Investigating PIP Fraud Through the Use of EUOs and Preserving the EUO Defense in PIP Cases

As medical provider PIP fraud continues to increase in the State of Florida, insurers must effectively use the available tools to investigate suspected fraud.  Florida’s No-Fault Statute provides options to insurance companies to investigate suspected fraud by claimants (both providers and individual accident participants), with the ultimate goal of protecting the insureds and controlling the cost of fraud on consumers.  One potentially effective tool to investigate fraud is the examination under oath (“EUO”).

The purpose of the EUO is to “enable the insurer to possess itself of all knowledge and all information as to other sources and means of knowledge, in regards to the facts, material to its rights, to enable it to decide upon its obligations and to protect it against false claims.”[1]  Sitting for an EUO is a contractual obligation of the insured.  It is not also required by statute.

Effective EUOs require preparation and focus.  It is critical that areas of concern be identified and questions tailored to elicit information relevant to the material issues.  Often the insurance adjuster plays a critical role in identifying the areas of concern.  The lawyer should always consult with the adjuster well before, during (on breaks), and after the EUO to ensure that nothing is missed.  A thorough review of the claim file, the treatment records, the accident report, photographs, and the like must be completed.  A plan must be developed before the EUO in order to efficiently and effectively draw out accurate and reliable testimony.

Often, proper preparation may require counsel for the insurer to review other resources.  For example, one may need to print out maps, photographs of the clinics, or depictions of the treatment allegedly rendered.  It may also be important to review the relevant medical coding book or other billing guidelines.  A comprehensive understanding of the relevant policy language as well as a command of the legal issues involved in critical.

Prior to 2010, the case law in the state of Florida was that an EUO or a compulsory medical examination (CME or IME) was a condition precedent to receiving benefits under the Florida No-Fault Statute, pursuant to the language of the relevant insurance policies.  The state of the law was briefly altered in 2010 with Florida Supreme Court’s decision in Custer Medical Center v. United Auto. Ins. Co.[2]  The Florida Legislature quickly reacted to Custer by amending the Florida No-Fault Statute to specifically state that an EUO is a mandatory statutory condition precedent to receiving personal injury protection insurance benefits.  The legislative history reflects the Florida legislature’s concern over increased PIP fraud by providers and attorneys, and its intent to provide an investigative tool to insurers to combat the increasing fraud.

The EUO requirement was codified in § 627.736(6)(g) of the Florida No-Fault Statute in 2012, and states, in part, as follows:

An insured seeking benefits under ss. 627.730-627.7105, including an omnibus insured, must comply with the terms of the policy, which include, but are not limited to, submitting to an examination under oath.  The scope of questioning during the examination under oath is limited to relevant information or information that could reasonably be expected to lead to relevant information.  Compliance with this paragraph is a condition precedent to receiving benefits.[3]

Since the statute is so new, case law is limited on its interpretation.  As a good rule of practice, the EUO should be set so that it takes place within 30 days of receiving the medical bills in order to preserve the EUO defense in a PIP lawsuit if the insured fails or refuses to appear.[4]  This provides a very tight deadline for an insurer to determine that there is some issue with the claim, retain counsel to conduct the EUO, and to actually set the EUO with the insured (and the insured’s attorney, if he or she has retained one).  If an insured fails to appear for his or her EUO, it is a good idea to give the insured another chance to appear at an EUO before denying benefits.  After all, the ultimate goal of the EUO is to obtain the information necessary to adjust the claim and deal with any issues unique to the subject claim.[5]

