Plaintiffs can sue insurance company before collection actions begin, Florida court rules.

Recognizing that some policyholders can't pay their medical bills until they get a check from their insurance companies, a Florida appellate court has ruled that plaintiffs can sue their insurance companies even before the plaintiffs have paid the bills or been sued for nonpayment. (Kaklamanos v. Allstate Ins. Co., No. 1D00-2974 (Fla. Dist. Ct. App. July 26, 2001).)

The court noted that people injured in car collisions sustain financial liability for medical bills, and can suffer damage to their credit histories, before collection actions begin. "An insured who incurs reasonable and necessary medical expenses on account of an automobile accident sustains losses and incurs liability ... whether or not the medical bills have been paid," the Florida court wrote. "An insured may be damaged by an insurance company's failure to pay a claim even if the insured has not already paid or been sued by the medical provider."

The decision stems from a case in which the plaintiffs, Dino and Keely Kaklamanos, sued Allstate after the insurer refused to pay for diagnostic testing performed on Keely nearly a year after she was injured in a car crash. The insurance company claimed that the testing was not medically necessary and sought summary judgment, relying on a clause in its policy allowing it to reject certain medical expenses.

The trial court ruled in Allstate's favor. But the Florida District Court of Appeal ruled the lower court applied "a fundamentally incorrect rule of law" and remanded the case for further proceedings.

In a footnote to the decision, the court noted the economic harm that plaintiffs can suffer when insurance companies refuse to pay. "Allstate's argument that [the] plaintiff will sustain no damages as a result of wrongful nonpayment fails because the indemnification provision ignores the harmful consequences to an insured's credit history and financial future caused by the mere filing of a credit-driven lawsuit," the court wrote. "Even if Allstate pays any judgment obtained by the medical care provider, the insured's credit history will reflect the untimely payment and subsequent judgment."

Plaintiff lawyer David Sellers, of Pensacola, Florida, said the decision was consistent with Florida rulings in favor of coverage for insureds. He said many policyholders previously faced paying such bills themselves. "For a lot of folks who live week to week, it's a hardship," Sellers said, adding that insurance companies' refusal to pay benefits can affect not only policyholders' credit ratings but their relationships with their doctors as well.

Allstate declined comment.