14 Fla. L. Weekly Supp. 570a

Insurance — Personal injury protection — Application — Material misrepresentations — Insurer’s remedy of rescission for material misrepresentation in application for PIP policy is irreconcilable with mandatory requirements of No-Fault Law and was abolished thereby — Insurer cannot avoid liability on ground that policy did not exist at time of loss because it was cancelled ab initio due to insured’s failure to list son with restricted license as member of household — Question certified whether cancellation of no fault insurance policy can be effective ab initiio in light of mandatory requirements imposed by Florida No Fault Law

Reversed. Question answered in the affirmative at 34 Fla. L. Weekly D2458b (United Auto Ins. Co. v. Total Health etc. Fla. 3DCA, 11-25-09)

TOTAL HEALTH CARE OF FLORIDA, INC., as assignee of Sabina Leyva, Plaintiff, v. UNITED AUTOMOBILE INSURANCE COMPANY, Defendant. County Court, 11th Judicial Circuit in and for Miami Dade County, Civil Division. Case No. 04-1214 SP 25 (1). March 30, 2007. Andrew S. Hague, Judge. Counsel: Christian Carrazana, Panter, Panter & Sampedro, P.A., for Plaintiff. Raul Espuru, Office of the General Counsel, for Defendant.

ORDER GRANTING PLAINTIFF’S MOTION FOR FINAL SUMMARY JUDGMENT AND CERTIFIED QUESTION OF GREAT PUBLIC IMPORTANCE

THIS ACTION was heard on the 7th day of March, 2007 on Plaintiff’s motion for final summary judgment; upon considering same, and hearing arguments of counsel, the Court makes the following findings of fact and law:

FINDINGS OF FACT

1. This is a breach of contract action for personal injury protection benefits governed by § 627.336, Florida Statutes (2007).

2. The insureds, Richard Molina and Sabina Leyva, entered into contract of insurance with Defendant on or about October 29th, 2002 for personal injury protection benefits required by §§ 627.730-.7405, Florida Statutes (2007).

3. The policy effective date is October 25th, 2002 and the policy expiration or non-renewal date is October 25th, 2003.

4. The co-insured, Sabina Leyva, was involved in a motor vehicle accident on April 8th, 2003 in the State of Florida.

5. The insured incurred medical expenses with Plaintiff in the gross sum of $7,125.00 for chiropractic services that were submitted to Defendant for reimbursement of personal injury protection benefits under the policy.

6. Prior to receiving Plaintiff’s bills, Defendant commenced an investigation upon notification that the insured is making a claim on the policy.

7. The insured appeared for an examination under oath (i.e., EUO) on July 31st, 2003 pursuant to Defendant’s request.

8. During the EUO, the investigator asked the insured a series of questions with respect to who was residing in the household and whether they possessed a valid driver’s license at the time when the application was executed.

9. United sent a notice of cancellation to the insured on or about December 4th, 2003, stating that the policy is cancelled for material misrepresentation effective October 25th, 2002. This of course, occurred approximately five (5) months after United discovered the material omission during the EUO, and after policy expired on October 25th, 2003.

10. Upon advising the insured that the policy is cancelled, United returned the premium to the premium finance company; and the finance company returned the premium to the insured on or about December 18th, 2003.¹

11. The nature of the misrepresentation is an undisclosed household member in the policy application. Apparently, the insured failed to list her son, Roberto Suarez, who possessed a restricted license as a member of the household.

12. According to the record, the omission was discovered during the examination under oath of July 31st, 2003.

13. The litigation adjuster and underwriter testified during deposition that had United known of the insured’s son at the onset, it would have assumed the risk or issued the policy to Ms. Leyva but with an additional premium of $1,677.00.

14. Plaintiff moved for final summary judgment claiming there are no genuine issues of material fact whether the chiropractic services were medically necessary and related; and that United could not preclude liability on the grounds that the policy did not exist at the time of loss because the Florida No Fault Law supplanted a PIP carrier’s right to cancel a no fault policy ab initio.

15. In a reply to the answer, Plaintiff alleged the abrogation theory as a defense to United’s affirmative defense of material misrepresentation.

16. Although Plaintiff’s motion for summary judgment did not assert this theory with sufficient particularity, United, however, litigated the issue by consent when the motion was heard and argued by counsel.²

17. In light of the undisputed record evidence, there are no genuine issues of material fact whether the claimed expenses were for services that were medically necessary and related; therefore, the only issue to be addressed is Plaintiff’s argument that a no fault policy cannot be cancelled ab initio.

