2 Fla. L. Weekly Supp. 122a

Criminal law — False and fraudulent insurance claims — Incomplete personal injury protection claims — No conflict exists between disclosure requirements of fraud statute and insurance statute pertaining to PIP claims — Statute prohibiting false and fraudulent insurance claims does not provide sufficient notice to attorneys that omission of unfavorable medical report from demand package presented to client’s insurer violates statute — Statute is unconstitutionally vague only in fraudulent omission provisions as applied to attorneys engaged in representation of their clients

STATE OF FLORIDA, Plaintiff, v. MARK MARKS, P.A., et al., Defendants. 17th Judicial Circuit in and for Broward County. Case Nos. 90-6433CF10-J, 90-6433CF10-A, 90-6433CF10-B. January 27, 1994. Robert Lance Andrews, Judge.

Additional rulings in this case at 2 Fla. L. Weekly 26a
Reversed in part; affirmed to limited extent at 20 Fla. L. Weekly D770a

ORDER ON DEFENDANTS’ MOTION TO DISMISS THE PREDICATE ACTS OF COUNT 1 AND THE SUBSTANTIVE COUNTS WHEREIN THE CLAIMANT HAS A PIP CLAIM

THIS CAUSE came before the Court for consideration of Defendant, Mark Marks P.A.’s Motion to Dismiss the Predicate Acts of Count 1 and the Substantive Counts Wherein Mark Marks P.A. is Charged with Violating the Insurance Statute by Submitting an “Incomplete” Insurance Claim Wherein the Claimant has a PIP Claim.¹ This Court having considered the various motions, responses and memoranda submitted, the argument of counsel, and the applicable law, and being otherwise fully advised, finds as follows:

The amended information contains thirty-five counts against six defendants charging criminal activities primarily dealing with the preparation and submission of fraudulent demand packages, the subornation of fraudulent and perjured testimony, and the theft of monies by means of the foregoing acts. The State alleges that the Defendants engaged in these illegal activities for the purpose of enhancing the settlement value of insurance claims.

In the October 14, 1993 order on the motion to dismiss based on the constitutionality of F.S. § 817.234, this court dismissed twelve predicate acts and twelve counts of the information relating to violations of F.S. § 817.234. This Court held that the nonjoinder of insurers statute exempted third party claims from the purview of the Insurance Fraud Statute. Consequently, there remains only one predicate act, predicate act “S”, and one count, Count 21, involving a violation of F.S. § 817.234. The State alleges that the Defendant submitted an incomplete demand letter in a first party uninsured motorist claim.

The Defendant, Mark Marks P.A. submitted several motions and memoranda concerning Predicate Act “S” and Count 21 in which the Defendant contends that the Insurance Fraud Statute considered in pari materia with the PIP statute violates due process. The Defendant argues that the Insurance Fraud Statute provides for automatic, full, and complete disclosure upon an attorney’s filing of an insurance claim on behalf of a client. Conversely, the PIP statute, F.S. § 627.736, establishes preconditions to the requirement of submission of medical reports by the insured to the insurance company. The insured is not obligated to disclose all medical information concerning her condition until 1) the insured undergoes an examination by the insurance company’s doctor, 2) the insurance company provides the insured with its doctor’s report, and 3) the insurance company requests any preexisting medical reports. Thus, the Defendant interprets F.S. § 817.234 as requiring full and automatic disclosure while the PIP statute only requires disclosure under certain conditions. The Defendant insists that the conflict between these two statutes creates an ambiguity on the issue of the appropriate degree of disclosure and, therefore, renders the Insurance Fraud Statute void as a vague and unconstitutional penal statute.

While the Defendant asserts that the insurance fraud statute requires automatic, full disclosure, the State maintains that § 817.234 does not demand such disclosure. Thus, the State asserts that the purported conflict conceived by the Defendants causes no vagueness and no arbitrary enforcement.

The Defendants in the instant case are charged with violating subsection (1) of F.S. § 817.234. Florida Statutes § 817.234(1) provides in relevant part:

(1)(a) Any person who, with the intent to injure, defraud, or deceive any insurance company, including, but not limited to, any statutorily created underwriting association or pool of insurers or any motor vehicle, life, disability, credit life, credit, casualty, surety, workers’ compensation, title, premium finance, reinsurance, fraternal benefit, or home or automobile warranty company:

1. Presents or causes to be presented any written or oral statement as part of, or in support of, a claim for payment or other benefit pursuant to an insurance policy, knowing that such statement contains any false, incomplete, or misleading information concerning any fact or thing material to such claim; or

2. Prepares or makes any written or oral statement that is intended to be presented to any insurance company in connection with, or in support of, any claim for payment or other benefit pursuant to an insurance policy, knowing that such statement contains any false, incomplete or misleading information concerning any fact or thing material to such claim,

A review of the text of the statute reveals no language which compels complete disclosure. Moreover, this court cannot find any indication that the legislature intended for this statute to govern disclosure at all.

