13 Fla. L. Weekly Supp. 94a
Insurance — Personal injury protection — Application — Misrepresentations — Common law rescission of PIP policy for material misrepresentation is preempted by PIP statute where common law rescission allowing retroactive cancellation is irreconcilable with statutory scheme requiring driver to maintain PIP coverage continuously, providing for notice in advance of cancellation of coverage to afford insured the opportunity to procure other insurance to avoid lapse in coverage, and providing penalties for failure to maintain coverage — Further, to allow insurer to retain right of rescission and postpone investigation of insured’s insurability until claim is made defeats purpose of Florida Financial Responsibility Law to protect public — Cancellation for material misrepresentation must be prospective — Summary judgment granted in favor of medical providerAFFIRMED at14 Fla. L. Weekly Supp. 360b
MIAMI CHIROPRACTIC ASSOCIATES, as assignee of George Brice, Plaintiff, v. UNITED AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 11th Judicial Circuit in and for Miami-Dade County, Civil Division. Case No. 03-8773 SP 25 (2). October 21, 2005. Lawrence D. King, Judge. Counsel: Christian Carrazana, Panter, Panter & Sampedro, P.A., Miami, for Plaintiff.
ORDER GRANTING PLAINTIFF’S MOTION FOR FINAL SUMMARY JUDGMENT AND FINAL SUMMARY JUDGMENT
THIS CAUSE came before this Court on this 4th day of October 2005 on Plaintiff’s motion for final summary judgment. The Court, having heard the arguments of counsel and being otherwise fully advised in the premises, makes the following findings of fact and law:
UNDISPUTED FACTS
1. The insured, George Brice, entered into a contract of insurance for personal injury protection benefits governed by § 627.736, Florida Statutes, (2003) with Defendant, UNITED AUTOMOBILE INSURANCE COMPANY (hereafter “UNITED”).
2. The effective date of said policy is April 9th, 2003 through April 9th, 2004.
3. The insured was involved in an automobile accident on May 3rd, 2003 in the State of Florida; the insured suffered personal injuries that necessitated chiropractic care as a result of said accident.
4. The insured underwent chiropractic treatment at MIAMI CHIROPRACTIC ASSOCIATES. The insured assigned his rights and benefits under said policy of insurance in exchange for said treatment.
5. The Plaintiff, MIAMI CHIROPRACTIC SERVICES, filed suit on the policy to recover unpaid PIP benefits on or about July 30th, 2003.
6. During suit, UNITED requested the insured to submit to an examination under oath (hereafter “EUO”) scheduled for September 8th, 2003.
7. UNITED discovered during said EUO that the insured failed to list a licensed household member on the application of insurance who allegedly creates an additional premium.
8. UNITED served an answer to Plaintiff’s complaint on or about September 22nd, 2003 and alleged as an affirmative defense, that UNITED is not liable on the grounds of material misrepresentation in the inducement.1
9. Seven months after learning the grounds for forfeiture and on April 8th, 2004, i.e., one day before the policy lapse date, UNITED sent a notice of cancellation advising the policy has been cancelled for material misrepresentation.
10. The effective date of cancellation on the notice is the policy effective date or date of issuance; i.e., April 9th, 2003.
11. UNITED did not immediately return the premium to the insured after learning the grounds for forfeiture; instead, the premium was returned several months after litigation commenced and UNITED learned the grounds for forfeiture.2
12. Plaintiff moved for final summary judgment with a supporting affidavit from Dr. David Hirschenson D.C., who opines that the subject chiropractic bills are reasonable, necessary and related. In response, UNITED filed the affidavit of Dr. Glen Siegel D.C., who performed an independent medical examination on July 17th, 2003. According to Dr. Siegel, further chiropractic care is not reasonable, necessary and related after July 17th, 2003.
13. Plaintiff also moved for summary judgment as to Defendant’s affirmative defense of material misrepresentation. Plaintiff’s counsel argues that summary judgment must be entered for Plaintiff because UNITED may not escape liability on the grounds that the policy did not exist; more succinctly, common law rescission is preempted by the Florida Automobile Reparations Act, §§ 627.730-7405; statutory cancellation is the exclusive mechanism to terminate statutorily mandated coverage for material misrepresentation.
