20 Fla. L. Weekly Supp. 323a

Online Reference: FLWSUPP 2004HERNInsurance — Personal injury protection — Coverage — Medical expenses — Exhaustion of benefits — Trial court abused its discretion in denying insurer’s second motion to amend its affirmative defenses to include that of exhaustion of benefits where motion was filed before trial date was set and before court ruled on motion for summary judgment — Trial court not precluded from imposing costs incurred by insurer’s belated discovery that it had exhausted available benefits should plaintiff sustain its burden of demonstrating those costs after remand

UNITED AUTOMOBILE INSURANCE COMPANY, A Florida Corporation, Appellant, v. PCM MEDICAL CENTER, INC., a/a/o ADA HERNANDEZ, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case Nos. 11-043AP & 11-332A (Consolidated). L.T. Case No. 09-3828 CC 25 (01). Opinion filed December 19, 2012. On Appeal from a Final Judgment rendered by the Miami-Dade County Court, Andrew S. Hague, presiding. Counsel: Michael J. Neimand, Office of the General Counsel, for Appellant. Kevin W. Whitehead, for Appellee.

(Before, TRAWICK, LEBAN, CABALLERO, JJ.)

PROCEDURAL HISTORY

(LEBAN, J.) Ada Hernandez was injured in an automobile accident on May 9, 2008. At the time of the accident she held PIP coverage from United Auto Insurance Company. PCM Medical Center, Inc. provided medical coverage care to Hernandez (hereinafter, the insured) and submitted the bills to United Auto. As to the first set of bills, United Auto reduced PCM Medical’s charges, applied the $1000 deductible and paid 80% of the remainder. United Auto did the same for PCM’s second bill. The third and fourth sets of bills from PCM were denied completely. An Explanation of Benefits (EOB) letter was sent to PCM Medical on or about August 14, 2009.

Following submission and denial of PCM Medical’s bills, United Auto (unbeknownst to PCM Medical) paid $9,208.38 to a different provider on October 23, 2008. Despite having exhausted all benefits, United Auto proceeded to pay $951.21 to PCM Medical on February 23, 2009. Hence, United Auto had tendered all benefits at the time PCM Medical filed its April, 2009 complaint.

Nevertheless, United Auto’s June 24, 2009 answer and affirmative defenses made no mention of the apparent exhaustion of its benefits. Rather, United Auto proceeded to tender an additional $500.12 to PCM Medical on September 1, 2009. Shortly thereafter, on September 21, 2009, United Auto sought leave to amend its answer and affirmative defenses to expand upon its initial affirmative defenses of payment and of the insured’s failure to appear at her examination under oath (EUO). No hearing was sought on United Auto’s attempt to amend its affirmative defenses with respect to the insured’s EUO no show.

United Auto did file a second motion to amend its affirmative defenses on October 13, 2009, to include exhaustion of benefits. See R. 201-205. Appellee PCM Medical opposed this attempt to amend asserting that it was untimely filed some five months after United Auto’s initial answer and affirmative defenses were filed; Appellee further argued that it would suffer prejudice by allowing United Auto to amend its affirmative defenses in that it had taken approximately one year, the filing of its complaint and multiple pleadings for United Auto to inform PCM Medical and the court of critical facts that were either known to it or should have been known to it, and to seek relief pursuant to a motion for leave to file affirmative defenses.

At the January 22, 2010, hearing on Appellant’s second motion to amend, the trial judge observed that United Auto needed to alert the plaintiff to the fact that it was litigating “a dead claim.” (Supplement, Hearing Transcript at 43). The trial court continued to explain that it wastes both plaintiff’s and the court’s time to have plaintiff “spin their wheels for a claim that would yield nothing.” Id. The judge continued, “if the defendant fails to [do something], they can’t come in at a later stage and attempt to [do] something that they could have done earlier and say ‘Hey, look. You know, we want to amend now. We knew it months earlier, but now we want to amend.” Id.

Accordingly, on February 16, 2010, well before completion of discovery or the March 30, 2010 filing of plaintiff/Appellee’s motion for summary judgment, or any ruling thereon, the court denied United Auto’s second motion to amend its affirmative defenses to include exhaustion of benefits. Pursuant to Appellant’s stipulation for entry of a final judgment while reserving its right to appeal the court’s ruling, a final judgment against United Auto was entered on May 25, 2011. This appeal follows.

STANDARD OF REVIEW

A trial court’s denial of a motion to amend is reviewed for abuse of discretion. Quality Roof Serv., Inc. v. Intervest Nat’l Bank, 21 So. 3d 883 (Fla. 4th DCA 2009) [34 Fla. L. Weekly D2205d]. However, “[l]eave to amend should not be denied unless the privilege has been abused [or] there is prejudice to the opposing party.” Cousins Restaurant Assoc, v. TGI Friday’s, Inc., 843 So. 2d 980, 982 (Fla. 4th DCA 2003) [28 Fla. L. Weekly D1066a].

