A Florida appellate court has ordered an auto insurance provider to pay an additional $27,000 in sanctions on top of a $20,000 injury liability limit, after it failed to indemnify the estate of an insured who was dishonest about his ability to drive during a deposition in a negligence action.
The case is convoluted, and spread over the course of several years. But West Palm Beach pedestrian accident attorneys understand the bottom line was the insurer violated Florida insurance law and did not act soon enough to mitigate its liability after learning the driver had lied about his physical impairments – specifically, his poor vision – in sworn testimony in a lawsuit following a crash.
In GEICO v. Rodriguez, Florida’s Third District Court of Appeal indicated the sanctions judgment, rendered as punishment for the dishonesty of the at-fault driver, was to be paid by the driver’s insurer, which had a duty to indemnify him. The insurer may additionally have to pay $750,000 in consent judgments, though that matter is still pending.
The case began in November 2005 when the insurance company renewed the driver’s auto coverage with a $10,000 per-person bodily injury limit, and a cap of $20,000 per occurrence. The following month, the driver, who was 83, struck two pedestrians in Miami, causing them serious injury.
Immediately thereafter, the driver’s insurer paid $20,000 to the injured parties. However, this was not enough to cover their medical bills. Plaintiffs retained an attorney to help negotiate a settlement. When one could not be reached, they filed a lawsuit against the driver, alleging negligence.
The terms of the driver’s insurance policy required the insurer to provide defense counsel, which it did. One year after the lawsuit was filed, the driver was deposed. He denied having any physical problems or vision issues that would prevent him from being a safe driver. His testimony was proven false, however, when one month later, plaintiff lawyers found evidence he was legally blind and had been advised by his doctors prior to the crash he shouldn’t drive.
Plaintiffs sought sanctions for the driver’s misrepresentations under oath, asserting this amounted to fraud on the court. Pending a hearing, the driver died, and a personal representative of his estate was substituted as a defendant.
Days before the hearing, approximately one year after the misrepresentations came to light, the insurer informed the personal representative in a “reservation of rights” (ROR) letter that due to the insured’s conduct, the company would not provide coverage for the claim, damages, sanctions or fees.
The hearing continued, with the insurer’s defense counsel acting for the personal representative. The court awarded $27,000 in sanctions, and allowed the injured plaintiffs to amend their complaint to request punitive damages.
The insurer then sought a declaration in federal court that it did not have to provide coverage due to the driver’s false statements, per the “Fraud and Misrepresentation” provision of its policy.
The personal representative and the defense lawyer had a falling out, and the insurance company offered several replacement lawyers in the pending action. However, the personal representative refused unless the insurer would lift the ROR. The company declined, and the case continued with the personal representative’s personal attorney.
An amended complaint was filed by plaintiffs, naming the insurer as a defendant, and requesting the company be required to pay the sanctions. The personal representative filed a cross-claim also asking for the company to pay.
The firm responded with a second ROR, indicating that because the personal representative refused representation by its defense attorneys, the policy terms were breached and it would not provide coverage.
Subsequently, two consent judgments were entered for plaintiffs against the estate amounting to $750,000 (on top of the $20,000 liability limit and $27,000 in sanctions).
Plaintiffs then filed a motion seeking to compel the insurer to pay the sanction amount. The trial court granted this request, holding the insurer had violated Florida’s Claims Administrations Statute with the issuance of its first ROR. The law requires the company to assert any defense of coverage within 30 days of becoming aware of its existence. Here, the company knew the insured had been dishonest in his deposition a full year before it issued the ROR.
Because of this, the court found, the personal representative owed no duty to cooperate with the company, and therefore the second ROR was void.
Florida’s Third District Court of Appeal affirmed this judgment, finding the driver’s false statements during the deposition didn’t amount to false representation preceding his coverage. Therefore, the policy was fully in effect when sanctions were issued, and the insurer was responsible to pay them.
Whether the company will also have to pay the $750,000 in consent judgments remains to be seen.
If you have been injured in a pedestrian accident in West Palm Beach, contact the Hollander Law Firm at (888) 751-7770 for a free and confidential consultation. There is no fee unless we win.
GEICO v. Rodriguez, Sept. 11, 2014, Florida’s Third District Court of Appeal
More Blog Entries:
Step-Down Provisions and Other Exclusions in Florida Auto Insurance Policies, Sept. 5, 2014, West Palm Beach Pedestrian Accident Lawyer Blog