Case Law Summary

Sinkhole Trial Court Orders on Constitutionality of Neutral Evaluation

Anderson v. American Strategic Insurance Corporation, Case No.: 51-2011-CA-1136-WS/G (6th Cir. Fla. June 17, 2011); Buitrago v. State Farm Florida Insurance Company, Case. No.: 512011CA1918ES (6th Cir. Fla. August 11, 2011); Appleby v. Royal Palm Insurance Company, Case No.: 11-329-CA (12th Cir. Fla. October 6, 2011)

Circuit Courts held that Florida Statute § 627.7074 (2006), the Neutral Evaluation statute, unconstitutionally encroaches upon the powers of the judiciary, the evidence code, and the insured’s rights to due process. Article II, section 3, of the Florida Constitution prohibits one branch of the government from exercising the powers of another branch. The statute unconstitutionally gives the Department of Financial Services, an executive agency, the power to adopt court rules of practice and procedure – a power that belongs to the judiciary alone. The statute also violates the Evidence Code and the insured’s due process rights by admitting the neutral evaluator’s report without subjecting it to the standards of relevancy, credibility and authentication, which are required of all other evidence admissible in court. Further, the insured is deprived of the opportunity for cross examination.

Kroener v. Florida Insurance Guaranty Association, Inc., 63 So.3d 914 (Fla. 4th DCA 2011)

Assignees of insureds under a homeowners' insurance policy brought action against FIGA, seeking benefits under the policy for hurricane damage to the residence that the assignees purchased from the insureds. After FIGA made an offer of judgment to the assignees, the circuit court awarded summary judgment to FIGA. The assignees then accepted the offer of judgment and moved to compel enforcement of the settlement. The circuit court denied the motion to compel enforcement, and the assignees appealed. The Fourth District Court of Appeal held that the insureds failed to give insurer “prompt notice” of their claim, as required by the policy, and so the assignees were not entitled to recover benefits from FIGA. Notice was not given until two years and two months after the loss. Additionally, the trial court's award of summary judgment terminated FIGA's pending offer of judgment and precluded the assignees from accepting the offer. Allowing the offer to remain open after entry of summary judgment would frustrate the purpose of the offer of judgment rule to encourage settlement and discourage protracted litigation.

Florida Insurance Guaranty Association, Inc. v. Devon Neighborhood Association, Inc., 67 So.3d 187 (Fla. 2011)

The insured made hurricane damage claims under a commercial residential insurance policy issued by an insurer that became insolvent. The circuit court denied FIGA's motion to compel an appraisal of the property damage. FIGA appealed, and the Florida Supreme Court held that there was no clear evidence of legislative intent for the amendments to Florida Statute § 627.7015, which added the requirement that if the insurer fails to give notice of mediation, the insured shall not be required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action, to apply retroactively. Accordingly, the amendment could not be applied retroactively to the insured's policy.

Meritplan Insurance Company v. Perez, 963 So. 2d 771 (Fla. 3d DCA 2007)

In this case, the insureds sustained a theft loss and made a claim under their homeowner’s policy, which provided for replacement cost coverage for their personal property.  The insureds took the position that they were entitled to receive the replacement value of the loss once they produced receipts for the replacement items.  Although the insureds did replace some of the items, the insurer later suspected that some of the claimed replacement had not occurred, and that some of the orders to purchase replacement items were cancelled. 

The insurer sought the ability to claim insurance fraud, and although the trial court had concluded that the receipts were all that was required to obtain the replacement cost benefit under the policy, Florida’s Third District Court of Appeal reversed and allowed the insurer to proceed on its defense of insurance fraud.

Grife v. Allstate Floridian Insurance Company, 493 F.Supp. 2d 1249 (S.D.Fla. June 28, 2007)

In Grife, the federal district court addressed an issue of insurance policy interpretation concerning a condominium unit owner’s insurance policy’s loss assessment provision.  The court concluded that the policy language in question provided loss assessment coverage for losses in excess of the association’s master policy limit. 

Thus, if no payment was made, or if a reduction in payment was made to the condominium association after taking into account the policy deductible, the amount of the reduction was not included in the unit owner’s loss assessment coverage.

Ceballo v. Citizens Property Insurance Corporation, 2007 Fla. 967 So.2d 811 (Fla. 3d DCA 2007)

Ceballo dealt with the interpretation of the 2004 version of Florida’s Valued Policy Law.  Here, the Florida Supreme Court analyzed whether the payment of additional coverages, such as Ordinance or Law coverage, is owed without a showing that any such expense was actually “incurred,” as the policy language in that case required.  The Court concluded that the purpose of the Valued Policy Law did not extend to these supplemental coverages. 

Thus, the insured must “incur” such expenses if the policy contains such a requirement, and “to incur” means “to become liable for the expense, but not necessarily to have actually expended it.”

Florida Farm Bureau Casualty Company v. Cox, 967 So.2d 815 (Fla. 2007)

In Cox, the question was whether Florida’s Valued Policy Law, section 627.701(1), Florida Statutes (2004), required an insurance carrier to pay the face amount of the policy when a building is deemed a total loss, even if the building is damaged in part by both a covered peril and by an excluded peril.   Although the intermediate appellate court and the widely-recognized Mierzwa opinion had previously concluded that the answer would be yes, the Florida Supreme Court decided the opposite, and disapproved the previous appellate opinions on the subject. 

Thus, the law, when considering pre-2005 Valued Policy Law, is that a property insurer is only responsible to pay for the amount of damage cause by a peril that the policy covers.

Starling v. Allstate Floridian Insurance Company, 956 So. 2d 511 (Fla. 5th DCA 2007)

In Starling, the homeowner’s policy required the insured to provide a sworn proof of loss and also required compliance with all policy terms before suit could be brought to enforce the insurance policy.  After the insured sustained a fire loss, the carrier reminded the insured of the policy requirement regarding the sworn proof, but the insured filed suit without having complied with this policy condition.  Three months after filing suit, the insured submitted a sworn proof, and she did not submit a contents inventory until six months after that. 

The insurer moved for summary judgment in its favor, based on the insured’s failure to comply with policy conditions.  Although the insured argued substantial compliance with the policy condition, both the trial and appellate courts found that the insured materially breached a condition precedent to filing suit, so that her recovery was barred.

Pino-Santoro v. Citizens Property Ins. Corp., 15 Fla. L Weekly Supp. 463b (Circuit Court Order, 17th Judicial Circuit, Broward County, February 25, 2008

In this Circuit Court matter the trial court granted the insured’s motion to confirm appraisal award. The insured had filed suit for Citizens’ failure to fully compensate the insured for property damage from hurricanes Katrina and Wilma.  After suit was filed, Citizens moved to compel appraisal. Appraisal awards were issued which totaled $412,778 for both storms. The insured then filed a motion to confirm appraisal award. The court found that it was compelled to confirm the appraisal awards because Citizens had requested the appraisal, and did not wholly deny coverage or claim fraud, lack of notice, or failure to cooperate.

State Farm Automobile Ins. Co. v. O'Hearn, 33 Fla. L. Weekly D708a, ___So.2d ___ (Fla. 2d DCA 2008)

O’Hearn filed a claim for uninsured motorist benefits under her automobile policy.  State Farm offered $5,000 to settle the UM claim, but O’Hearn rejected the settlement offer.  O’Hearn then filed a complaint asserting a claim for bad faith.  The complaint alleged State Farm had determined the value to be $5,000, however, it also alleged the value of the claim far exceeded $5,000.  At the same time O’Hearn served a request for production of documents, including the contents of the insurer’s claims and underwriting files.  State Farm moved to dismiss the bad faith claim as premature, arguing damages and liability had not yet been determined.  State Farm also objected to the request for production of documents.  The trial court denied both the motion to dismiss and the objection to produce the claims and underwriting files.  State Farm appealed, and the Second District Court of Appeals held that the $5,000 settlement offer did not constitute a final determination of damages where the complaint alleged damages far exceeding that amount.  The Court also reversed the discovery order to produce the claims and underwriting file, holding they were not discoverable until liability and the amount of damages were determined.