ANALYSIS OF THE LAW
Whether an insurer may terminate a contract of insurance mandated by the Florida Automobile Reparations Act by way of common law rescission is novel question unaddressed by the Florida Supreme Court and District Courts. Rescission for material misrepresentation has been frequently upheld in the context of non compulsory motor vehicle coverage such as bodily injury and comprehensive and collision coverage; but on the other hand, there is no reported decision from the Florida Supreme Court or Districts Courts upholding rescission in the context of statutorily mandated coverage.
The present question requires a comprehensive analysis of the Florida Statutes. The Court begins with maxim that “[l]egislative intent, as always, is the polestar that guides a court’s inquiry under the Florida No-fault Law.” United Auto. Ins. Co., v. Rodriguez, 808 So.2d 82, 85 (Fla. 2002). “Where the wording of the Law is clear and amendable to a logical and reasonable interpretation, a court is without power to diverge from the intent of the Legislature as expressed in the plain language of the Law.” Id. Subsection (9)(a) of the PIP statute states that “[e]ach insurer which has issued a policy providing personal injury protection benefits
shallreport the renewal, cancellation, or nonrenewal thereof to the Department of Highway Safety and Motor Vehicles within 45 days from the effective date of the renewal, cancellation, or nonrenewal. Upon the issuance of a policy providing personal injury protection benefits to a named insured not previously insured by the insurer thereof during that calendar year, the insurer shall report the issuance of the new policy to the Department of Highway Safety and Motor Vehicles within 30 days.” (emphasis added).
The plain meaning of “cancellation” is undefined by the PIP statute; therefore the Court may rely on the cannons of statutory construction to ascertain its plain meaning. See Nehme v. Smithkline Beecham Clinical Laboratories, Inc., 863 So.2d 201, 204 (Fla. 2003) (Explaining that where a statutory term is undefined, the “Court must resort to canons of statutory construction in order to derive the proper meaning.”) The ordinary meaning of cancellation is defined by dictionary as “[t]o destroy the force, effectiveness, or validity of; [t]o annul, abrograte, or terminate.”3 Black’s Law Dictionary 206 (6th Ed. 1990). The dictionary meaning of “cancellation,” does not reflect whether “cancellation,” means to “annul, abrograte or terminate,” from the inception or prospectively; but “cancellation,” on the other hand, is a technical term with special legal significance and must be presumed to have been used by the Legislature according to its legal meaning in the context of insurance law. See Tampa v. Thatcher Glass Corporation, 445 So.2d 578, 579, n.2 (Fla. 1984) (“Terms of special legal significance are presumed to have been used by the legislature according to their legal meanings.”) As such, the term “cancellation” under subsection (9)(a) of the PIP statute means to terminate PIP coverage prospectively because in insurance law, cancellation means to terminate a policy prospectively. As explained by Couch, “an insurer cannot, by canceling the policy or contract of insurance, avoid liability which has already vested thereunder. Since cancellation takes effect only from the time of cancellation and does not operate retroactively, it follows that if the insured’s rights have become vested by the occurrence of a loss, a subsequent cancellation or attempted cancellation does not relieve the insurer from liability . . . .” Couch on Insurance, § 30: 25 (3rd Ed.) (emphasis added).
The cancellation statute, i.e., § 627.728, Florida Statutes, (2003), also illuminates that “cancellation” under subsection (9)(a) of the PIP statute must be prospective; moreover, § 627.728 must be read in pari materia with § 627.736(9)(a) because the former illuminates the plain meaning of “cancellation, renewal and non renewal” which is undefined in the latter. See Brown v. State, 848 So.2d 361, 363 (Fla. 4th DCA 2003) (The in pari materia rule of statutory construction applies where “two different statutory provisions deal with the same specific subject or with subjects so connected that the meaning of the one informs the other.”) (emphasis added).
UNITED’s notice of cancellation is non compliant with the PIP statute because the effective date of cancellation on the notice is the effective date of the policy; if cancellation were retrospective, UNITED must report cancellation to the Department within 45 days from the date of issuance to comply with the statute — which is impossible in this case; therefore, cancellation for material misrepresentation must be prospective in accordance with §§ 627.736(9)(a) and 627.728. The notice provisions of the cancellation statute, i.e., 627.728, moreover, apply in this case because the policy was in effect for more than 60 days.4 See Sauvageot v. Hanover, 308 So.2d 583, 585 (Fla. 2nd DCA 1975) (Provisions of § 627.0852, which now reads as § 627.728, do not apply to policies in effect less than 60 days.)