DISCUSSION

Leave of court to amend a pleading shall be given freely when justice so requires. Rule 1.190 (a), Fla. R. Civ. P. Public policy favors the liberal amendment of pleadings, and courts should resolve all doubts in favor of allowing the amendment of pleadings to allow cases to be decided on their merit. S. Developers & Earthmoving, Inc. v. Caterpillar Fin. Servs. Corp., 56 So.3d 56, 62 (Fla. 2d DCA 2011) [36 Fla. L. Weekly D405a]. A trial court’s refusal to permit an amendment of a pleading is an abuse of discretion unless it is clear that: (1) the amendment would prejudice the opposing party, (2) the privilege to amend has been abused, or (3) the amendment would be futile. Id. at 62-63. “Courts should be especially liberal when leave to amend ‘is sought at or before a hearing on a motion for summary judgment.’ ” Gate Lands Co. v. Old Ponte Nedra Beach Condo., 715 So.2d 1132, 1135 (Fla. 5th DCA 1998) [23 Fla. L. Weekly D1955b] (quoting Bill Williams Air Conditioning & Heating, Inc. v. Haymarket Co-op. Bank, 592 So.2d 302, 305 (Fla. 1st DCA 1991)).

The Third District has long adhered to the above principles governing Florida’s liberal amendment policy. “Leave to amend a pleading may be freely given when justice so requires. Fla.R.Civ.P. 1.190(e). A denial of leave to amend a pleading is an abuse of discretion where the proffered amendment indicates. . . [that] a defendant demonstrates he could prevail with the assertion of a properly available defense.” Wayne Creasy Agency, Inc. v. Maillard, 604 So. 2d 1235, 1235 (Fla. 3d DCA 1992). Indeed, “[a] party may, with leave of court, amend a pleading at or even after a hearing and ruling on a motion for summary judgment.” Cardona v. Benton Exp., Inc., 804 So.2d 505, 507 (Fla. 3d DCA 2001) [27 Fla. L. Weekly D76a].

To illustrate, in Laurencio v. Deutsche Bank Nat. Trust Co., 65 So. 3d 1190 (Fla. 2d DCA 2011) [36 Fla. L. Weekly D1600b], the Second District held:

Here, the record does not show that Deutsche Bank established any of the three exceptions to amendment of pleadings. There is no basis for concluding that Laurencio abused the privilege to amend or that Deutsche Bank would he prejudiced by the amendment which alleges, inter alia, the bank’s failure to comply with its own documents. And the amendment clearly would not be futile considering the unrefuted allegations that Deutsche Bank failed to comply with conditions precedent to suit. See Wayne Creasy Agency Inc. v. Maillard, 604 So.2d 1235, 1236 (Fla. 3d DCA 1992) (“A denial of leave to amend a pleading is an abuse of discretion where the proffered amendment indicates that a plaintiff can state a cause of action. The same holds true where a defendant demonstrates he could prevail with the assertion of a properly available defense.” (citation omitted)). Therefore, the trial court should have granted Laurencio leave to file an amended answer and affirmative defenses.

Laurencio, supra at 1193.

Also illustrative of the policy of liberality with which courts must exercise their otherwise broad discretion in allowing or disallowing motions to amend affirmative defenses is Crown v. Chase Home Finance, 41 So.2d 978 (Fla. 5th DCA 2010) [35 Fla. L. Weekly D1703d], where unlike the case at bar in which the attempt to add the exhaustion of benefits affirmative defense was made weeks before a motion for summary judgment was heard and well before discovery was completed or any trial date had been set, the belated affirmative defenses were sought to be amended a week after the plaintiff served its motion for summary judgment, which itself occurred seven months after the first answer was filed without the attempted affirmative defenses in question; of course, plaintiff’s summary judgment motion “did not address several of the affirmative defenses raised in the Crowns’ proposed answer.” Id. at 979. The trial court there denied the motion to amend and granted summary judgment. In reversing the final summary judgment, the Fifth District held:

An order on a motion to amend is reviewed under the abuse of discretion standard. See Yun Enters., Ltd v. Graziani, 840 So.2d 420, 422-23 (Fla. 5th DCA 2003) [28 Fla. L. Weekly D781a]; Gate Lands Co. v. Old Ponte Vedra Beach Condo., 715 So.2d 1132, 1135 (Fla. 5th DCA 1998) [23 Fla. L. Weekly D1955b]. However, all doubts should be resolved in favor of allowing the amendment and refusal to do so generally constitutes an abuse of discretion unless it clearly appears that allowing the amendment would prejudice the opposing party, the privilege to amend has been abused, or amendment would he futile. See Yun Enters., 840 So.2d 420; Gate Lands Co., 715 So.2d 1132. Public policy further favors the liberal granting of leave to amend where the failure to do so will likely prevent the cause from being resolved on its merits. Gate Lands Co., 715 So.2d at 1135 (public policy of this state is to freely allow amendments to pleadings so that cases may be resolved on their merits). In the instant case, Crowns had not abused the privilege to amend and there was no showing that amendment would be futile or that Chase would suffer prejudice. Furthermore, denial of the motion to amend would preclude the case from being resolved on its merits. Crown, supra at 979-80.

