Challenging Florida Auto Insurance Step-Down Provisions

One of the many ways car insurance companies seek to limit the amount they have to pay in claims is with fine print that includes so-called “step-down provisions.” These are clauses that limit the amount of money available to be paid in certain circumstances.
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While the language may vary from policy to policy, in a family step-down provision, the insurance company will limit the amount payable to the insured’s family members. These would be individuals who would otherwise be covered, but because of their familial relationship to the policy holder, can only receive the state’s statutory minimum in personal injury protection. It’s essentially a “step down” from what they would otherwise receive.

So for example, a child injured due to his father’s negligent operation of a vehicle would only be able to collect a maximum of $10,000 in damages, even if his parent had an auto insurance policy that he believed covered the child for up to $100,000. The insurer would cite the family step-down exclusion.

Our Fort Lauderdale car accident lawyers know Florida is one of a handful of states that still recognize this provision as not running contrary to public policy (that is, against the public good). So long as the policy language isn’t ambiguous, it’s likely the family step-down provision will be upheld. However, recent case law in other jurisdictions indicates there could soon be a shift in the legal landscape.

Up until last month, South Carolina routinely upheld these provisions as well. The recent ruling in Williams v. GEICO changed that stance. Here, the insurer attempted to stretch the language of the family step-down provision to avoid paying the $100,000 policy limit to the personal representatives of a husband and wife who were both killed in a crash. Both individuals were named insureds. Both were covered for the aforementioned policy limit. However, the insurance company cited the family step-down provision, and indicated the most that would be recoverable was $15,000, the state’s statutory minimum.

Personal representatives for the husband and wife sued. Initially, the trial court sided with the insurer, finding there was no ambiguity in the policy and it didn’t run contrary to public policy.

Upon appeal, the South Carolina Supreme Court disagreed, at least in part. The court found the policy was clear and unambiguous. The step-down provision didn’t contain any misleading language. However, the policy was void because it ran against the well-being of the public.

The court conceded that many other jurisdictions had taken variant approaches on this issue. In reviewing those by other supreme courts, however, the court most aligned with the findings of the Kentucky Supreme Court, which reached its conclusion on the matter in 1996. The court pointed to the original reason for the provision, which was to prevent fraud and collusion among family members. What that means, however, is that this excluded class – i.e., family members – is labeled at high risk and more likely to engage in fraud, without any documentation or factual basis.

Furthermore, the provisions of this nature tend to be overly-broad, and determine the extent to which an injured party can recover damages solely on the basis of their familial relationship with the insured. For this reason, the South Carolina Supreme Court ruled, family step-down provisions are contrary to public policy and void.

Call Fort Lauderdale Injury Attorney Richard Ansara at (954) 761-4011. Serving Broward, Miami-Dade and Palm Beach counties.

Additional Resources:
Williams v. GEICO, Aug. 20, 2014, South Carolina Supreme Court
More Blog Entries:
2nd DCA Upholds $1.1M Verdict for Florida Car Accident Victim, June 30, 2014, Fort Lauderdale Car Accident Lawyer Blog