SUPREME COURT OF FLORIDA. v. Case No. SC DCA Case No. 2D WILMA SMITH, individually, and on behalf of all others similarly situated,

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1 SUPREME COURT OF FLORIDA FOREMOST INSURANCE COMPANY and AMERICAN FEDERATION INSURANCE COMPANY, Petitioners, v. Case No. SC DCA Case No. 2D WILMA SMITH, individually, and on behalf of all others similarly situated, Respondent, / RESPONDENT S AMENDED BRIEF ON JURISDICTION JAMES E. FELMAN Florida Bar No KATHERINE EARLE YANES Florida Bar No Kynes, Markman & Felman, P.A. Post Office Box 3396 Tampa, FL Telephone: (813) Facsimile: (813) ATTORNEYS FOR RESPONDENT WILMA SMITH

2 TABLE OF CONTENTS PAGE TABLE OF CITATIONS...ii STATEMENT OF THE CASE AND OF THE FACTS... 1 SUMMARY OF THE ARGUMENT... 3 ARGUMENT... 4 CONCLUSION...10 CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE WITH FONT STANDARDS i

3 TABLE OF CITATIONS CASES PAGE(S) Capital Nat l Fin. Corp. v. Dep t of Ins., 690 So. 2d 1335 (Fla. 3d DCA 1997)... 3, 4, 5, 6, 7 Gerlach v. Allstate Ins. Co., 338 F. Supp. 642 (S.D. Fla. 1972)...6, 7 Smith v. Foremost Ins. Co., 2004 WL (Fla. 2d DCA Sept. 10, 2004)...passim Unruh v. State, 669 So. 2d. 243 (Fla. 1996)... 9 STATUTES 2002 Fla. Laws ch , 8 Fla. Stat passim Fla. Stat passim Fla. Stat passim Fla. Stat Fla. Stat , U.S.C. 1638(a) U.S.C. 1640(a)... 6 OTHER AUTHORITIES BLACK'S LAW DICTIONARY 630 (1990)... 9 ii

4 STATEMENT OF THE CASE AND OF THE FACTS Petitioners Foremost Insurance Company and American Federation Insurance Company (collectively Foremost ) seek discretionary review of the opinion of the Second District Court of Appeal in this case. The Second District s opinion construes the previous version of a since-amended consumer protection measure. Smith v. Foremost Ins. Co., 2004 WL (Fla. 2d DCA Sept. 10, 2004). The Second District held the statute applies to Foremost, reversed the trial court s grant of summary judgment in favor of Foremost, and remanded the case for trial. Id. at *4-5. The consumer protection measure at issue here limits the service charges or interest that may be collected in connection with financing insurance premiums. These limits are contained in two parts of the Florida Insurance Code. Part XVI of Chapter 627 of the Insurance Code generally applies to insurance agents and insurance companies, while Part XV generally applies to premium financing companies. Smith, 2004 WL at *1-2. Florida Statutes sections and , contained in Part XVI of the Insurance Code, limit the charges insurers may collect from customers who pay their insurance premiums in installments. At the time periods relevant to this case, 1 1 Sections and were amended effective May 13, 2002, to add a third option for premium finance charges

5 insurance companies that charged consumers for financing premiums were limited to two choices: (1) collecting a service charge of no more than $1 per installment or a total of $12 per year; or (2) charging interest of no more than 18% simple interest per year on the unpaid premium balance. Fla. Stat (1), (2001); Smith, 2004 WL at *2. Any insurer that collects a service charge or rate of interest that substantially exceeds these limits is subject to Part XV of the Florida Insurance Code ; Smith, 2004 WL at *2. An insurance company collecting service charges or interest under Part XVI must separately state and identify the amount of service charges or interest. Fla. Stat (1). Part XVI also requires insurers to file service charge or interest rate plans separately from premium rate filings. Fla. Stat Part XV of the Insurance Code contains limits on premium finance charges and creates explicit requirements as to how such charges must be documented and explained to customers. Fla. Stat , Part XV also creates an express Fla. Laws ch Under the amended statute, insurers may collect interest up to 18% simple interest per year on [t]he average unpaid balance as billed over the term of the policy, which may be billed in equal installments. Fla. Stat (1) (2003). 2

6 private right of action when any entity has collected premium finance charges that exceed the statutory limits on these charges. Fla. Stat Any consumer who has paid an unlawful premium finance charge may sue to recover two times the amount of the unlawful charge Smith sued Foremost under the section statutory cause of action on behalf of herself and all others similarly situated, alleging that Foremost s premium finance charge exceeded the limits set forth in sections (1) and Smith, 2004 WL at *1. Smith and Foremost both moved for summary judgment. The trial court granted summary judgment in favor of Foremost and denied Smith s cross motion for summary judgment as to liability. The trial court held that the fees Foremost collected were not subject to the premium financing statutes because they did not constitute an advancement of funds or credit. Smith, 2004 WL at *2. The trial court also held that even if the premium financing statutes applied in this case, the fees Foremost collected from Smith did not exceed the limits set forth in section and Id. The Second District reversed the trial court s order granting summary judgment to Foremost. Smith, 2004 WL at *4. It held that as a matter of law Florida s premium financing 3