State Farm v. Ondis, 33 Fla. L. Weekly S224a; Citizens v. Ueberschaer, 33 Fla. L. Weekly S223a (Fla. 2008)

In the lower court ruling, the First District Court of Appeal held in each case that the pre-2005 Valued Policy Law (F.S. 627.701(1)) required payment of the face amount of the policy when the building was a total loss, even if the damage was from a covered peril and an excluded peril.  The Florida Supreme Court accepted jurisdiction in both cases and held them in abeyance  pending their decision in Florida Farm Bureau Casualty Ins. Co. v. Cox, 967 So.2d 815 (Fla. 2007), where they held an insurer is only responsible to pay for the amount of damage caused by a covered peril in the policy.  The Florida Supreme Court quashed the opinions below and remanded them to the First DCA for reconsideration in light of the ruling in Cox on the pre-2005 Valued Policy Law.

Banat Investment Corp. v. Certain Interested Underwriters at Lloyds, 15 Fla. L. Weekly Supp. 361a (Circuit Court Order, 19th Judicial Circuit, Martin County, January 11, 2008)

The Circuit Court in this matter granted defendant’s (Underwriters) motion to compel appraisal, noting that appraisal is not inconsistent with a coverage defense; an insurer can challenge the amount of loss and coverage at the same time.  The Court denied Banat’s arguments that Underwriters waived the appraisal clause in the insurance contract by repudiating the contract of insurance and that appraisal is barred because Underwriters failed to promptly inform Banat of the option to mediate pursuant to F.S. 627.7015.  The Court found that Underwriters’ substantial payments in at least partial satisfaction of the claim proved Underwriters did not repudiate the contract.  The Court also held that F.S. 627.021(2)(e) specifically excludes surplus lines insurers, like Underwriters, from the obligations and responsibilities imposed by Chapter 627,* and Underwriters had no obligation to notify Banat of the hurricane mediation program.  The Court stayed the case pending binding appraisal proceedings.

*Note that the Florida Supreme Court has pending before it the issue of whether Chapter 627 applies to surplus lines insurers.  Essex Ins. Co. v. Zota.

Essex Ins. Co. v. Zota, 33 Fla. L Weekly S425b, ___So.2d ___ (Fla. 2008)

The Florida Supreme Court answered the following question certified by the Eleventh Circuit Court of Appeals:
Whether Florida Statute sections 626.922 or 627.421, or both, require the delivery of evidence of the insurance directly to the insured, so that delivery to the insured's agent is sufficient.

Essex provided surplus lines insurance to development/builder corporations for whom Mercedes Zota was working. Zota was injured on the job, and brought a negligence action against the builders/developers. Essex filed an action in federal court seeking a determination and declaration of its rights and obligations with respect to Zota in the negligence action. The surplus lines policy Essex issued was delivered to the builder's producing agent, but the policy was never delivered to the builder. The Zotas argued that Essex violated Florida Statute sections 626.922 and 627.421 by not delivering the policy to the builder and were therefore precluded from denying coverage. The district court agreed and granted the Zotas' motion for summary judgment. The Eleventh Circuit got the case and certified 5 questions to the Florida Supreme Court, which chose to answer only one.

Before turning to the certified question, the Florida Supreme Court addressed the issue of whether chapter 627 of the Florida Statutes applies to surplus lines insurers.  Essex contended that none of chapter 627 applies in any way to surplus lines insurance by force of 627.021(2)(e), which states, "This chapter does not apply to...[s]urplus lines insurance placed under the provisions of ss. 626.913-626.937."  The Court rejected that argument, and found that the exclusionary provisions of 627.021(2) apply only to part I of chapter 627, and further that the legislative history demonstrated that it related only to the ratings laws of part I.  The remainder of chapter 627, therefore applies to surplus lines insurers.

On the certified question, the Court held that neither statute altered the common-law presumption that an insurance representative, serving as an independent insurance broker, acts on behalf of the insured for purposes of procuring insurance coverage. Neither statute precludes a surplus lines insurer or its direct surplus lines agent from delivering a copy of the coverage documents to the insured's independent representative-broker instead of directly to the insured.

Hoey v. State Farm Florida Ins. Co., 33 Fla. L. Weekly D1789a, ___So.2d ___ (Fla. 2d DCA 2008)

The Fourth Circuit Court of Appeal affirmed the trial court's finding that water damage to a vacant home fell within the homeowner's policy exclusion for "continuous or repeated seepage or leakage of water or steam from" a "plumbing system, including from, within or around any shower stall, shower bath, tub installation or other plumbing fixture, including their walls or floors."  The trial court's finding was supported by expert testimony, water bills, and the plaintiff's testimony.

Allstate Floridian Ins. Co. v. Office of Ins. Regulation, 981 So.2d 617 (Fla. 1st DCA 2008)

The First Circuit Court of Appeal affirmed the Immediate Final Order of OIR, suspending Allstate's certificates of authority to transact new business in Florida until it complied with subpoenas and subpoenas duces tecum issued in connection with OIR's investigation into Allstate's claims handling practices. The OIR is investigating Allstate's relationship with risk modeling companies, insurance rating organizations, trade associations and compliance with House Bill 1A.  Each subpoena gave notice of OIR's hearing on the matter, and the subpoena duces tecum required Allstate's corporate representatives with knowledge of the identified subject matter to appear and testify at the public hearing. In response to the subpoena's Allstate produced more than 30,000 documents labled "trade secret," and most of the documents produced had pages removed. Allstate did not produce most of the required documents. Notably, Allstate chose to incur more than $2 million in fines rather than produce the requested documents for a Missouri Court. At the hearing, Allstate's witnesses were not able to testify regarding its claims handling practices (as contained in the McKinsey report), despite being requested to do so. The three witnesses Allstate produced did not bring documents and were unable to answer questions about the subjects required by the subpoenas. Allstate argued that OIR's request was "breathtakingly broad" and they were not given enough time to comply. However, Allstate did not request an extension of time. Allstate's representative told OIR that it intended to provide documents it felt were necessary for OIR's review, subject to Allstate's objections and privileges. OIR issued the IFO the next day. Finding that Allstate's willful failure to comply with its statutory disclosure requirements made it extremely difficult for OIR to provide the degree of specificity the Court usually requires to uphold an IFO, the Court applied a relaxed standard and affirmed the IFO. An IFO must contain facts sufficient to demonstrate: 1) immediate, serious danger to the public health, safety, or welfare; 2) the order takes only that action necessary to protect the public; 3) procedural fairness under the circumstances. Two alagations in the IFO met the first element: monetary loss to policy holders and beneficiaries, and ongoing criminal activity-failure to cooperate with an OIR investigation is a crime. The IFO was limited in scdope to new businesses, mitigating potential harm from Allstate's insurance practices while allowing Allstate to service existing policies. Third, the IFO was tailored to the harm by allowing Allstate to determine the duration of its suspension; Allstate can lift the suspension at any time by simply producing the documents it is required by statute to "freely" produce in order to conduct insurance business in Florida. The Court noted the record supported the IFO allegation that Allstate's conduct was likely to continue, based on its failure to comply with the hearing requirements, request an extension of time to comply, timely request a protective order for documents it believed were privileged, and its decision to incur millions of dollars in fines rather than comply with court-ordered production in Missouri.

Banat Investment Corp. v. Certain Interested Underwriters at Lloyd's,15 Fla. L. Weekly Supp. 361a (Circuit Court Order, 19th Judicial Circuit, Martin County, January 11, 2008)

UPDATE:  The Circuit Court in this matter granted defendant's (Underwriters) motion to compel appraisal and denied Banat's arguments that appraisal was barred because Underwriters failed to promptly inform Banat of the option to mediate pursuant to F.S. 627.7015. The trial court held that F.S. 627.021(2)(e) specifically excludes surplus lines insurers, like Underwriters, from the obligations and responsibilities imposed by Chapter 627, and Underwriters had no obligation to notify Banat of the hurricane mediation program. Although it appears the Circuit Court Order was not appealed by plaintiff, the recent Florida Supreme Court opinion in Essex Ins. Co. v. Zota, (see summary above), wherein the Florida Supreme Court ruled Chapter 627 applies to surplus lines insurers, would appear to overrule this trial court ruling.

