Wouldn't it be nice if you never had to buy insurance untilafter you had a claim? Think of the money you could savenot having to purchase auto insurance until your teenager crashedthe car. What about the cash you could bank if you didn't have topay those astronomical Florida homeowner's premiums until ahurricane rendered your home uninhabitable? But let's face it,that's neither the intent nor purpose of insurance, which providescoverage for certain risks for which a policyholder pays a premiumfor risk minimization or mitigation. But what happens when emotionsget in the way of the law?

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Having overseen a number of litigated cases during my tenure inclaims, it was certainly not uncommon for juries to invoke emotionin the courtroom. While they should not do this, we cannot losesight of the fact that humans are emotional beings and at times,even the most callous of people will be brought to their knees whentheir heartstrings are tugged.

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As many fellow professionals can attest, careful considerationis often given to the credibility of both the insured and theclaimant. If either had serious credibility issues, sordid pasts,or other such negatives, then the strategy was often different thanif the parties were pillars of the community.

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Consideration is often given to the highly charged emotionalissues such as DUIs, tractor-trailer crashes or the death of achild, to name a few such instances. It is in the courtroom thateveryone becomes humanized and despite the emotion, the hope is fora fair and accurate outcome based upon the law and facts.

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Insurance fraud cancellation

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Photo: ZoltanFabian/Shutterstock

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A recent Florida appellate decision exposes the need to keepemotions at bay, while focusing on the facts. In the case of GEICOv. Kisha, a Florida jury found there to be coverage despite theinsured's policy having been legally cancelled pursuant to Floridalaw. In reviewing the case, the facts present as such:

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The insurance policy had a designated policy period fromDecember 19, 2010, to June 19, 2011, and provided PIP andunderinsured/uninsured motorist coverage to Madeline Kisha and herhusband, Stephen Kisha. The policy contained provisions under theheading “CANCELLATION BY US,” that stated:

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“We may cancel this policy by mailing to you, at the addressshown in this policy, written notice stating when the cancellationwill be effective. This notice will be mailed by United States PostOffice certificate of mailing.

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We will mail this notice:

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(a) 10 days in advance if the proposed cancellation is fornonpayment of premium or any of its installments when due;

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(b) The mailing or delivery of the above notice will besufficient proof of notice. The policy will cease to be in effectas of the date and hour stated in the notice.”

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According to the court documents, on March 14, 2011, GEICO sent the Kishas themonthly bill requiring payment of $195.20 by March 29th. When GEICOdid not receive the payment by the due date, it sent a notice ofcancellation for nonpayment of premium to the Kishas on April 4th.This notice was in conformance with the cancellation provisionspreviously quoted and advised the Kishas that unless they submittedthe past due payment prior to April 20th, the effective date ofcancellation, their policy would be cancelled as of that date.

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The waters became somewhat murky when the insured provided acancelled check for the proper premium amount dated on April 17th.However, the postmark of the envelope in which the check was mailedwas dated April 25th, past the cancellation date. On May 8th, theKishas were involved in a rear-end collision and subsequently fileda claim.

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The carrier responded with a reservation of rights letter to theclaim parties, indicating that it did not appear that there wascoverage at the time of the loss, as the policy had lapsed on April20th for non-payment of premium.

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auto insurance

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Photo: zimmytws/Shutterstock

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When presented to the jury, there was evidence that the Kishashad been longstanding insureds. Previously referenced courtdocuments indicated policies dating back between 17 and 24 years.In addition, GEICO did receive a check for the premium amount,which was cashed and deposited, which is a standard practice.

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With a jury heavily laden with emotion, and plaintiffs arguingestoppel, it is somewhat understandable how the jury came to theirdecision to award coverage, but it was not a proper decision hadthe jury focused solely on the law, which is what they wereempaneled to do.

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The premium check was received on April 28th, eight days afterthe policy lapsed. The check was deposited as a matter of courseand held for a period of two weeks to give the policyholders ampletime to contact GEICO to get their policy reissued. The carrierasserted that it kept the premium payment for the period of time tocomply with section 627.7283(2), Florida Statute (2012), whichrequires that when an insurer cancels a policy, it is to mail anyunused premium to its insured within 15 days of cancellation. Thestatute further provides that if the check is not mailed out withinthe 15-day period, the insurer will owe the insured 8% interest onthe unearned premium due until it is returned §627.7283(3) Fla.Stat. (2012).

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The carrier issued a refund check that was written and dated May14th and was mailed out to the Kishas on May 17th. Madeline Kishaadmitted that at the time of the accident she did not know thatGEICO had deposited the check, and Stephen Kisha stated that he didnot know GEICO had deposited the check until after suit was filed.Thus, the carrier appropriately contended that the plaintiffs couldnot have detrimentally relied on the deposit of a check that theydid not know had even been deposited.

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While the plaintiffs garnered sympathy from the jury based uponlength of policy term and theory of estoppel, the defense arguedthat the only relevant contract was the one cancelled fornon-payment. The trial court allowed significant testimony that didnot appear to be relevant to the issue at hand.

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On appeal, the justices found that the length of contract wasnot relevant and should not have been admissible, reversing andremanding the case back for a new trial.

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The challenge of coverage issues is that they can be emotionallycharged. Let's face it, the insurance industry generally is notshowered in adoration by the public. According to an Ipsospoll, negatives outnumbered positives among the public by morethan two to one. Compounding matters is a recent Insurance ResearchCouncil poll that showed nearly one quarter of Americans believes itacceptable to inflate insurance claims.

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Having investigated claims with questionable coverage, it is notunheard of for policies to lapse and then a loss to occur. It isalso not uncommon to have parties to the claim attempt to addcoverage after a loss has occurred.

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Insurance fraud is a complex phenomenon as detailed in my newthriller, Swoop &Squat. While a work of fiction, many aspects of the book werederived from very real situations involving everything fromcoverage issues to international criminal enterprises. The key togetting the right outcomes on claims is to focus on the facts; justthe fact.

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Christopher Tidball is an author, speaker and claimsconsultant. He spent more than 25 years in the property &casualty industry in adjusting, management and leadership roles. Tolearn more, please visit www.christidball.com.

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