September 21, 2009

In These Economic Times…

The economic downturn the country has been experiencing has affected families, individuals and corporations alike.  In Florida in particular, the insurance industry has been hard hit and eventually, the losses get passed down to the consumer.  In most cases, consumers will obtain insurance from underwriters who have contractual relationships with the actual providers.  The underwriters are charged with obtaining all requisite application materials, including any necessary waivers.  The underwriters request insurance based on the information obtained.  This procedure can lead to the insurance provider’s liability if they fail, mistakenly or otherwise, to obtain all necessary documentation prior to binding coverage.  For this reason, insurance companies are even more careful to scrutinize application materials.  Robin Bresky, P.A. was retained by a law firm who represented the insurance company, to assist on an appeal, which was successfully reversed.  The Third District Court of Appeal reversed a trial court’s decision, which had entered judgment in favor of an insurance underwriter.

As individuals we often times pay high monthly automobile premiums to ensure we are abiding by the law and more importantly are covered in the event of an accident.  Therefore, it should come as no surprise that in the event of an accident, insureds expect that their insurance companies will cover their losses.  But, what happens when an underwriter fails, intentionally or negligently, to secure proper insurance?  The underwriter owes a contractual fiduciary duty to the insurance company.  The underwriter must also proceed with great care to secure all required documentation in an effort to ensure that the appropriate coverage is secured.  For example, Florida law requires that no automobile policy be issued without uninsured motorist (“UM”) coverage unless the insured expressly rejects such coverage in writing.  See, § 627.727(1), Fla. Stat. (2009).  Therefore, it is imperative that when an individual wishes to decline UM coverage, an underwriter MUST procure a written rejection.  Absent said rejection, an insurance company is required by law to provide said coverage.

In our case, an insured expressed his wish to decline UM coverage because of the high premium attached to said coverage.  The insurance company binded automobile coverage on behalf of the insured based on the underwriter’s representation that the insured declined uninsured motorist (UM) coverage.  Subsequently, the insured was involved in an automobile accident.  It was at this time that it was discovered that there was no UM waiver.  Because the underwriter failed to secure a proper UM waiver, the insurance company was forced under Florida law to re-issue the policy retroactively with UM coverage.  The insurance company was then required to make a significant payout to the insured for damages that resulted from the accident.

A lawsuit for breach of contract resulted.  The insurance company alleged that the underwriter breached its contract when it failed to secure a written UM rejection from the insured.  At summary judgment, however, the underwriter successfully argued that the insured wanted UM coverage and absent a written rejection, the insurance company was required to cover the losses.  On appeal, we were successful in arguing that the insurance company presented material issues of fact at the summary judgment hearing that could reasonably support the inference that the insured did in fact wish to decline UM coverage and therefore the underwriter, that failed to procure the UM waiver, was responsible for the insurance company’s loss.  Specifically, there was evidence presented that showed that the underwriter either negligently or fraudulently failed to obtain the necessary waiver when in fact the insured had expressed a wish to decline it and the insured had likewise not been paying premiums consistent with UM coverage.  Thus the appellate court reversed the trial court’s order granting summary judgment.