Holder v. State Farm Ins. Co., 994 So. 2d 521, 33 Fla. L. Weekly D2694a (3rd DCA November 19, 2008)

Insured gets attorney fees post-suit when appraisal is demanded. The insured declined State Farm's settlement offer of $65.00 ($9065 minus the homeowner's $9,000 deductable) and filed suit. State Farm then invoked the binding arbitration clause of the policy, resulting in an appraisal award of $50,178.60. The insured sought both attorney's fees and interest prior to the date of payment. Citing Ajmechet v. United Automobile Ins. Co., 790 So. 2d 575 (Fla. 3d DCA 2001), the Third District Court of Appeal held State Farm was required to pay the insured's attorney's fees because State Farm's payment was obviously affected by filing of the lawsuit. The Court then held that the insured was not entitled to interest prior to the date of the appraisal award, as the matter was in controversy prior to that time.

QBE Ins. Corp. v. Dome Condominium Ass’n, Inc., 577 F.Supp.2d 1256 (S.D. Fla. 2008) Southern District case

After hurricane Wilma, Dome filed a claim with its insurer, QBE. The parties disputed what damages were covered by the policy and twice submitted to the mediation program offered under Florida Statutes, section 627.7015. Although the statute requires the insurer to notify the insured of its right to participate in the mediation program, QBE never did. Dome's attorneys were aware of the program and sought mediation through the program after the attorneys were retained. The parties could not agree on a neutral umpire and QBE petitioned the United States District Court for the Southern District of Florida to appoint a neutral umpire, and Dome filed a counterclaim. QBE moved to dismiss the counterclaim, arguing Dome could not bring suit because it had not participated in the appraisal process. The Court strictly construed Florida Statutes, section 627.7015. Noting that Florida Statutes. Section 627.7015(7) states that if the insurer fails to notify the insured of its right to participate in the mediation program, “the insured shall not be required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder's claims covered by the policy,” the Court refused to dismiss Dome's counterclaim. Dome's independent knowledge of the mediation program did not absolve QBE of its statutory duty to give notice, and since it failed to do so, Dome could bring the suit.

Goff v. State Farm Florida Ins. Co., ___ So. 2d ___, 33 Fla. L. Weekly D2694a (Fla. 2d DCA November 19, 2008)

In Goff v. State Farm Insurance Co., the Second District Court of Appeal held that State Farm could withhold a portion of profit and overhead as depreciation in determining actual cash value of a loss. The plaintiff argued that State Farm wrongly depreciated and withheld a portion of contractor overhead and profit. The Court noted that actual cash value includes overhead and profit when the insured is reasonably likely to need a general contractor for repairs. However, the Court also noted that depreciation is the actual cost of replacement or repair minus actual cash value, and that profit and overhead of twenty percent is usually incorporated into a contractor’s bid. Therefore, the Second District Court of Appeal held that State Farm could withhold a portion of profit and overhead as depreciation in determining actual cash value of a loss.

Ramirez v. Mccravy, ___ So. 2d ___, 34 Fla. L. Weekly D395a (3rd DCA February 18, 2009)

In this case, the Third District Court of Appeal held that the Florida Supreme Court’s hurricane related tolling orders did not toll a statute of limitations where the weather emergencies did not delay the plaintiff in filing suit. Ramirez filed suit 3 days after the running of the statute of limitations, and 6 months after the courts had entered an administrative order tolling the statute of limitations due to Tropical Storm Ernesto causing the closure of the courts. The administrative order stated the storm “may have temporarily impeded the ability of attorneys, litigants…in the performance of their duties and obligations with respect to many legal processes.” The court found that Ramirez did not show how he was temporarily impeded in his ability to timely file suit six months after the court closing. The court held there was nothing in the language that required tacking extra days at the end of a four year period.

Citizens Property Ins. Corp. v. Cuban-Hebrew Congregation of Miami, Inc., ___ So.2d ___, 34 Fla. L. Weekly D333a (3rd DCA February 11, 2009)

In 2006, the insured sued Citizens for breach of contract and declaratory relief, arguing that Citizens failed to pay the full amount of the insured's loss with respect to one of the three properties. The trial court compelled appraisal pursuant to the appraisal clause of the insurance policy. Each party appointed an appraiser and the court appointed the neutral umpire. Two of the three members of the appraisal panel agreed that the amount of the insured's loss was $194,454. The award did not include any deduction for the policy deductible or prior payments by Citizens.

Citizens took the position that the appraisal award was subject to reduction for the policy deductible and payments previously made on the claim. Citizens subtracted those items and issued a check for $106,646.27.

The insured filed a motion to compel payment of the full amount of the appraisal award, without reduction. The trial court entered an order compelling payment of the full amount, and Citizens appealed.

The Third District Court of Appeal reversed the order. The lower court found that Citizens waived the right to make these deductions, that making these deductions amounted to a modification of the appraisal award, and that Citizens unreasonably delayed in bringing the issue to the court because Citizens did not file anything which amounted to a request for modification until after the statutory ninety-day time limit had expired. The Third District disagreed. It noted that the appraisers made an estimate of the total loss, without regard to the deductible or any prior payments. Citizens accepted the appraisers' calculation, and then reduced it by the deductible and the prior payments. That procedure was correct. There was no requirement for Citizens to file an application for modification, and there was no waiver of Citizens' position under the circumstances.

The Court also held that because Citizens underpaid the claim, the insured was forced file suit, and the appraisal award resulted in judgment for the insured, the insured was entitled to attorney’s fees.

Chalfonte Condominium Apartment Assoc. v. QBE Ins. Corp., ___ F.Supp.2d ___ (11th Cir. March 9, 2009)

In Chalfonte, the insured brought action against the insurer, arguing that it breached the implied warranty of good faith and fair dealing based on the insurer’s failure to investigate and assess the insured’s claim within a reasonable time period and seeking to invalidate the hurricane deductable because the policy did not comply with language and type size requirements established by Florida law.

In addressing the first issue, the Eleventh Circuit Court of Appeals noted that the Florida Supreme Court has repeatedly observed that Florida does not recognize a common law first-party action for bad faith failure to settle a claim under an insurance contract. However, the Court held that was not dispositive. Florida has a statutory first-party action for bad faith failure to settle a claim under an insurance contract under Fla. Stat. § 624.155 (“to provide a civil remedy for any person damaged by an insurer's conduct, including ‘[n]ot attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.”) Florida contract law recognizes the implied covenant of good faith and fair dealing in every contract. Several of the federal district courts in Florida have held that common law good faith and fair dealing claims are distinct from statutory bad faith claims in the context of a first-party action on an insurance contract. Additionally, at least one Florida appellate court has implicitly recognized that a good faith and fair dealing claim can be distinct from a statutory bad faith claim in a first-party action on an insurance contract.

The Court then concluded that because Florida courts have not addressed the issue, the following questions would be submitted to the Florida Supreme Court:

(1) Does Florida law recognize a claim for breach of the implied warranty of good faith and fair dealing by an insured against its insurer based on the insurer's failure to investigate and assess the insured's claim within a reasonable period of time?

(2) If Florida law recognizes a claim for breach of the implied warranty of good faith and fair dealing based on an insurer's failure to investigate and assess its insured's claim within a reasonable period of time, is the good faith and fair dealing claim subject to the same bifurcation requirement applicable to a bad faith claim under Fla. Stat. § 624.155?

