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

My client insures multiple vehicles on his auto policy with Cornerstone National Insurance Company. The auto insurance policy provides liability coverage for bodily injury liability, property damage liability for damage to other vehicles, and collision coverage for damage to his vehicles. My client’s friend, while driving one of his vehicles (with his consent), is alleged to have caused a multiple car accident. Two people were injured in the crash. Claims were submitted to Cornerstone for the collision damage to my client’s vehicle, as well as the personal injury claims.

Cornerstone filed a declaratory judgment action asking the court to void the insurance policy for what it believes were “material misrepresentations” in the application process. According to Cornerstone, my client failed to properly disclose on the application that his friend was a regular user of the vehicle, and the location where the vehicle involved in the crash would be garaged.

However, a close review of the questions and answers on the application shows that there was no misrepresentation at all. We have filed a counterclaim seeking a declaration that the policy provides coverage for all of the claims arising from the crash.

As with most of my insurance cases, if we win, the insurance company must pay all my fees and costs, and if we lose, I’ll work for free.
 

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In Mercury Insurance Company of Florida v. Markham, ____ So.3d ____ (Fla. 3rd DCA April 20, 2010), the application for insurance asked if the subject vehicle had been "rebuilt, salvaged, modified, altered, or specially built/customized?"  Markham - the applicant - stated "no" to this question.   

Prior to the application Markham had put large tires and a lift-kit on his truck.  After an accident, Mercury Insurance denied the claim, alleging that Markham has made a material misrepresentation on the application for insurance.  According to Mercury Insurance, the large tires and lift-kit constituted a "modification" of the vehicle, and if it had known about the modification it would not have issued the policy. 

The trial court found that the term "modified" as used in the application was ambiguous, and granted summary judgment in favor of the insured.  Mercury appealed and the 1st DCA held that even though the term "modify" could be ambiguous in the abstract, under the facts of this case: 

... there is no objectively reasonable interpretation of 'modify' that would justify Roberts' negative answer to this question.  Where, as here, neither the application form, nor the policy incorporated by reference therein, defines 'modify,' we interpret the word in accordance with its plain and ordinary meaning as reflected in the dictionary.

However, the dissent points out that the policy itself provides coverage (with a sublimit of $1,000) for after-market/modified parts.  The dissent made the point that this policy language granting coverage for "modified" parts created an ambiguity. 

The insured also argued that the insurance agent knew of the changes to his vehicle and that the insurance company was charged with that knowledge because the agent was actually the agent of the insurer.  For a discussion of "When is an Insurance Agent and 'Agent' for the Insured vs. the Insurer," see my blog at http://www.floridainsuranceblog.com/articles/agent-broker/

The 1st DCA remanded the agency issue back to the trial court for a trial on disputed issues of fact. 

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In Lloyds Underwriters v. Keystone Equipment Finance Corp., 25 So3d 89 (Fla. 4th DCA 2009), the insured obtained an insurance policy from Lloyds providing liability coverage on a commercial tractor-trailer.  The policy's effective date was November 30, 2004.  The tractor-trailer was stolen December 18, 2004.  The policy provided coverage for loss due to theft, but Lloyds denied the claim, relying on a "Garaging or Secured Yard Warranty" contained in the policy.  This garaging warranty required the insured to "warrant" that the vehicle would be kept in a closed garage, in an enclosed 24-hour guarded lot, or parked adjacent to the insured's residence.  A breach of this warranty "shall result in denial of claim or any rights of recovery hereunder." 

The insured sued Lloyds for breach of contract alleging that Lloyds was estopped from relying, or waived its right to rely, upon the garaging warranty because Lloyds had failed to comply with the notice and delivery requirements of Florida Statutes Section 627.421 and 626.922, and the insured had not otherwise been provided notice of the garaging warranty.  Section 627.421 requires delivery of the insurance policy not more than sixty days after effectuation of coverage.  Section 626.922 requires the surplus lines agent to "promptly issue and deliver to the insured" either the policy or, if the policy is not "then available, a certificate, cover note, or other confirmation of insurance" showing, amount other things, "coverage, conditions, and term of insurance."  Section 626.922(1).  Section 626.922(4) provides that "[a] copy of the policy or cover note or confirmation of insurance shall be delivered to the insured within 60 days after the effectuation of coverage." 