As there exists no requirement of automatic, full disclosure, there is, consequently, no resulting conflict between the insurance fraud statute and the PIP statute. However, the lack of conflict between these statutes does not resolve the remainder of the concerns raised in the defendant’s motion and memoranda.

The Defendant argues that F.S. § 817.234 violates the Defendant’s state and federal constitutional right to due process. The Defendant insists that the term “incomplete” can proscribe practically any conduct, and therefore, the statute fails to give attorneys fair warning that their conduct is proscribed. The State rebuts this contention by maintaining that the scienter requirement cures whatever vagueness may be present in the statute.

Fair Notice

The vagueness doctrine safeguards due process by invalidating laws that fail to provide adequate notice. S.E. Fisheries v. Dept. of Nat. Resources, 453 So.2d 1351 (Fla. 1984). The proper standard for evaluating vagueness under Florida law is whether the language provides a person of common intelligence fair warning of the conduct it prohibits. State v. Thomas, 616 So.2d 1198 (Fla. 2d DCA 1993) citing Papachristou v. City of Jacksonville, 405 U.S. 156, 92 S.Ct. 839, 31 L.Ed.2d 110 (1972). A penal statute, particularly, must be drafted with great precision. State v. Thurston, 591 So.2d 998 (Fla. 3d DCA 1991) citing Winters v. N.Y., 333 U.S. 507, 515, 68 S.Ct. 663, 670, 92 L.Ed.2d 840, 847 (1945). The test for vagueness must not be applied in a vacuum; in its examination of a statute, a court must be cognizant of the context. The applicable standard for vagueness is:

the practical criterion of fair notice to those to whom the statute is directed. The particular context is all important.

American Communications Association, C.I.O. v. Douds, 339 U.S. 382, 412, 70 S.Ct. 674, 94 L.Ed. 925 (1950).

In the instant case, the State attempts to utilize F.S. § 817.234(1) to charge an attorney with a fraudulent omission. The allegedly illegal act charged consists of the Defendant’s failure to incorporate a lumbar NMR in its demand package to the uninsured motorist carrier. The State contends that in omitting the medical report which incorporated the doctor’s opinion that there was no lumbar nerve damage the Defendant misled the insurance company because the demand package sought damages for the lumbar injury. The issue which this Court must confront is whether attorney can reasonably be expected to know that omitting an unfavorable medical report violates the statute because it constitutes an incomplete statement with the intent to injure, defraud or deceive the insurance company.

Attorneys are expected to zealously represent their clients interests. In an adversary system such as ours the contending parties presume that evidence is marshaled competitively. As this Court noted in its prior order of October 14, 1993, advocacy is ingrained at every stage in the education and training of attorneys.

In light of the heavy emphasis placed on the attorney’s duty to represent his client’s interest, the statute does not provide sufficient notice to attorneys. This application of the statute ignores the fact that the average personal injury attorney does not view the withholding of medical reports, or any information unfavorable to his client, as inappropriate, much less criminal. The attorney’s duty to zealously advocate his client’s position within the adversarial system is so entrenched that any modification of it must be wrought clearly and unambiguously. If the legislature intended to reach such conduct, its failure to declare it explicitly renders the statute’s criminalization of fraudulent omission as unconstitutional as applied to the attorney client context.

Moreover, this conclusion is reinforced by the requirements ordinarily inherent in liability for fraudulent nondisclosure. In a civil setting, a party can only be liable for failure to disclose if that party is under some duty of disclosure to the other party in the transaction. Restatement of Torts, Second § 551. Generally, in cases of criminal fraud, the law does not impose a penalty for an omission without a concomitant duty to disclose.² See 21 Am Jur2d, Criminal Law § 36. The duty to disclose arises as an explicit requirement to disclose material facts or an implicit requirement occasioned by some fiduciary relationship. United States v. Irwin, 654 F.2d 671 (1981) (dealt with a violation of 18 U.S.C. § 1001, by failing to disclose a material fact required by a federal agency); Chiarella v. United States, 100 S.Ct. 1108 (1980) (involving a violation of the Securities Exchange Act of 1934, § 10(b) resulting from a breach of fiduciary duty). It is this preexisting duty to disclose which puts the Defendant on notice that his silence is proscribed.

In the instant case, the lack of either an explicit requirement to disclose all information to the insurance companies or a fiduciary relationship suggests that the legislature would not embark on such a departure from general legal principles without providing more notice. Attorneys, especially, are uniquely aware that an omission is not actionable without a corresponding duty to disclose. Therefore, an attorney, in an adversarial position with the insurance company, would never suspect that an omission would result in a charge of fraud.

Arbitrary Enforcement

The vice of vagueness is even more serious if it also invites arbitrary enforcement. The United States Supreme Court has recognized that

the more important aspect of the vagueness doctrine is not actual notice, but the other principal element of the doctrine — the requirement that a legislature establish minimal guidelines to govern law enforcement.