Regarding the second issue, the Eleventh Circuit, noted that to resolve the issue, it had to determine what penalty an insurer must pay for noncompliance with language and type size requirements for hurricane deductibles and coinsurance provisions established by Florida law as well as the remedy/penalty for noncompliance with the statute. Fla. Stat. § 627.701(4)(a). The statute does not have an explicit statutory remedy provision, so resolution of the issues required a determination of how the Florida Legislature intended courts to address violations of § 627.701(4)(a). Because the Florida Supreme Court has not yet directly addressed the consequences of noncompliance with § 627.701(4)(a), the Eleventh Circuit declined to resolve the dispute and certified the following questions to the Florida Supreme Court:

(1) May an insured bring a claim against an insurer for failure to comply with the language and type-size requirements established by Fla. Stat. § 627.701(4)(a)?

(2) Does an insurer's failure to comply with the language and type-size requirements established by Fla. Stat. § 627.701(4)(a) render a noncompliant hurricane deductible provision in an insurance policy void and unenforceable?

Finally, the Court addressed Chalfonte’s argument that the plain language of the policy required QBE to pay Chalfonte within 30 days of the district court's entry of the amended final judgment on December 18, 2007, and that the district court erred when it denied Chalfonte's motion to enforce execution of the amended final judgment. Once again, because the Florida Supreme Court has not addressed that specific issue, the Court certified the following question:

(1) Does language in an insurance policy mandating payment of benefits upon “entry of a final judgment” require an insurer to pay its insured upon entry of judgment at the trial level?

Hopefully, the Florida Supreme Court will resolve the issues soon.

Segal v. Hartford Ins. Co., No. 09-10588, 2009 U.S. Dist. LEXIS 13215 (11th Cir. June 18, 2009)

Most insurance policies contain a liberalization clause. We usually think that a liberalization clause means that any change in the law broadening coverage would benefit the policyholder, even if the change happened in the middle of a policy period. One court, however, took a narrower view on a liberalization clause's applicability.

The Segals' Boca Raton home was damaged by Hurricane Wilma in 2005. The Segals duly filed a claim under their homeowner's insurance policy with Harford. Hartford accepted liability for the claim. However, Hartford held back the depreciation in value of the damaged property that was covered. The Segals felt Hartford's depreciation holdback breached the insurance policy, and sued. Hartford moved to dismiss the Segals' Complaint with prejudice for failure to state a claim.

The United States District Court for the Southern District of Florida granted Hartford's motion to dismiss because the Segals' insurance policy with Hartford included a depreciation holdback clause. Thus, the district court concluded that Hartford's depreciation holdback pursuant to that clause was not a breach. The Segals appealed.

The 11th Circuit affirmed the district court's dismissal and held that the Segals' Complaint failed to state a claim. On appeal, the Segals had two arguments. First, the Segals argued that Florida Statute § 627.7011(3), which prohibited insurers from holding back the depreciation in value of damaged property covered by a policy, was incorporated into the Segals' policy. Unfortunately for the Segals the statute went into effect after the Segals' policy was signed. The parties even agreed the statute did not apply retroactively to the Segals' existing policy. However, the Segals argued that the statute prohibiting depreciation holdback was incorporated into their policy through the policy's liberalization clause. The liberalization clause stated,

"If we make a change which broadens coverage under this edition of our policy without any additional premium charge, that change will automatically apply to your insurance as of the date we implement the change in your state . . . "

The court, however, disagreed with the Segals, and explained that in Florida, contracts for insurance "are construed in accordance with the plain language of the policies as bargained for by the parties." Segal, 2009 U.S. Dist. LEXIS 13215 at *1. So, the court analyzed the liberalization clause pursuant to its plain language. The liberalization clause stated, "[I]f we make a change . . . ." Id. Section 627.7011(3)'s change prohibiting depreciation holdback, however, was made by the Florida Legislature, not by Hartford. Thus, the court took a narrow view of the liberalization clause and held that pursuant to the policy's plain language the liberalization clause did not incorporate the statute's provision prohibiting depreciation holdback.

Second, the Segals argued that the same liberalization clause also incorporated Hartford's changed practices to no longer holdback depreciation to their insureds. The court, however, rejected this claim because the Segals did not allege Hartford's changed practices in their Complaint. Accordingly, the court affirmed the district court's dismissal of the Segals' Complaint with prejudice for failure to state a claim.

Sunshine State Ins. Co. v. Davide, ___ So. 3d ___, 34 Fla. L. Weekly D1422a (Fla. 3d DCA July 15, 2009)

In this case, Florida’s Third District Court of Appeal held that when an insurer erroneously withholds a portion of a payment due, the insured is entitled to prejudgment interest on the amount not timely paid from the date the payment became due under the policy, not from the date the property was damaged. As I will explain at the end of the case summary, this case applies only to pre-2007 claims. On July 11, 2007, consumer friendly legislation took effect which would have provided Davide with prejudgment interest from the date Sunshine received notice of the claim.

In the summer and early fall of 2005, Arthur Davide’s home was damaged by Hurricanes Katrina and Wilma. Davide filed a claim with his insurer, Sunshine State Insurance Company, a dispute arose regarding the amount to be paid for damage to Davide’s roof, and the parties went to appraisal. More than one year after Wilma, the appraisers awarded David $246,491.94, with the caveat:

This appraisal award is in total, and money previously paid by the carrier to its insured on the subject claim, if any, should be deducted from this award. This appraisal award is subject to the terms and conditions of the policy of insurance (e.g., deductible) and the laws of the State of Florida.

Claiming to be unsure as to whether this language meant that the appraisal award had already taken into account a deduction for depreciation or whether this language authorized Sunshine to take such a deduction, Sunshine asked the umpire many times for clarification. Twenty six days later, without an answer from the umpire, Sunshine paid the award minus an amount it attributed to depreciation. Three months later, Davide brought suit to confirm the appraisal award. That same day, Davide's counsel obtained a letter from the umpire which confirmed David’s position that the award was an actual cash value award which took depreciation into account. David told Sunshine on March 8, 2007, and the amount previously withheld by Sunshine was paid to Davide on April 4, 2007.

Davide sought an award of pre-judgment interest on the amount held back from the date on which his home was damaged rather than within the time frame authorized by the policy (within sixty days of the filing of an appraisal award). The trial court gave it to him; the Third District Court of Appeal reversed.

Basically, the Third District held the parties to the terms of the policy. The policy stated that Sunshine was not obligated to pay a covered claim until sixty days after the filing of an appraisal award. Relying on substantial precedent the Court noted that prejudgment interest should be computed from the date payment of a covered claim is due. Therefore, Davide was entitled to pre-judgment interest on the portion of the appraisal award not timely paid within sixty days of the filing of the appraisal award with Sunshine.

As noted above, Davide would have faired better if the hurricanes occurred in 2007 rather than 2005. Florida Statute 627.70131, which was effective on July 11, 2007, provides:

§ 627.70131. Insurer's duty to acknowledge communications regarding claims; investigation

(5) (a) Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of a claim or portion of a claim paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, shall bear interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy. If there is a right to prejudgment interest, the insured shall select whether to receive prejudgment interest or interest under this subsection. Interest is payable when the claim or portion of the claim is paid. Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.

(b) Notwithstanding subsection (4), for purposes of this subsection, the term "claim" means any of the following:

  1. A claim under an insurance policy providing residential coverage as defined in s. 627.4025(1);
  2. A claim for structural or contents coverage under a commercial property insurance policy if the insured structure is 10,000 square feet or less; or
  3. A claim for contents coverage under a commercial tenants policy if the insured premises is 10,000 square feet or less.

Had this Statute been in effect at the time Davide suffered his loss, he would have been entitled to a year and a half’s interest, not just a few month’s.

