Definitions & References
PERSONAL AUTOMOBILE
Automobile insurance is generally regarded as the most important of the property and liability insurance lines. Exposures to loss for virtually every individual, family and business. The requirements of Florida law and economic realities make auto insurance a primary necessity.
This section reviews the different forms of automobile policies used to provide coverage to individuals and businesses. While there are numerous independently developed policy forms, this review deals with the standard provisions contracts promulgated by Insurance Services Office, Inc., which include:
- Personal Auto Policy
- Business Auto Policy (includes business auto, garage and truckers forms)
Information on the Florida Joint Underwriting Association, a state-regulated market for those who are unable to procure auto insurance through normal channels, is included. Attention is also given to Florida laws of special interest related to auto insurance.
A final section is included on mechanical breakdown insurance.
FINANCIAL RESPONSIBILITY
Any analysis of auto liability insurance should include an understanding of the Florida Financial Responsibility Law. Chapter 324, 324.011 F.S., Purpose of the Law, states:
It is the intent of this unit to recognize the existing privilege to own or operate a motor vehicle on the public streets and highways of this state when such vehicles are used with due consideration for others and their property, and to promote safety and provide financial security requirements for such owners or operators whose responsibility is to recompense others for injury to person or property caused by the operation of a motor vehicle. Therefore, it is required herein that the operator of a motor vehicle involved in an accident or convicted of certain traffic offenses meeting the operative provisions of 324.051(2) shall respond for such damages and show proof of financial ability to respond for damages in future accidents as a requisite to his or her future exercise of such privileges.
Operation of the law is triggered by an accident which involves: bodily injury; or property damage when a vehicle is rendered inoperative; or certain serious traffic violations, such as driving under the influence and committing a felony with a motor vehicle.
Effective October 1, 2007, persons found guilty of driving under the influence (DUI) they must purchase limits of 100/300/50 or post a bond in the amount of $350,000. If the person has not been found guilty of a DUI or felony traffic offense during the three-year period, they are allowed to return to the standard coverage limits. Additionally, those directed to maintain higher limits are required to keep proper proof of insurance in his or her possession at all times.
As to required proof for future accidents by purchase of auto liability insurance, the insurer must make a filing (Form “SR-22”) certifying that coverage is in effect, and this certification must remain on file for three years. If the coverage is terminated within that time, a notice of cancellation must be filed and the person again becomes subject to license/registration suspension.
When an operator who does not own an automobile needs a SR-22 filing, a form of coverage known as a Named Nonowner policy is required. This form of policy covers only while the insured is operating automobiles owned by others.
When an owner becomes subject to vehicle registration suspension, it is unlawful to transfer the registration to another person for the purpose of circumventing the intent of the law.
Violations of the law, such as making misstatements, committing forgery, or filing false affidavits, are punishable as second-degree misdemeanors.
The Personal Auto Policy, as well as other standard policies provides that limits afforded will meet the minimum requirements of law in other states. Thus, for example, a Florida insured with limits of 10/20/10 may be in a state that requires 25/50/10; the policy will be interpreted as affording such limits under those conditions wherein it is required of the insured.
NO-FAULT
Currently, there are about a dozen states that have “no-fault” laws of one type or another. These laws, no two of which are identical, attempt to remove certain claims from the tort liability system and to substitute a system of benefits payable by one’s own insurer. In most (if not all) instances, the primary impetus was to contain rising costs of Auto Liability insurance.
The main elements of the Florida law include:
- Those who are subject to the law, and comply with the law are not subject to legal liability for causing bodily injuries to others regardless of fault (subject to important exceptions, discussed below).
- As one may not be able to seek legal liability damages against another for bodily injuries, the law substitutes, under one’s own insurance, a coverage named “Personal Injury Protection” (PIP). This coverage provides first-party benefits for economic loss, without regard to fault.
- The law requires that PIP insurance be carried by the owners of motor vehicles, and imposes penalties for failing to do so.
An important point: the law has nothing to do with property damage. It applies to bodily injury claims only. In this area, the traditional legal liability system applies.
