20 Fla. L. Weekly Supp. 373a

Online Reference: FLWSUPP 2004GUTIInsurance — Personal injury protection — Coverage — Medical expenses — Examination under oath — Trial court erred in entering summary judgment in favor of insurer on ground that failure of an insured to provide answers for certain questions asked during examination under oath conducted by the insurer was tantamount to a failure to submit to a contractually mandated EUO and constituted a failure to fulfill a condition precedent to lawsuit for PIP benefits — Because insurer asserted in its affirmative defense that insured refused to answer “material” questions, insurer was obligated to establish materiality of unanswered questions — Whether an insured’s refusal to answer certain questions at an EUO amounts to a failure to cooperate is a question which requires an evaluation of the degree of cooperation and, accordingly, a question for factfinder rather than an issue for judicial determination on a motion for summary judgment — Condition subsequent — Under statute in effect at time policy was issued, submitting to EUO was condition subsequent, not a condition precedent to coverage

T&M DIAGNOSTIC SERVICE INC., a/a/o RIGOBERTO GUTIERREZ Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No.10-362 AP. L.T. Case No. 2007 018091 SP05. January 25, 2013. An appeal from Miami-Dade County Court. Counsel: Christian Carrazana, for Appellant. Douglas H. Stein, for Appellee.

(Before GERALD BAGLEY, SCOTT BERNSTEIN, and DAVID MILLER, JJ.)

(MILLER, Judge.) T & M Diagnostic Services, Inc. (T & M Diagnostic), the Appellant and assignee of Rigoberto Gutierrez, is requesting this Court to reverse a summary judgment ruling rendered in favor of the Appellee, State Farm Mutual Automobile Insurance Company (State Farm).

In its appeal, T&M Diagnostic contends the trial court erred in ruling the failure of an insured to provide answers for certain questions asked during an examination under oath (EUO) conducted by the insurer is tantamount to a failure to submit to a contractually mandated EUO, and constitutes a failure to fulfill a condition precedent to filing a lawsuit for Personal Injury Protection (PIP) benefits. T&M Diagnostic, which is seeking reversal of the trial court’s summary judgment ruling, contends (1) an EUO provision in a PIP policy is treated as a condition subsequent and not a condition precedent; (2) in order to obtain a summary judgment, the insurer is required to prove the insured’s noncompliance was prejudicial to the insurance company’s investigation of the claim; and (3) a failure to cooperate with an insurance company’s claim investigation is a question of fact which makes summary judgment inappropriate. Based on these contentions, T & M Diagnostic is requesting this Court to reinstate its claim, which the trial court dismissed.

Based on a de novo review¹, this Court finds the trial court did err in its ruling by overlooking and misconstruing legal authority and key principles governing PIP cases. Accordingly, we are reversing the trial court’s summary judgment order and final judgment erroneously entered in favor of State Farm; and remanding this matter for further proceedings.

Facts

This appeal originates from injuries sustained by Rigoberto Gutierrez in an automobile accident occurring on July 10, 2006. Mr. Gutierrez is insured by the Appellee, State Farm. On July 13, 2006, Mr. Gutierrez, who was examined by the Appellant, T & M Diagnostic, assigned his PIP claim for the payment of medical benefits to T & M Diagnostic. On August 23, 2006, T & M Diagnostic submitted to the Appellee, State Farm, its bill for reimbursement of the expenses incurred by Mr. Gutierrez and its application for the PIP benefits previously assigned by Mr. Gutierrez. After receiving the bill and the application for benefits, State Farm requested Mr. Gutierrez to submit to an EUO which was initially scheduled, for September 19, 2006. The EUO was rescheduled to October 2, 2006. Mr. Gutierrez, who appeared at the October 2nd EUO without an attorney, answered most of the EUO questions posed by State Farm, but refused to answer several other questions regarding his employment, which Mr. Gutierrez believed were irrelevant and unduly intrusive. Mr. Gutierrez ultimately terminated the EUO stating that he was going to retain an attorney. Following the October 2nd EUO, State Farm made repeated requests for Mr. Gutierrez to supply the name of his attorney. These requests were ignored. Thus, the EUO was never continued. Consequently, State Farm did not pay T & M Diagnostic for its medical services.

