6 Fla. L. Weekly Supp. 471a
Insurance — Personal injury protection — Insurer may defend a PIP claim on the merits even when it does not have reasonable proof in its possession, within thirty days of receiving a claim, that it is not responsible for payment of the claim — Such claim is, however, overdue, and insured will be entitled to statutory interest and attorney’s fees as provided by law
STATE FARM FIRE AND CASUALTY COMPANY, Appellant, vs. JUANA MARIA PEREZ, Appellee. 11th Judicial Circuit in and for Miami-Dade County, Appellate Division. Case No. 97-383 AP. Opinion filed May 7, 1999. On Appeal from the County Court, in and for Miami-Dade County, Marilyn Milian, Judge. Counsel: James K. Clark, and Shelley Senecal, attorneys for Appellant. John H. Ruiz, attorney for Appellee.
Supreme Court opinion quashing District Court of Appeal ruling at 26 Fla. L. Weekly S747a
District Court of Appeal opinion quashing Circuit Court decision at 24 Fla. L. Weekly D2355a
(BEFORE MARGARITA ESQUIROZ, STEVE LEVINE, and SANDY KARLAN, JJ.)
OPINION
(LEVINE, S.) This appeal raises the issue of whether an insurance company is barred from asserting a reasonableness defense to paying medical bills stemming from a covered accident when it does not have reasonable proof in its possession within thirty (30) days of receipt of the bills to establish that it is not responsible for the payment of the bills. In other words, is an insurance company barred from defending on the merits when the claim is overdue pursuant to Florida Statutes, Section 627.736(4)(b)? We answer in the negative.
State Farm appeals from a Final Judgment entered in favor of Perez for claimed medical expenses which had been submitted by Perez for payment under her automobile policy’s personal injury protection (PIP) coverage. The Final Judgment was entered after the trial court granted summary judgment.
This action arose out of an automobile accident on March 24, 1996. Five days following the accident Perez sought medical treatment from M.C.L. Health Center. Almost three months later, on June 19, 1996, State Farm received medical bills from M.C.L. Health Center totaling $4,100.00. The bills showed that Perez received fifty-four (54) treatments consisting of hot packs, cold packs, electrical stimulation, and ultrasound. State Farm then arranged for Perez to see Dr. Stephen Turbin, an orthopedic surgeon, for an independent medical examination. This examination took place on July 17, 1996, twenty-eight (28) days after State Farm’s receipt of the bills. State Farm also obtained Perez’s medical records and submitted them to Dr. Turbin, seeking his opinion as to the reasonableness, necessity and relatedness of the medical treatment.
State Farm received Dr. Turbin’s opinions on July 26, 1996, thirty-six (36) days after receiving the medical bills. He indicated that Perez had reached maximum medical improvement as of his examination date, and that she had been discharged from medical care. Dr. Turbin also concluded that the maximum benefit of physical therapy was achieved within eight (8) weeks after the accident. He further expressed the opinion that ultrasound provided the same relief as hot packs, and that providing both modalities constituted a duplication of services. Dr. Turbin told State Farm that the nerve conduction studies were unwarranted. Based upon Dr. Turbin’s independent medical examination and his review of Perez’s medical records, State Farm reduced payment of the physical therapy treatments and denied payment for nerve conduction studies.
Perez filed this lawsuit against State Farm seeking payment for the medical expenses submitted on behalf of M.C.L. Health Center. Perez alleged that State Farm breached its insurance contract by failing to pay Perez’s bill with M.C.L. in its entirety. State Farm responded by asserting that no breach occurred because the expenses did not constitute reasonable expenses for necessary medical treatment under the PIP statute. After initial discovery had taken place, Perez moved for summary judgment, asserting that “the Defendant did not have reasonable proof to establish that it was not responsible for the payment of the Plaintiff’s claimed medical bills from M.C.L. Health Center within thirty (30) days of receipt of the bills from M.C.L. Health Center, Inc.” The trial court granted the motion, holding that because State Farm did not have Dr. Turbin’s report in its possession until more than thirty (30) days after receipt of the bills from the insured, Florida Statutes §627.736 barred defenses to payment of any part of the claim.