In some cases, especially where there are multiple providers claiming benefits, an insured may sit for a deposition in the course of litigation.  Courts have held that a deposition does not satisfy the condition precedent that an insured sit for an EUO.[6] Where the insured fails to appear for an EUO, and subsequently appears at a deposition during a lawsuit, the EUO condition precedent still has not been satisfied.  Insurers can argue that the insured has breached the insurance policy, and the insured is still not entitled to receive PIP benefits.  This is because the insured has a duty under the terms of the insurance contract to volunteer information related to his or her claim; no such duty exists in a deposition.[7] Depositions are controlled by the Florida Rules of Civil Procedure, while EUOs are primarily controlled by the insurance contract between the insurance company and its insured.  Depositions are markedly different in that the questioning is limited to the issues relevant to the litigation, while the questions in an EUO can cover all of the issues relating to the accident, including injuries, treatment by all medical providers, the injuries suffered by other accident participants, relationships between parties, etc.  Further, in an EUO, an insurance company has the right to exclude from the EUO all persons other than the insured and his or her attorney, and to question the insured independently.  That right does not exist in depositions.[8]  Simply put, a deposition in litigation does not satisfy the mandatory condition precedent of submitting to an EUO.

There are, however, limits to the scope of the EUO.  Florida courts have issued recent opinions to caution insurers against asking inappropriate questions.  For example, Florida courts have held that an insured’s refusal to answer “unwarranted and intrusive inquiries into the personal life of an insured” cannot be considered as a basis to deny benefits to which the insured was otherwise entitled.[9] The opinion in De Leon places limits on the extent of the questioning permitted by an insurer, disapproving an insurer’s seven (7) hour questioning of an insured on topics completely unrelated to the facts and circumstances surrounding the insured’s claim.  As such, it is essential that counsel for the insurer carefully construct his or her questions to elicit “relevant information or information that could reasonably be expected to lead to relevant information.”[10]

The EUO is a contractual device permitted by the policy, and supported by the Florida Statutes, that insurers can use to investigate, and attempt to combat, suspected fraud in the context of a PIP claim.  When used properly, it is a valuable tool to gather information relating to fraudulent claims, and to defend against suits filed by persons attempting to prematurely seek payment of PIP benefits.

[1] Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300, at n. 9 (Fla. 4th DCA 1995) (quoting Claflin v. Commonwealth Ins. Co., 110 U.S. 81 (1884)).

[2] 62 So. 3d 1086 (Fla. 2010).

[3] § 627.736(6)(g), Fla. Stat. (2015).

[4] Amador v. United Auto. Ins. Co., 748 So. 3d 307 (Fla. 3d DCA 1999) (holding the burden is on the insurer to authenticate the claim within the statutory period and the insurer cannot use its investigative rights to extend the thirty-day period without reasonable proof that it was not responsible for the claim); January v. State Farm. Mut. Ins. Co., 838 So. 2d 604 (Fla. 5th DCA 2003) (holding that the failure to show up for an EUO after the initial 30 day period cannot justify refusal to pay those claims); United Auto Ins. Co. v. Millennium Diagnostics & Imaging Center, 10 Fla. L. Weekly Supp. 971c (holding that where the actual EUO was not scheduled to take place until well over thirty days after receipt of the medical bills, the insurer could not use the insured’s failure to attend the EUO as a defense because insurer breached the insurance policy first by failing to pay the claim within thirty days of receipt of the bills).

[5] The insurer can still assert a breach of the duty to cooperate if the EUO is set outside this window.  The insurer, however, will need to prove something other than that the insured simply failed to appear.

[6] See Goldman, 660 So. 2d 300; see also Laine v. Allstate Ins. Co., 355 F. Supp.2d 1303 (N.D. Fla. 2005).

[7] Id. at n. 9 (“A provision in an insurance policy requiring the insured to submit to examination under oath must be complied with, and, if breached, the insurer will be deprived of a valuable right for which it had contracted.”)

[8] Id. at 305.

[9] De Leon v. Great American Assur. Co., 78 So. 3d 585, 587 (Fla. 3d DCA 2011); see also Whistler’s Park, Inc. v. Florida Ins. Guar. Ass’n, 90 So. 3d 841 (Fla. 5th DCA).

[10] § 627.736(6)(g), Fla. Stat. (2015).

To read more on PIP fraud see Investigating PIP Fraud Through the Appropriate and Effective Use of  (6)(b) Requests.