Florida Court's Ruling Points Out Flaws In Buying Online Auto Insurance

Florida Court's Ruling Points Out Flaws In Buying Online Auto Insurance

Many insurance companies now offer you the chance to buy auto insurance over the phone or through a website. Companies like Geico and Progressive have aggressively marketed these online buying systems. Geico claims one can buy insurance and save money in 15 minutes, while Progressive touts a name-your-price online buying tool.

When you use these systems, you don’t ever meet an agent, and you don’t ever sign a form in person.

Everything is done over the phone or through mouse clicks, and you pay with a credit card. It’s undoubtedly an easy way to get coverage.

However, there’s a serious question about whether these online buying routines actually do what Florida auto insurance law requires. To understand why that is, we have to take a step back to review auto insurance generally, and uninsured motorist coverage in particular.

In an ideal world, everyone would carry insurance to protect other people from their negligent acts. People who cause car crashes would have liability insurance to cover the damages they cause when they make mistakes out on the road.

Unfortunately, Florida law doesn’t require the general population of drivers to carry liability insurance. So people don’t always carry enough liability insurance - or any liability insurance at all. That’s why we have something called “uninsured motorist” coverage (UM). This coverage, as the name suggests, kicks in to cover your damages when someone without insurance causes a wreck. It’s provided by your own insurance company, and is the flipside of the liability insurance you buy to protect others from your own mistakes.

Florida law makes UM a critical coverage. In fact, every auto policy issued in Florida which provides liability insurance has to provide UM insurance too. The only way that doesn’t happen is if the insurance customer specifically declines UM. To do that, the customer has to sign a “rejection form” which tells them exactly what they’re giving up. If you buy a restricted form of UM coverage called “nonstacking” UM, you have to complete a form indicating that too.

Insurance companies sometimes fall down on the job when it comes to getting these forms signed. Sometimes the signed forms would get lost, or an insurance company would never get them signed in the first place. We have successfully made UM claims for clients in those situations for years.

Now we have online and phone-based insurance buying in the mix. While convenient, these processes creates problems of its own when it comes to UM.

If an insurance representative tries to explain UM coverage over the phone, the explanation you get may be superficial or downright inaccurate. UM coverage can get tricky, and some insurance representatives don’t truly understand it themselves. We have heard of insurance representatives telling people not to buy UM because they don’t own multiple cars, or because their own car is old. Neither of these things have much to do with the protection UM provides, but they could certainly deter a potential customer who doesn’t know better.

Thus, this process can result in the customer never getting a fair chance to accept or decline UM insurance. An insurance buyer may just get swept through the insurance buying process without understanding how valuable UM could be for them.

Of course, this has resulted in some recent legal challenges to electronic or telephonic sign-up processes. Lawyers in our line of work have argued that the shortcomings in these systems require insurance companies to provide UM coverage by default.

Insurance companies have responded by claiming the failure to obtain signed forms doesn’t really make a difference. In other words, they claim their customers wouldn’t have bought UM insurance even if they had been fully informed, because they would consider it unnecessary, too expensive, etc. In effect, the insurance companies have tried to prove an “oral rejection” of UM coverage.

A critical court decision on this issue came out this week. In a case involving Geico, a south Florida appeals court ruled that the law still requires insurance companies to get signed UM rejection forms. The court refused to allow an “oral rejection” defense as a fallback position. Basically, the court just said the insurance companies have to do what the law says they have to do. It recognized that allowing exceptions would defeat the whole purpose of the law.

After wryly observing that the average insurance customer would find thinking about UM “as enjoyable as a dramatic reading from the Internal Revenue Code,” the court said:

To allow an insurance company to prove that an insured orally and knowingly rejected stacked coverage in the absence of the [written rejection form] notice would undermine the legislature’s determination that such written notice is mandatory.

This is a big deal. Again, many insurance companies offer online insurance purchasing. Thousands of customers could be affected. They might be eligible for this coverage even if they never actually purchased it, because they were never told how it could protect them.

In the meantime, no one should lose any sleep worrying about the poor insurance companies. No one is above the law. The court’s opinion just recognizes that insurance companies should not benefit financially from failing to do what our laws require.

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