CONCLUSIONS OF LAW

United seeks to avoid liability on the grounds that a valid contract of insurance did not exist at the time of accident because the policy was cancelled ab initio;which presents the precise question whether the cancellation of a no fault policy can be effective ab initio inlight of the mandatory requirements imposed by §§ 627.730-.7405, Florida Statutes (2007). Before addressing the question, the Court observes that United’s attempt to characterize its action as a “rescission,” not a “cancellation” is nothing more than semantics. The term “cancellation” has been used interchangeably by the courts with “rescission.”³ Indeed, “[t]he terms “rescission” and cancellation are virtually synonymous, but if there is a distinction, it is only that a rescission is a general undoing of an agreement, while a cancellation is a more formal annulment or rendering of an instrument ineffective as a legal obligation.” 17B Corpus Juris Secundum, Contracts § 422 (1999) (emphasis added). A more precise statement of law in the realm of insurance is that a distinction exists where a policy is cancelled ab initio as opposed to one that is“statutorily” or prospectively cancelled. The author in Couch on Insurance articulates that distinction and its consequences in the following passage:

“[A] rescission avoids the contract ab initio whereas cancellation merely terminates the policy as of the time when the cancellation becomes effective. In other words, cancellation of a policy 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.”

***

“[A]n 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, §§ 30:3; 30.25. (3rd Ed. 2000) (emphasis added).

Now with respect to the pending question, the Court finds that the legislature has supplanted a PIP carrier’s ability to cancel PIP coverage ab initio because of the mandatory requirements imposed by the No Fault Law. See §§ 627.731, 627.733(1)(6)(7), 627.736(9)(a), Florida Statutes (2007). Accordingly, no fault coverage can only be “statutorily” cancelled for a material misrepresentation in the policy application. See § 627.728, Florida Statutes (2007). Applying the No Fault Law to the facts in this case inexplicably reaffirms this conclusion. For instance, United issued the policy to the insured on or about October 25th, 2002. United, however, is statutorily obligated under § 627.736(9)(a) to report the issuance of the policy to the Department of Highway Safety and Motor Vehicles, hereafter (“Department”), within thirty days of October 25th, 2002. Section § 627.736(9)(a) states in relevant part:

“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).

United is also obligated to report to the Department within 45 days from the effective date when the policy is cancelled, re-newed or non-renewed. Section § 627.736(9)(a) states:

“[e]ach insurer which has issued a policy providing personal injury protection benefits shall report 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.” (emphasis added).

In the present case, United discovered the omission during the examination under oath of July 21st, 2003; but United did nothing and instead, permitted the policy to expire on October 25th, 2003; which requires United to report to the State no later than December 8th, 2003 that coverage was non-renewed effective October 25th, 2003. Thus, it begs the question how can United, on the one hand, report to the State that coverage is non-renewed effective October 25th, 2003, but unbeknownst to the State, United cancelled the policy ab initio after the policy expired? The consequence of this action is that it thwarts the Department’s ability to enforce the mandated security because the Department is misled to believe that coverage was continuous when in fact it was not; instead; the insured was driving a dangerous instrumentality on the public roadway without the mandated security from October 25th, 2002, through October 2003 because United cancelled the policy ab initio. The statutory scheme is designed to assist the Department to ensure that no persons are permitted to drive a motor vehicle without the mandated security; and so that the Department will know whether a person fails to acquire new security before a prospective date of cancellation or non-renewal. See § 627.736(9)(a). By the same token, the scheme is designed in this fashion to permit the insured to acquire new security before being subjected to risk without protection; and to avoid imposition of sanctions by the Department for failure to acquire new security beforehand.⁴

United, nonetheless, argues that by definition, a contract that did not exist cannot be canceled; therefore, § 627.736(9)(a), which only involves cancellation, does not apply to cases where the policy is rescinded. United’s argument, however, is based on semantics because rescission is a cancellation of contract, except it is effective ab initio. Undoubtedly, a policy that does not exist, e.g., one that is cancelled ab initio, cannot be“statutorily”or prospectively cancelled. But that rule of thumb is inapplicable in this instance because when a mandatory no fault policy is issued, it does exist because the State of Florida is aware of it. See § 627.736(9)(a). Hence, the legal fiction created by rescission is incompatible with the statutory scheme.⁵

