its entirety can be viewed and downloaded by clicking here.
 

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This week I was retained by a general contractor who subcontracted out roofing work on a large construction project. The Sub negligently installed the roof, which resulted in significant water and mold damage to the interior of the structures. The Sub agreed to replace the roof.  However, the general contractor has paid to repair and replace all of the interior damage.

The general contractor submitted a claim for the interior damage to its Commercial General Liability Carrier.  The insurance company has essentially ignored the claim – neither paying or denying the claim after having it for months.

In exasperation, the general contractor retained me this week to pursue the claim. Suit has been filed seeking reimbursement under the liability potion of the CGL policy for the damage resulting from the leaking roof.
 

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Avmed HMO asserted a lien, or right of reimbursement, against a portion our client's uninsured motorists settlement.  Although the amount of the alleged Lien - $9,749.51 - is relatively small, it is my position that HMO's never have any lien on UM benefits.  When Avmed refused to voluntarily withdraw its claim of lien, I filed a declaratory judgment action seeking a declaration that Avmed had no lien. 

Although HMO's often assert liens against UM benefits, pursuant to our Florida Statutes, an HMO never has a lien against UM benefits.  This is true regardless of what the HMO contract says.  Even if the HMO is governed by ERISA, the "savings clause" of the ERISA statute provides that ERISA does not preempt the "business of insurance." 

Also, even if Avmed HMO had a lien on UM benefits, it would only be entitled to recover a fraction of the amount it was seeking because our client was not "made whole" by the policy limits UM settlement.  Under the "make whole" doctrine a lienholder is not entitled to any reimbursement if the insured was not made whole by the recovery.  The make whole doctrine has been modified in Florida under some circumstances by Section 768.76.  However, even if the entire lien is not eliminated, what the health plan can recover is significantly limited when the injured party is not made whole.  Unfortunately, often times, health insurers, PPO's and HMO's ignore the law and assert liens that do not exist, or demand payments that are exorbitant under the circumstances.  Equally unfortunate, is the fact that many plaintiffs attorneys pay liens that do not exist, or pay significantly more than what is due and owing. 

In this case, cross motions for summary judgment have been filed, and a hearing on the issue is scheduled.  If we are successful, Avmed HMO will be obligated to pay all of our fees and costs incurred in prosecuting this action. 

Repeatedly, I have seen cases where good attorneys pay back liens that do not exist, or they pay back way too much. Paying back liens that don't exist, or paying back too much is a disservice to our clients, and can be considered malpractice. The law on health insurance, ERISA, PPO, and HMO liens is complicated and requires experience to unravel.

Many times, personal injury attorneys will recommend that their clients hire The Nation Law Firm to negotiate and litigate liens on behalf of the personal injury victims. This removes any potential liability from the personal injury attorney, and provides a much needed service to their clients.

I am currently in litigation in numerous such declaratory judgment actions at this time.  For more information on lien resolution, click the word "Liens" in the right-hand column. 

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We recently filed suit against Hartford Life and Accident Insurance Company for denying our client's claim for Long Term Disability benefits. 

Our client was a salesman working for a chemical company.  He suffered from intractable pain, and applied for and received short term disability benefits.  He then received long term disability benefits for 24 months.  Then, suddenly, his disability benefits were terminated based on Hartford's finding that even though he was disabled from his own occupation, he was not disabled from all occupations. 

Contrary to Hartford's opinion, the medical evidence supports the fact that our client is unable to work at any occupation. 

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In Citizens Property Ins. Corp. v. Mallett, 2009 WL 485038 (Fla. 1st DCA Feb. 27, 2009), the First DCA dealt with three issues which are common in homeowners insurance claims: 1) interpreting Florida’s Valued Policy Law (VPL); 2) when payment is due under debris removal, and law and ordinance coverage; and 3) when prejudgment interest begins to running after a loss.

VPL

In Mallett, wind and flood combined to render the home a constructive total loss. Wind damage was a covered cause of loss under the Citizens’ policy, and flood damage was excluded. There was uncontroverted evidence that the wind was a “substantial” cause of the loss to the Mallett’s home. The insureds argued that under Florida Statute Section 627.702(1), Florida’s VPL, Citizens was required to pay its entire policy limits because the home was a constructive total loss, and wind substantially contributed to causing that total loss. The trial court agreed, granting summary judgment to the insured for the entire policy limits.

The 1st DCA reversed, holding that Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2007) governed:

The summary judgment on appeal is expressly contrary to the holding in Cox, and accordingly, we reverse that part of the summary judgment granting the Malletts additional compensation for the damage sustained to their residence not solely attributable to wind.

However, in my mind, this still leaves open several issues. Who has the burden of proof at the trial level to prove which portion of the loss is due to the uncovered peril of flood?  Typically, if an insurer is claiming that all or a portion of a loss is due to an excluded peril, then the insurer has the burden of proving which portion of the loss is due to the excluded peril. Thus, if these two perils (wind and flood) combined to cause the loss, then does the insurance company need to prove by a preponderance of the evidence which part of the loss was due to flood? Or, does the insured have to prove which portion is due to wind?  There is also an issue raised by the “anti-concurring cause clause” that is typically present in these types of policies.

Debris Removal and Law and Ordinance Coverage

In Mallett, the insured argued that because the home was a total loss, and the insurer owed its entire policy limits under the VPL, then Citizens was required to pay out under the debris removal and the law and ordinance coverage. It is unclear from the opinion if the insureds had actually incurred these expenses, or were seeking these as additional coverages that were simply due because they had recovered the entire policy limits at the trial level.  In any event, the 1st DCA held that summary judgment was improper on the issues of debris removal and law and ordinance, and that there would need to be a trial on the issue of how much was due under these two additional coverages that was attributable to wind alone.

Prejudgment Interest

The insureds argued that they were entitled to prejudgment interest running from the date of the loss.  However, the Citizens’ policy specifically stated that Citizens was not obliged to pay a claim until twenty days after it reached a written agreement with the Malletts, or sixty days after entry of a final judgment on the claim or after the filing of an appraisal award or mediation settlement with Citizens.  Relying on this language, the court sided with Citizens and held that: “It is the terms of a contract for insurance which determine the date from which the coverage payment is due, as well as when interest is due on the amounts payable.”

Obviously, this ruling allows an insurance company to breach the insurance contract, force the insured to file suit, retain the use of the money while the case is litigated, and not be liable for interest on the money they illegally retained.

One way to possibly avoid this result is to file a Civil Remedy Notice pursuant to Florida Statute 624.155, and then seek the prejudgment interest as damages in a subsequent bad faith case.

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Our client is the daughter of a deceased State of Florida retiree. In 2007, the State of Florida changed the amount of life insurance benefits it offered to its employees. The retiree died 5 months after the change in coverage took effect.

Prior to 2007, the State of Florida had always conducted “passive enrollment” during the open enrollment period. In other words, if an employee took no action during the open enrollment period, the coverage they had for the previous year would remain in effect for the next year.

When the amount of life insurance changed in 2007, the State changed from passive enrollment to active enrollment forcing retirees to actively elect to keep the prior level of coverage.

We have filed suit, arguing that the State violated its own policy and procedure and that Prudential should pay the benefit amount in effect prior to the 2007 change. 

Litigation continues both in State Court as well as administratively through the State of Florida.

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