Pyramid Diversified Servs., Inc. v. Providence Prop. & Cas. Ins. Co., No. 08-445, 2009 U.S. Dist. LEXIS 49056 (N.D. Fla. June 10, 2009)

We all enter into contracts everyday. Every time we buy a product, get a gym membership, or even renew a home insurance policy we sign and enter into contracts. What we usually don't do, however, is read the fine print. More often than not, these contracts we enter into everyday are what we like to call "form contracts." Form contracts contain standard terms of legal mumbo jumbo that most people think nothing about and proceed to sign the contract without reading. Often the legal mumbo jumbo includes forum selection clauses. Forum selection clauses dictate where any litigation surrounding the contract will take place. Not only can this clause shlep any old person across the country to litigate a contract dispute, but this clause can be mandatory and dictate which jurisdiction's law will be controlling in the suit and consequently whether or not a court has jurisdiction to hear the case. Recently, one court stressed a forum selection clause's importance.

The United States District Court for the Northern District of Florida, Pensacola Division, granted Providence Property & Casualty Insurance Company's Motion to Transfer Venue from the Northern District of Florida to the Western District of Oklahoma pursuant to 28 U.S.C. § 1404(a) based on a forum selection clause in a diversity jurisdiction case. 28 U.S.C. § 1404(a) provides, in pertinent part,

"(a) For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."

28 U.S.C. § 1404(a) (2009). In other words, Section 1404(a) allows a party to transfer the venue of a lawsuit to any venue where jurisdiction was proper. Here, the court explained that not only does Section 1404(a) allow the transfer, but a forum selection clause can mandate the transfer so long as the transfer was not "unreasonable or unjust and the clause was not the product of fraud or overreaching." Pyramid Diversified Servs., Inc. v. Providence Prop. & Cas. Ins. Co., 2009 U.S. Dist. LEXIS 49056 (N.D. Fla. June 10, 2009). Basically, forum selection clauses are the "get out of jail free" cards for venue selection and transfer.

The Pyramid court explained that forum selection clauses were enforceable by federal courts, and federal law, rather than state law, governed the determination of whether to enforce a forum selection clause in a diversity jurisdiction case. The court further explained that forum selection clauses are

"generally considered either mandatory, in which there is a clear, unequivocal expression of the parties' intent to exclusively limit the forum to a particular venue of court, or permissive, in which there is no clear expression of exclusivity but rather an understanding that the parties have consented to venue or jurisdiction in a particular forum."

Pyramid Diversified Servs., Inc., 2009 U.S. Dist. LEXIS 49056 at *1.

After reviewing the forum selection clause at issue in Pyramid, the court concluded that the clause was mandatory rather than permissive. The clause read,

"The parties agree that any legal action, suit or proceeding relating to this Agreement or the transactions contemplated hereby, shall be instituted in a federal or state court sitting in Oklahoma County, Oklahoma, which shall be the exclusive jurisdiction and venue of said legal proceedings."

Pyramid Diversified Servs., Inc., 2009 U.S. Dist. LEXIS 49056 at *1. The court concluded the clause to unambiguously demand that litigation would take place in Oklahoma County, Oklahoma. The court further noted that the action might have been brought in the Western District of Oklahoma and jurisdiction was proper. Accordingly, the court granted Providence's Motion for venue transfer from the Northern District of Florida to the Western District of Oklahoma.

The lesson here is to read those pesky forum selection clauses. If not, you could find yourself litigating in Western Oklahoma and dealing with an unfamiliar body of law. So, just remember, forum selection clauses are kind of a big deal.

North Pointe Ins. Co. v. Tomas, No. 3D08-2245, ___ So. 3d ___ (Fla. 3d DCA, August 26, 2009)

The recent case of North Pointe Insurance Company v. Tomas illustrates why many insurers who wrongfully fail to pay a claim choose to unnecessarily delay payment rather than submit an outright denial. 

In Tomas, the insureds made a claim with North Pointe, their homeowners' insurance carrier, for a complete replacement of a marble kitchen floor. North Pointe first concluded the loss was excluded under the policy and denied coverage. The Tomases filed a petition to compel appraisal pursuant to the terms of their policy, and North Pointe withdrew its previous denial of the claim, admitted coverage and stipulated to attorney's fees up to that date. The claim went to appraisal, and North Pointe paid. A month later, an appraisal award was entered in the amount of $115,899.52, including pre-judgment interest from the date of the loss. The lower court confirmed the appraisal award and entered final judgment.

On appeal, North Pointe argued that the trial court erred in confirming the award before the contractual sixty-day period to make payment expired and that prejudgment interest should have been awarded only from the date it paid the award, not the date of loss. Citing long-standing authority in the Third District, Independent Fire Insurance Co. v. Lugassy, 593 So. 2d 570 (Fla. 3d DCA 1992), the Court disagreed.

Generally, interest on a loss payable under an insurance policy is recoverable from the date the policy provides that payment is due. Lugassy carved out an exception to that rule: when the insurer denies coverage but later admits coverage or coverage is later awarded through litigation, the insurer is liable for prejudgment interest from the date of the loss. “Once the insurer denies coverage, it is deemed to have waived the policy provision for deferred payment and, should it pay, becomes responsible for prejudgment interest from the date of loss.” Tomas, at * 2.

Because North Point first denied coverage for the claim, it was deemed to have waived the policy provision allowing deferred payment and was responsible for prejudgment interest from the date of the loss, even though it later agreed to pay the claim within the time period provided in the policy.

Had North Pointe not denied the claim at first but instead engaged in tactics to delay or reduce that payment owed for the loss, the issue of prejudgment interest would not have been so clear. Without the denial, the payment may have been deemed due—60 days after the appraisal award or the date of final judgment, and the Tomases may not have been entitled to the nearly two and a half years of prejudgment interest they ultimately received. See Liberty Mut. Ins. Co. v. Alvarez, 785 So. 2d 700 (Fla. 3d DCA 2001) (making distinction that, where there is no denial of coverage, prejudgment interest is payable from date of appraisal as opposed to date of the loss); Aries Insurance Co. v. Hercas Corp., 781 So. 2d 429 (Fla. 3d DCA 2001).

Corban v. USAA, No. 2008-IA-00645-SCT, ___ So. 3d ___, (Miss., October 8, 2009)

In Corban, the Supreme Court of Mississippi addressed three issues that were the focal point of much of the Katrina litigation.

(1) Whether “storm surge” is included in a “water damage” exclusion.

(2) The interpretation and application of an Anticoncurrent Causation Clause .

(3) Which party bears the burden of proof. 

The case came to the Court as an interlocutory appeal from the circuit court, where the Corbans filed suit claiming, among other things, breach of their insurance contract. The Corban’s home was damaged during Katrina, and they sought compensation under their standard all-risk homeowners policy with USAA. Citing the policy’s Anticoncurrent Causation Clause (ACC), USAA denied coverage for damage to the structures caused by wind because they were also damaged by water. The ACC read:

1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

To resolve the three issues, the Court declared, “Our role is to render a fair reading and interpretation of the policy by examining its express language and applying the “ordinary and popular meaning” to any undefined terms.” In doing so, the Court used the following rules of contract interpretation: clear and unambiguous contracts are interpreted as written; if a contract contains ambiguous or unclear language, the ambiguities are resolved in favor of the non-drafting party; ambiguities exist when a policy can be logically interpreted in two or more ways, and one logical interpretation provides coverage; a term that is not defined within the policy is not necessarily ambiguous; the common meaning of the term will prevail; exclusions and limitations on coverage are also construed in favor of the insured; and language in exclusionary clauses must be “clear and unmistakable,” as those clauses are strictly interpreted.

1) Whether the circuit court erred in finding that “storm surge” is included in the “water damage” exclusion.

The Corbans argued that “storm surge” was a covered peril because “[t]he policy itself defines ‘water damage’ and purposely does not include storm surge within that definition.” USAA argued that “storm surge” is obviously an “excluded peril” under the “water damage” exclusion. Citing Mississippi and Fifth Circuit caselaw, the Court sided with USAA, holding that “storm surge” is contained unambiguously within the “water damage” exclusion. “Storm surge” was plainly encompassed within the “flood” or “overflow of a body of water” portions of the “water damage” definition, and no other logical interpretation existed.