Statutory cancellation and common law rescission is a mechanism to terminate a policy but the difference lies in the operative effect of each method; i.e.,“cancellation operates prospectively, while rescission in effect, operates retroactively to the very time that the policy came into existence; the distinction is similar to that between divorce and annulment.” Couch on Insurance § 30:3 (3rd Ed.) (emphasis added). UNITED, however, may not exercise rescission to terminate PIP coverage because the legislature mandates that UNITED must report cancellation to state authorities within 45 days from the effective date of cancellation; which necessary implies that cancellation is the exclusive mechanism to terminate PIP coverage.
When viewed in isolation, the cancellation statute, i.e., § 627.728, does not express a legislative intent to preempt common law rescission for material misrepresentation5; but a contrary intent is expressed when §§ 627.730-7405 and § 627.728 are viewed in pari materia and it is that intent which must prevail for that, in fact is will of the legislature. See Forsythe v. Longboat Key Beach Erosion Control Dist., 604 So.2d 452, 455 (Fla. 1992) (“[I]f from a view of the whole law or from other laws in pari materia the evident intent is different from the literal import of the terms employed to express it in a particular part of the law, that intent should prevail, for that, in fact is the will of the Legislature.”) (citation omitted). Therefore, common law rescission must yield to the superior force of the statutes.
There are other provisions that show common law rescission for material misrepresentation is irreconcilable with the statutory scheme. Section 627.733(1) states “every owner or registrant of a motor vehicle . . . required to be registered and licensed in this state shall maintain security as required by subsection (3) in effect continuously throughout the registration period or licensing period.”(emphasis added). Section 627.733(3) provides that the security requirements of §§ 627.730-7405 or equivalent security under § 324.031 of the Florida Financial Responsibility Law without consideration of one’s accident record is compulsory.6 Andriakos, et. al., v. Cavanaugh, 350 So.2d 561, 563 (Fla. 2nd DCA 1977). Rescission, however, defeats the plain meaning of § 627.733(1) because it creates a situation where the insured is guilty of operating a motor vehicle without the required security mandated by law.
Rescission also defeats the purpose of subsection (9)(a) of the PIP statute. The purpose of § 627.736(9)(a) is to assist the Department in enforcing the required security“continuously through the registration period or licensing period.”7 § 627.733(1) (emphasis added). Section 627.733(6) provides that the “Department of Highway Safety and Motor Vehicles . . . shall suspend the driver’s license of any owner or registrant’s motor vehicle with respect to which security is required by under this section and s. 324.022:
(a) Upon its records showing that the owner or registrant of such motor vehicle did not have in full force and effect when required security complying with the terms of this section; or (b) Upon notification by the insurer to the Department of Highway Safety and Motor Vehicles, in a form approved by the department, of cancellation or termination of the required security.” (emphasis added).
Section 627.733(7) imposes sanctions to reinstate one’s operating licensing and registration where it has been suspended by the Department for failure to maintain the required security. See also Hepler v. Atlas Mutual Ins. Co., 501 So.2d 681, 683 (Fla. 1st DCA 1987) (“The penalties for failure to maintain the minimum security required by statute evidence a strong public interest in having car owners maintain motor vehicle insurance coverage.”) (emphasis added).
The legislative scheme is frustrated if the insurer is permitted, because of hidden infirmity, to void the policy retroactively during the registration period where the public and Department is led to believe coverage was in effect. The legislative scheme is intended to give the insured a reasonable opportunity to procure other insurance before the effective date of cancellation or non renewal without suffering penalty; but rescission thwarts that purpose; it would be impossible for the insured to do what the law requires him to do if rescission is permitted; i.e., procure new insurance before the effective date of cancellation;the insured, moreover, would be subject to sanctions, see § 627.733(6)(7), even though the insured’s conduct was lawful at the time when he engaged in it; such a result, without question, could not have been intended by the legislature.
