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Facing a fraud lawsuit in an auto accident case, State Farm Mutual Automobile Insurance Co. is trying to stave off the prospect of punitive damages for allegedly forging a policyholder’s documents and engaging in a cover-up to reduce its liability in the case. A hearing is scheduled for Thursday in Florida before Broward Circuit Judge Jeffery Streitfeld to determine whether State Farm, the Michael Mahovich Jr. Insurance Agency in Coral Springs, Fla., and one of the agency’s employees, Patricia Fields, should face a trial for punitive damages. The auto accident case involves a State Farm policyholder, Guy Abbanat of Coral Springs, who was driving a leased Nissan in 1996 when he rear-ended a car driven by Sheryl Gruden, who lives near Tampa, Fla. The underlying issue is whether Abbanat had sufficient bodily injury coverage under state law to protect the lease-holder, Nissan Motors Acceptance Corp., and perhaps State Farm, from having to pay damages in excess of the insurance policy limits. State Farm contends that, by coincidence, it increased Abbanat’s coverage to the statutorily required level one day before he crashed into Gruden’s car. But Gruden’s attorneys accuse State Farm of backdating documents to falsely increase Abbanat’s level of coverage and qualify the lease-holder and itself for the statutory protection from any excess damages. The amount of coverage was crucial because car-leasing companies are conditionally exempt from Florida’s “dangerous instrumentality” law, which makes the owner of a vehicle liable for damages even if it wasn’t the owner’s negligence that caused the damages. For the leasing company to qualify for this exemption, the lease must be for more than one year. Abbanat had a three-year lease and the lessee must carry insurance coverage of at least $100,000 per person and $300,000 per incident. Lewis contends that Abbanat only had $50,000/$100,000 coverage when the accident occurred, and that the defendants forged records to make it look like he had $100,000/$300,000 coverage. While Nissan Motors Acceptance Corp. faced excess liability if Abbanat didn’t have the required level of coverage, Gruden’s attorney, Darryl Lewis, an associate at Searcy Denney Scarola Barnhart & Shipley in West Palm Beach, Fla., contends that State Farm was on the hook too. “We believe Nissan was going to hold State Farm responsible for all the damages,” he says. The dispute began in April 1996, when Gruden’s car was hit in Clearwater by a leased van driven by Abbanat, who was vacationing with his family. A single mother, Gruden previously had both legs amputated below the knee from a prior accident. The impact from the crash with Abbanat’s vehicle broke one of her legs above the knee. “There’s concern the leg above the knee may have to be amputated, which would severely limit her mobility,” Lewis says. In May 2000, a Pinellas County jury was asked to decide the sole issue of whether Guy Abbanat did indeed have bodily injury limits of $100,000 per person and $300,000 per accident, as State Farm contended, when he ran into Gruden’s car. The jurors rejected the carrier’s arguments and concluded he did not have the legally required policy limits. That left Nissan and perhaps State Farm liable for damages above the $50,000/$100,000 limits. The 2nd District Court of Appeal in Tampa affirmed the jury’s decision on Jan. 30. State Farm settled Gruden’s auto negligence complaint against Abbanat before trial in an amount that Lewis says was in seven figures. Tom Hagerty, a State Farm spokesman, says Gruden received about $900,000. Then, two years ago, Gruden sued State Farm, the Mahovich agency and Fields in Broward Circuit Court, alleging that the defendants committed fraud by manipulating Abbanat’s insurance policy records. The suit sought punitive damages. HAPPY COINCIDENCE? Abbanat and the defendants offer different accounts of whether and when Abbanat’s coverage was increased to the statutorily required levels prior to the accident. Abbanat leased his Nissan van in October 1993, obtaining 100/300 coverage. In November 1995, his coverage lapsed due to nonpayment. It was reinstated in March 1996 at 50/100. A month later, he hit Gruden’s car. On the day of the collision, Abbanat said, he phoned the office of his State Farm insurance agent, Michael Mahovich Jr. Insurance Agency in Coral Springs. According to his cellphone records and his independent recollection, that was the only phone call he made that week to the insurance agent. Two days later, when he returned home from vacation, Abbanat received a letter from Nissan Motors Acceptance Corp. informing him that his insurance didn’t comply with the requirements of his lease agreement, and instructing him to contact his insurance agent to correct this. A copy of the letter was not sent, however, to State Farm. The following day — three days after the accident — Abbanat said he spoke to somebody at the Mahovich agency about this. But Mahovich agent Patricia Fields swore in a deposition that she spoke by phone to Abbanat the day before his accident, and increased Abbanat’s insurance coverage from 50/100 to 100/300 that day. Abbanat, however, said he did not talk to Fields that day. As proof that she changed Abbanat’s policy the day before his accident, Fields explained that the company’s computer automatically generates the time and date that a change is made, and that there was no way to backdate the entry. Computer records confirm her account, she said. In a subsequent deposition, however, Fields backed off her assertion that she spoke with Abbanat the day before the accident, saying she no longer was sure whether she talked to Abbanat or someone from the company that monitored insurance coverage of Nissan’s leased vehicles. But employees of that company said they didn’t initiate contact with Fields regarding Abbanat’s policy. Gruden’s lawyers pointed out that the changes in Abbanat’s policy weren’t reflected in State Farm’s records until four days after the accident. Until then, its records showed that he had 50/100 coverage. It wasn’t until six days after the accident — and seven days after State Farm claimed it had renewed Abbanat’s coverage at 100/300 — that the insurer generated a “coverage card” for Abbanat listing his coverage at 100/300. Lewis contends that and other evidence lend credence to his assertion that State Farm backdated the coverage change to protect the carrier and Nissan from liability for damages beyond the insurance policy limit in the auto accident case. As further proof of the alleged fraud, Lewis and co-counsel Christian Searcy contend in court documents that a master record from the Mahovich agency “contains suspicious irregularities.” In April 1996, the log contained 11 entries in perfect chronological order, followed by two that aren’t in order, including the change in Abbanat’s coverage, they say. Lewis argues that if the defendants are found to have committed fraud, Gruden should be compensated for the additional attorneys’ fees and costs she has incurred, and the defendants should be punished monetarily for their actions. The attorney for State Farm and its two co-defendants referred questions to Hagerty, a spokesman at State Farm’s regional office in Winter Haven, Fla.. Hagerty said he couldn’t comment on pending litigation. “State Farm is committed to maintaining the highest standards of integrity,” he says.

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