Colodny Fass Featured in Federation of Regulatory Counsel December 2010 Update

Colodny Fass attorneys were featured contributors to the Florida section of the Federation of Regulatory Counsel’s (“FORC”) December 2010  “FORC Alert.”  To view the publication, click here.  The articles are reprinted below.

Florida Supreme Court: PIP policy provisions not directly mirroring Florida statutes may be unenforceable

In its November 4, 2010 opinion on Custer Medical Center v. United Automobile Insurance Company, the Florida Supreme Court indicated that Personal Injury Protection (“PIP”) policy provisions that do not directly mirror the State’s PIP statutes may be unenforceable. The opinion ultimately addresses the granting of a motion for directed verdict and the burden of proof for an affirmative defense that an insured unreasonably refused to submit to a medical examination pursuant to Florida Statute § 627.736(7). The Court’s opinion says:

• Unless otherwise provided by statute, a PIP carrier may not deny payment of medical expenses incurred and submitted by the insured prior to the date of a scheduled independent medical exam (“IME”), even if an insured does not attend the IME.
• Unless otherwise provided by statute, a PIP carrier may only deny payment of an insured’s medical expenses incurred and submitted after the date of the IME if the carrier can affirmatively prove the unreasonableness of an insured’s failure to attend an IME. Thus, the burden of proving the unreasonableness of the insured’s action or non-action rests with the insurer.
• Denial of benefits for an insured’s failure to submit to an examination under oath (“EUO”) may no longer be permissible, inasmuch as the Court points out that EUOs are not expressly permitted under Florida’s PIP statutes.

The effects of the Supreme Court’s decision are yet to be determined, but the use of IMEs appears to be significantly impaired. Widespread litigation of these issues is anticipated.

Insurers Cannot Challenge Now Non-Existent Rate Filing Arbitration Rules

In a November 10, 2010 opinion, the First District Court of Appeal overruled an administrative law judge’s decision that Florida Administrative Code Rule 69O-170.105(1)(d), which relates to the costs, expenses and fees of rate filing arbitration, was an invalid exercise of delegated legislative authority.  In lieu of demanding a hearing under Florida’s Administrative Procedure Act, former section 627.062(6), F.S. permitted an insurer to request arbitration of a rate filing once the Florida Office of Insurance Regulation made its final decision on the rate filing. This law was amended in 2008, after which it no longer provided an insurer with the option to request rate filing arbitration.

In June 2009, Service Insurance Company instituted a Rule challenge on Rule 69O-170.105(1)(d), F.A.C, arguing that the Florida Department of Financial Services and the Florida Financial Services Commission’s adoption the Rule was an invalid exercise of delegated legislative authority. Section 120.56(3)(a), Fla. Stat. provides that “[a] substantially affected person may seek an administrative determination of the validity of an existing rule at any time during the existence of the rule.”  In effect, the First District Court of Appeal held that the amendment to Section 627.062(6), F.S., which removed the insurer’s option to seek arbitration of a rate filing, caused Rule 69O-170.105(1)(d) to automatically expire.  Section 120.536(1), F.S. provides that a grant of rulemaking authority and a specific law to be implemented is required for an agency to adopt a Rule and that an agency may only adopt rules that implement or interpret the specific powers and duties granted by the enabling statute. Once the Rule’s enabling statute is repealed, the Rule automatically expires. (Canal Ins. Co. v. Cont’l Cas. Co., 489 So. 2d 136, 138 (Fla. 2d DCA 1986).  As a result, Service Insurance Company cannot pursue its action with regard to Rule 69O-170.105(1)(d), because section 120.56(3)(a) of the Administrative Procedure Act requires that the Rule exist.  Other Rules relating to the arbitration of rate filings have not been administratively repealed.  Therefore, this conclusion would appear to apply to these Rules as well.

Third District Court of Appeal: Citizens’ Homeowners Policy Conditions Must Be Met to Trigger Appraisal Provisions

On November 24, 2010, Florida’s Third District Court of Appeal issued an opinion in Citizens Property Insurance Corporation v. Galeria Villas Condominium Association, Inc., 2010 WL 4740049 (Fla. 3rd DCA 2010), in which it re-established that policy conditions and post-loss obligations must be met in order for a request for an appraisal to be “ripe.”  In this case, the Court found that the appraisal provisions of the homeowner’s policy at issue were not triggered because Galeria did not provide Citizens with a reasonable opportunity to investigate and adjust the claim. Thus, no “disagreement” had arisen. Galeria had refused to comply with certain policy conditions and post-loss duties by failing to provide Citizens with requested documentation and refusing to allow Citizens’ loss consultant to inspect the property.

As a side issue and in reliance on its recent decision in Sunshine State Ins. Co. v. Rawlins, 34 So. 3d 753 (Fla. 3d DCA 2010) the Third District Court noted that the lower court “has the discretion to control the order in which an appraisal and coverage determinations proceed.” (Galeria Villas Condominium Association, 2010 WL 4740049.)  The Rawlins decision, and now the Galeria decision are in direct conflict with the Fourth District Court of Appeal’s recent opinion in Citizens Property Insurance Corporation v. Michigan Condominium Association, 2010 WL 4226281 (Fla. 4th DCA 2010). Essentially, the Third District permits courts to order appraisals prior to, and while reserving jurisdiction on, the determination of coverage issues.  The Fourth District’s opinion disagrees with this “dual-track” approach, holding that liability on coverage issues must precede the determination of damages, i.e. the appraisal. (Michigan Condominium Association, 2010 WL 4226281 at *1.)  The Fourth District has certified the conflict between its opinion and Rawlins. The Supreme Court of Florida may decide to hear the issue and resolve the conflict.

Florida Office of Insurance Regulation 2010 ‘Fast Facts’ Report: Florida Ranks 15th in World/State Premium Comparison

The Florida Office of Insurance Regulation “2010 Fast Facts” report, issued on November 28, 2010, indicates that the State of Florida ranks 15th compared with the amount of insurance premium generated by nations as large as the United States and China.  The report also ranks Florida’s largest insurance writers by premium in various lines of business.

As of December 31, 2009, Citizens Property Insurance Corporation dominated Florida’s “Top 20” list of personal residential property insurance writers.  Florida insurance regulatory and enforcement statistics for 2009 through 2010 are also provided in the report, which can be viewed by clicking here: