Insurance — Automobile — Rescission — Material misrepresentations on
application — Identity of owner of vehicle — Trial court properly found that
claimant made material mispresentations in insurance application, warranting
rescission of policy, by misrepresenting that she was registered owner of
vehicle — Trial court erred in failing to consider claimant’s argument that
insurer waived its misrepresentation or confessed judgment when it made PIP
payments to claimant’s medical care providers after claimant filed suit —
Statute does not provide that contract is void ab initio because of insured’s
misrepresentation, but instead gives insurer the right to rescind insurance
contract if statutory criteria are met; and case law establishes the principle
that an insurer can forfeit its right of rescission — Trial court erred in
finding that claimant lacked standing to assert her waiver and confession of
judgment arguments because she assigned her rights to PIP benefits to her
medical care providers — Remand for trial court to resolve waiver issue on the
merits or, alternatively, submit matter to a jury — Confession of judgment —
Whether insurer made payments to providers as result of claimant’s lawsuit and,
thus, whether this constituted a confession of judgment is question for trial
court to resolve — Evidence — PIP payout ledger — Statute providing that
evidence of furnishing, or offering or promising to pay, medical or hospital
expenses or other damages occasioned by an injury or accident is inadmissible to
prove liablity for injury or accident does not make such evidence inadmissible
to prove insurer’s obligation to make payments for or on behalf of its insured
based on contract of insurance

GWENDOLYN ECHO, Appellant, v. MGA INSURANCE COMPANY, INC., Appellee. 1st
District. Case No. 1D14-1444. Opinion filed February 16, 2015. An appeal from
the Circuit Court for Escambia County. Linda L. Nobles, Judge. Counsel: J.
Alistair McKenzie of McKenzie Law Firm, P.A., Pensacola, for Appellant. Jeffrey
E. Bigman and Amanda J. Jacobsen of Smith, Hood, Loucks, Stout, Bigman &
Brock, P.A., Daytona Beach, for Appellee.

(THOMAS, J.) Appellant appeals a final summary judgment in a favor of
Appellee MGA Insurance Co. (“MGA”), in which the court determined MGA was
entitled to rescind an insurance policy based on Appellant’s material
misrepresentations. Appellant raises four issues on appeal, asserting that the
trial court erred by: 1) rejecting Appellant’s argument that MGA waived its
misrepresentation defense or confessed judgment when it made personal injury
protection (PIP) payments to Appellant’s medical care providers after Appellant
filed suit; 2) finding Appellant lacked standing to assert her waiver and
confession of judgment arguments because she assigned her rights to PIP benefits
to her medical care providers; 3) interpreting section 90.409, Florida Statutes,
to preclude evidence of the PIP payments in support of those arguments; and 4)
finding that there were no genuine issues of material fact as to the
misrepresentation issue. For the reasons discussed below, we reverse as to the
first three issues. We affirm as to the fourth issue without further comment.

Appellant purchased a 2008 Ford Focus in the name of one Mildred White.
Appellant was at no point a registered owner of that vehicle, and only Ms.
White’s name appears on the documents related to the vehicle. Regardless,
Appellant purchased the subject insurance policy covering the vehicle, and hers
is the only name appearing on any of the insurance documents. The insurance
application Appellant signed listed her as the only driver or resident in her
household.

Approximately one year later, Appellant was involved in a motor vehicle
accident while she was driving the Focus. Appellant underwent medical treatment
with several medical care providers and submitted a claim with MGA. MGA
responded with a letter advising Appellant that, pursuant to its investigation,
it had learned that, contrary to her assertion in the insurance application,
Appellant was not the owner of the Focus. MGA asserted that this constituted “a
misrepresentation, omission, concealment of fact and/or incorrect statement and
was material.” MGA also asserted that it either would not have issued the policy
or would not have issued it for the same premium had it known the truth; thus,
there was no coverage for the claim and the “policy is being voided ab
initio.” The letter was accompanied by a check refunding all premiums
Appellant had paid, which Appellant did not cash. The record also includes a
letter from MGA to one of Appellant’s medical providers indicating that it was
“unable to make payment on charges submitted because your patient’s claim has
been denied for Material Misrepresentation.”

