In State Farm Mutual Auto. Ins. Co. v. Curran, 2014 WL 1010658, decided March 13, 2014, the Florida Supreme Court upheld Ms. Curran’s recovery of uninsured motorist (UM) benefits despite an uncontested finding that she had breached the automobile insurance policy. After an accident, Ms. Curran made a claim for her $100,000 UM benefits. Her attorney indicated that the damages were approximately $3.5 million.  After receiving the UM claim, State Farm requested a medical examination of Ms. Curran. Through her attorney, Ms. Curran refused to attend the examination, and she filed a lawsuit instead.   

State Farm argued that Ms. Curran’s lack of cooperation precluded recovery of UM benefits. The court disagreed. The court found that the duty to cooperate by submitting to a medical examination was a condition subsequent, rather than a condition precedent. While breach of a condition precedent would preclude recovery, the breach of a condition subsequent precludes recovery only when the insurer has been prejudiced. The court imposed the duty on the insurer to prove that it was prejudiced by breach of a condition subsequent.

As to prejudice in this case, the court noted that State Farm had not advanced a specific argument establishing its prejudice. The court refused to remand the case for further proceedings and fact-finding regarding prejudice. Instead, the court reviewed the facts and concluded that State Farm had not been prejudiced. The court found no prejudice because State Farm obtained a medical examination of Ms. Curran after the lawsuit was filed. The court placed emphasis on the fact that the medical examination ultimately confirmed that Ms. Curran was injured. Since State Farm ultimately learned Ms. Curran was injured, there was no harm.  But lost in that ruling is any recognition that the timing of the confirmation is significant. 

In my view, timing should matter – State Farm should have been afforded confirmation of the injury at a time when confirmation would have been helpful to resolving the matter. Thus, the case should have been remanded for further consideration of timing and prejudice.

State Farm was prejudiced because it was denied the opportunity to confirm the injury before suit, i.e. before it incurred expense in defending a lawsuit. Had the medical examination occurred when requested, the claim could have been evaluated and the policy limits tendered, which would have mooted any need for a lawsuit.  The policy’s cooperation clause should have been construed more broadly to facilitate the goals of claim settlement and lawsuit avoidance. All parties, including a large insurer, are prejudiced when they incur unnecessary lawsuit expenses.

Furthermore, State Farm was prejudiced because it was denied the medical examination during the 60-day period provided by section 624.155, Florida Statutes. Ms. Curran’s attorney had filed a civil remedy notice under the statute, giving notice of intent to pursue a “bad faith” claim. Again, had the medical examination occurred when requested, the policy limits could have been tendered during the statutory period thereby precluding any “bad faith” claim. But Ms. Curran’s attorney evidently wanted to prevent State Farm from investigating the claim, in the hope that State Farm would not tender the policy limits and Ms. Curran could claim “bad faith” and seek to recover a larger sum in a “bad faith” claim.

Ultimately, this case did not decide whether delay which causes missed settlement opportunities and which leads to lawsuit expenses constitutes prejudice. As a result, insurers should raise and preserve those arguments when a UM claimant fails to attend a requested pre-suit medical examination.