7 statutes governed Foremost s service fees. Id. It also held that summary judgment in Foremost s favor was improper because [a] question of material fact remains as to whether Foremost s service charges were substantially more than the limits established in section Id. at *5. SUMMARY OF THE ARGUMENT The Court lacks jurisdiction over this appeal because the Second District s opinion does not expressly and directly conflict with any opinion of any Florida appellate court. The Second District found the case Foremost claims conflict with, Capital Nat l Fin. Corp. v. Dep t of Ins., 690 So. 2d 1335 (Fla. 3d DCA 1997), to be distinguishable. Smith, 2004 WL at *3. Capital concerns a different statute, found in a separate portion of the Insurance Code, that regulates a different type of entity than the statute at issue here. Even if the Court did not lack jurisdiction over this case, discretionary factors would weigh against accepting jurisdiction. The amendment of the statute at issue means the Second District s opinion is unlikely to have any significant impact going forward. Further, the Second District s opinion correctly interpreted the premium financing statutes to apply to Foremost. The contrary statutory interpretation urged by Foremost would render the premium financing statutes 4

8 meaningless. ARGUMENT I. The decision of the Second District Court of Appeal does not expressly and directly conflict with Capital National Financial Corp. v. Department of Ins. The Court lacks jurisdiction in this case. The Second District s opinion does not expressly and directly conflict with any opinion of any Florida appellate court on the same question of law. Foremost claims conflict with Capital Nat l Fin. Corp. v. Dep t of Ins., 690 So. 2d 1335 (Fla. 3d DCA 1997). Pet r s Br. at 3-6. As the Second District held, Capital is distinguishable from this case, 2004 WL at *3, and does not conflict with it. Capital does not address the statute at issue here, but one found in a different part of the Insurance Code than sections and that governs the activities of third party premium financing companies rather than insurance companies. Capital concerned whether a premium finance company violated Florida Statutes section , in Part XV of the Insurance Code, which prohibits premium finance companies from financing auto club memberships. 690 So. 2d at The premium finance company in Capital merely collected installment payments for the memberships and passed them on to the insurance company or auto club. Id. at It did not advance funds for the 5

9 memberships and, unlike Foremost, did not charge any fee in connection with the installment payments. Id. Capital held that the premium financing company had not violated section because its collection of the payments was not financing them. Id. Foremost argues that Capital conflicts with the Second District s opinion in this case because Capital held the term financing involves the advancement of money rather than the mere collection of funds, while the Second District s opinion held that the term financing involves the collection of funds even when no money is advanced. Pet r s Br. at 6. But Capital states its definition of financing was in the context of prohibiting certain activities of a finance company. 690 So. 2d at By contrast, this case does not involve restrictions on the activities of premium finance companies but the limits on charges insurers may collect from their installment customers. As the Second District stated in distinguishing Capital from this case: Foremost is not a premium finance company, as defined by section , in the business of advancing premium payments for insureds via premium finance agreements. Discussing the advancement of funds may very well be appropriate when applied to transactions conducted by premium financing companies, in which there are three parties: the insurance company, to which the premiums are advanced; the premium financing company, which advances the premiums 6

10 and is repaid by the customer; and the customer. When the only two parties to the transaction are the insurer and the customer, however, there is no need for the insurer to advance funds to itself. While this does not involve the advancement of funds, it is financing as contemplated by part XVI, which specifically addresses insurers such as Foremost, to whom the insureds pay the premiums WL at *3. Foremost argues as well that the Second District s opinion conflicts with the opinion of a federal district court in Gerlach v. Allstate Ins. Co., 338 F. Supp. 642 (S.D. Fla. 1972). Pet r s Br. at 6. As Foremost correctly recognizes, conflict with the opinion of a federal district court provides no basis for this Court s jurisdiction. Pet r s Br. at 6. In any event, as the Second District stated, Gerlach is distinguishable. Smith, 2004 WL at *2. It concerned whether premium finance charges constituted a consumer credit transaction within the meaning of the Truth in Lending Act [ TILA ], 15 U.S.C. 1640(a). Smith, 2004 WL at *2. Unlike the Florida premium financing statutes, TILA expressly applies only to credit transactions. 15 U.S.C. 1638(a). The Florida Legislature imposed no such limitation on the scope of the premium financing statutes. The Second District further pointed out that: Gerlach, although distinguishable because it addressed an issue unrelated to the issues in this case, is 7