Clearly the “prejudice” prong of the test was not met by the Crown plaintiffs’ having to bear the cost of suit, litigating for several months, and plaintiffs’ preparation, filing of and appearing at the summary judgment hearing. Were such the bar to the filing of an amended affirmative defense, the rule permitting liberal amendment practice, with its salutary goal of reaching the merits of a claim or defense, would have no applicability after the filing of any lawsuit. Rule 1.190(e), Fla. R. App. P., would have no field of operation in any case where the affirmative defense had any merit simply by virtue of its efficacy.

Expounding on the prejudice factor upon which Appellee here so strongly relies (the abuse of the amendment privilege and futility prongs bearing no fruit whatsoever), case law demonstrates the clear lack of “prejudice” that would befall Appellee by allowing an amendment of affirmative defenses to include the exhaustion of benefits.¹ Addressing a case where, as here, a party made a bad mistake in its initial preparation and formulation of its theory of defense, the Second District, finding a lack of prejudice had the amendment been allowed, held:

JKC’s argument that it would be prejudiced by the amendment due to the close proximity of the trial date is without merit. In Florida Sunshine Coast Development Co. v. McClung, 352 So.2d 154 (Fla. 2d DCA 1977), this court found there was no prejudice where a party amended a mistaken admission after the plaintiff had rested its case. Granted, had the Thompsons been allowed to amend their answers and counterclaim, the theory and strategy of the case would have changed and rather than relying on the Thompsons’ procedural admission, JKC would have had to actually prove that a new contract had been entered. However, requiring a plaintiff to prove its allegations is not prejudice to the plaintiff; it merely offers due process to the defendants. If, in fact, JKC could not complete its trial preparation in the two months remaining before trial, it would have been more appropriate for the matter to have been continued than to foreclose the Thompsons’ right to litigate the issues critical to a proper disposition of the case.

Thompson v. Jared Kane Co., Inc., 872 So. 2d 356, 360 (Fla. 2d DCA 2004). [Emphasis added] [29 Fla. L. Weekly D1020b].

The same must be said here. That PMC Medical Center had to file suit and prepare to prove its case against a mistaken analysis of what had occurred with respect to United’s payments to it and other providers, is simply not the “prejudice” envisioned by the rule and cases interpreting the rule, both of which favor reaching the merits of the litigation. Moreover, that United Auto here did not abuse the rule’s amendment privilege by seeking to add its exhaustion of benefits claim in what is essentially only its second amendment, and one that came relatively early in the litigation process, is made clear by the cases that approve far more amendments. See, e.g., Kohn v. City of Miami Beach, 611 So.2d 538 (Fla. 3d DCA 1992) (noting the amendment there was beyond a third attempt). And that the exhaustion claim is far from “futile” needs no more citation of authority than cases such as Sheldon v. United Services Auto. Ass’n, 55 So. 3d 593 (Fla. 1st DCA 2010) [36 Fla. L. Weekly D23a]; Progressive American Ins. Co. v. Stand-Up MRI of Orlando, 990 So.2d 3, 7-8 (Fla. 5th DCA 2008) [33 Fla. L. Weekly D1746a];² as well as the very fervor with which Appellee abhors the attempted amendment by presenting a litany of such “kitchen sink” arguments³ as laches, unclean hands, waiver,⁴ estoppel, “quasi- estoppel,” and even fraud. We reject any such parade of horribles as both unsupported by the record before us and not demonstrated nor argued below.

This case boils down to Appellant’s negligence in failing to recognize that it had paid out PIP benefits even beyond statutory limits (one such over-payment even to Plaintiff/Appellee) well before the filing of this lawsuit.⁵ In such circumstances, Rule 1.190(e), Fla. R. App. P., serves as a “fail safe” to protect a party from its own blunders.⁶ “In accordance with the language of the rule itself, see generally Bill Williams Air Conditioning & Heating, Inc. v. Haymarket Coop. Bank, 592 So.2d 302 (Fla. 1st DCA 1991) (general rule favors amendment), it is clear that the ‘interests of justice’ are far better served by determining a case on its substantive merits, rather than a mistake in pleading.” Carib Ocean Shipping, Inc. v. Armas, 854 So. 2d 234, 236 (Fla. 3d DCA 2003) [28 Fla. L. Weekly D2055a] [emphasis added]. Carib contains a compendium of such cases and rather than include the many case citations there, we accept them as controlling in the case at bar and refer the reader to Carib, supra at 236-7. We do, however, quote the following rule of Carib which we find directly on point with respect to the case at bar:

While amendments may be denied when there is a sufficient showing of prejudice to the opposing party in preparing for the “new issue,” see Designers Tile Intl Corp. v. Capitol C Corp., 499 So.2d 4 (Fla. 3d DCA 1986), review denied, 508 So.2d 13 (Fla.1987), it is clear that the “justice factor” more than outweighs any such prejudice including that which may have been caused by the fact that the motion to amend was not filed until shortly before trial. 854 So.2d at 236-7 [footnotes omitted]

Of course, here, the Appellant sought to amend its affirmative defenses well before trial, indeed, before any trial date was even set or before Appellee’s motion for summary judgment was ruled upon. Clearly, for the reasons set forth in Carib and in the above analysis in this opinion, we find that the trial court abused its discretion in denying Appellant’s motion to amend its affirmative defenses to include that of exhaustion of benefits.

Finally, we are not blind to the possibility that Appellee may have incurred unnecessary costs by its having to file a doomed suit for what may well, upon remand, result in a summary judgment or adverse verdict based on the establishment of the very exhaustion of benefits affirmative defense we here hold should have been permitted by amendment. This case appears to have been unnecessarily brought at worst or delayed at best by the Appellant’s belated discovery of its having exhausted any recoverable benefits. In such cases, courts have imposed costs that may have been incurred by these circumstances and we do not pretermit the trial court’s imposition of such costs if Appellee can sustain its burden of demonstrating them after remand. See, Batista v. Walter & Bernstein, P.A., 378 So.2d 1321 (Fla. 3d DCA 1980) (“remedy for ‘surprise’ is continuance, not disregard of newly raised issue [ ], conditioned, if appropriate, upon the defendant’s payment of any costs and expenses incurred by the plaintiff because of the delay.”), cited by Carib Ocean Shipping, Inc. v. Armas, 854 So. 2d 234, 237, n. 2 (Fla. 3d DCA 2003) [28 Fla. L. Weekly D2055a].

Accordingly, we reverse the trial court’s final summary judgment entered below in favor of Appellee and remand with directions that the court permit Appellant to amend its affirmative defenses as discussed herein and for proceedings consistent with this opinion. We also reverse the trial court’s award of attorney’s fees inasmuch as we are reversing the benefits judgment. Marty v. Bainter, 727 So.2d 1124 (Fla. 1st DCA 1999) [24 Fla. L. Weekly D695a]. (Trawick and Caballero, JJ., concur.)

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¹In part, Appellee protests that it was essentially led down the primrose path by being “lured” into having to defend against a mythical RRN defense (or EUO no show defense that, it turned out, was itself a “no show” having been abandoned by United Auto), and that, despite the fact that it never had to go to trial, and that it was the beneficiary of some post-exhaustion monies to which it was never entitled, the amendment came too late.

²As to any “futility” of the defense, Appellee itself admits it does not challenge that the “benefits were properly exhausted. . .”. See, Answer Brief at page 11, n. 1; and Appellee filed its response to the affirmative defense acknowledging the facts of payments on November 1, 2009.

³Like the habeas corpus petition in State v Duncan, 894 So. 2d 817, 832 (Fla. 2004) [29 Fla. L. Weekly S719a], which the Supreme Court rejected as “essentially a ‘kitchen sink’ argument,” and the complaint condemned by the Fourth DCA in Broward County v. Payne, 437 So. 2d 719, 721 (Fla. 4th DCA 1983), approved, 461 So. 2d 63 (Fla. 1983), for “alleg[ing] almost everything but the proverbial kitchen sink,” the cascade of horribles that was purportedly wrecked upon Appellee by United Auto’s failure to timely assert the exhaustion of benefits affirmative defense rings hollow.

⁴The courts are loathe to find waiver of defenses in similar circumstances. See, e.g., United Auto Ins. Co. v. Garrido, 990 So. 2d 574 (Fla. 3rd DCA 2008) [33 Fla. L. Weekly D1846b], review denied, 7 So.3d 1097 (Fla. 2009).

⁵In its Answer Brief at page 30, Appellee characterizes tinned Auto’s “adjuster [as] negligent in his handling of this claim or incompetent. . .”.

⁶The Rule provides:

At any time in furtherance of justice, upon such terms as may be just, the court may permit any process, proceeding, pleading or record to be amended or material supplemental matter to be set forth in an amended or supplemental pleading. At every stage of the action the court must disregard any error or defect in the proceedings which does not affect the substantial rights of the parties.

Rule 1.190(e), Fla. R. Civ. P.

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