Florida Court Weighs When Not Meeting Policy Terms Means Coverage Forfeiture

Florida’s high court is debating whether a driver forfeited her uninsured motorist coverage by refusing to meet the insurer’s specific requirement to undergo a scheduled medical exam.

The state Supreme Court recently heard oral arguments in a case [State Farm Mutual Insurance Co. v. Curran, SC 12-157, (2012)] that could reduce mandated policyholder requirements to issues to be negotiated between the insurer and policyholder. This would directly affect cases where the policy doesn’t specify any consequences for not meeting the requirements.

State Farm policyholder Robin Curran was involved in an accident in 2006 with an underinsured driver. At the time of the accident Curran appeared unharmed, but a year later she submitted a claim to State Farm stating she had developed regional sympathetic dystrophy, demanding $3.5 million in damages with the initial $100,000 policy limit of her underinsured motorist to be paid within 30 days.

State Farm requested that Curran undergo a medical examination as provided for under the policy, which states that “any person making a claim… under the no-fault, medical payments, uninsured motor vehicle and death, dismemberment, and loss of sight coverages shall… be examined by physicians chosen and paid by us as often as we may reasonably require.”

Curran failed to appear at the first scheduled exam and demanded State Farm agree to a list of conditions including that she would not have to be submitted to any other exam. When State Farm refused to meet those conditions, Curran sued the insurer and a trial court ruled that since her demands were not unreasonable State Farm owed the policy limits of $100,000.

After filing suit, Curran did agree to undergo the medical exam, but State Farm stated that since the exam had to be taken before Curran filed suit she had already forfeited her coverage.

Florida’s Fifth District Court of Appeal initially reversed the trial court’s findings and agreed with State Farm that Curran’s failure to comply with the scheduled medical exam was a material breach of her policy and therefore she was owed no benefits. But the court on appeal reversed its decision.

The court maintained that Curran did breach the terms of her policy, even though she later agreed to submit to the medical exam. However, it noted that State Farm’s policy did not contain any specific consequences for failing to meet the terms of the policy. Further, the court noted that State Farm failed to prove how Curran’s actions prejudiced the insurer’s ability to handle her claim and resulting suit.

The Florida Supreme Court in oral arguments tackled several issues starting with whether there is even a statutory basis supporting a compulsory medical exam.

Justice Fred Lewis noted that as a statutory coverage, the law states no policy can have exclusions, exceptions and policy conditions that are more restrictive that what is required by statute. He questioned whether the medical exam requirement exceeded those conditions since the uninsured motorist statute, unlike personal injury protection (PIP) coverage, makes no reference to medical exams.

State Farm Attorney Elizabeth Russo said that since the coverage is designed to compensate drivers in the event of an accident, in effect it serves the same purpose as PIP coverage and therefore the insurer is well within the spirit of the law to set the terms for a compulsory medical exam.

”It can’t be that we get a call from our uninsured motorist insured saying, ‘I was just in an accident and I have a bad, bad injury so please send me a check for $100,000,’” said Russo.

She said that a medical exam is needed for the insurer to even evaluate the claim. She said that is why the policy requires that drivers undergo the exam before filing suit or they lose their benefits.

“The point here is you, the insured, is the only one that has the information, you are the only one who can give us that and we ask for it in your policy,” said Russo. “If you don’t want to forfeit, don’t create a forfeit, just do it.”

Several judges noted that Curran’s actions in not attending the initial medical exam certainly could be considered in a bad faith claim. However, they questioned why she should lose her coverage, especially if State Farm could not show how Curran’s failure to undergo the first medical exam negatively affected the insurer’s ability to handle the claim.

“To me, I see it more as a failure to cooperate and then did that prejudice the insurer?” said Judge Rickey Polston.

Gary Farmer, representing Curran, acknowledged that State Farm’s need for the medical exam. However, he argued that by allowing State Farm to unilaterally set the terms of the compulsory medical exam the insurer can make it difficult for a driver to meet the conditions.

“If State Farm’s uninsured motorist policy is dependent on whether this woman really has RSD, why aren’t they asking her to see someone close to where she lives in Brevard County and not way up in northern part of Orlando?” questioned Farmer.

Farmer said that the medical exam should be negotiated between the two parties, which is standard practice with most contracts.

“It was never if the compulsory medical exam was going to take place, it was just where, when and how,” said Farmer.