The insured provided an affidavit wherein he swore that the loss occurred on December 18, 2004, that he had not received a copy of the binder or policy prior to the loss, and that he had not otherwise received written or verbal notice of the garaging warranty.  The insured did file a copy of the binder issued by the insurance agent, bearing a date of January 2, 2005, and the Lloyds' policy, listing February 9, 2005, as the date printed on the schedules of equipment and drivers. 

Lloyds did not dispute these facts, but merely argued that Florida law expressly provides that the doctrines of estoppel and waiver may not be applied to create coverage that does not otherwise exist. 

The trial court granted summary judgment in favor of the insured.  On appeal, the 4th DCA affirmed.

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Pursuant to Florida Statute Section 627.409, an insurer can retroactively rescind a policy if it later finds a material misrepresentation in the application for insurance.  A misrepresentation is "material" if the misrepresentation was material to the acceptance of the risk by the insurer, or, if the insurer in good faith would not have issued the policy under the same terms and premium. 

In United Automobile Insurance Company v. Salgado, _____ So.3d. _____ (Fla. 3rd DCA August 5, 2009), the PIP insurer discovered a material misrepresentation after its insured presented it with a PIP claim.  The PIP insurer then rescinded the policy, pursuant to 627.409.  The County Court held that a PIP insurer was not entitled to retroactively rescind a PIP policy pursuant to 627.409.  In essence, the County Court reasoned that PIP is a statutorily mandated coverage and pursuant to the PIP statute claims can only be denied prospectively, not retroactively.  The Circuit Court, sitting in its appellate capacity, affirmed. 

The 3rd DCA reversed, holding that, pursuant to 627.409, a PIP insurer can retroactively rescind a PIP policy if it meets the requirements of 627.409. 

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A new case out of the Second District reveals how important it is for an insured to comply with the provisions of the insurance contract.  In Amica Mutual Insurance Company. v. Drummond, 32 Fla. L. Weekly D2907, 2007 WL 4270593 (Fla. 2nd DCA December 7, 2007), the court determined the insurer was not obligated to pay any outstanding medical payment ("Med Pay") benefits based on the insureds' refusal to attend an examination under oath.

In this case, both the motor vehicle and passenger were insured by the same insurance company. The driver sought Med Pay benefits under the motor vehicle's policy, and the passenger sought Med Pay benefits under both the motor vehicle's policy and his own policy. The insurance company which insured the vehicle tried to investigate the accident and injuries to both insureds, and began to take sworn statements, which were unfinished. The insurance company then sought to exercise its right to "Examinations Under Oath" (EUOs) as allowed by the insurance policies. The insureds' attorney advised the insurance company his clients would not be pursuing a UM claim, and that since PIP benefits did not require an EUO, the insureds would not participate in any EUOs. The attorney did not produce his clients for EUOs on a date which was previously coordinated by the insurance company, the lawyers, and the insureds.

The insurance company again tried to schedule the EUOs, advising that the insureds' Med Pay benefits were suspended until the examinations occurred. Once again, the lawyer for the insureds informed the insurance company that the insureds would not appear for the EUOs. The insurance company then filed a declaratory judgment action to determine whether the insureds' refusal to attend EUOs relieved the insurer of its duty to pay outstanding Med Pay benefits.

The appellate court noted an EUO was a "condition precedent" which must be performed to trigger the insureds' rights under the insurance policy. The court recognized the insurance policy contained language that the insurance company had "no duty to provide coverage . . . unless there has been full compliance" with the EUO requirement. Thus, the insureds' failure to submit to the EUOs absolved the insurance company of its duty to provide coverage. Because the insureds never submitted to an EUO, the court claimed the insurer was within its rights to refuse payment of Med Pay benefits for treatment which occurred after the insureds' initial refusal to attend an EUO.

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