7 Fla. L. Weekly Supp. 74a
Insurance — Personal injury protection — Endorsement in PIP policy which provides that insurer is entitled to refuse to pay medical expenses it deems to be unreasonable or unnecessary is without force or effect to extent that policy purports to authorize insurer to refuse to pay medical expenses that would be properly payable under Section 627.736 — Indemnification — Endorsement provision which provides that insurer will pay resulting defense costs and any resulting judgment against insured if insured is sued by medical services provider because insurer refused to pay medical expenses deemed unreasonable or unnecessary does not entitle insurer to summary judgment — To extent that endorsement purports to substitute indemnification for insurer’s obligation to pay insured’s related, reasonable and necessary medical expenses under Section 627.736, endorsement runs afoul of section 627.418(1) and does not vary insurer’s statutory duties
MICHAEL C. FORLENZA, JR., Plaintiff, v. ALLSTATE INDEMNITY COMPANY, Defendant. County Court, 18th Judicial Circuit in and for Brevard County. Case No. 99-9578-CC-4. September 27, 1999. David E. Silverman, Judge. Counsel: Kimberly B. Bonder, Melbourne, for Plaintiff. Christopher A. Layman, Turner Law Firm, L.L.C., Melbourne, for Defendant.
ORDER
This cause coming before this Court on the Motion for Partial Summary Judgment filed by the defendant and the Court having reviewed the pleadings, the motion and any sworn affidavits, having considered the argument of counsel, and having been otherwise advised in the premises,
The Court finds as a matter of fact and concludes as a matter of law, as follows:
Introduction
The motion and supporting documents assert that the insured incurred medical expenses for services that were necessary and related to the accident covered by plaintiff’s personal injury protection (PIP) policy. However, the insurer deemed the bills excessive and paid only a portion of each.
The Right to Refuse Payment
The insurer contends that as a result of a policy endorsement entitling the insurer to refuse to pay medical expenses it, “deems to be unreasonable or unnecessary.”
Initially we note that the endorsement came into effect after the policy and there may be a question as to whether it was consented to by the insured.
Assuming that such consent is established, the issue becomes whether the endorsement can be reconciled with the provisions of Section 627.736(1)(a), Florida Statutes, that require the insurer to pay,
Eighty percent of all reasonable expenses for necessary medical, surgical, X-ray, dental, and rehabilitative services, including prosthetic devices, and necessary ambulance, hospital, and nursing services. . .
The statutory scheme of Chapter 627 erects an objective standard, that mandates payment of medical expenses that are related, reasonable and necessary — not merely those found subjectively by the insurer to be appropriate. See, Palma v. State Farm Fire & Cas. Co., (4th DCA 1986) 489 So. 2d 147, 148-49, construing the statute, “liberally in favor of the insured,” with respect to what constitutes a, “necessary medical service.”
The law further provides in Section 627.418(1), Florida Statutes, that noncomplying endorsements are ineffective to vary the insurer’s statutory obligations.
Any insurance policy, rider, or endorsement otherwise valid which contains any condition or provision not in compliance with the requirements of this code. . . shall be construed and applied in accordance with such conditions and provisions as would have applied had such policy, rider, or endorsement been in full compliance with this code. . .1
Therefore, the endorsement is without force or effect to the extent that the policy purports to authorize the insurer to refuse to pay medical expenses that would be properly payable under Section 627.736.2
Consequently, there remains a question of fact as to whether the expenses are reasonable and payable within the purview of the pertinent provisions of Chapter 627.3
The Duty to Indemnify
The insurer also asserts that another provision of the endorsement entitles it to summary judgment.
This portion provides that if the insured is sued by a medical services provider because the insurer refused to pay medical expenses deemed unreasonable or unnecessary, the insurer, “will pay resulting defense costs and any resulting judgment against the insured person.”
The argument runs that as a result of this provision, the insured would sustain no damages as a result of wrongful non-payment because the insurer is obligated to indemnify. Damages are, of course, an element of the plaintiff’s breach of contract action. See, H. Trawick, Trawick’s Florida Practice and Procedure, 1990 Ed., Section 6-17.
