Swearingen v. State Farm Mutual Automobile Insurance Company

Filing 32

ORDER denying 24 motion to dismiss. Signed by Judge James D. Whittemore on 12/9/2013. (KE)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
JOYCE L. SWEARINGEN, individually,
and on behalf of all others similarly situated,
Plaintiff,
Case No. 8:13-CV-986-T-27MAP

vs.

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Defendant.

ORDER
BEFORE THE COURT is State Farm's Motion to Dismiss Second Amended Complaint
(Dkt. 24), which Plaintiff opposes (Dkt. 25). Upon consideration, the motion (Dkt. 24) is DENIED.
In sum, the Second Amended Complaint contains factual allegations sufficient to provide Defendant
with fair notice of Plaintiffs claims and those allegations, when taken as true, state one or more
claims to relief that are plausible on their face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). Plaintiff alleges a case or controversy
between the parties concerning the allocation of PIP and MedPay benefits appropriate for declaratory
relief. The language of the policy does not preclude her claims as a matter of law. If she prevails
on Count I, she may be entitled to relief on Counts II and III.1
DISCUSSION

Swearingen purchased an automobile insurance policy from State Farm. As required by
statute, the policy provided $10,000 of PIP coverage. Swearingen elected Med Pay insurance for an
additional premium, providing $5,000 of medical payments coverage to supplement PIP.

1

This should not be construed as a comment on the merits of Plaintiff's claims.

Swearingen' s policy contained Amendatory Endorsement 6910 .3, which addresses both PIP
and Med Pay. The Med Pay provision of the Endorsement provides:
THERE IS NO COVERAGE UNTIL THE MEDICAL EXPENSE
BENEFITS OF ALLNO-FAULTCOVERAGEAVAILABLEFROMALL
SOURCES HAS BEEN EXHAUSTED. However, this does not apply to
the 20% of expenses that are not paid under no-fault coverage because of
the 80% limitation.

Limit of Liability

2.

Medical payments coverage is excess over and shall not
pay any medical expenses paid or payable under any nofault coverage, or which would otherwise be payable
except for:
a.

any no-fault deductible; or

b.

the amount of workers compensation
benefits paid or payable for the same
items of loss or expense.

What Is Not Covered Under [Med Pay]
THERE IS NO COVERAGE UNDER MEDICAL PAYMENTS:
1.

FOR ANY MEDICAL EXPENSES THAT ARE NOT
PAYABLE UNDER NO-FAULT COVERAGE, except
for:
a.

the 20% of expenses that are not paid
under no-fault coverage because of the
80% limitation;

b.

expenses not paid because the medical
expense benefits of all no-fault coverage
available from all sources has been
exhausted;

(Dkt. 23-1 at 40-42) (emphasis in original).
2

When the policy was in effect, Swearingen was injured in an automobile accident. She
obtained medical treatment and sent State Farm medical bills and lost wage claims for
reimbursement under PIP and Med Pay. State Farm exhausted Swearingen' s PIP coverage by paying
medical bills without covering her lost wages. Swearingen requested that State Farm reallocate
coverage so that PIP covered her lost wages and Med Pay covered the excess medical expenses after
PIP was exhausted. State Farm refused, contending that Med Pay could not be transferred to PIP
due to language in the Endorsement providing that"[m]edical payments coverage is excess over and
shall not pay any medical expenses paid or payable under any no-fault coverage .... "
Swearingen alleges that the insurance policy language is vague and ambiguous as to the
allocation of PIP and Med Pay coverage and that the policy should be construed in her favor to
provide the maximum coverage possible under the policy. She further alleges that if State Farm's
reading of the policy is adopted, it would render her PIP and Med Pay illusory and worthless,
essentially negating the premium she paid for the coverage. Swearingen alleges that State Farm
regularly allocates PIP and Med Pay in this manner, depriving insureds of coverage that would
otherwise be provided if lost wages were paid under PIP. According to Plaintiff, this practice is
followed throughout the state of Florida except in Lake County, where State Farm routinely grants
requests from its insureds to reallocate coverage to maximize reimbursement.
Swearingen originally filed this putative class action in state court. State Farm removed the.
case under the Class Action Fairness Act and now moves to dismiss the Second Amended
Complaint.
State Farm first argues that Swearingen's claims should be dismissed because once PIP
coverage was exhausted, State Farm satisfied its duty under the no-fault statute. In support, State
3

Farm cites various cases holding that once an insurer pays the policy limits to an insured, it is not
liable to pay any further PIP benefits. See, e.g., Progressive Am. Ins. Co. v. Stand-Up MRI of
Orlando, 990 So. 2d 3 (Fla. 5th DCA 2008); Sheldon v. United Servs. Auto. Ass 'n, 55 So. 3d 593

(Fla. 1st DCA 2010). Swearingen counters that her claims are viable under Bennett v. State Farm
Mutual Automobile Insurance Co., 580 So. 2d 217 (Fla. 2d DCA 1991). She is correct.