The law applies to “motor vehicles,” defined to include all self-propelled vehicles with four or more wheels which are of a type both designed and required to be licensed for use on Florida highways, and trailers and semi-trailers designed for used with such vehicles.
This definition is important because it is those who are injured by motor vehicles who are entitled to PIP benefits.
The “owner” of a motor vehicle, is required to provide PIP insurance as to such vehicle. An owner is defined as one who holds legal title, a debtor in possession, one who leases (lessee) with an option to purchase, and other lessees under agreement of six months or more when lessor and lessee agree that the lessee will be treated as the owner.
Nonresidents
Nonresidents, who may not be required to register their vehicles in Florida, are subject to the law if any defined motor vehicle which has been physically present in Florida for more than 90 of the preceding 365 days.
PERSONAL AUTO POLICY
The Personal Auto Policy is divided into sections:
Declarations
Agreement and Definitions
Part A - Liability Coverage
Part B – Medical Payments Coverage
Part C – Uninsured Motorists Coverage
Part D – Coverage For Damage To Your Auto
Part E – Duties After an Accident or Loss
Part F – General Provisions
Part A – The function of auto liability insurance is to pay on behalf of the insured money damages for which the insured becomes legally liable to others for bodily injuries or property damages. Also included is defense against claims or suits for such liabilities.
Part B – Medical Payments is an auto insurance coverage that pays expenses incurred for necessary medical and funeral services to persons injured by accident. Payments are without regard to fault or legal liabilities.
Part C – While liability insurance protects an insured against claims of others, Uninsured Motorists (UM) coverage is a form of coverage to pay compensatory damages for bodily injuries, under one’s own policy, for amounts which would otherwise have been recovered from the liability insurance of another – either an uninsured motorist, or one who carries liability limits that are lower than the insured’s damages.
Part D – Under the Part D Insuring Agreement of the Personal Auto policy, the company agrees to pay for direct and accidental loss to a “your covered auto” or to any “nonowned auto,” including their equipment. This type of coverage is sometimes called physical damage coverage.
Part E and F – Part E imposes various responsibilities on the insured after an accident or loss. Prompt notice and forwarding of legal papers, cooperation, submission to physical exams and to examination under oath, provide proof of loss, report to police if it is a UM hit-and-run claim or theft claim, protect against further loss, allow inspection and appraisal of damage before repair or disposal – all are required, depending upon the type of claim, to enable the company to properly process the claim.
The general provisions of Part F contain contract conditions about policy changes, coverage denial for fraud, how the company may be sued, company subrogation rights and transfers of interest. There are two provisions, however, that require special attention.
MISCELLANEOUS FLORIDA AUTOMOBILE LAWS
During the first 60 days of a new policy – F.S 627.728 states an insurer may cancel for any reason except discrimination with respect to race, color, national origin, creed, marital status, or sex. Unless there is a reasonable relationship between such characteristic and the coverage being issued, cancellation is also prohibited based upon residence, age, lawful occupation of the individual, or location of the risk. For policies providing mandatory PIP and property damage liability, F.S. 627.7295 prohibits cancellation: (1) by the insurer for nonpayment of premium unless payment was made by a dishonored check or the insured failed to respond to a valid notice of additional premium; or (2) by the insured except for total destruction of the vehicle, transfer of ownership, or after purchasing at least the mandatory coverage’s for the same vehicle from another insurer, or (if military personnel) when insured is deployed outside the United States.
After 60 days of a new policy – For the remainder of a new term, and from inception of a renewal, an insurer may cancel for nonpayment of premium, material misrepresentation or fraud, or suspension or revocation of the driver’s license or during the policy term or within the previous 180 days.
When cancellation is permitted, 45 days notice to the insured is required, except 10 days notice is permitted for nonpayment of premium.
A valid cancellation notice must state the reason and must also notify the insured of a right to an Insurance Department hearing to contest the cancellation. Both cancellation and nonrenewal notices must advise the insured of possible eligibility for coverage in the Florida Joint Underwriting Association.