Kolender v. Lawson, 461 U.S. 356, 359, 103 S.Ct. 1855, 1858 (1983). A criminal statute should avoid “a standardless sweep [that] allows policemen, prosecutors, and juries to pursue their personal predilections.” Id.

The State has continuously reiterated that the scienter language saves the statute from being unconstitutionally vague. The State insists that because the attorney violates the statute only when he has a specific intent to injure, defraud or deceive an insurance company, the statute cannot be void for vagueness. However, this argument overlooks the effect of the adversarial context.

As this Court stated in its prior order, it is part of custom and practice of personal injury attorneys in the pre-suit investigation stage of litigation for an attorney to emphasize the strengths of his case and downplay the weaknesses. Legal scholars and treatises advise attorneys to be selective about the medical information disclosed at this stage of the litigation. Is this effective advocacy or a fraudulent omission violative of F.S. § 817.234(1)?

In applying this statute to attorneys, an attorney’s conduct is potentially fraudulent any time the attorney withholds any material information from the insurance company. This is true precisely because of the scienter language included in the statute. The insured’s attorney always attempts to better his client’s position vis-a-vis the insurance company, to either settle for the greatest amount conceivably possible, or seek the highest award possible from a jury. In so doing, the practice of marshaling a set of facts to obtain a large settlement can be construed as deceiving the insurance company or injuring the company’s financial position. Certainly, the requisite intent will always be present as attorneys are paid to act tactically and strategically.

The State draws a fine line distinction between strengthening your position and committing fraud which relies on the insured’s entitlement to the fair amount of what the injury is worth. According to the State, an attorney who in good faith represents his client to get everything to which she is entitled does not violate the insurance fraud statute. However, once that attorney attempts to mislead the insurance company and obtain more than the amount the insured is entitled to, then that attorney is guilty of fraudulent conduct.

This distinction is problematic due to the speculative nature of the determination of the amount to which the insured is entitled. The worth of a specific injury is determined either by the settlement process or by a jury. In the process of negotiating a settlement, the insurance company attempts to offer the least amount possible while the insured seeks the greatest amount possible and the parties maneuver and manipulate to arrive at a settlement figure. In a trial, the insurance company claims the insured had little or no injury while the insured maintains the contrary both parties attempting to sway a jury that has great leeway in fixing an award. When the interpretation of a penal statute must be based on speculation, then that statute invites arbitrary enforcement and therefore is unconstitutionally vague. State v. McCarthy, 615 So.2d 784 (Fla. 2d DCA 1993) (involving a statute that involved misrepresentation of speculative activity). Clearly, the portion of the F.S. § 817.234 criminalizing omissions falls prey to the same type of constitutional infirmity.

The statute’s susceptibility to arbitrary enforcement became evident at the hearing on the instant motion. At the time, the discussion centered on the fine line distinction drawn by the State between the fraudulent omission incorporated by the insurance fraud statute and the practice of advocacy in an adversarial system. One of the defense attorneys argued that both the insurance company’s attorney and the insured’s attorney marshal a set a facts presenting them in the best possible light for their respective positions as a part of the adversarial process. The attorney further argued that under the State’s construction of the statute an attorney could be penalized it he erred in valuing the case because he could then be prosecuted for fraud. The State responded by informing this Court of the statute’s purported higher level of purpose. According to the State, the intent of the legislature was to prevent claims from being decided by arbitrators and jurors. The State claims that the legislature intended to unclog the court system through the use of these inhibitions and thereby keep these claims from the court system.

This court disagrees with the State’s rendering of the legislature’s purpose in drafting the insurance fraud statute as it is wary of attributing an unconstitutional motive to legislative action. The State’s interpretation of the statute’s purpose would effectively result in an infringement on an individual’s right of access to the courts, a right protected by the Florida Constitution. Attempting to deprive the citizens of Florida of their right of access to the courts by threatening their attorneys with possible jail time for actions which the insurance company can itself engage in is both inequitable and unconstitutional.

In the case at bar, this court concludes that unconstitutional vagueness lies only in the fraudulent omission as applied to attorneys engaged in the representation of their clients. The Court does not address the constitutionality of the term “incomplete” in any other context. Accordingly, the counts charging the Defendant with presenting an incomplete statement in support of a claim should be dismissed.

ORDERED AND ADJUDGED that Defendant’s Motion to Dismiss is GRANTED as to Predicate Acts “R” and “S” of count 1 and Counts 20 and 21.

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¹The other Defendants in this case subsequently adopted the reasoning of Defendant Mark Marks, P.A.’s motions and memoranda on this issue, and therefore, this order shall apply to all Defendants charged in the relevant counts.

²Mail and wire fraud are the unique exceptions to this rule. These federal statutes were conceived to safeguard the integrity of the post office department, originally a department of the federal government, and thereby, prevent the federal government from becoming an unwitting accomplice to fraudulent schemes perpetrated upon the innocent public through the mails. McNally v. United States, 483 U.S. 350, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987) (citing Durland v. United States, 161 U.S. 306, 16 S.Ct. 508, 40 L.Ed. 70 (1896).

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