11 helpful here in that the court points out the difference between the Gerlach-Allstate transaction, governed by part XVI, and a transaction between an insured and a premium financing company under a promissory note or similar agreement: The transaction in this action is not to be confused with the premium financing transaction, where the insured becomes obligated to a broker, bank, the issuing company or other creditor to pay the premium, or an indebted-ness for premiums, and is contractually obli-gated to make payments... There, of course, the creditor-debtor relationship comes into existence between the insured and the party he is obligated to pay. Id. at 647 (citation omitted). Similarly here, Smith's transactions with insurer Foremost, which fall within part XVI, section of the Florida Insurance Code, are not to be confused with an insured's transaction with a premium financing company as defined by part XV. Smith, 2004 WL at *2-3. This case does not conflict with Gerlach, Capital, or any Florida appellate opinion. The Court lacks jurisdiction in this case and should decline review. II. Even if conflict jurisdiction existed here, discretionary considerations weigh against accepting jurisdiction. Acknowledging that the Court s jurisdiction in this case is discretionary, Foremost argues the Court should accept jurisdiction on the theory that the Second District s holding that Foremost is subject to Florida s premium financing laws 8

12 misconstrues the statutory regulatory scheme governing premium financing. Pet r s Br. at 6. As discussed above, the Court lacks jurisdiction over this case because no express and direct conflict exists. Even if jurisdiction existed here, however, the Court should decline to exercise it for at least two reasons. First, the Second District s decision is unlikely to have any significant impact going forward. Sections and , the statutes at issue in this case, were amended in Fla. Laws ch The decision Foremost seeks to have reviewed expressly states that it construes only the pre-amendment version of those sections. Smith, 2004 WL at *1 n.1. The issue of whether Foremost presently complies with the amended statute has never been considered and is not addressed in the Second District s opinion. Foremost has claimed throughout this proceeding that its premium finance charge plan complies with the amended statute. The Court should not expend its judicial resources reviewing a decision that is unlikely to have any impact beyond its own parties, and may have no future effect even on them. Second, the Second District s holding that an insurer need not advance funds to its insureds to be governed by Florida s premium finance statutes is correct. Section permits 9

13 insurance companies to finance insurance premiums and provides that any insurance company that collects a service charge or rate of interest greater than permitted in Section (1) is subject to Part XV of the Insurance Code. In this context, any reasonable construction of the term financing would include the collection of a fee in exchange for allowing payment to be deferred. 2 Indeed, no other definition of financing would make sense when applied to insurance companies. Foremost s theory that financing by insurance companies requires the extension of credit or the advancement of funds would so limit the application of Part XVI as to render it meaningless. Unruh v. State, 669 So. 2d. 242, 245 (Fla. 1996) (courts must construe statutes so no part is rendered meaningless). Foremost sells insurance policies on an annual basis, and consumers who cannot afford to pay in advance for 12 months worth of insurance pay a fee with each installment payment. According to Foremost s logic, the statute would apply 2 For instance, BLACK'S LAW DICTIONARY (6th ed. 1990) defines finance charge as: The consideration for privilege of deferring payments of purchase price. The amount however denominated or expressed which the retail buyer contracts to pay or pays for the privilege of purchasing goods or services to be paid for by the buyer in installments. Id. at

14 to it only where it took the unlikely and unnecessary step of advancing funds to itself. Further, insurance premiums are strictly regulated under Florida law, and the only provisions of Florida law permitting an insurer to collect an additional amount from the insured when the premium is paid in installments are the premium financing statutes contained in parts XV and XVI. Smith, 2004 WL at * 3. Foremost itself apparently considered its [service charge] plan to be premium financing subject to part XVI because it filed a service charge and interest rate plan with the Department of Insurance as required under section Id. Foremost s practice of selling annual polices in advance and collecting the premiums on the policies in installments for a fee is premium financing within the meaning of Part XVI of the Insurance Code. Foremost s interpretation of the premium financing statutes would not only effectively read Part XVI out of the statute, but would also would frustrate the legislative intent to protect consumers from excessive insurance fees. The only reasonable construction of the legislative scheme as a whole is that insurance companies who sell multi-month policies and collect a fee for the payment of premiums in installments are subject to the limits on those charges contained in Part 11

15 XVI, and, if they exceed those limits, to the requirements of Part XV. CONCLUSION For these reasons, the Court should decline to review the decision of the Second District Court of Appeal. Respectfully submitted, James E. Felman (FB#775568) Katherine Earle Yanes (FB#159727) KYNES, MARKMAN & FELMAN, P.A. Post Office Box 3396 Tampa, FL Telephone: (813) Facsimile: (813)

16 CERTIFICATE OF SERVICE I hereby certify that a copy hereof has been furnished by Federal Express on December 17, 2004, to: Katherine E. Giddings Akerman, Senterfitt & Eidson, P.A. 105 E. College Avenue, Suite 1200 Tallahassee, Florida Valerie B. Itkoff, Esq. Marcy Levine Aldrich, Esq. Akerman, Senterfitt & Eidson, P.A. SunTrust Int l Center, 28 th Floor One Southeast Third Avenue Miami, FL James E. Felman CERTIFICATE OF COMPLIANCE WITH FONT STANDARDS I certify that the forgoing complies with the font requirements of Florida Rule of Appellate Procedure 9.100(l). This Brief has been prepared using Courier New, 12-point font. James E. Felman 13