United cannot comply with the mandatory requirements under § 627.736(9)(a) if the cancellation is effective October 25th, 2002 unless United reports the cancellation to the Department no later than December 8th, 2002 — i.e., 45 days after the policy issuance date of October 25th, 2002; which is impossible considering United cancelled the policy after the policy expired on October 25, 2003. The logic of this analysis is reinforced by the Georgia Supreme Court’s decision in Pearce v. Southern Guaranty Ins. Co., 268 S.E.2d 623 (G.A. 1980) where the Court determined that the Georgia compulsory motor vehicle insurance law supplanted the insurer’s remedy of rescission. The following passage in the Court’s opinion demonstrates that the Florida scheme is nearly the same as the Georgia scheme analyzed in Pearce:

“Section 12(a) [of the Georgia Motor Accident Reparations Act] does not allow cancellation to be retrospective. It requires the insurer to notify the Department of Public Safety of the cancellation “within five days after the effective date of cancellation.” In the case before us, the notice of cancellation to the insured was dated December 31st, 1975. If cancellation were retrospective to the date of issuance of the policy, October 21st, 1975, then in order for the insurer to comply with section 12, notice of cancellation would have to been given by the insurer to the Department no later than October 26th, 1975. * * * The provisions of our law . . . compel us to the conclusion that an automobile insurance policy providing the basic third party liability insurance and basic personal injury protection benefits (no fault) issued pursuant to Georgia law cannot be voided retrospectively . . . .”

Id. at 627-28 (emphasis added) (alteration in original); See also Teeter v. Allstate Ins. Co., 192 N.Y.S.2d 610 (1959), aff’d 212 N.Y.2d 655 (1961) (Insurer’s common law remedy of rescission for material misrepresentation is supplanted by New York compulsory motor vehicle insurance law.)

Clearly, the only way a PIP carrier can comply with the requirements of § 627.736(9)(a) is by complying with the requirements of the Florida Cancellation Statute, § 627.728, Florida Statutes (2007). The District Courts, however, have previously held that the legislature did not supplant an auto insurer’s remedy of rescission with the enactment of the Florida Cancellation Statute. See Sauvageot v. Hanover, 308 So.2d 583, 585 (Fla. 2nd DCA 1975); Motors Ins. Co. v. Woodcock, 394 So.2d 485 (Fla. 3rd DCA 1981); Motors Ins. Co. v. Marino, 623 So.2d 814 (Fla. 3rd DCA 1993). Clearly, the District Courts’ finding in that regard is correct because they construed § 627.728 in isolation; and when the statute is viewed in such a manner, it does not supplant the insurer’s remedy of rescission. But a contrary result is reached when the No Fault Law is construed in pari materia with § 627.728. There is a well entrenched rule that a legislative intent discerned by reading statutes in pari materia controls over a contrary intent in a particular part of the law viewed in isolation. See Forsythe v. Longboat Key Beach Erosion Control Dist., 604 So.2d 452, 455 (Fla. 1992). That rule applies here. The Court, moreover, must read §§ 627.736(9)(a) & 627.728 in pari materia because the legislature did not define the term “cancellation, renewal or non-renewal” in the former whereas the terms are defined 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). The second reason why the statutes must be read in pari materia is because the plain dictionary meaning of “cancellation” is silent regarding whether it can be effective retrospective or prospective.⁶

