State Farm Mut. Auto. Ins. Co. v. Curran

• Decision Date: 13 March 2014
• Docket Number: No. SC12–157.,SC12–157.
• Citation: 135 So.3d 1071
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner, v. Robin CURRAN, Respondent.
• Court: Florida Supreme Court

135 So.3d 1071

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner,

v.Robin CURRAN, Respondent.

No. SC12–157.

Supreme Court of Florida.

March 13, 2014.

Elizabeth Koebel Russo of Russo Appellate Firm, P.A., Miami, FL; and The Turner Law Firm, LLC, Sarasota, FL, for Petitioner.

Gary M. Farmer, Sr., of Farmer Jaffe Weissing Edwards Fistos & Lehrman, P.L., Fort Lauderdale, FL; O. John Alpizar, Palm Bay, FL; and Marjorie Gadarian Graham, Palm Beach Gardens, FL, for Respondent.

Bard Daniel Rockenbach of Burlington & Rockenbach, P.A., West Palm Beach, FL, for Amicus Curiae Florida Justice Association.

LABARGA, J.

This case is before the Court for review of the decision of the Fifth District Court of Appeal, sitting en banc, in State Farm Automobile Insurance Co. v. Curran, 83 So.3d 793 (Fla. 5th DCA 2011). In its decision the district court ruled upon the following question, which the court certified to be of great public importance:

WHEN AN INSURED BREACHES A [COMPULSORY MEDICAL EXAMINATION] PROVISION IN AN UNINSURED MOTORIST CONTRACT, (IN THE ABSENCE OF CONTRACTUAL LANGUAGE SPECIFYING THE CONSEQUENCES OF THE BREACH) DOES THE INSURED FORFEIT BENEFITS UNDER THE CONTRACT WITHOUT REGARD TO PREJUDICE, OR DOES THE PREJUDICE ANALYSIS DESCRIBED IN BANKERS INSURANCE CO. V. MACIAS, 475 So.2d 1216, 1218 (Fla.1985), APPLY? IF PREJUDICE MUST BE CONSIDERED, WHO BEARS THE BURDEN OF PLEADING AND PROVING THAT ISSUE?

Id. at 806–07. We have jurisdiction. Seeart. V, § 3(b)(4), Fla. Const. In line with the legal analysis we adopt, we clarify the issue presented by rephrasing the certified question as follows:

WHEN AN INSURED BREACHES A COMPULSORY MEDICAL EXAMINATION PROVISION IN AN UNINSURED MOTORIST CONTRACT, DOES THE INSURED FORFEIT BENEFITS UNDER THE CONTRACT WITHOUT REGARD TO PREJUDICE? IF PREJUDICE MUST BE CONSIDERED, WHO BEARS THE BURDEN OF PLEADING AND PROVING THAT ISSUE?

We answer the first portion of the certified question in the negative. As to the second portion of the certified question, we hold that the insurer as the defensive party pleading an affirmative defense has the burden of pleading and proving prejudice. For the reasons explained below, we approve the decision of the Fifth District.

BACKGROUND AND FACTS

The facts of this case are fully set forth in the Fifth District's opinion in Curran.Id. at 794–800. We briefly summarize the facts here. This case arose as a result of a June 2006 traffic accident involving Robin Curran, insured by State Farm Automobile Insurance Company (State Farm), and the underinsured motorist who rear-ended Curran's car. Subsequently, Curran and the underinsured motorist reached a settlement agreement, which was approved by State Farm. On July 19, 2007, through counsel, Curran requested her $100,000 underinsured motorist policy limits and offered to settle and release State Farm from an uninsured motorist (UM) lawsuit if it tendered the policy limits no later than August 18, 2007. In the letter to State Farm, Curran indicated that her damages were estimated to be $3.5 million because she suffered from reflex sympathetic dystrophy syndrome (RSD) type 1.¹ On August 17, 2007, State Farm contacted Curran's counsel to schedule a compulsory medical examination (CME) with Dr. Joseph Uricchio ² pursuant to the terms of the policy, which provide that a claimant has the duty to

be examined by physicians chosen and paid by us as often as we reasonably may require. A copy of the report will be sent to the person upon written request. The person or his or her legal representative if the person is dead or unable to act shall authorize us to obtain all medical reports and records.

Further, in a different section, the policy also provided that “[t]here is no right of action against [State Farm] until all terms of this policy have been met.”