On October 11, 2007, T & M Diagnostic filed suit against State Farm for failure to pay. State Farm filed its answer to the complaint raising various affirmative defenses. Among those defenses, State Farm alleged that Mr. Gutierrez failed to satisfy his obligation to submit to an EUO asrequired under the insurance policy by refusing to answer questions material to his claim for PIP benefits, and by failing to reschedule and complete the EUO, which is a condition precedent to recovering PIP benefits. State Farm further alleged because Mr. Gutierrez failed to comply with all the terms and conditions of the insurance policy, his conduct constitutes a failure to cooperate and a breach of the insurance policy; thereby relieving State Farm of its obligation to pay PIP benefits.

After the pleadings were closed, on August 26, 2009, State Farm moved for summary judgment based on the above-noted arguments. The trial court judge, relying on Stringer v. Fireman’s Fund Ins. Co., 622 So. 2d 145 (Fla. 3d DCA 1993), concurred with State Farm and entered an order granting State Farm’s motion for summary judgment. Shortly thereafter, a final judgment was entered in favor of State Farm.

Based on this ruling, T & M Diagnostic filed the pending appeal.

The issue before this court is whether to affirm or reverse the trial court’s decision which precluded the recovery of PIP benefits based on the insured’s conduct at the EUO.

Analysis

At the outset it is noted that summary judgments are granted cautiously when requested by the insurer in PIP cases. Such procedural devices have the potential for summarily eliminating an insurance company’s duty to pay, and causing the undesirable effect of an insured forfeiting his or her insurance premiums. Such possible outcomes conflict with Florida’s “swift and virtually automatic” recovery scheme, and a public policy to maximize coverage and minimize forfeitures. For this reason, the Florida Supreme Court most recently ruled, in Custer Medical Ctr. v. United Auto Ins. Co., 62 So. 3d 1086, 1093 (Fla. 2010) [35 Fla. L. Weekly S640a], that summary rulings, such as directed verdicts, should be entered sparingly in PIP cases; and considered in the light most favorable to the non-moving party.

Based on this premise, this Court approached its review of the trial court’s summary judgment ruling within the parameters pronounced by the Supreme Court, and within the goals of the public purpose underlying the no-fault PIP law.

A: Affirmative Defense — Burden of Proof

In Custer, the Florida Supreme Court defined the evidentiary burden imposed on an insurer who asserts an affirmative defense, and seeks a directed verdict based on the affirmative defense in PIP actions. The Court clarified it is the insurer’s burden to prove any affirmative defense pled. This burden does not shift to the claimant merely because the insurer set forth a prima facie case.

Custer involved the failure of the insured to appear at a scheduled independent medical examination (IME). The insurer, United Auto Insurance Company (United Auto), suspended the insured’s PIP benefits which were assigned to Custer Medical Center (Custer). Custer filed an action in the county court against United Auto for failing to pay for the medical services rendered to the insured. United Auto asserted the affirmative defense that the insured’s unreasonable refusal to attend the scheduled IME absolved the insurer of its responsibility for paying PIP benefits under the PIP statute. At trial, United Auto moved for a directed verdict without presenting any evidence on its affirmative defense. The trial court granted United Auto’s motion noting the insured’s failure to appear without excuse or objection constituted an unreasonable refusal to submit to the requested IME as a matter of law. The trial court discharged the jury in light of its ruling on the motion. Custer appealed the ruling to this circuit’s appellate division.

This circuit reversed and remanded the matter for a trial on the merits. The court reasoned that motions for directed verdict should only be granted if there is no evidence or reasonable inferences to support the opposing position. The Court noted United Auto, which bears the burden of establishing its affirmative defense, failed to present evidence in support of the key element of the affirmative defense, i.e., “unreasonable refusal.” The court further noted that a simple showing of a failure to appear did not negate or lessen the insurer’s burden of proof, anddid not shift the burden of proof to the opposing party. The court concluded that in the absence of evidence supporting the affirmative defense pled, the directed verdict was premature.

On appeal, the Third District Court of Appeal reversed the circuit court’s decision, and shifted the burden of proof to Custer to disprove United Auto’s affirmative defense of “unreasonable refusal.” The Florida Supreme Court, in turn, reversed the Third District Court of Appeal’s opinion, finding it did not comport with governing law, and reinstated the decision of the circuit court appellate division. The Supreme Court concluded the circuit court’s decision was consistent with well-established civil procedure governing directed verdicts and burdens of proof for affirmative defenses. The Supreme Court particularly ruled an affirmative defense asserted by the defendant should not be construed as assigning to the plaintiff the burden of proving the affirmative defense does not exist.

Moreover, the Court noted it is the function of the jury to weigh and evaluate any evidence presented to support a motion for directed verdict; particularly since the reasonableness of the insured’s conduct is a question of fact for the jury, and not a question of law for the court. The Supreme Court ultimately held the insurer was not entitled to judgment as a matter of law due to the posture of the case.

Thus, pursuant to Custer, if an affirmative defense is pled by an insurer, which consists of the insured’s failure to submit to an investigation verifying proof of loss, it is inappropriate to assign to the opposing party the burden of disproving the insurer’s affirmative defense. The onus is on the insurer to establish the basic components of its affirmative defense.

Given the standards for directed verdicts and summary judgments are essentially identical, to prevail in a summary judgment motion, which is based on an affirmative defense, the party asserting the affirmative defense is required to establish the uncontroverted elements of its affirmative defense before a summary ruling is appropriate.

In this case, State Farm, is obligated to establish what constitutes “material” unanswered questions since it purports, in its affirmative defense, the insured’s refusal to answer questions material to his claim posed during the EUO constitutes a failure to cooperate and a breach of the insurance policy. State Farm, as the moving party in a summary judgment motion, must “specifically identify any affidavits, answers to interrogatories, admissions, depositions and other materials as would be admissible in evidence,” which it believes demonstrate the absence of a genuine issue of material fact. Fla. R. Civ. P. 1.510(c) (2012). Particularly in instances when relevance and intent are to be considered, it is not enough to simply suggest the insured did not answer material questions. Custer, in effect, requires State Farm as the party moving for summary judgment, to set forth plainly and concisely all material facts which it contends supports its position.

This Court finds the trial court should not have granted the motion for summary judgment. State Farm had not presented any evidence of what constitutes material questions. Therefore, State Farm failed to present any evidence to prove its affirmative defense.

We further find whether an insured’s refusal to answer certain questions at an EUO amounts to a failure to cooperate is a question which requires an evaluation of the degree of cooperation. Therefore, it is a question for the fact-finder to decide. It is not for judicial determination on a motion for summary judgment.

Because the trial court did not consider the evidentiary burden imposed on an insurer when an affirmative defense is pled; nor did it address whether the record evidence before it was legally sufficient to warrant summary judgment, we find the summary judgment ruling was improper.

B: Condition Subsequent

While it is acknowledged the main issue before the Court in Custer was the failure of an insured to appear at an IME, the court also addressed EUOs. In particular the Supreme Court, in Custer, addressed how to construe EUOs set forth in PIP policies, and suggested that an EUO is not a condition precedent to PIP coverage, but is a condition subsequent.