The Court’s finding is neither absurd nor rewards an insured guilty of a material misrepresentation. An insured who commits a material misrepresentation in the inducement is not necessarily entitled to recover PIP benefits because an insurer may avail itself to its coverage or policy defenses; but a material misrepresentation in the inducement, on the other hand, is not a coverage defense; instead, it’s a technicality unrelated to (1) whether the insured complied with the terms of the policy after a loss; (2) whether the loss arose from an insured risk, i.e., coverage, or a cause excepted or barred by a policy exclusion. A material misrepresentation in the inducement is a claim or defense that attacks the validity of the policy by way of rescission which permits the insurer to escape liability as if the policy never existed. Florida case law supports the view that defenses going to coverage or failure to comply with the terms of the policy after a loss is distinguishable from a claim or defense attacking the validity of the policy. See e.g., Home Life Ins. Co., v. Regueira, 313 So.2d 438 (Fla. 2nd DCA 1975); Paul Revere Life Ins. Co., v. Damus, et. al., 864 So.2d 442 (Fla. 3rd DCA 2003). The Florida legislature, moreover, did not deprive the insurer’s right to terminate PIP coverage for material misrepresentation; rather, the legislature only preempted the “retroactive” effect of terminating PIP coverage by way of rescission; therefore, statutory cancellation is the only method to terminate PIP coverage for material misrepresentation and as such, UNITED may not escape liability on the grounds that the policy never existed because of a material misrepresentation unrelated to the claim — but UNITED may still avail itself of its coverage or policy defenses to bar recovery which it did in this case.
The circumstances in this case also begs the question why did UNITED postpone its investigation of the applicant’s insurability until after the loss? A routine investigation before the loss or during the underwriting of the risk would likely reveal an unlisted household member is licensed.8 Although UNITED owes no duty to the insured to investigate the latter’s truthfulness, UNITED owes a duty to the public to investigate the applicant’s insurability because statutorily mandated coverage is intended to protect the public. Allstate Indemnity Co., v. Wise, et. al., 818 So.2d 524, 526 (Fla. 2nd DCA 2001). The rule, moreover, is well established “that means of knowledge is equivalent to knowledge, and that a party who has the opportunity of knowing the fraud of which he complains cannot be supine and inactive, and afterwards allege a want of knowledge that arose by reason of his own laches or negligence.” Barrera v. State Farm Auto. Ins. Co., 456 P.2d 674, 681 n. 7 (CA 1969) (citations omitted). “Thus if a person has a duty to make inquiry, but unreasonably delays in conducting that inquiry, his negligent omission constitutes laches which bars his defense of fraud.” Id. (citation omitted). To permit an insurer to retain the right of rescission and postpone its investigation of the applicant’s insurability until the insurer’s financial interests are at stake defeats the purpose of the Florida Financial Responsibility Law,§ 324.011, et seq., and permits the insurer to retain premiums and avoid all risk on the policy.
Perhaps there is merit to the argument that it would be absurd to permit an insured to recover where (1) the insured commits an “intentional” material misrepresentation in the inducement; (2) the insurer could not have discovered said misrepresentation by a routine investigation before the loss and (3) would not have assumed the risk had it known the truth; but that is not the case here because UNITED, by its own admission, still would have assumed the risk had it known the truth — but at a higher premium. UNITED, moreover, took no action in seeking an additional premium upon learning the existence of the unlisted household member during the policy period. If a demand for additional premium were made pursuant to § 627.7282 and rejected, the policy is cancelled for non payment of premium and UNITED may sue in tort or quasi contract for the difference of the “earned” premium owed by the insured; which is a cognizable cause of action for damages in Florida. See e.g., Billian, et. al., v. Mobile Corp., et. al., 710 So.2d 984, 991, n.5 (Fla. 2nd DCA 1998) and citations therein.
Section 627.409, Florida Statutes, (2003) is irrelevant to the present question because the statute is not a statutory right to rescission; but instead, a remedial statute intended to restrict the insurer’s right to rescission in the common law. The first sentence in § 627.409(1) provides that a statement by the insured in an application of insurance“is a representation and not a warranty.”(emphasis added). “A warranty in the law of insurance consists of a statement by the insured upon which the literal truth, [even if immaterial], the validity of the contract depends.” Black’s Law Dictionary, 1588 (6th Ed. 1999) (alteration in original). Thus, the statute is intended to bar forfeiture for a technicality immaterial to the risk and instead, require the insurer to prove a misstatement or omission is material to forfeit the policy. Section 627.409, moreover, is silent whether the operative effect of a material misrepresentation terminates the policy to the inception; therefore, the retroactive effect of rescission lies not in the statute, but in the common law; moreover, if the legislature intended § 627.409 as a statutory right to rescission, they would know how to express it such. See Comptech Int’l, Inc., v. Miliam Commerce Park, Ltd., 753 So.2d 1219, 1222 n.5 (Fla. 2000) (“The legislature is presumed to know the common law of contract and tort and the limitations on such remedies created by judges.”).