After this initial letter, Curran and State Farm exchanged several contentious letters regarding attempts by State Farm to schedule the CME.³ Ultimately, however, Curran refused to attend a CME despite receipt of a reservation of rights letter from State Farm stating that her failure to “assist and cooperate” with the insurer may result in a denial of coverage. Instead, Curran filed suit against State Farm. State Farm answered and asserted an affirmative defense contending that Curran was not entitled to coverage under the policy because she breached the CME provision, which State Farm characterized as a condition precedent to coverage under the policy. Thereafter, State Farm moved for summary judgment on the coverage issue claiming it was entitled to decline coverage as a matter of law. Curran also filed a motion for summary judgment contending that the CME provision was not a condition precedent to coverage and that, at worst, her complaint was filed prematurely. Curran further claimed that she did not refuse to submit to a CME, but only asserted reasonable requests to protect her own personal interests, which requests had been ignored by State Farm. Following the hearing on both motions, the trial court entered its order granting summary judgment in favor of Curran.⁴

Curran's complaint then proceeded to a jury trial, which culminated in an award of $4,650,589 in damages to Curran. Curran, 83 So.3d at 800. The trial court entered a judgment against State Farm for the $100,000 UM policy limits and State Farm appealed the judgment to the Fifth District.⁵

On appeal, the Fifth District sitting en banc concluded that under these undisputed facts, Curran did not act reasonably in insisting that State Farm abandon its contractual rights as a condition to an examinationand, consequently, breached the contract when she failed to attend the CME. It concluded, however, that in order “to avoid liability under the insurance policy based on noncompliance with the CME clause, it was essential that State Farm plead and prove a material breach, which means a breach causing prejudice.” ⁶Id. at 803.

In concluding that State Farm must plead and prove prejudice, the Fifth District relied on this Court's precedent in Bankers Insurance Co. v. Macias, 475 So.2d 1216 (Fla.1985), and Custer Medical Center v. United Automobile Insurance Co., 62 So.3d 1086 (Fla.2010), for support.⁷ The district court noted that in Macias, this Court concluded that neither the failure to timely report a claim nor the breach of the duty to cooperate gives rise to the automatic forfeiture of insurance benefits absent prejudice to the insurer. Curran, 83 So.3d at 802. Applying Macias to the contractual provision here, the Fifth District concluded that the provision was analogous to the claims notice provision discussed in Macias, but also overlapped with the insured's duty to cooperate in that the insurer was given the opportunity to obtain evidence from the insured. Further, the court observed that in its reservation of rights letter dated September 18, 2007, State Farm treated Curran's actions as a breach of the duty to cooperate. However, the Fifth District concluded that a determination of whether the CME clause in the contract was more analogous to a claims notice provision or a cooperation clause was relevant only to the question of who has the burden on the issue of prejudice. Curran, 83 So.3d at 802. The court then noted that Custer resolved this issue by finding that a “CME provision is a ‘condition subsequent,’ the nonoccurrence of which is an affirmative defense that the insurer has the burden to plead and prove.” See Curran, 83 So.3d at 802–03 (citing Custer, 62 So.3d at 1097–99).

Having determined that in order to defeat coverage State Farm had the burden to plead and prove that Curran's breach caused prejudice, the Fifth District held that State Farm failed to meet its burden, stating:

Even had State Farm argued prejudice, the record refutes any such allegation, at least to the extent that it would affect entitlement to the UM contract benefits. Immediately upon filing suit (seven days after the scheduled examination), Curran offered to submit to a medical examination pursuant to Florida Rule of Civil Procedure 1.360 (also well before the expiration of the time period under the Civil Remedies Notice). State Farm declined Curran's offer, electing instead to defer an examination until after the court first decided “if your client's failure to cooperate and failure to comply with all policy terms, conditions, limits, provisions and applicable Florida law affects coverage under the provisions which you now seek benefits.” After the lower court ruled, the record reflects that Curran submitted to a CME with Dr. Uricchio. State Farm elected not to call Dr. Uricchio as a trial witness. There is no indication that the validity of the CME was affected by the short lapse of time attributable to Curran or that the rule 1.360 examination was materially different from the CME State Farm would have performed under the contract. The effect of Curran's breach was clearly inconsequential as it pertained to the merits of her claim for UM benefits.

Id. at 806 (footnote omitted). The Fifth District then certified a question to this Court as one involving great public importance.⁸Curran, 83 So.3d at 807.

State Farm contends that Curran's failure to attend a CME is a breach of a condition precedent to both coverage and to suit, which constitutes a material breach of the policy resulting in forfeiture of coverage irrespective of any showing of prejudice to State Farm. State Farm also contends that if prejudice is an issue, this Court should remand to the trial court so that State Farm has an opportunity to prove Curran's breach resulted in actual prejudice. Because Curran does not contest the Fifth District's finding that she breached the contract, the pertinent issue on appeal is whether the breach of such a provision precludes recovery under the policy as a matter of law without regard to whether the breach resulted in actual prejudice to the insurer. For the following reasons, we agree with the ...