Appellant filed a breach of contract action against MGA seeking PIP benefits,
payment for vehicle repair costs, and legal representation in the event she was
sued for the accident, all pursuant to the subject policy. MGA’s answer to the
complaint generally denied the substantive allegations and included an
affirmative defense asserting that Appellant’s misrepresentation “regarding the
identity of the owner of the auto she was attempting to insure under said
policy” entitled it “to revoke and/or cancel the contract of insurance pursuant
to F.S. 627.409,” which it did pursuant to the notice provided in the
aforementioned letter and its refund of Appellant’s premium payments. MGA also
reiterated its position that the policy was void “ab initio.” Nearly one
year after Appellant filed her complaint, however, MGA paid over $10,000 to
Appellant’s medical care providers.

MGA later amended its affirmative defenses, asserting that Appellant lacked
“standing to pursue a claim for PIP benefits” because she “executed an
assignment of any and all benefits she may have under the policy . . . including
but not limited to the right to receive payment; the right to bring suit for an
alleged breach of contract” and any claim for fees, costs, and interest.
Appellant subsequently filed an amended complaint which omitted any claim for
PIP benefits. Appellant also filed a motion for partial summary judgment,
asserting as grounds for entitlement the fact that MGA paid PIP benefits
pursuant to the policy and, thus, waived its argument that the insurance
contract was void ab initio. Appellant argued that the “confession of
judgment” doctrine also applied, because MGA made the PIP payments after
Appellant filed suit and before a judgment was entered.

After a hearing on the parties’ respective motions, the court found that the
record established that Appellant completed the application for the subject
insurance policy and indicated in it that she was the vehicle’s registered
owner, “even though she knew at the time of the application” that this was not
the case. The court determined that the policy was issued based on this
representation and that the “record evidence indicates that the policy would not
have been issued had [MGA] known that [Appellant] did not own the vehicle.” The
court also found that Appellant’s “misrepresentations were material to the risk
being assumed by [MGA] and were relied upon by [MGA] in deciding whether the
policy of insurance should have been issued,” thus, rescission was appropriate
pursuant, to section 627.409(1)(a), (b), Florida Statutes, and case law.

Addressing Appellant’s waiver and confession of judgment arguments, the court
found that Appellant had “no standing to bring suit for [PIP] benefits under the
policy as she assigned those benefits to her treating physicians.” Finally, the
court found that section 90.409, Florida Statutes, “prohibits the introduction
of evidence of furnishing; offering; or promising to pay medical or hospital
expense to prove liability. Therefore [MGA’s] payments of PIP benefits to
medical providers are inadmissible.” The court entered judgment in MGA’s favor,
and this appeal followed.

Because this appeal concerns a final summary judgment, our review is de
novo. See Volusia Co. v. Aberdeen at Ormond Beach, L.P., 760
So. 2d 126, 130 (Fla. 2000) (holding: “Summary judgment is proper if there is no
genuine issue of material fact and if the moving party is entitled to a judgment
as a matter of law. Thus, our standard of review is de novo.”) (citation
omitted).

We agree with the trial court’s finding that Appellant made material
misrepresentations in the insurance application, warranting rescission pursuant
to section 627.409(1)(a), (b), Florida Statutes. We find that the trial court
erred, however, by failing to consider Appellant’s waiver and confession of
judgment arguments. The trial court found those arguments failed, because
Appellant lacked standing to raise them based on her assignment of PIP benefits.
As of the time of the hearing, however, Appellant was no longer seeking payment
of PIP benefits; she was seeking payment for vehicle repair costs and legal
representation, in the event she was sued for the accident. Furthermore,
Appellant’s position was that because of MGA’s payment of PIP benefits after she
filed her complaint, MGA could no longer contend that the contract was void, and
regardless of assignment of PIP benefits, she still had standing to contest
whether MGA waived its right to rescind the contract.

MGA counters Appellant’s waiver and confession of judgment arguments by
asserting that once it rescinded the contract, because of Appellant’s
misrepresentations, the contract became “void ab initio.” Thus, MGA
argues the contract could not be “resurrected” even if it took actions
inconsistent with the rescission. We disagree.

Simply because MGA deemed the contract void because of Appellant’s alleged
misrepresentation does not mean the contract never existed. Pursuant to section
627.409(1), Florida Statutes, an insured’s material misrepresentation “may
prevent recovery under the contract or policy” if certain conditions exist.
Thus, the statute does not provide that the contract instantly ceased to ever
exist, because of an insured’s misrepresentation (i.e., void ab initio);
rather, it gives an insurer the right to rescind an insurance contract if the
statutory criteria are met (i.e., the contract is voidable). Furthermore, case
law establishes the principle that an insurer can forfeit its right of
rescission.

