Florida’s 3rd District Court of Appeals has ruled an insured’s misrepresentations to the court about his fitness as a driver at the time of a serious crash did not void his insurance policy. Therefore, the company is responsible for paying sanctions imposed against defendant by the court in GEICO v. Rodriguez.

Our Fort Myers accident lawyers understand this means the company will be responsible for more than $27,000 in sanctions, on top the $20,000 liability limit already paid. Separate lawsuits have been filed requesting the court to compel the insurer to pay another $750,000 in consent judgments, though those actions are still pending. drivefastsaab

According to court records, the insurance policy was issued to defendant driver in 2005, indicating a $10,000 liability limit per person and $20,000 per occurrence. Additionally, as is common, the policy covered all court costs caused to an insured in a covered lawsuit (stemming from a crash).

One month after renewal of the policy, the 83-year-old insured was driving a motor vehicle when he struck two pedestrians, resulting in serious injuries. The at-fault driver’s insurer immediately tendered the policy limit amount of $20,000 to the injured parties. However, a dispute arose between the insurer and attorneys for the injured plaintiffs regarding coverage of medical costs. When this dispute could not be resolved out of court, the injured pedestrians filed a negligence lawsuit against the at-fault driver.

Per the terms of the driver’s insurance policy, the insurance company provided legal defense counsel for him. Approximately one year after the lawsuit was filed, the driver was deposed. In his sworn testimony, the driver indicated he had no physical impairments that would prevent him from being a safe driver, and specifically stated he had no significant vision problems.

Medical records later obtained by plaintiffs proved otherwise. In fact, at all times material to the case, the driver was legally blind and had been told by his doctors he should not be driving.

With this information, plaintiffs filed a motion for sanctions against the driver, alleging his misrepresentations amounted to fraud on the court. Plaintiffs also sought coverage of costs and attorney fees incurred.

A hearing was scheduled, but in the interim, the driver died. A relative was substituted in the lawsuit as personal representative of the estate.

Days before the hearing was to proceed, the insurer issued a “reservation of rights” letter, indicating that because of the driver’s misrepresentations, he may no longer be covered under the insurer’s policy for damages, sanctions or fees. The company cited the “Fraud and Misrepresentation” section under its policy.

The hearing proceeded, and the court entered an order granting the injured pedestrians sanctions for a total of $27,000.

After that, the insurance company filed a lawsuit against the estate in federal court, seeking declaration that no insurance coverage was available due to the driver’s misrepresentations to the court.

Meanwhile, the personal representative filed an appeal of the sanctions, which was later dismissed amid a dispute between the representative and an attorney provided by the insurer. The insurer offered several options for a new lawyer, but the personal representative insisted the insurer first retract the reservation of rights if he was to cooperate. The company refused, and the case continued with the personal representative working with his own personal attorney.

Plaintiffs then filed an amended complaint against the estate, this time naming the insurance company, asking that the insurer be required to pay the sanctions. Then, the personal representatives filed a cross-claim against the insurer, seeking declaration that the insurer was required to provide indemnification. The insurance company issued a second “reservation of rights” letter, indicating covered was forfeited because the personal representative breached the policy contract by refusing to work with appointed defense attorney.

Soon after, the injured parties and personal representative reached an agreement for consent judgment in the underlying action claim for $750,000. This balance is still outstanding, with both plaintiffs and the personal representative suing to have the insurer pay.

The injured pedestrians then sought a judgment that would require the insurer to pay the sanctions. The trial court granted it, finding the first reservation of rights was a violation of Florida’s Claims Administrations Statute.

The law says an insurer has to assert a coverage defense within one month of becoming aware of it. This insurer waited one year from the time it learned of the driver’s misrepresentations to the time it issued the first revocation of coverage. Further, because of that first reservation of rights, the personal representative owed no duty to the insurance company that would have required him to use the insurance company’s defense attorney.

The insurer appealed, but the 3rd DCA upheld the ruling. The misrepresentations were made in court, after the crash, not to the insurer at the time of coverage. That meant the false statements in deposition didn’t trigger the policy’s “Fraud and Misrepresentation” provision that would have voided coverage.

The court noted it was sympathetic to the argument that the insurance company shouldn’t be responsible for sanctions imposed by an insured making false statements during discovery. However, because the insurer had a year in which it knew of this problem, controlled the defense at that time and failed to take any action to mitigate the impact, coverage of the final amount was ordered.

Contact our Fort Myers pedestrian accident lawyers at Chalik & Chalik at (954) 476-1000 or 1 (800) 873-9040.

Additional Resources:

GEICO v. Rodriguez, Sept. 10, 2014, Florida’s Third District Court of Appeal

More Blog Entries:

Spate of Florida Pedestrian Accidents a Reminder to Use Caution, April 21, 2014, Fort Myers Pedestrian Accident Lawyer Blog