Bennett was insured by State Farm with both PIP and Med Pay coverage. Id. at 218. After
an accident, State Farm applied the coverage in a manner that exhausted PIP benefits before utilizing
Med Pay, thereby leaving no further benefits or coverage available to cover Bennett's lost wages.
Id. The Second District ordered State Farm to reapportion the benefits such that PIP coverage would

cover lost wages and Med Pay could be utilized for medical benefits. Id. The court admonished
State Farm that it "should have been more concerned about their obligation to provide their insured
with the maximum benefits allowable under the contract." Id. State Farm argued that it was not
required to reapportion the benefits because they were exhausted and Bennett had not made a request
for apportionment prior to the benefits being paid. The court rejected that argument, holding"[w]e
do not feel that it is right to deny insured's benefits for which they have clearly paid, because they
did not have the insight to determine how their payments should be apportioned." Id.
Bennett is directly analogous to this case, and Swearingen's claims are therefore viable. State

Farm's argument that Stand-Up MRI and Sheldon control, rather than Bennett, is unpersuasive. In
Stand-Up MRI and Sheldon, the plaintiffs were medical providers who sought reimbursement for

claims that were originally denied or reduced. See Sheldon, 55 So. 3d at 594; Stand-Up MRI, 990
So. 2d at 5. Both Courts of Appeal held that the insurer was not liable to the provider because PIP
coverage had been exhausted, and the insurer, therefore, could not be liable for additional PIP
4

payments. See Sheldon, 55 So. 3d at 595; Stand-Up MRI, 990 So. 2d at 8. Swearingen, however, is
not claiming additional PIP payments like the plaintiffs in Stand-Up MRI and Sheldon. Rather, she
is alleging that the PIP and Med Pay coverages were improperly apportioned, and is claiming only
Med Pay benefits. Under Bennett, she has stated a plausible claim.
State Farm argues that Bennett is distinguishable. First, it argues that Bennett was decided
at a time when Med Pay was part of the no-fault statute and therefore "intertwined with the public
policy rationale behind PIP." This argument is not supported by Bennett, which does not mention
Florida's no-fault statute or the Med Pay provision. There is no indication that the Second District
relied on the statutory framework for its decision.
Second, State Farm argues that Bennett is distinguishable because the Second District did not
examine the policy and did not address any potentially limiting language. See Bennett, 580 So. 2d
at 218. 2 While this is true, Bennett supports Swearingen's claim unless the exclusionary language
of her policy clearly precludes it. See Fayad v. Clarendon Nat'! Ins. Co., 899 So. 2d 1082, 1090 (Fla.
2005) ("[A]ny exclusion must be strictly construed against the drafter" and "any ambiguity in policy
language must be liberally construed in favor of the insured."). State Farm argues that the following
exclusion in the endorsement precludes a reallocation of PIP and MedPay benefits: "THERE IS NO
COVERAGE UNTIL THE MEDICAL EXPENSE BENEFITS OF ALL NO-FAULT COVERAGE
AVAILABLE FROM ALL SOURCES HAS BEEN EXHAUSTED."
State Farm interprets the exclusion too broadly in light ofSwearingen's allegations. Reading
the allegations in the light most favorable to Swearingen, she alleges that State Farm should have

2"We note that the insurance policy in question is not part of the record on appeal. No issue was raised regarding
limiting language which might require a different result than that reached herein."Bennett, 580 So. 2d at 218.

5

exhausted PIP by allocating PIP coverage to lost wages first and then to medical bills, after which
the remainder of the medical bills could be covered by Med Pay. Under this allocation, medical
expense benefits of no-fault coverage would be exhausted before Med Pay funds were disbursed, a
process consistent with the plain language of the exclusion. The exclusion therefore does not
conclusively preclude Swearingen's claim as a matter of law as State Farm contends.3
State Farm also argues that the claim should be dismissed because Swearingen was obligated
to notify State Farm to reserve some of her PIP benefits for lost wages before those benefits were
paid under PIP. The policy, however, does not require her to give that notice. Furthermore, this
contention is squarely rejected in Bennett, as noted, which reasons that insureds should not be denied
benefits just "because they did not have the insight to determine how their payments should be
apportioned." Bennett, 580 So. 2d at 218.
Finally, State Farm argues that the complaint should be dismissed because Swearingen does
not allege compliance with the no-fault statute's presuit demand requirement. Section 627.736(10)
requires written notice to initiate litigation concerning no-fault benefits: "As a condition precedent
to filing any action for benefits under this section, written notice of an intent to initiate litigation
must be provided to the insurer." § 627.736(10)(a), Fla. Stat. Swearingen alleges that a pre-suit
demand letter was unnecessary because ( 1) her claim is not an actions for benefits arising under the
no-fault statute, and (2) a pre-suit demand letter would have been futile given State Farm's standard
response to requests for reallocation (Dkt. 23

~~

35, 36, 52, 53, 62-64).

Even if the exclusion is ambiguous, Swearingen's claims would survive. See Wash. Nat'! Ins. Corp. v.
Ruderman, I I 7 So. 3d 943, 949-50 (Fla. 2013) ("[T]his Court has held many times ... that where the provisions of an
3

insurance policy are at issue, any ambiguity which remains after reading each policy as a whole and endeavoring to give
every provision its full meaning and operative effect must be liberally construed in favor of coverage and strictly against
the insurer.").

6

Regarding futility, State Farm contends that these allegations are insufficient because
Swearingen does not provide a sufficient factual basis supporting futility, and allowing Swearingen
to allege futility in this manner would "eviscerate the entire purpose of serving a demand letter on
an insurer" (Dkt. 24 at 21). At the motion to dismiss stage, however, all facts must be construed in
the light most favorable to Swearingen and all of her allegations must be accepted as true. The
Second Amended Complaint, applying these principles, adequately alleges that service of a demand
letter was unnecessary because this is not an action for benefits arising under the no-fault statute, and
in any event, she provides plausible factual support for her allegation of futility .4
Accordingly, State Farm's Motion to Dismiss Second Amended Complaint (Dkt. 24) is
DENIED. State Farm shall answer the Second Amended Complaint within fourteen (14) days of

the date of this Order.
DONE AND ORDERED this

.,.,.

C/

-day of December, 2013.

~1TEM0RE
::~istrict
Judge

Copies to:
Counsel of Record

4

The remainder of State Farm's arguments have been considered and are without merit.

7