It is “well settled in insurance law that, when an insurer has knowledge of
the existence of facts justifying a forfeiture of the policy, any unequivocal
act which recognizes the continued existence of the policy or which is wholly
inconsistent with a forfeiture, will constitute a waiver thereof.” Johnson v.
Life Ins. Co. of Ga., 52 So. 2d 813, 815 (Fla. 1951). Furthermore, in
United Services Automobile Association v. Clarke, the court acknowledged
that an insurer can waive its right to void a policy pursuant to section
627.409, but found that the carrier in that case had not done so. 757 So. 2d
554, 556 (Fla. 4th DCA 2000). Thus, MGA’s position that it could do nothing to
“resurrect” or “cure” a contract that was not in existence once void ab
initio is not supported in law.

Because of its erroneous conclusion that Appellant lacked standing to raise
her waiver argument, the trial court did not address the factors necessary for
determining whether MGA waived its right to void the contract. Consequently, we
remand this matter for the court to resolve the waiver issue on the merits or,
alternatively, submit the matter to a jury. See, e.g., Hill v.
Ray Carter Auto Sales, 745 So. 2d 1136, 1138 (Fla. 1st DCA 1999) (holding
“[w]hether a waiver has occurred in any given situation is generally a question
of fact.”); Pajcic v. Am. Gen. Life Ins. Co., 419 F. Supp. 2d 1380, 1382
(M.D. Fla. 2006) (holding: “Generally, the existence or absence of waiver is a
question of fact to be answered by the jury. However, if based on the facts
surrounding a claimed waiver, a reasonable person could draw only one conclusion
from those circumstances, then the existence or absence of waiver is a question
of law for the Court.”) (citation omitted). We decline Appellant’s suggestion
that we hold waiver occurred here as a matter of law.

The court applied the same lack of standing rationale to its finding that
Appellant’s confession of judgment argument “fails.” But “where an insurer pays
policy proceeds after suit has been filed but before judgment has been rendered,
the payment of the claim constitutes the functional equivalent of a confession
of judgment or verdict in favor of the insured, thereby entitling the insured to
attorney’s fees.” Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684-85 (Fla.
2000). And this “doctrine applies where the insurer has denied benefits the
insured was entitled to, forcing the insured to file suit, resulting in the
insurer’s change of heart and payment before judgment.” State Farm Florida
Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007). Finally, “the
question of whether an insurer’s post-suit payment of additional policy proceeds
constitutes a confession of judgment will be determined based on whether ‘the
filing of the suit acted as a necessary catalyst to resolve the dispute
and force the insurer to satisfy its obligations under the insurance contract.’
” Clifton v. United Cas. Ins. Co. of Am., 31 So. 3d 826, 829 (Fla. 2d DCA
2010) (emphasis supplied) (quoting Lewis v. Universal Prop. & Cas. Ins.
Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009)).

Here, although Appellant may have lacked standing to sue for payment of PIP
benefits under the policy by her assignment of those benefits, MGA took the
position that it had no obligations at all under the policy, based on section
627.409(1), Florida Statutes. After Appellant filed suit, however, MGA made PIP
payments pursuant to the policy. There remains, therefore, the matter of whether
MGA made these payments as a result of Appellant’s lawsuit and, thus, whether
this constituted a confession of judgment — i.e., a confession that, contrary
to MGA’s assertion, the insurance contract was in fact valid — or whether there
existed some other reason for MGA’s decision to make the payments. This is a
question for the trial court to resolve.

Section 90.409, Florida Statutes, in its entirety, provides:

The trial court agreed with MGA’s argument that this statute renders evidence
of paying for medical expenses inadmissible to “prove liability.” But both MGA
and the learned trial court fail to note the clause “for the injury or accident”
following the word “liability.” Thus, the plain language of the statute
prohibits evidence of, inter alia, paying medical expenses to prove an
insured’s liability for causing an injury or accident, not for an
insurer’s obligation to make payments for or on behalf of its insured as
a result of injury or accident, based on a contract of insurance.