(2) Whether the circuit court erred in finding that the ACC clause is applicable in the case sub judice.

To resolve this issue, the Court parsed the language of the ACC clause. First, the Court considered the term “loss.” The court noted a “loss” is incurred by an insured and typically, but not always, follows “damage” to his or her property. “Loss” occurs at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured. The Court further noted that once a loss occurs, caused by either a covered peril (wind) or an excluded peril (water), that loss is not changed by any subsequent cause or event. “The insured's right to be indemnified for a covered loss vests at time of loss. Once the duty to indemnify arises, it cannot be extinguished by a successive cause or event.”

Next, the Court looked at the term “concurrently.” Based on the plain meaning of the term, the Court concluded: “the exclusion applies only in the event that the perils act in conjunction, as an indivisible force, occurring at the same time, to cause direct physical damage resulting in loss.” In this case, though, the perils acted in sequence, not concurrently, to cause different damage, resulting in separate losses.

The Court then considered the phrase, “in any sequence.” The term was contained within an exclusionary clause for “water damage” losses, but not defined in the policy. Given the Court’s determination that loss occurs at the point in time when the insured property is damaged, the phrase “in any sequence” conflicted with other provisions of the USAA policy, creating ambiguity. The provisions, which allowed USAA to determine the value of covered property at the time of a loss or the instant immediately preceding it, irreconcilably conflicted with the “in any sequence” language. Because the phrase had two interpretations, equally reasonable, the rules of contract interpretation mandated the interpretation that gave the Corbans greater indemnity. Thus, the Court concluded that the “in any sequence” language in the policy could not be used to divest the Corbans of their right to be indemnified for covered losses.

In sum, the Court explained that different perils from a hurricane generally, but not without exception, result in separate damage and loss. The ACC clause applies only “if and when covered and excluded perils contemporaneously converge, operating in conjunction, to cause damage resulting in loss to the insured property.” If the insured property is separately damaged by a covered or excluded peril, the ACC clause does not apply. If the Corban’s property first suffered damage from wind, resulting in a loss, whether additional “[flood] damage” occurs was of no consequence, as they would have suffered a compensable wind-damage loss. Conversely, if the property was first damaged by flood, resulting in a loss, and then wind damage occurred, they could only recover for losses attributable to wind. Those issues were for a jury to decide.

(3) Which party bears the burden of proof.

Generally, under all-risk policies, the insured has the initial burden to prove that the loss occurred. The burden then shifts to the insurer, to prove any affirmative defense. Accordingly, the Corbans are required to prove a “direct, physical loss to property described.” Thereafter, USAA has the burden to prove, by a preponderance of the evidence, that the losses are excluded by the policy as flood damage.

Coconut Key Homeowners Ass’n, Inc. v. Lexington Ins. Co., No. 08-60640, ___ F. Supp. 2d ___ (S.D. Fla., August 28, 2009)

Coconut Key Homeowners Association, Inc., brought suit after its insurer, Lexington Insurance Company, allegedly failed to pay for covered losses incurred as a result of Hurricane Wilma. 

Lexington filed a Motion for Partial Summary Judgment, arguing that Coconut Key did not comply with an inspection provision in the policy which was a condition precedent to recovery. The provision at issue stated:

3. Duties In The Event of Loss Or Damage

You must see that the following are done in the event of loss or damage to Covered Property:

f. Permit us to inspect the property and records proving the loss or damage. Also, permit us to take samples of damaged property for inspection, testing or analysis.

Coconut Key provided Lexington access to the majority of the property, but a few unit owners refused to make their units available for inspection. Lexington argued it needed access to “the entirety of damaged property” in order for Coconut Key to present a claim regarding that property, and, as a result, it was entitled to partial summary judgment for damage to the units it had not been able to inspect.

Coconut Key argued the inspection provision was a cooperation clause, not a condition precedent, and Lexington's motion should be denied because the record evidence showed Coconut Key cooperated with Lexington's request for inspections.

The issue before the United States District Court for the Southern District of Florida was whether the inspection provision was a condition precedent or a cooperation clause. The difference between the two is that a condition precedent must be performed before the contract becomes effective; there is no recovery if the insured materially breaches or does not fulfill condition precedent at issue. The insurer does not have to show prejudice. Cooperation clauses however, are less burdensome on insured parties. To establish a defense based on breach of a cooperation clause, the insurer must show both a material breach and substantial prejudice.

The Court looked to case law regarding insurance policies to determine that the inspection provision at issue was a cooperation clause. The Court relied on a few factors in reaching this conclusion. First, the inspection provision helped Lexington obtain evidence, a key purpose of cooperation clauses. Second, the Court found no Florida law to support Lexington’s contention that inspection provisions are typically considered to be a condition precedent. Finally, the rule of interpretation that policy provisions limiting liability are construed in favor of the insured weighed in favor of holding the provision was a cooperation clause. If the provision were a condition precedent, it would be more difficult for Coconut Key to recover.

As the inspection provision was a cooperation clause, Lexington needed to show as a matter of law that Coconut Key materially breached the inspection provision and that it was prejudiced by the breach to prevail on the motion for summary judgment. The Court concluded that Lexington did not meet this burden. It was undisputed that Coconut Key extended four invitations for reinspection by Lexington. Further, the Court noted that the record indicated the cause of Lexington's inability to access the property was the individual unit owners and there was no evidence that Coconut Key could compel the unit owners to assist Lexington. As a result, Lexington did not show, as a matter of law, that Coconut Key materially breached the inspection provision.

Moreover, Lexington offered no evidence that a meaningful amount of Coconut Key's damages were located in the inaccessible units nor did it explain why it must access each and every unit to respond effectively to Coconut Key's claims. Additionally, Lexington's assertion that it found no additional damage to unit interiors during re-inspection tended to show that lack of access to the remaining units has had little impact on its assessment of Coconut Key's claimed damages. Accordingly, Lexington's motion also failed because it did not demonstrate substantial prejudice.

Liebel v. Nationwide Ins. Co. of Florida, No. 4D08-3356, ___ So. 3d ___, (Fla. 4th DCA, October 7, 2009)

On February 14, 2003, Liebel noticed a wide gap between the floor and the wall in her living room. Over the following two and a half weeks, Liebel's living room floor began to sag and bend, and then every room of the home detached from the walls, and a wide crack formed in the middle of the living room. It turned out that the crack caused a ruptured water line under Liebel's home, and the escaping water caused the soil beneath the home to erode, causing the foundation to settle, and the damage to Liebel's home. Liebel sought coverage for the damage under her all-risk homeowner's insurance policy with Nationwide. 

Nationwide denied coverage for the damage, alleging that the loss was specifically excluded by the following exclusions in the policy:

1. We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another cause or event contributed concurrently or in any sequence to cause the loss.

a) Earth Movement and Volcanic Eruption. Earth movement means: earth movement due to natural or unnatural causes, including mine subsidence; earthquake; landslide; mudslide; earth shifting, rising or sinking (other than sinkhole collapse). Volcanic eruption means: eruption; or discharge from a volcano.
3. We do not cover loss to property described in Coverages A and B resulting directly from any of the following:
e) Continuous or repeated seepage or leakage of water or steam over a period of time from a heating, air conditioning or automatic fire protective sprinkler system; household appliance; or plumbing system that results in deterioration, rust, mold, or wet or dry rote [sic]. Seepage or leakage from, within, or around any shower stall, shower tub, tub installation or other plumbing fixture, including their walls, ceilings or floors, is also excluded.

Liebel argued that the loss was covered based upon the following provision of the policy:

If loss caused by water or steam is not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair or replace the system or appliance. We do not cover loss to the system or appliance from which the water or steam escaped.

f) (1) wear and tear, marring, deterioration;

If any items f)(1) through (7) cause water to escape from a plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance, we cover loss caused by the water not otherwise excluded. We also cover the cost of tearing out and replacing any part of a building necessary to repair the system or appliance. We do not cover loss to the system or appliance from which the water escaped.