There is no controlling law from the Florida Supreme Court or District Courts on the pending question before the Court. More simply, it is a question of first impression. Recently, a three judge panel from the 11th Circuit Court disagreed with the County Court’s finding that the Florida No Fault Law supplanted a PIP carrier’s right to cancel no fault coverage ab initio in Miami Chiropractic Associates, as assignee of George Brice v. United Auto. Ins. Co., 13 Fla. L. Weekly Supp. 94 (Fla. Dade Cty. Ct. 2005) aff’d on other grounds 14 Fla. L. Weekly Supp. 16 (Fla. 11th Jud. Cir. App. 2006). The panel, however, affirmed the County Court on rehearing on the grounds that the unlisted household member is immaterial notwithstanding the fact that the omission did create an additional premium. See United Auto. Ins. Co. v. Miami Chiropractic Associates, as assignee of George Brice, Case No.: 05-418 AP (Fla. 11th Jud. Cir. App. 2006) [13 Fla. L. Weekly Supp. 94a] rehearing granted with corrected opinion on February 20th, 2007. The Court believes that the circuit panel’s reasoning for affirmance is erroneous; but the panel, nonetheless, reached the correct result even though the panel did not apply the correct law — i.e., the No Fault Law — to the facts below. The Court, moreover, finds that panel’s disagreement with the County Court on the abrogation question is obiter dicta unnecessary to the panel’s actual reasoning for affirmance. See Mouzon v. Mouzon, 458 So.2d 381, 391 n.18 (Fla. 5th DCA 1984) (“Comments in the opinion relating to other reasoning not relied on in it, being unnecessary to support the decision in that case, is for that reason dicta and is without precedential value or stare decisis authority.”) Further, the circuit panel primarily relied on the holdings in Flores v. Allstate Ins. Co., 819 So.2d 740 (Fla. 2002) and Independent Fire Ins. Co. v. Arvidson, 604 So. 2d 854 (Fla. 4th DCA 1992) to reject the County Court’s finding of law; but the holdings in Flores & Arvidron did not address the abrogation question as it relates to the No Fault Law because the issue was not litigated in those cases. But another panel in this circuit recently reached a contrary result where it affirmed another County Court’s finding that the No Fault Law supplanted a PIP carrier’s right to cancel a no fault policy ab initio. See Salgado v. United Auto. Ins. Co., 13 Fla. L. Weekly Supp. 500 (Fla. Dade Cty. Ct. 2006) aff’d without opinion United Auto. Ins. Co. v. Salgado, Case No.: 06-082 AP (Fla. 11th Jud. Cir. App. 2007).⁷ [14 Fla. L. Weekly Supp 362a]. In the absence of controlling case law on point and considering the conflict within this circuit, the controlling law upon which the Court’s decision must rest is the Florida No Fault Law.

United primarily relies on the circuit panel’s analysis in Miami Chiropratic, supra, where the panel determined that the right of rescission has not been supplanted with respect to no fault policies because the legislature did not exempt no fault policies from § 627.409, Florida Statutes (2007). The thrust of that analysis presumes that § 627.409 is intended as a statutorily created right of rescission; and if a policy is exempted from § 627.409, a carrier cannot void a policy ab initio. That analysis, however, is erroneous because insurers are permitted to void policies even if they’re exempted from § 627.409 unless there is specific statutory enactment abolishing that remedy. For example, if no fault policies were exempted from § 627.409, and assuming the No Fault Law did not supplant the remedy of rescission, United would be at liberty in this case to void the policy for breach of warranty instead of material misrepresentation; and consequently, the insured could not contest whether the omission is material because a breach of warranty, unlike a false representation, renders a policy voidable regardless of materiality.⁸ Further, credit disability carriers are permitted to void credit disability policies even though such policies have been exempted from § 627.409. See § 627.401(5), Florida Statutes (2007). The consequence of that exemption is that credit disability carriers are permitted to treat statements in a policy application for credit disability insurance as a warranty; and if the warranty is false, the policy is voidable regardless of whether the warranty is material or immaterial.

At common law, a warranty is a statement appearing in a policy or in a policy application where the application is incorporated as part of the agreement. See Cooley’s Briefs on Insurance, 1872 (2nd Ed. Vol. 3 1927) (“[I]f the insured’s statement or representation in the application is incorporated in the policy as part of the agreement, the statement becomes by force a warranty.”) (footnotes omitted) (emphasis added). If the warranty is false or breached, the policy is voidable regardless of whether the warranty is material or immaterial. See Van Riper v. Equitable Life Assurance Soc’y of the United States, 561 F. Supp. 26 (E.D. Pa. 1982), aff’d without opinion, 707 F.2d 161 (3rd Cir. 1983); Vance, The Law of Insurance, 408 (3rd Ed. Anderson 1951). A misrepresentation, on the other hand, is a collateral statement or statement in policy application where the application is not incorporated as part of the agreement. See Keeton & Widiss, Insurance Law, § 6.6(a) 564 (1988) quoting Vance, The History of the Development of the Warranty in Insurance Law, 20 Yale L. J., 523, 531 (1911). But unlike a false warranty, a misrepresentation does not render a policy voidable unless the misrepresentation, whether intentional or not, is material to the risk; but the insurer, however, bears the burden of proving materiality to defeat an action to recover on the voided policy. Vance, The Law of Insurance, 386, 415 (3rd Ed. Anderson 1951).