The reason for this evidentiary rule was explained by the Florida Supreme
Court in Carls Markets, Inc. v. Meyer, 69 So. 2d 789, 793 (Fla. 1953), in
which the court held that “evidence of insurance carried by a defendant is not
properly to be considered by the jury because that body might be influenced
thereby to fix liability where none exists, or to arrive at an excessive amount
through sympathy for the injured party and the thought that the burden would not
have to be met by the defendant.” See also Babcock v. Flowers, 198
So. 326, 329 (Fla. 1941) (in which the plaintiff in an automobile negligence
action sought to testify that the defendant had offered to pay her medical bills
and was covered by insurance, and the court held such testimony was inadmissible
because “an agreement to pay expenses of the injured constitutes no admission of
any actionable negligence on the part of the person making such agreement.”).
Here, however, Appellant sought to admit MGA’s PIP payout ledger, not as
evidence of liability for an injury or accident, but as evidence that MGA waived
its affirmative defense of misrepresentation and resultant rescission. To put it
another way, Appellant sought to use the evidence to prove that a contract
existed despite MGA’s claim to the contrary.

MGA relies on USAA Casualty Insurance Company v. Shelton, 932 So. 2d
605 (Fla. 2d DCA 2006), to support its position that the payout ledger was
inadmissible. In that case, the insureds in an uninsured motorist action
obtained a judgment against USAA for policy limits. The insurer argued that “the
trial was tainted by the court’s decision to allow the [insureds] to introduce
evidence concerning USAA’s standards for payment of personal injury protection
(PIP) benefits.” Id. at 606. The Second District first explained that the
case “did not involve questions of coverage or negligence. The sole issue
was whether Mrs. Shelton’s medical bills were reasonable, necessary, and related
to the accident” and “whether evidence of a carrier’s payment of PIP benefits is
admissible as part of the plaintiff’s evidence that medical damages sought in a
UM suit are reasonable, necessary, or connected with the accident.” Id.
at 606-07 (emphasis added). The court held that, although “a carrier’s payment
of PIP benefits is not an admission that its insured’s claims for UM benefits
are reasonable, necessary, and connected to the accident . . . [b]ecause of the
unique policy considerations underlying PIP coverage . . . evidence of an
insurer’s payment of PIP benefits is not relevant, and therefore is not
admissible, to prove the propriety of claimed medical damages in a UM
action.” Id. at 607 (emphasis added).

The court explained:

Id. at 608.

The Shelton decision does not support MGA’s arguments on the question
of the admissibility of the PIP payout ledger, because the issue in that case
was not whether an insurer had waived its right to void a policy. Rather, the
issue in Shelton was the admissibility of evidence of PIP benefits with
respect to the reasonableness of the damages being sought by the insureds, and
whether those damages were related to the accident in question. The case before
us involves a contract or coverage dispute, which was, as the Shelton
court expressly pointed out, not at issue in that case, whereas Shelton
involved a question of the admissibility of evidence as to damages sounding in
tort.1

Thus, in the context of section 90.409, “liability” clearly refers to an
insured’s (or, in a UM claim, uninsured motorist’s) responsibility for causing
injury or accident, not for an insurer’s obligations to its insured pursuant to
an insurance contract.2 Conflating an
insured’s liability for causing injury or accident with an insurer’s contract
obligation disregards the policy behind the rule codified in section 90.409, as
explained by the supreme court in Meyer. Thus, the trial court erred by
ruling the PIP ledger was inadmissible under these circumstances.

We affirm the trial court’s granting of partial summary judgment in favor of
MGA on the issue of material representation. We reverse, however, the trial
court’s conclusions that Appellant lacked standing to establish that MGA
forfeited its right to rescind the contract at issue, based on that
misrepresentation. The trial court also erred in ruling that evidence of MGA’s
PIP payments was inadmissible for that purpose. We therefore REMAND for the
trial court to address the merits of Appellant’s waiver and confession of
judgment arguments.

AFFIRMED in part, REVERSED in part, and REMANDED with instructions. (ROWE and
OSTERHAUS, JJ., CONCUR.)

__________________

1Although Shelton does not support
MGA’s interpretation of section 90.409, the “unique policy considerations”
discussed in the case may bear some relevance on the issue of why MGA made the
PIP payments it did despite rescinding the contract.

2The Shelton court cited with
approval Judge Torpy’s concurrence, in which he opined that “payment of medical
expenses by USAA, pursuant to the PIP coverage” was not admissible “for the
purpose of proving USAA’s liability for the injury under the
uninsured motorist component of its policy.” Id. at 1180 (emphasis
added). In a UM claim, the insurer is effectively put in the shoes of the
uninsured tortfeasor for damage purposes; thus the reference to the “insurer’s”
liability for injury should be read in that context.