Florida Statutes §627.736(4)(b) (1995) provides in relevant part:
“Personal injury protection insurance benefits paid pursuant to this section shall be overdue if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of same . . . However, any payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment …
(Emphasis added). Florida Statutes §627.736(4)(c) provides that “overdue payments shall bear simple interest at the rate of 10 percent per year.” This is the only penalty specified by the legislature for an insurer being overdue, although Florida Statutes §§627.736(8) and 627.428 also allows recovery of attorneys’ fees under certain circumstances.1 The statute does not provide that the insurers’ defenses to paying a claim are barred if the insurer does not have reasonable proof within thirty (30) days of receiving the bills that it is not responsible. “The cardinal rule of statutory construction is that the courts will give a statute its plain and ordinary meaning.” Weber v. Dobbins, 616 So. 2d 956 (Fla. 1993). The plain meaning of Florida Statutes, §627.736(4) is that a PIP claim pending for more than thirty (30) days is overdue, subject to statutory interest and possibly attorneys’ fees. Although the lower court found that such sanctions were hollow given the apparent intent of the legislature to motivate insurance companies to pay PIP claims in a timely manner, it remains a legislative prerogative to enact more stringent consequences.2
In Jones v. State Farm Mut. Auto Ins. Co., 694 So. 2d 165 (Fla. 5th DCA 1997), the Court ruled on this very issue. Jones was injured in an automobile accident and sought medical treatment. State Farm scheduled Jones for an independent medical exam outside of the thirty (30) days permitted under the statute. Jones refused to attend the independent medical exam, and brought suit to recover the PIP benefits, alleging that State Farm had violated the statute by failing to make payment on the claim within the thirty (30) days. The appellate court rejected Jones’ position that the failure to pay within the thirty (30) day period “relieved him of any further obligation under the policy . . .” Id. at 166. The court concluded that while State Farm would be subject to the statutory penalties for an overdue claim, it would not lose its right to contest the claim. Thus, Jones was obligated to attend the independent medical exam despite State Farm’s failure to pay within thirty (30) days.
On close reading, the cases cited by Perez are consistent with the statutory language and the holding in Jones, supra. Although the cases contain dicta that lend support to Appellee’s view, the actual holdings of these cases are quite narrow and factually distinct from the case sub judice. In Dunmore v. Interstate Fire Ins. Co., 301 So. 2d 502 (Fla. 1st DCA 1974), the appellant was injured in an auto accident and submitted a claim for PIP benefits to his insurer. The claim was not paid within thirty (30) days, and the appellant brought suit. The insurer did not contest the entitlement to the benefits, but did dispute the allowance of attorneys’ fees. The only issue on appeal was whether attorneys’ fees were properly awarded by the trial court to the insured. The Court held that they were, pursuant to Florida Statutes, Section 627.428. The admission of liability by the insurance company on the underlying claim was treated, in essence, as a judgment or decree in favor of the insured. See, Wollard v. Lloyd’s and Companies of Lloyd’s, 439 So. 2d 217 (Fla.1983). Again in Crooks v. State Farm Ins. Co., 659 So. 2d 1266 (Fla. 3rd DCA 1995), an insurer failed to pay a claim within thirty (30) days. “After Crooks had filed suit, State Farm paid the claim.” Id. at 1267 (emphasis added). The court only addressed, and reversed, the trial court’s decision that Crooks was not entitled to attorneys’ fees. In Martinez v. Fortune Ins. Co., 684 So. 2d 201 (Fla. 4th DCA 1996), the insured was also injured in an auto accident and submitted a claim for PIP benefits. The claim was not paid by the insurer within thirty (30) days, purportedly because the insurer had not received a disability report from the doctor. The insured brought suit to compel payment. After the lawsuit was initiated, the insurer received the doctor’s report and paid the claim. The court held that the insured was entitled to statutory interest and attorneys’ fees because the insurer had paid the claim late. No issue was presented to the court about the insurer’s defense to the underlying claim. Finally, in Fortune Ins. Co. v. Pacheco, 695 So. 2d 394 (Fla. 3rd DCA 1997), the insured was injured in a car accident and submitted a claim. “Fortune did not pay the claim until after the thirty day deadline, and only after Pacheco had filed suit for his PIP benefits.” Id. at 395. Again, the appellate court was not presented with the issue of whether the insurer could defend the merits of the claim after the thirty (30) days expired.3 The only issue was whether the insured was entitled to attorneys’ fees, and the court emphatically answered in the affirmative.