Undoubtedly, the legislature did not intend § 627.409 as a statutorily created right of rescission; instead, § 627.409 is a remedial statute intended to curtail the insurer’s remedy of rescission by eliminating the distinction between warranties and misrepresentations at common law and place them on the same footing. See § 627.409, Florida Statutes (2007) (“[A]ny statement or description made by or on behalf of an insured or annuitant in an application for an insurance policy or annuity contract, or in negotiations for a policy or contract, is a representation and is not a warranty.”) (emphasisadded); See also Leonardo v. State Farm Fire & Cas. Co., 675 So.2d 176, 179 (Fla. 4th DCA 1996) (Gross, J.) (Concurring) (“Section 627.409 . . . does not create a right, but places limits on contractual and equitable remedies.”) (emphasis added). More simply put, the purpose of § 627.409 is to prohibit carriers from voiding insurance policies for immaterial misstatements or omissions in a policy application under the “guise” of warranties.

Although § 627.409 is a remedial statute in derogation of the common law, the statute is a codification of an insurer’s material misrepresentation defense at common law, which requires the carrier to cancel the policy ab initio and restore the status quo within a reasonable time to preclude liability for a material misstatement in the application.⁹ The general rule has always been that “an insurer may not simply deny a claim based on omissions [or a misrepresentation] in an application. Since the mechanism for the denial is that grounds for rescission exist, an insurer must take the steps necessary to exercise that remedy.” Leonardo, 675 So.2d. at 179 (alternation in original). The problem in this case, however, is that United’s remedy of rescission, i.e., a creature of the common law, is irreconcilable with the mandatory requirements imposed by the No Fault Law; therefore, it must yield to the superior force of the statutory scheme. Thus, while § 627.409 restricts a carrier’s remedy of rescission, that remedy, on the other hand, is abolished under No Fault Law. To presume otherwise will allow insurers to defeat the purpose of the statutory scheme.¹⁰

The Court has not overlooked § 627.736(4)(g); but that subpart of the PIP statute does not suggest the remedy of rescission survived the passage of the No Fault Law. Instead, § 627.736(4)(g) permits a PIP carrier to void coverage with respect to a fraudulent claim, but not the policy.

There is no doubt that the distribution of financial risk is a legitimate public policy concern. In the area of automobile insurance, the industry benefits by the fact that consumers must purchase no fault insurance because it has been mandated by the State; therefore, the insurance industry has a guaranteed market. Although the consumer must buy, the consumer benefits from the knowledge that PIP coverage may only be terminated prospectively, thus, allowing an opportunity to find alternate insurance. The Court, however, is aware that this trade off has shortcomings in that the potential lies that a policy may be acquired by fraud and the insurer is stuck with the policy in the event of a loss. But there are three answers to this concern.

First, the insurer can preclude recovery by asserting policy or other coverage defenses. Notwithstanding the carrier’s inability to cancel a no fault policy ab initio, the legislature did not supplant a PIP carrier’s right to assert policy defenses by the enactment of the no fault law.

Second, the legislature did not supplant the insurer’s right to sue an insured for fraud in the policy application where the insurer, had it known the truth, would not have issued the policy. Under such circumstances, the insurer can recover damages for payments made to medical providers arising from a personal injury protection claim. But here, the Court is unsympathetic to United’s plight because United suffered no injury as a result of the omission where United, by its own admission, would have issued the policy had it known the truth, except with an additional premium. The omission in this case, moreover, did not occur by an act of fraud, but instead is an innocent omission caused in part by the claimant’s inability to read and understand English.

Third, carriers must be diligent at the onset instead of post claims underwriting as a systematic business practice to “fatten” their pockets. The general rule in Florida is that an insurer has the right to rely on the insured’s representation in a policy application. See North Miami General Hospital v. Central Nat’l Life Ins. Co., 419 So.2d 800, 802 (Fla. 3rd DCA 1982). But here there is factual question whether United did in fact “rely” on the house member clause in the policy application when it ultimately decided to assume the risk. A fact finder can certainly find that Defendant’s decision to insure Ms. Leyva did not rest on the information in the household member clause, but instead rested on its greedy shoulders; and that the household member clause is used as a pre-text to deny possible future claims for technical omissions that merely creates an additional premium; while at the same time, it profits from policies that have such omissions but are never discovered because no claims are filed. See Cady & Gates, Post Claims Underwriting, 102 W. Va. L. Rev. 809, 818 (2000). Simply put, post claims underwriting is a means of generating profit at the expense of lulling insureds into a false sense of security; which is tantamount to bad faith and defeats the purpose of insurance. See Id. The Honorable Judge King said it best:

“Insurance companies are engaged in the business of running risks for pay;bluntly stated, they gamble with fate for an agreed remuneration; when they issue a policy they import and intend to import to the insured a sense of security as to the risk insured against and when they accept premiums they mean thereby to convey to the insured continued assurance of the security afforded by the protective provisions of the policy.” Guardian Life Ins. Co. v. Weiser, et al., 51 N.Y.S. 771, 773 (N.Y. S.Ct., Spec. Term 1941) (emphasis added). But if an insurer can postpone the investigation of insurability and concurrently retain its right to rescind until after a claim is made, then an insurer can accept premiums, deal with the insured as if there is coverage, lead the insured to believe that he is covered, and never take on the risk that is inherent to the business of insurance.”