Therefore, based on the forgoing undisputed facts and conclusions of law, it hereby ORDERED & ADJUDGED that Plaintiff’s motion for final summary judgment on reasonable, necessary and related is GRANTED9; Plaintiff’s motion for final summary judgment as to Defendant’s affirmative defense of material misrepresentation is GRANTED; Plaintiff, MIAMI CHIROPRACTIC ASSOCIATES, as assignee of George Brice, shall recover from Defendant, UNITED AUTOMOBILE INSURANCE COMPANY, the sum of $2,314.56 on principle, the sum of $316.60 in late interest penalties § 627.736(4)(c), Florida Statutes, (2003) at the rate of 6% making a total of $2,631.16 that shall bear interest at the rate of 7% for which let execution issue. The Court shall reserve jurisdiction to award Plaintiff attorney fees and taxable costs pursuant to §§ 627.428 and 57.041, Florida Statutes, (2003).
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1UNITED did not allege a valid cause of action for rescission by way of affirmative defense; UNITED failed to allege that it gave notice to the insured of its intent to forfeit the policy as soon as practicable upon learning the grounds for forfeiture and immediately returned the insured to the status quo ante.
2The premium was returned to the insured on or about April 29th, 2004.
3“A court may refer to a dictionary to ascertain the plain and ordinary meaning which the legislature intended to ascribe to [a] term.” L.B. v. State, 700 So.2d at 320, 372 (Fla. 1997) (alteration in original).
4Section 627.728 states in pertinent part, “(2) No notice of cancellation shall be effective unless it is based on one or more grounds: (a) Non payment of premium; (b) Material misrepresentation or fraud . . . . This subsection shall not apply to any policy in effect less than 60 days at the time the notice of cancellation is mailed or delivered by the insurer unless it is a renewal policy. (3) No notice of cancellation of a policy to which this section applies shall be effective unless mailed or delivered by the insurer to the named insured or to the named insured’s agent at least 45 days prior to the effective date of cancellation, except that when cancellation is for non payment of premium, at least 10 days’ notice of cancellation accompanied by the reason therefor shall be given.” (emphasis added).
5Section 627.728 does not state or have all inclusive language that cancellation for material misrepresentation is mandatory or the sole exclusive means to terminate a motor vehicle policy on such grounds; the reason for this is because automobile insurance was not compulsory in Florida when § 627.728 was enacted in 1967, see c. 67-148, § 1, Laws of Florida (1967); therefore, the need to preempt common law rescission did not ripen until auto insurance became compulsory for all Floridians regardless of one’s accident record in 1972; which is the year when the Florida Automobile Reparations Act became effective. See ch. 61-175, Laws of Florida (1971).
6UM and property damage liability coverage is likewise compulsory. See §§ 627.727 and 627.7275(1), Florida Statutes, (2003). UM and PD became compulsory when the Florida Automobile Reparations Act became effective; UM and PD cannot be offered without PIP.
7Sections 627.733 and 627.736 must be read in pari materia since they are part of the same enactment. See Singleton v. Larson, 46 So.2d 186, 189 (Fla. 1950) (Statutes that are part of the same general scheme are regarded as in pari materia.); Miami Dolphins v. Metropolitan Dade Cty. 394 So.2d 981, 988 (Fla. 1981) (“[L]aws should be construed with reference to the constitution and the purpose designed to be accomplished, and in connection with other laws in pari materia, though they contain no reference to each other. (citation omitted). While the legislature may direct that statutes be read in pari materia, the absence of such a directive does not bar construing two statutes in that manner.”)(emphasis added).
8The home address of licensed drivers can be obtained by the insurer through the Department of Motor Vehicles or by a state line information check.
9Plaintiff has agreed to withdraw or waive the post IME bills and stipulated to UNITED’s usual customary fee reductions to bring finality to Plaintiff’s cause of action.
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