In previous cases, Florida courts have held that compliance with an EUO requirement of an insurance policy is a condition precedent to bringing suit against an insurer. See Goldman v. State Farm Fir Gen. Ins. Co., 660 So. 2d 300, 303 (Fla. 4th DCA 1995) [20 Fla. L. Weekly D1844a]; Stringer v. Fireman’s Fund Ins. Co., 622 So. 2d 145 (Fla. 3d DCA 1993). Notably, in those cases, the insured’s obstinate conduct and willful refusal to submit to any examination was deemed a conscious decision to forfeit coverage. However, the Supreme Court, in Custer, has interpreted an EUO as a condition subsequent because it operates as an investigative tool, available to insurers to verify facts and compliance with an existing policy. Since it affects rights that have already accrued under the policy, and does not function as a preliminary condition as to the issuance of coverage, submitting to an EUO is construed as a condition subsequent.

In the pending case, the trial court — without benefit of the Supreme Court’s opinion in Custer, (issued seven months later) – erroneously held that an EUO qualifies as a condition precedent to recovery of PIP benefits. It mistakenly relied on Stringer and the express terms of the insurance policy. However, as the Supreme Court noted in Custer, under the PIP statutory framework, it is questionable as to whether EUOs even may be authorized by contract. Custer, at 1089, n1; and 1094-1095.

While the Supreme Court’s remarks concerning EUOs were noted as “not relevant” to the appeal in Custer, this Court finds the statements are nevertheless pertinent and instructive, albeit dicta. To the extent Custer construes EUOs, the Court has unambiguously characterized EUOs set forth in insurance policies as a condition subsequent and not a condition precedent to receiving PIP benefits. Moreover, since EUOs can be regarded as substantively equivalent to IMEs, in this regard, the Supreme Court’s rationale and its conclusion as to IMEs equally apply in the context of an EUO.

Presumably in response to the Supreme Court decision in Custer, the Florida legislature, in 2012, enacted § 627.736(6)(g), Fla. Stat. which provides, in part:

(g) An insured seeking benefits under ss. 627.730 – 627.7405, including an omnibus insured, must comply with the terms of the policy, which include, but are not limited to, submitting to an examination under oath. . . . Compliance with this paragraph is a condition precedent to receiving benefits.. . .

See §627.736(6)(g), Fla. Stat. (2012). See also, Ch. 2012-197, §10, at 29, Laws of Fla.

Thus, the state legislature amended the PIP statute, nearly 2 years following the trial court’s decision, to expressly state that an insured must submit to an EUO as a condition precedent to receiving benefits. However, the general rule is the statute in effect at the time the insurance policy was issued governs. Menendez v. Progressive Exp. Ins. Co., 35 So. 3d 873, 876 (Fla. 2010) [35 Fla. L. Weekly S222b]. Thus, the 2012 amendment, viewed as a substantive change and not a clarification of the original law, does not retroactively alter pre-amendment authority. More importantly, the EUO amendment is only effective for policies issued or renewed on or after January 1, 2013.²

In light of the Custer decision, this Court finds that submitting to an EUO is a condition subsequent, and not a condition precedent to filing a suit against an insurer. Therefore, an insured’s failure to submit to an insurer’s EUO to verify proof of loss will not automatically, as a matter of law, bar recovery on a policy.

Ruling

This Court, therefore, finds the trial court’s ruling conflicts with the Supreme Court’s pronouncements on affirmative defenses, condition precedents and EUOs in PIP cases. Thus, the trial court’s decision does not comport with governing authority. Accordingly, this court reverses the trial court’s decision which granted summary judgment in favor of the Appellee, State Farm. This case is remanded for further proceedings consistent with this opinion.

Appellate Attorney’s Fees

In addition, due to the posture of this case, neither party is entitled to an award of appellate attorney’s fees, at this time. Accordingly, each party’s motion for attorney’s fees is denied. (BAGLEY and BERNSTEIN concur, JJ.)

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¹ Volusia County v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000) [25 Fla. L. Weekly S390a] (court reviews a summary judgment de novo).

²HB 119, Banking & Insurance Committee Bill Summary, at 3 (2012 Fla. Sess.) available at

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