Miami Chiropractic Associates, as assignee of Yvrose Perpignan v. United Auto. Ins. Co., 13 Fla. L. Weekly Supp. 273, 280 (Fla. Dade Cty. Ct. 2006) (King, J.) (emphasis added). An insurance carrier controls when underwriting takes place; and it will always have the upper hand because it can engage in a post hoc evaluation of the risk due to the “sequential” nature of insurance contracts; in other words, an insurer can “fix” the odds and assume no risk whatsoever by post claims underwriting because its duty to perform is delayed or contingent upon the occurrence of a fortuitous event that may or may not happen. Judge Farmer in Vega, etc. v. Independent Fire Ins. Co., 651 So.2d 743, 746 (Fla. 5th DCA 1995) expressed his concern that the law should not provide a safe haven for insurers who are guilty of such a practice:

“[T]he law should not discourage a diligent investigation by insurers. By the same token, neither should the law provide an escape hatch for an insurer . . . whose underwriting procedures are so ill conceived, that the decision to insure actually rests on its own negligent (or greedy) shoulders rather than on any representation made by the applicant.”

Judge Farmer’s concurrence in Vega certainly gives credence to the view that current decisional case law from the District Courts has created a disincentive against vigilance. Insurance carriers are sophisticated to the extent that they are aware of current case law that says that if a carrier is vigilant at the onset and discovers inaccuracies in the application, it cannot remain silent, collect premiums, and retain the right of rescission in the event of a loss; therefore, to avoid having actual or constructive notice of inaccuracies, a carrier will do a cursory review of the application or ignore it altogether, and collect premiums; but if there is a loss, then it will rigorously investigate the application to dig up inaccuracies to void the policy while acting under the “false” pretense that it relied on the policy application, when in fact, it did not. Courts in other jurisdictions, on the other hand, have not turned a blind eye to this practice and have condemned it. See e.g., Barrera v. State Farm Mut. Auto. Ins. Co., 456 P.2d 674 (CA. 1969) (Insurer who unreasonably delays in conducting a diligent investigation with respect to the verity of a policy application until there is a loss forfeits the right of rescission.); See also in accord State Farm Mut. Auto. Ins. Co. v. Wood, 483 P.2d 982 (Ut. 1971). The Mississippi Supreme Court explained the inequities of post claims underwriting and found it unacceptable:

“An insurer has an obligation to its insureds to do its underwriting at the time a policy application is made, not after a claim is filed. It is patently unfair for a claimant to obtain a policy, pay his premiums and operate under the assumption that he is insured against a specific risk, only to learn after he submits a claim that he is not insured, and therefore, cannot obtain any other policy to cover the loss. The insurer controls when the underwriting occurs. It therefore should be estopped from determining whether to accept an insured six months or more after a policy is issued. If the insured is not an acceptable risk, the application should be denied up front, not after a policy is issued. This allows the proposed insured to seek other coverage with another company since no company will insure an individual who has suffered serious illness or injury.”

Lewis v. Equity Nat’l Life Ins. Co., 637 So.2d 183, 188-89 (Miss.1994) (emphasis added); See also American Life Ins. Co. v. Hollis, 830 So.2d 1230, 1235 (Miss. 2002) (“We have condemned this practice of post-claim underwriting and cautioned insurers to abstain from such practices in the future.”); Smith ex rel. Stephan v. AF & L Ins. Co., 147 S.W.3d 767, 775 (Mo. App. E.D. 2004) (Finding that post claims underwriting is unacceptable.). The rational employed by these courts is based on imminent good sense and fair play; and the Court believes that the District Courts of this State should follow suit and condemn the practice as well.

