Jeffrey P. Gale, P.A. // Insurance Companies, Policyholders, and the Never-Ending Battle Over Claims: A Look at State Farm v. Curran

I have blogged extensively on the constant tug-of-war between insurance companies and their insureds when it comes to claims handling. While insurers are relentless in demanding timely premium payments, their approach to claims is often summarized in two words: delay and deny.

Insurance carriers have an arsenal of tools designed to execute this strategy. Examinations Under Oath (EUOs), Independent Medical Examinations (IMEs), Compulsory Medical Examinations (CME), appraisals, allegations of policy misrepresentation, and claims of “failure to cooperate” are just a few of their go-to tactics. Some of these are provided by statute, others are embedded in the fine print of policy contracts.

At its core, an insurance policy is a contract. Although statutory law governs certain rights and obligations in the insurer-insured relationship, many critical aspects are controlled by the terms of the insurance policy itself. Inevitably, disputes arise over how these provisions are applied. When negotiations fail, courts are left to sort through the rubble.

One notable battleground in this ongoing war was addressed in the Florida Supreme Court’s decision in State Farm Mutual Automobile Insurance Co. v. Curran, 135 So. 3d 1071 (Fla. 2014). The legal issue in Curran was succinctly framed as:

‘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?’

Here’s what happened:

Curran, insured by State Farm, sustained catastrophic injuries in a motor vehicle accident. The at-fault driver’s insurance coverage was insufficient, so Curran sought the $100,000 in uninsured motorist (UM) benefits under her State Farm policy. She gave State Farm 30 days to tender the limits, estimating her damages at $3.5 million due to Reflex Sympathetic Dystrophy Syndrome (RSD). On the 29th day, State Farm demanded Curran submit to a Compulsory Medical Examination (CME) under the policy.

The CME request was made pursuant to the terms of the insurance 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.”

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

Curran refused to attend the CME and instead filed suit.

At trial, the jury awarded Curran $4.65 million in damages. State Farm appealed, arguing that Curran’s failure to attend the CME constituted a material breach of a condition precedent to coverage, resulting in a forfeiture of all policy benefits, regardless of whether State Farm was prejudiced by her non-compliance.

The Fifth District Court of Appeal disagreed. The court held that although Curran breached the contract by not attending the CME, State Farm still had the burden to plead and prove prejudice resulting from that breach in order to avoid liability. Simply pointing to the breach itself was not enough.

Recognizing the public importance of the issue, Florida’s Supreme Court reviewed the decision and, in a 5-2 ruling, affirmed the Fifth DCA. The Court held that an insured’s failure to comply with a CME provision does not automatically forfeit coverage unless the insurer can demonstrate actual prejudice. Importantly, the burden to prove prejudice rests with the insurer, as part of its affirmative defense.

State Farm’s mistake? It assumed the forfeiture argument would carry the day and neglected to develop the record on prejudice. In fact, the Court noted that Curran had offered to submit to a Rule 1.360 medical examination after litigation began, but State Farm strategically deferred the examination, betting everything on its forfeiture argument. That gamble failed.

The takeaway? Curran was a landmark victory for policyholders, but it also serves as a cautionary tale. Insureds who ignore policy requirements, even minor ones, do so at their peril. The stakes in Curran were immense: either collect the $4.65 million jury verdict — to recover this amount, instead of just the $100,000 UM limit, the insured will be required to show, in a separate trial, that State Farm was in bad faith for failing to tender the $100,000 within the demanded 30 day time period. She preserved the right to do this by filing a Civil Remedy Notice — or walk away with nothing. Had State Farm done a better job of presenting prejudice evidence, the outcome could have been very different.

Rest assured, insurance companies have studied Curran carefully. In future cases, they’ll be prepared to document prejudice to enforce forfeitures. Policyholders and their attorneys must be equally vigilant in navigating these contract provisions.

*********************************************************

Contact us toll free at 866-785-GALE or by email (jgale@jeffgalelaw.com) for a free, confidential consultation to learn your legal rights.

Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.

While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.