In Nunez v. GEICO General Ins. Co., (decided June 27, 2013), the Florida Supreme Court struck down a common policy condition which insurers had used to investigate claims for No-Fault benefits.  The Florida Supreme Court reviewed the Motor Vehicle No-Fault Law, sections 627.730 – 627.7405, Florida Statutes (aka the Personal Injury Protection or PIP statute), in its pre-January 1, 2013 form, and held that the Law did not authorize an insurer to require the insured to attend an examination under oath (EUO) as a precondition to obtaining No-Fault coverage.

The court explained that an EUO is an investigatory tool in which the insurer takes the insured’s statement under oath.  In this case, GEICO sought to take Ms. Nunez’ EUO regarding a September 17, 2008 accident.  When she failed to attend the EUO, GEICO denied coverage.  Her lawsuit was removed to federal court where the district court ruled in GEICO’s favor finding Ms. Nunez’ attendance at an EUO to be a prerequisite to coverage.  She took an appeal to the U.S. Circuit Court of Appeals which certified a question to the Florida Supreme Court.

The Florida Supreme Court answered the question in a 5-2 decision which found that an EUO-provision is not authorized by the No-Fault Law and, further, that the provision conflicts with the fundamental purpose of the Law.  The court noted that the purpose of the No-Fault Law is to ensure “swift and virtually automatic payment” of No-Fault benefits.  The court viewed an EUO as an impediment to “swift and virtually automatic payment.”

The court rejected GEICO’s arguments that an EUO provision is consistent with the No-Fault Law.  The court summarily dismissed GEICO’s concerns about insurance fraud and the need to investigate claims.

Although the decision does not prevent an insurer from asking its insured to submit to an EUO, the decision does prevent an insurer from denying coverage when the insured refuses.  As a result, the decision removes this investigation tool from the insurer’s toolbox.  While the statute does authorize other investigation tools (such as physical exams by physicians chosen by the insurer, written reports by treating physicians, and sworn earnings statements from employers), in our view those tools are not a reasonable substitute for an EUO on many issues.

The court viewed the No-Fault Law as ensuring “swift and virtually automatic payment,” but coverage must still be found in order for any payment obligation to exist.  For example, the Law covers the policyholder’s relatives when residing in the same household as the policyholder.  Section 627.736(4)(e)4, Florida Statutes.  In our view, an EUO is a practical, reasonable and swift method of investigating the issue of residency, and the issue is not effectively investigated through other tools.  To the court, it made “no sense” that coverage could “evaporate” because the insured refuses to submit to an EUO, but the court failed to acknowledge that an EUO often helps to determine whether coverage exists in the first place.

Finally, the court recognized that the No-Fault Law had been amended recently, effective January 1, 2013, to explicitly require insureds to comply with policy terms regarding an EUO.  See section 627.736(6)(g), Florida Statutes.  The court noted that the amendment did not “inform or control” its disposition of Ms. Nunez’ case because her policy was issued in 2008, her accident happened in 2008, and her lawsuit was filed in 2009.  The court further found the amendment to be a substantive change in the law rather than a clarification of prior legislative intent.  Although the court did not expressly rule that the amendment does not apply retroactively, that is the import of its finding of a substantive change.  Cryptically, the court stated that it would not comment on the “validity” of the amendment.