The plain language in Florida Statutes, Section 627.736(4)(b), together with the decision in Jones v. State Farm Mut. Auto Ins. Co., 694 So. 2d 165 (Fla. 5th DCA 1997), compel this Court to reverse the order granting summary judgment. We hold that an insurer may defend a PIP claim on the merits even when it does not have reasonable proof in its possession, within thirty (30) days of receiving a claim, that it is not responsible for payment of the claim. Such a claim is overdue, however, and the insured will be entitled to statutory interest and attorneys’ fees as provided by law.
Reversed and Remanded for further proceedings. Appellee’s Motion for Attorneys’ Fees for this appeal is granted contingently on Appellee being the prevailing party in the underlying litigation. (KARLAN, J., concurs. ESQUIROZ, J., dissents with opinion.)
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1Florida Statutes, Section 627.428 allows recovery of attorneys fees “[u]pon the rendition of a judgment or decree.” This has been interpreted to include payment of the underlying claim at issue in a lawsuit, Wollard v. Lloyd’s and Companies of Lloyd’s, 439 So. 2d 217 (Fla. 1983) (payment is the functional equivalent of a confession of judgment or verdict in favor of the insured), but not a voluntary dismissal by the insurer in a declaratory action against the insured. O.A.G. Corp. v. Britamco Underwriters, Inc., 707 So. 2d 785 (Fla. 3rd DCA 1998).
2The 1998 Legislature enacted additional safeguards for insurance companies, insureds, and providers regarding PIP medical bills. 1998 Fla. Sess. Laws Ch. 98-270 (HB 3889) (effective date October 1, 1998).
3The court intimated that defenses on the merits were permissible when it suggested in a footnote that suspected fraud be investigated by the insurance company or the state Division of Insurance Fraud. Fortune Ins. Co. v. Pacheco, 695 So. 2d 394, 396 fn. 1 (Fla. 3rd DCA 1997).
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(ESQUIROZ, J., dissenting.) I respectfully dissent. Jones v. State Farm Mutual Automobile Insurance Company, 694 So. 2d 165 (Fla. 5th DCA 1997) is not the law in our district. Rather, controlling precedent for us on the issue raised by this appeal is furnished by the Third District Court of Appeal’s decisions in Fortune Insurance Company v. Pacheco, 695 So.2d 394 (Fla. 3d DCA 1997) and in Crooks v. State Farm Mutual Automobile Insurance Company, 659 So.2d 1266 (Fla. 3d DCA 1995), which adopted the interpretation to Section 627.736(4)(b), Florida Statutes, earlier announced in Dunmore v. Interstate Fire Insurance Company, 301 So.2d 502 (Fla. 1st DCA 1974).1 In both Pacheco and Crooks, the Third District expressly quoted the holding in Dunmore:
It appears to us that the statutory language is clear and unambiguous. The insurance company has thirty days in which to verify the claim after receipt of an application for benefits. There is no provision in the statute to toll this time limitation. The burden is clearly upon the insurer to authenticate the claim within the statutory time period. To rule otherwise would render the recently enacted “no-fault” insurance statute a “no-pay” plan — a result we are sure was not intended by the legislature. Dunmore v. Interstate Fire Insurance Company, 301 So.2d at 502 (Emphasis added as in Pacheco), quoted in Fortune Insurance Company v. Pacheco, 695 So.2d at 395, and in Crooks v. State Farm Mutual Automobile Insurance Company, 659 So.2d at 1268.
If the burden is clearly upon the insurer to authenticate the claim within the statutory time period, and if “the legislature provided no exceptions to the thirty-day period,” Fortune Insurance Company v. Pacheco, 695 So.2d at 395-396,2 then I cannot justify the result reached by the majority and I must conclude that the lower court correctly granted the insured’s motion for summary judgment in this case.
Furthermore, Jones and the instant case are distinguishable in some significant respects. In the instant case, the insured, Juana Maria Perez, did not fail to appear for the insurer’s requested independent medical examination, but did indeed submit to one within the 30-day period that the insurer had to pay the claim (on the 28th day after State Farm’s receipt of Perez’s medical bills). Nonetheless, State Farm did not pay the full claim for the medical bills, but made a reduced payment thereon after the 30 days had expired following its receipt of the IME physician’s opinions. Indeed, admittedly State Farm did not have reasonable proof to establish that it was not responsible for payment of the benefits within said 30-day period, as required by Section 627.736, Florida Statutes, and the interpretations thereof.
