Posted December 29, 2011
Insurance Coverage, Uninsured Motorist Coverage
Fifth DCA Holds That Failure To Attend Compulsory CME Is A Breach Of Condition Subsequent, Which Is An Affirmative Defense Which Insurer Has Burden To Plead And Prove And That Breach Did Not Forfeit Benefits Without Regard To Prejudice To Insurer - Also Concludes That Insurer Was Not Prejudiced By Breach Even Though It Failed To Obtain CME During 60 Day "Cure" Period Allowed Under 624.155
State Farm Mut. Auto. Ins. Co. v. Curran
36 FLW D2635c (Fla. 5th DCA, Dec. 2, 2011)
The court's original opinion issued in January 2011 was withdrawn and replaced by this en banc opinion.
Curran was injured in a traffic accident involving an underinsured motorist. With State Farm's approval, she settled with the underinsured motorist. Thereafter, on July 19, 2007, through counsel, she requested her $100,000 UM policy limits based upon her estimate that her damages were approximately $3.5 million. She offered to settle the case and release State Farm from an uninsured motorist lawsuit if it tendered the policy limits no later than August 18, 2007. On August 17, 2007, State Farm asked Curran's counsel, Mr. David Alpizar, to contact it to discuss coordinating the date and time for Curran to undergo a CME pursuant to the terms of the policy. That request triggered a series of letters between the attorneys, that referenced limitations and conditions on the CME requested by the insured. Ultimately, the insured did not attend the CME and filed suit instead. In addition, on August 21, 2007, counsel for the insured advised that he had filed a civil remedies notice and that the time for tendering the policy limits had expired. More letters were exchanged regarding the CME and more conditions and objections interposed by the insured's attorney. After all was said and done, the insured did not attend the CME, but filed suit on September 10, 2007.
In analyzing the failure to attend the CME, the court stated:
Curran did not act reasonably in insisting that State Farm abandon a contractual right as a precondition to an examination, we conclude that Curran breached the contract. Under the terms of the policy, Curran was obligated to attend a CME upon request. Implicit in the policy was the condition that the request be reasonable in time, location and manner. State Farm's requests were all patently reasonable. Initially, State Farm simply asked to coordinate a date and time for a CME. Instead of offering a date, Curran insisted on a "condition" that State Farm waive any further examinations. This proposed condition unreasonably sought a waiver of a contractual right. The contract expressly permits future examinations under reasonable circumstances. Thereafter, State Farm was well within its right to unilaterally schedule the examination, especially given the time constraints it had under the pending Civil Remedies Notice and the impending threat of a claim for bad faith....
Under these undisputed facts, we have no reticence in concluding that Curran breached the contract. The contract conferred upon State Farm the right to schedule an examination with a physician chosen by State Farm. It also gave State Farm the right to conduct more than one such examination, if reasonably necessary. It was not necessary that State Farm agree to any proposed condition proffered by Curran (even if reasonable from the standpoint of the insured), only that State Farm act reasonably. Here, State Farm's requests were at all times reasonable. Operating within an accelerated time frame, State Farm made every reasonable effort to set a date and time convenient for Curran. It offered transportation, acquiesced in Curran's request that counsel and a reporter be permitted to attend and agreed that counsel for State Farm would not attend. Conversely, Curran was uncooperative in scheduling the examination, insisted on at least one unreasonable condition and set up a moving target with evolving demands. Although proffering conditions might not be a breach of the contract, an insured has no contractual right to unilaterally change the contract terms under the guise of proffered conditions.
Despite this clear conclusion that the insured had acted unreasonably and had breached the policy's condition, the court continued. They noted that the policy provides that no right of action against the insurer existed until all policy terms had been met, but that the policy did not provide for a forfeiture of benefits in the event of a breach of the duty to submit to a CME. The court further noted that the requirement to attend the CME was grouped with other post-loss duties, such as reporting the claim in a timely fashion. Thus, the court concluded that, "In the absence of policy language imposing a penalty or forfeiture in the event of non-compliance with these provisions, we think the remedy must be proportionate to the harm that results from the breach, just as it is in other contractual disputes." The court reasoned that a prejudice analysis must be applied here, consistent with the ruling in Bankers Insurance Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985). The court also held that the CME provision was "analogous to and overlaps the insured's duty to cooperate (the other provision addressed in Macias) in that it affords the insurer the opportunity to obtain evidence from the insured, an express duty under the cooperation clause of this policy... Whether the CME clause is more analogous to a claims notice provision or a cooperation clause bears only on who has the burden on the prejudice issue, not the materiality of a resulting prejudice analysis. In any event, our high court recently made clear that the burden to plead and prove a breach of a CME clause is on the insurer. Custer Med. Ctr. v. United Auto. Ins. Co., 62 So. 3d 1086 (Fla. 2010)."
While noting that Custer involved a PIP CME and was not directly on point, the court felt that the Custer discussion of the nature of a CME provision and the burden of proof of breach was applicable in the UM context. After citing to some insurance treatises that supported this view, the court held, "to avoid liability under the insurance policy based on non-compliance with the CME clause, it was essential that State Farm plead and prove a material breach, which means a breach causing prejudice."