Under exclusions 3.a) through 3.f), any loss that follows is covered unless it is specifically excluded.

In deciding the case, Florida’s Fourth District Court of Appeal explained the classic rules of insurance policy interpretation. In Florida, insurance contracts are interpreted according to the plain language of the policy. However, if the terms of a policy are amenable to two or more reasonable interpretations, one that provides coverage and one that does not, the policy is considered ambiguous. Ambiguous coverage provisions are interpreted against the insurer that drafted the policy and in favor of the insured. Further, the Court noted ambiguous “exclusionary clauses are construed even more strictly against the insurer than coverage clauses.” The Court also noted the failure of a policy to define a certain term does not make the policy ambiguous; when the insurer has not defined a term, the common definition prevails.

Applying these rules to the policy, the Fourth District held that the plain and unambiguous language of the policy’s earth movement exclusion excluded from coverage the damage to Liebel’s home. The policy specifically excluded “loss to any property resulting directly or indirectly” from “earth movement due to natural or unnatural causes.” “Earth movement” included “earth shifting, rising, or sinking.” Liebel, 2009 WL 3189332 at *4. As the loss to Liebel's home was caused by the shifting of earth under the home, which was caused by earth shifting from unnatural causes, the water line rupturing, the loss was specifically excluded from coverage.

However, the Court agreed with Liebel's contention that the cost of repairing the water line was covered by the policy. Because the policy stated that it did not cover damage caused by water from a plumbing system that was otherwise excluded, but then stated that it covered the cost of repairing a system that caused water damage, the policy was ambiguous because there were two reasonable interpretations of the provisions.

Specifically, one may interpret the “otherwise excluded” language to preclude coverage for all damages caused by a matter otherwise excluded, including the cost of tearing out and replacing any part of Liebel's home necessary to repair the ruptured water line. In contrast, a reasonable person could interpret the Policy to exclude from coverage the damage caused by earth movement, but include the cost of repairing the water line that caused the loss, as it is a plumbing system that caused water damage due to its deterioration from wear and tear.

Liebel, 2009 WL 3189332 at *6. Following the principle that ambiguities in insurance contracts are construed in favor of the insured, the Court held that the cost of tearing out the floor and repairing the water line was covered by the policy. The Court noted that this finding was supported by the principle that an all-risk policy covers a loss unless that loss is specifically excluded; the policy did not specifically exclude the cost of repairing a plumbing system from coverage, it only specifically excluded damage caused by earth movement.

Florida Insurance Guaranty Association, Inc. v. Castilla, No. 4D09-103, ___ So. 3d ___ (Fla. 4th DCA, September 30, 2009)

The Castillas filed an insurance claim with Florida Preferred Property Insurance Company (PPI), alleging their home was damaged by Hurricane Wilma in October, 2005. PPI issued a check for the claim, but the Castillas found it insufficient and objected. PPI was liquidated and taken over by FIGA, and the Castillas raised their claim with FIGA. FIGA inspected the property and denied their claim, finding that the damages were not caused by Wilma.

The Castillas filed suit against FIGA for breach of the insurance contract, claiming they furnished FIGA with timely notice of loss and performed all conditions precedent to recover under the policy and Florida law. FIGA filed a motion to dismiss, arguing the Castillas failed to fulfill their contractual obligations, citing to the provisions of the policy that permitted appraisal.

Two months after the Castillas filed suit, FIGA determined that the patio damage was covered and informed them that it would formally withdraw its previous denial of the claim. FIGA then filed an amended motion to dismiss or abate the action, arguing that the Castillas failed to satisfy all conditions precedent, including appraisal, documentation to substantiate their claim, and examination under oath. The trial court denied FIGA’s the motion, ordering it to answer the complaint.

Moffett v. Computer Sciences Corp., No. 05-1547, ___ F. Supp. 2d ___ (D. Md., July 6, 2009)

The plaintiffs in this case were Maryland residents seeking to recover damages for flood losses caused by Hurricane Isabel on September 18, 2003. They were insured under the National Flood Insurance Program (NFIP). Under the terms of the Standard Flood Insurance Policy, proofs of loss had to be filed within 60 days of the date of loss, by November 17, 2003. On October 28, 2003, FEMA notified all potentially affected insureds that the deadline for filing proofs of loss was extended until January 17, 2004. The plaintiffs missed the deadline and then requested waivers of the deadline, which FEMA denied. The issue before the Court was whether it had authority to review FEMA's decisions regarding the plaintiffs' individual requests for waiver of the deadline to file proofs of loss. 

The plaintiffs argued the Court has authority to review FEMA's waiver decisions under two theories. Citing 42 U.S.C. § 4072, [fn1] the plaintiffs argued that a waiver request constitutes a “claim” for purposes of section 4072, so the Court has the authority to review FEMA's denials of waivers as well as denials of claims of loss on the merits. Alternatively, the plaintiffs argued that the Court had authority to review FEMA’s waiver decisions under the Administrative Procedure Act, 5 U.S.C. § 702, which provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.” 5 U.S.C. § 702 (2006).

The defendants argued a “claim” under section 4072 can only mean a timely filed proof of loss for covered losses, not a request for waiver of the time to file the claim. The statute does not define the term “claim,” so the ordinary term prevails. The ordinary meaning of “claim” is to assert a right, and a request for waiver does not assert a right. To the contrary, it acknowledges that no right exists and seeks leave to assert a right. The defendants also argued the Administrative Procedure Act is inapplicable because the plaintiffs have an adequate remedy in section 4072. They further contended the APA does not apply because FEMA's decision to deny the waiver requests is discretionary and the Court lacked a meaningful standard against which to judge the decision.

Based on its interpretation of the word “claim,” the Court determined that it had authority to review the waiver decisions under 42 U.S.C. § 4072. The Court held that the term “claim” was ambiguous, and the ambiguity must be construed favorably to the insured. Accordingly, the Court held that a claim included a request for waiver of a proof of loss deadline.

The Court then concluded that FEMA abused its discretion in denying the plaintiff’s requests for waivers of the proof of loss deadline. FEMA did not publicly disclose that it would grant waivers, nor did it announce the criteria for obtaining waivers. That, concluded the Court, was a problem:

Its failure to disclose that waivers were even available or on what grounds was arbitrary and capricious and, in any case, constituted an abuse of discretion.

The Court therefore finds as a matter of law that all proofs of loss filed by Plaintiffs in this case must be deemed timely [filed].


[fn1] 42 U.S.C. § 4072 provides:

[T]he Director [Administrator of FEMA] shall be authorized to adjust and make payment of any claims for proved and approved losses covered by flood insurance, and upon the disallowance by the Director of any such claim ... the claimant ... may institute an action against the Director on such claim in the United States district court for the district in which the insured property or the major part thereof shall have been situated, and original exclusive jurisdiction is hereby conferred upon such court to hear and determine such action without regard to the amount in controversy.

Citizens Prop. Ins. Corp. v. Garfinkel, No. 5D09-1641, ___ So. 3d ___ (Fla. 5th DCA, December 18, 2009)

Citizens sought a writ of prohibition directed to prevent the trial court from taking any further action regarding a first-party bad faith claim brought by Alan Garfinkel.

Citizens sought a writ of prohibition directed to prevent the trial court from taking any further action regarding a first-party bad faith claim brought by Alan Garfinkel. Garfinkel purchased a windstorm insurance policy from Citizens which was in effect when his home was damaged by the multiple 2004 hurricanes. After some litigation, the parties agreed to appraisal, and an appraisal award was eventually entered in Garfinkel’s favor. When Garfinkel moved to confirm the award, he sought an amount in excess of the policy limits, arguing three distinct claims resulting from three separate occurrences. The trial court confirmed the award, but limited the amount awarded to the policy limits for a single occurrence. Garfinkel then amended his complaint, arguing the right to a final judgment on the breach of contract claim, and adding a bad faith claim against Citizens under sections 624.155(1)(b)(1) and 626.954(1)(i)(3), Florida Statutes (2008). Citizens moved to dismiss the bad faith claim on the basis of sovereign immunity, but the trial court denied the motion, and Citizens sought the writ from the Fifth District Court of Appeal.