With respect to the present case, the record begs the question that if United’s primary concern is collecting the correct premium charge, then why did it not request an additional premium upon discovery of the omission or counter sue for same?; or run a state line report at the onset to ensure the household member clause is accurate? Why are such reports pulled for the first time by the claims department after a loss; and then routed to the underwriting department to re-evaluate the risk? See Martinez Chiropractic Center Inc., as assignee of Rodney Kissoonlal v. United Auto. Ins. Co., 14 Fla. L. Weekly Supp. 189 (Fla. Broward Cty. Ct. 2006) (Deluca, J.). Why did United interrogate the insured during her examination under oath with respect to who is residing in her household at the time when the policy was executed? Undoubtedly, that line of questioning is unrelated to whether the insured incurred medical bills for services that were medically necessary and related to a motor vehicle accident. Needless to say, the answers to these questions are obvious. Then of course, there is the hidden disincentive that exists for the insurance agent to fully explain the household member clause to an applicant and ensure all persons are listed. Clearly, if the premium increases as a result of licensed household members, the agent may lose the applicant’s business and a commission.

The statutory framework under § 627.730-.7405 is purposely designed to ensure that PIP coverage is continuous without interruption so that Floridians will have tort immunity; which is one of the essential pillars of the Florida No Fault Law. To allow an insurer’s practice of post claims underwriting to go unchecked, and yet allow the remedy of rescission to co-exist along side the mandatory requirements of the No Fault Law will permit the forfeiture of one’s tort immunity; and will lull insureds into a false sense of security that they have tort immunity only to discover after a loss that they do not.¹¹ Hence, the practice not only undermines the purpose of the No Fault Law, but defeats it.

The legislature, by supplanting a PIP carrier’s right of rescission, decided the policy behind the No Fault Law carries more weight than the threat of fraudulent motor vehicle insurance applications; especially, considering PIP carriers have other remedies to combat fraud in the inducement. Certainly, only the legislature can decide which public policy outweighs the other. If United is dissatisfied with this result, then it should seek redress with the legislature, not the courts. See State ex rel. Second District Court of Appeal v. Lewis, 550 So.2d 522, 526 (Fla. 1st DCA 1989) (“[C]ourts cannot willy nilly strike down legislative enactments . . . because they do not conform with judicial notions of what is right or politic or advisable.”); See also Holly v. Auld, 450 So.2d 217 (Fla. 1984) (“[C]ourts of this state are without power to construe an unambiguous statute in a way which would extend, modify, or limit, its express terms or its reasonable and obvious implications. To do so would be an abrogation of legislative power.”) (emphasis added).

Perhaps when the circumstance is appropriate, the courts may invoke the golden rule to authorize a rescission of a no fault policy notwithstanding the No Fault Law to avoid the absurd consequence of permitting an insured who commits a fraud in the inducement, but not an innocent misstatement, to recover on a no fault policy. See State v. Atkinson, 831 So.2d 172, 172 (Fla. 2002) (“A basic tenant of statutory construction compels a court to interpret a statute so as to avoid absurd consequences.”). “But the absurdity principle must be applied with restraint. It serves only to prevent truly absurd results by a given application of a statute.” Blankfeld v. Richmond Health Care Inc., 902 So.2d 296, 308 (Fla. 4th DCA 2005) (Farmer, C.J.) (Concurring). The present case, however, does not merit that consideration because (1) the omission in the application did not occur as an act of fraud; (2) United suffered no injury because its ultimate decision to assume the risk did not rest on who is residing in the household because United would have assumed risk even if it knew the truth at the onset; and (3) United did not discover the omission at the onset because it chose to rely on its practice of post claim underwriting to discover the omission where instead, it could have been discovered by a state line report before United decided to accept the risk.¹²

In conclusion, the cancellation of the insured’s no fault policy cannot be effective ab initio in light of the mandatory requirements imposed by the Florida No Fault Law; therefore, Defendant cannot preclude liability on the grounds that the policy did not exist at the time of loss. Accordingly, it is hereby ORDERED & ADJUDGED that

Plaintiff’s motion for final summary judgment is GRANTED. Plaintiff, TOTAL HEALTH CARE OF FLORIDA, as the assignee of Sabina Leyva, shall recover from Defendant, UNITED AUTOMOBILE INSURANCE COMPANY, $3,557.92 on principle, $783.33 in late interest, making a total of $4,341.25 that shall bear interest at the rate of 11% for which let execution issue. The Court finds that Plaintiff is entitled to attorney fees & taxable costs for prosecution of this action pursuant to §§ 57.041, 627.428, Florida Statutes (2007); and shall reserve jurisdiction to fix the reasonable amount of same.