Further the court noted that the policy's language regarding the consequences of a failure to attend a CME also showed that a breach did not forfeit coverage. The policy stated that an action against the insurer was precluded "until" the insured complied. The use of the term "until" was consistent with an interpretation that a breach "suspends performance by the insurer and may be cured by the insured." (emphasis in original). Thus, the court concluded, "When a presuit request for a CME is made, thereby invoking the "until" language, the combination of these clauses establishes a condition precedent to maintaining an action, which, if raised as an issue, may be cured under most circumstances. See Holding Elec., Inc. v. Roberts, 530 So. 2d 301 (Fla. 1988) (condition precedent in mechanics lien statute may be performed after suit filed and alleged by amended complaint; it is not bar to recovery); Commercial Carrier Corp. v. Indian River Cnty., 371 So. 2d 1010, 1022 (Fla. 1979) (condition precedent for pre-suit notice may be cured by amended complaint after compliance); Wright v. Life Ins. Co. of Ga., 762 So. 2d 992, 993 (Fla. 4th DCA 2000) (failure to provide proof of death to life insurance company, a condition precedent, was curable; action abated pending compliance with proper procedure)." Then the court noted that even though Curran had prematurely filed suit, State Farm never raised this argument. In contrast, State Farm had argued that all coverage had been forfeited and did not seek abatement of the claim.
The court then noted that in asserting its complete forfeiture argument, State Farm had relied on two decisions of "sister courts" which the Fifth DCA now concluded were "incorrectly decided." The Curran court held that De Ferrari v. Government Employees Insurance Co., 613 So. 2d 101 (Fla. 3d DCA 1993), had "mistakenly" conducted its analysis under the PIP statute, which contained a penalty for the unreasonable refusal to attend a CME. Since there was no similar statute relating to UM claims, this reasoning should not have applied to a UM situation. In addition, the Curran court rejected DeFerrari because it "erroneously rejected the Macias prejudice analysis" on the "false legal premise" that CME is a condition precedent to coverage, whereas Custer had specifically held that it is a condition subsequent.
The Curran court also distinguished Goldman v. State Farm Fire General Insurance Co., 660 So. 2d 300 (Fla. 4th DCA 1995), which State Farm had heavily relied upon. Noting that Goldman had also relied on PIP cases to support its conclusion, the court also noted that it nonetheless applied a prejudice analysis, when it concluded that the failure to attend the EUO had prejudiced the insurer. The court also noted that Goldman "represents only one of two divergent views on this point" and that their view was the "better reasoned view."
Having thus concluded that prejudice was an issue and that the burden was on State Farm to plead and prove prejudice, they concluded that State Farm failed to meet its burden. They noted that State Farm made no assertion of prejudice in its pleadings or arguments, instead placing total reliance on De Ferrari and Goldman. Further, they stated, that "even had State Farm argued prejudice, the record refutes any such allegation, at least to the extent that it would affect entitlement to the UM contract benefits." The court stated:
Immediately upon filing suit (seven days after the scheduled examination), Curran offered to submit to a medical examination pursuant to Florida Rule of Civil Procedure 1.360 (also well before the expiration of the time period under the Civil Remedies Notice). State Farm declined Curran's offer, electing instead to defer an examination until after the court first decided "if your client's failure to cooperate and failure to comply with all policy terms, conditions, limits, provisions and applicable Florida law affects coverage under the provisions which you now seek benefits." After the lower court ruled, the record reflects that Curran submitted to a CME with Dr. Uricchio. State Farm elected not to call Dr. Uricchio as a trial witness. There is no indication that the validity of the CME was affected by the short lapse of time attributable to Curran or that the rule 1.360 examination was materially different from the CME State Farm would have performed under the contract. The effect of Curran's breach was clearly inconsequential as it pertained to the merits of her claim for UM benefits.
However, the court cautioned that they did not intend that the breach of contract by Curran could not be considered in the context of any subsequent action for bad faith. The court acknowledged conflict with DeFerrari and Goldman and certified the following question to the Florida Supreme Court.
When an insured breaches a CME provision in an uninsured motorist contract, (in the absence of contractual language specifying the consequences of the breach) does the insured forfeit benefits under the contract without regard to prejudice, or does the prejudice analysis described in Bankers Insurance Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985), apply? If prejudice must be considered, who bears the burden of pleading and proving that issue?
In addition to concurring with the majority, Judge Orfinger and Judge Monaco drafted specially concurring opinions. In addition, Judge Lawson drafted his own concurring opinion in which Judge Torpy concurred. Judge Sawaya dissented and Judge Palmer joined in the dissent. The views expressed in these concurring and dissenting opinions are critically important to anyone dealing with this issue, but due to length and complexity are beyond the scope of this website posting.
Click on the link below to read the Opinion filed December 2, 2011:
State Farm Mutual Auto Insurance Company v. Curran
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