In contrast, Jones failed to appear for the insurer’s requested independent medical examination scheduled outside the 30-day period and outside the municipality of Jones’ residence or of his treatment. The Fifth District Court of Appeal in Jones reversed a final summary judgment for the insurer because Jones’ failure to appear at the scheduled IME did not relieve State Farm of any further duty to pay. Rather, whether Jones’ failure to appear was or was not so “unreasonable” so as to void coverage raised a genuine issue of material fact not appropriate for resolution on motion for summary judgment. Indeed, in a footnote, the court cautioned that State Farm would still be liable for PIP benefits incurred before the request for the examination was made:
. . . Even if Jones’ refusal to submit to an examination were considered unreasonable, State Farm is not relieved from all liability for PIP payments; rather, the statute provides that “[i]f a person unreasonably refuses to submit to an examination, the personal injury protection carrier is no longer liable for subsequent personal injury protection benefits.” s 627.736(7)(b), Fla. Stat. (1993) (emphasis added). Under this statute, State Farm would appear to remain liable for PIP benefits incurred before the request for an examination was made. (Citation omitted) Jones v. State Farm Mutual Automobile Insurance Company, 694 So.2d at 167, n. 1.
It was also true in Jones that the insurer did not have “reasonable proof to establish that [it was] not responsible for the payment” of the medical bills, as required by the statutory standard. Instead, the Fifth District noted in Jones that the insurer fell short of that test when it had, at best, “ `reasonable proof’ to question the relationship of Jones’ left knee surgery….” Jones v. State Farm Mutual Automobile Insurance Company, 694 So.2d at 166. It was at this juncture in the opinion that the Fifth District spoke about State Farm’s right to contest the claim in the context of Jones’ obligation to submit to an independent medical examination and of his consequent failure to do so, stating in dictum:
Thus, State Farm is exposed to the statutory penalties attendant to an “overdue” claim. State Farm does not, however, lose its right to contest the claim. For this reason, State Farm’s failure to pay the claim in thirty days does not relieve Jones from the obligation to submit to an independent medical examination. (Emphasis added) Jones v. State Farm Mutual Automobile Insurance Company, 649 So.2d at 166.
Therefore, in light of the substantially different dynamics that generated the dictum in Jones, and more particularly in light of the well settled, controlling precedent emanating from the Third District Court of Appeal, as exemplified by Pacheco and Crooks,3 I must disagree with the majority’s decision to reverse the final summary judgment entered in favor of the insured Perez in the court below. I would therefore affirm.
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1Section 627.736(4)(b), Florida Statutes, reads in pertinent part:
Personal injury protection insurance benefits paid pursuant to this section shall be overdue if not paid within 30 days after the insurer is furnished written notice of the fact of a covered loss and of the amount of the same. . . . However, any payment shall not be deemed overdue when the insurer has reasonable proof to establish that the insurer is not responsible for the payment, notwithstanding that written notice has been furnished to the insurer. s 627.736(4)(b), Fla. Stat. (1997).
2This language was utilized by the Third District in Pacheco to address the insurer’s attempt to limit the reach of the holdings in Crooks and Dunmore, much like the majority does here. In flatly rejecting the insurer’s argument, the court distinctly stated:
Fortune attempts to distinguish Crooks and Dunmore by reasoning that neither case construed the phrase “reasonable proof of loss,” and neither case analyzed whether an insurer could itself define that phrase. Although Fortune is correct on both counts, it overlooks the broader holding of both cases — that the legislature provided no exceptions to the thirty-day period, and that courts will not countenance insurers’ attempts to create their own means of tolling that period. Fortune Insurance Company v. Pacheco, 695 So.2d at 395-396.
3I cannot agree with the majority’s attempt to reconcile its holding with the rationale of Dunmore, Pacheco, Crooks, and Martinez v. Fortune Insurance Company, 684 So. 2d 201 (Fla. 4th DCA 1996), by attaching undue significance to the fact that in all of these cases, the insurer either did not contest or had paid the claim after the insured filed suit, and that the only issue decided in these cases was therefore whether the insured was entitled to statutory interest or attorney’s fees from the insurer. While this may be so, the distinction is one without a difference in my view. The fact that the insurer pays a claim may well stem from the insurer’s candid recognition of its liability therefor and of the absence of any defense against it. There is no sound basis to believe that these cases would have been decided differently had the insurers therein failed to pay the claims altogether (a worse scenario at best), and none of these cases say so either expressly or impliedly.
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