The legal question addressed by the Court is one of first impression in the State of Florida for which there is no controlling case law from the Florida Supreme Court and District Courts on point. Considering the lack of an en banc mechanism at the circuit appellate level and the current conflict within this circuit on this question, this matter cannot be laid to rest unless it is addressed by a District Court. In light of strong public policy behind the Florida No Fault Law, which aims to in part ensure that all motor vehicles maintain the required security continuously without interruption during the registration period, the Court finds that the legal question before this Court is a question of great public importance. Accordingly, this Court pursuant to Fla. R. App. P. 9.160 hereby certifies the following question of great public importance to the Florida Third District Court of Appeal:

“WHETHER THE CANCELLATION OF A NO FAULT INSURANCE POLICY CAN BE EFFECTIVE AB INITIO IN LIGHT OF THE MANDATORY REQUIREMENTS IMPOSED BY THE FLORIDA NO FAULT LAW, §§ 627.730-.7405, FLORIDA STATUTES (2007)?”

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¹Whether a delay of nearly six months in returning the premium after discovering the omission resulted in a waiver of United’s right to void the policy ab initio is a question of fact. Reasonable minded persons may or may not find that a lapse of six months is unreasonable. But the question, however, is moot because of the Court’s conclusion of law.

²Plaintiff’s motion for summary judgment alleged that United failed to comply with the Florida Cancellation Statute; but did not, on the other hand, assert that United’s right to cancel the policy ab initio is supplanted by the No Fault Law.

³See e.g., Gonzalez v. Eagle Ins. Co., 31 Fla. L. Weekly D2287 (Fla. 3rd DCA 2006); Duncan Properties Inc. v. Key Largo Ocean View Inc., 360 So.2d 471 (Fla. 3rd DCA 1978).

⁴Section 627.733(6), Florida Statutes (2007) states that

“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 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) delineates the sanctions imposed by the Department for reinstatement of one’s driver license and registration after suspension for failure to maintain the required security.

⁵The insurer, however, can sever the policy and void non statutorily mandated coverage. See 17B Corpus Juris Secundum, Contracts, § 459 (1999) (“A contract can be partially rescinded only where the contract is severable or divisible from the rest of the contract . . . . [A] partial rescission may be effected where the parts of the contract are so severable from each other as to form independent contracts.”) (emphasisadded).

⁶Cancellation is defined by dictionary as “[t]o destroy the force, effectiveness, or validity of; [t]o annul, abrograte, or terminate.” Black’s Law Dictionary 206 (6th Ed. 1990).

⁷According to the representations of counsel, the only question litigated on appeal in Salgado is the current question before the Court.

⁸The term voidable simply means that an insurer can either rescind the policy or waive that right by ratifying the policy. See Illinois State Bar Ass’n Mut. Ins. Co. v. Coregis Ins. Co., 821 N.E.2d 706, 713 (Ill. App. 1st Dist. 2004) (“If a contract is merely voidable, a party can either opt to [rescind] the contract based upon that defect, or choose, instead, to waive that defect and ratify the contract despite it.”) (alteration in original) (emphasis added).

⁹Section 627.409 did not abrogate the insurer’s duty at common law to make restitution (i.e., restore the status quo) when voiding a contract of insurance. See Gonzalez v. Eagle Ins. Co., 31 Fla. L. Weekly D2287 (Fla. 3rd DCA 2006).

¹⁰Section 627.731, Florida Statutes (2007) states

“The purpose of ss. 627.730-627.7405 is to provide for medical, surgical, funeral, and disability insurance benefits without regard to fault, and to require motor vehicle insurance securing such benefits, for motor vehicles required to be registered in this state and with respect to motor vehicle accidents, a limitation on the right to claim damages for pain, suffering, mental anguish, and inconvenience.”(emphasis added).

See also § 627.733, Florida Statutes (2007) (“(1)(a) 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 or licensing period. (3) Such security shall be provided: (a) By an insurance policy delivered or issued in this state by an authorized or eligible motor vehicle liability insurer which provides the benefits and exemptions contained in ss. 627.730-7405.”) (emphasis added).

¹¹Section 627.733(4), Florida Statutes (2007) states in relevant part that “[a]n owner of a motor vehicle with respect to which security is required by this section who fails to have such security in effect at the time of an accident shall have no immunity from tort liability … .” (emphasis added).

¹²Judge King, in a lengthy analysis, also exercised restraint against using the absurdity principle based on the same reasoning. See Miami Chiropractic Associates, as assignee of Yvrose Perpignan, 13 Fla. L. Weekly Supp. at 279-280.