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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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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