If effective as advanced by the insurer, it would preclude successful suit by an insured against the carrier even though the insurer wrongfully refused all payments, so long as it paid the cost of defense and the judgment in favor of the health care provider. The argument overlooks the potential that the insured will incur consequential damages, whether or not recoverable, from the loss of credit and/or the rendition of an adverse judgment, in addition to the judgment amount and defense costs, if the duty to indemnify is substituted for the duty to pay the reasonable expenses.
Moreover, the right to have the expenses paid is distinct and superior to the right to indemnification.4 To the extent that the endorsement purports to substitute indemnification for its obligation, under Section 627.736, and the other pertinent provisions of Chapter 627, to pay the insured’s related, reasonable and necessary medical expenses, it runs afoul of Section 627.418(1) and does not vary the insurer’s statutory duties.
Additionally, in the instant case upon defendant’s refusal to pay the disputed charges, the insured paid them and claims damages as a result. The endorsement providing for indemnification on an adverse judgment and for defense costs appears inapplicable where the plaintiff pays the bill.5 Damages, in this case, remain a question of fact.
Judgment
It is hereby ORDERED and ADJUDGED that the said Motion for Partial Summary Judgment is denied and disposed.
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1See also, Section 627.412(2), Florida Statutes, which provides that,
No policy shall contain any provision inconsistent with or contradictory to any standard or uniform provision used or required to be used. . .
2The instant endorsements, substituting indemnification and payment of defense, which have subtle but important differences from the insurer’s original obligations under the policy, are reminiscent of the type of provision that led the Florida Supreme Court to construe insurance policies liberally in favor of the insureds, stating,
And so long as [insurance policies] are drawn in such a manner that it requires the proverbial Philadelphia lawyer to comprehend the terms embodied in it, the courts should and will construe them liberally in favor of the insured and strictly against the insurer to protect the buying public who rely upon the companies and agencies in such transactions.
Hartnett v. Southern Ins. Co., 181 So. 2d 524, 528 (Fla. 1965).
3However, the case of United Automobile Insurance Company vs. Metalit Viles, 3rd District, 24 Fla. L. Weekly D14a, December 17, 1998, suggests that pursuant to Section 627.736(7)(a), Florida Statutes, before an insurer may properly refuse payment, a physician is required to have certified that nonpayment is appropriate.
Applying these principles to the language at issue in Section 627.736(7)(a), we agree with the trial court’s well reasoned analysis concluding that United Auto was required to first obtain a physician’s report before refusing to pay medical bills. The statute plainly provides that an insurer must first obtain the referenced report before electing to deny payment.
4By mandating that appropriate expenses be paid by the insurer, the law contemplates insurance against any liability to health care service providers. It was designed to avoid insureds being pursued as debtors by their medical providers. Thereby promoting a satisfactory relationship conducive to effective medical treatment. As stated in Delta Cas. Co. v. Pinnacle Medical, Inc., 721 So.2d 321, 323 (5th DCA 1998),
Most owners of a motor vehicle required to be registered in Florida must buy PIP insurance. § 627.733, Fla. Stat. Under the statutory PIP scheme, the insured is assured of receiving certain medical, disability, and death benefits, but loses the common law right to sue a negligent party for those same damages. § 627.736(3), Fla. Stat. To further the purpose of the law, section 627.736(5) requires that a medical provider charge only a reasonable amount for services rendered to an insured and that those benefits are to be paid directly to the provider if the insured so directs on a form approved by the Department of Insurance.
Rather than providing such insurance, the endorsement does not purport to preclude such litigation and provides merely that the insurer will pay to defend the lawsuit and if the insured is found liable, pay the judgment. See, Black’s Law Dictionary, 6th Edition, West, 1990, p. 804-805 for the distinction between “indemnity” and “liability” insurance.
5The defendant has not reimbursed the plaintiff and such reimbursement may constitute a settlement within the meaning of Wollard v. Lloyd’s and Companies of Lloyd’s, 439 So.2d 217 (Fla. 1983), entitling plaintiff to recover attorneys fees.
However, in the event that the endorsement is otherwise effective, if the insured has failed to mitigate by omitting to invoke the duty of the defendant to indemnify, the insured may be precluded from damages and, as a result of the failure of that element, any recovery of attorney’s fees. “Damages are not recoverable for harm that the plaintiff should have foreseen and could have avoided by reasonable effort without undue risk, expense, or humiliation.” Restatement (First) of Contracts Sec. 336(1) (1932).
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