The issue specifically before the Court was whether Citizens is shielded by sovereign immunity from bad faith claims.

The enabling statute that created Citizens made it clear that Citizens is a government entity and not a private insurer. The Legislature made Citizens immune from all liability and suit with five exceptions; bad faith was not an exception. However, paragraph following the exceptions from immunity, section 627.351(6)(r)(2), provides:

2. The corporation shall manage its claim employees, independent adjusters, and others who handle claims to ensure they carry out the corporation's duty to its policyholders to handle claims carefully, timely, diligently, and in good faith, balanced against the corporation's duty to the state to man-age its assets responsibly to minimize its assessment potential.

Citizens argued that the plain meaning of the statute is that there are only five exceptions to its immunity and bad faith was not one of them. Garfinkel argued the requirement to act in good faith immediately following the exceptions from immunity suggests the Legislature intended a bad faith exception as well.

To resolve the issue, the Court applied standard principles of statutory construction. First, when a statute articulates exceptions, no other exceptions may be implied. As the Legislature specified only five exceptions to its grant of immunity, it would not be reasonable to think another grant would show up, unidentified as such, in a nearby but separate paragraph. Second, in construing statutes involving sovereign immunity, any waiver of that immunity must be clear and unequivocal. The paragraph explaining Citizens’ duty of good faith does not contain a clear waiver.

Garfinkel argued his claim existed under section 624.155, Florida Statutes, which provides that any person may bring a civil action against an insurer when damaged by the insurer’s failure to act in good faith to settle claims. Recognizing that section 624.155 applies to private insurers, Garfinkel argued Citizen’s bad faith liability comes from the above mentioned paragraph in the enabling statute. The Court explained the problem with this argument: “Garfinkel's complaint specifically pleads that bad faith liability is founded on section 624.155(1)(b). If Citizens is not an authorized insurer under section 624.155(1)(b), then it cannot be subject to bad faith claims pursuant to it.”

Additionally, the Court noted that the Legislature specifically declined to subject Citizens to bad faith claims during the 2007 legislative session. A bill before the Senate attempted to add language that would have made a claim arising under Citizens' duty to act in good faith one of the immunity exceptions by adding the word “or” after the five exceptions and before the subparagraph requiring Citizens to act in good faith. That bill was redrafted to exclude the word “or.” Additionally, a House bill that would have subjected Citizens to “all remedies” was not enacted. Accordingly, the Court concluded that recent legislative history suggested the Legislature did not intend for section 627.351(6)(r)2 to create a private right of action by policy holders against Citizens.

The Court further noted that Florida’s other “insurance risk appointment plans,” the Florida Insurance Guarantee Association (“FIGA”), and the Florida Medical Malpractice Joint Under Writing Association (“FMMJUA”), were endowed with similar immunity from bad faith causes of action. Finally, the Court explained that a cause of action for bad faith is not considered to be a willful tort that would give rise to a claim under the specific exceptions from liability.

In sum, the Court granted the writ of prohibition, holding that Citizens is immune from first-party bad faith claims pursuant to section 627.351(6)(r)1 and is not subject to bad faith liability under section 624.155(1)(b)(1).

State Farm Florida Ins. Co. v. Seville Place Condominium Ass’n, Inc., No. 3D08-2538, ___ So. 3d ___, (Fla. 3rd DCA, October 14, 2009)

In State Farm Florida v. Seville Place, Florida’s Third District Court of Appeal held that an insured could amend their complaint to add a bad faith claim after coverage was admitted by the insurer and an appraisal award had been entered, but before final judgment.

The issue on certiorari was whether a bad faith claim was ripe, not whether bad faith existed, therefore, the facts giving rise to the bad faith claim were not necessary to the opinion. In this case though, the majority opinion detailed the facts, noting the “extraordinary length of time it has taken to resolve the Association's claim,” and describing State Farm's actions as “aggressive legal tactics” and “unfounded imposition of conditions.” As the facts giving rise to the potential bad faith claim may well have been crucial to the two justice majority’s decision, they are detailed below.

The Facts

On October 24, 2005, Hurricane Wilma caused substantial damage to the forty five roofs covering the Seville Place residential condominiums. Seville Place filed a claim with State Farm under its condominium association insurance policy, which specifically covered direct physical loss or damage to property caused by a hurricane. The policy specified that any dispute between the insurer and insured regarding the loss amount would be resolved by appraisal:

If we [State Farm] and you [the Association] disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. Each party will notify the other of the selected appraiser's identity within 20 days after receipt of the written demand for an appraisal. The two appraisers will select an umpire. If the appraisers cannot agree upon an umpire within 15 days, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. . . . If we submit to an appraisal, we will still retain our right to deny the claim.

In January 2006, State Farm made two payments on the claim which totaled $90,564.62. Seville Place’s estimate of the damage exceeded $4.6 million. By October 2006 (a year after the loss), Seville Place concluded that further negotiation would be fruitless and made a written demand for appraisal.

State Farm claimed there was “no clear disagreement” between the parties because it had not yet been allowed access to all the damaged condominium units and declared it would agree to appraisal only if Seville Place agreed to two conditions: 1) any appraisal award “must be a line item document, broken down by building and unit number, including the pricing that establishes the award of that item;” and 2) State Farm required a sworn “proof of loss” form.

In February 2007, Seville Place filed suit against State Farm for breach of the insurance contract and sought declaratory relief regarding coverage and State Farm's waiver of policy defenses. Seville Place also asked the court to enforce the appraisal provision without State Farm's required conditions. State Farm claimed that it agreed to appraisal, but renewed its request for the special conditions.

The trial court granted Seville Place’s motion for partial summary judgment on the policy condition defenses, based on the facts that State Farm acknowledged the loss was covered by making the January 2006 payments and then denied the balance of Seville Place’s claim. The circuit court also ordered appraisal, without the conditions sought by State Farm, and allowed sixty days for the completion of the process. State Farm moved for an additional sixty days in order to inspect the interior of several of the condominium units. The trial court granted the extension, directed Seville Place to assist State Farm in accessing the units, and set a final appraisal hearing for June 28, 2008.

Seville Place’s appraiser and the umpire signed a final appraisal award, fixing the insured loss at $2,960,405. The award excluded any interest, costs, and attorney's fees that might be determined by the court, and noted it should be reduced by amounts State Farm previously paid and any applicable deductible.

The day before that hearing, State Farm filed an emergency motion and affidavit seeking removal of the neutral umpire appointed by the court. State Farm later supplemented this motion with a request for an “entirely new panel to conduct a new appraisal,” asserting that otherwise it would “require many weeks, months, and possibly even years to sort through the multiple issues related only to this highly problematic and invalid appraisal gone wrong.”
The trial court confirmed the award, denied State Farm's emergency motion for removal of the neutral umpire, and granted the Seville Place's motions to amend the complaint to add a statutory bad faith claim and a demand for punitive damages. The court also reaffirmed that State Farm's affirmative defenses had been subsumed in the confirmation order “and/or such defenses were waived by State Farm.” State Farm then filed the petition for certiorari at issue, arguing that the trial court erred in allowing the complaint to be amended with the bad faith claim.
Whether the bad faith claim was ripe

The Third District explained that two conditions must be met before a statutory first-party bad faith action is ripe. First, the insurer raises no defense which would defeat coverage, or any such defense has been adjudicated adversely to the insurer. Second, the actual extent of the insured's loss must have been determined.

The Court rejected State Farm’s argument that a trial was required on certain affirmative defenses it believed were still pending and all appellate remedies regarding that judgment must be exhausted before a bad faith claim may proceed. No affirmative defenses remained pending; State Farm waived most or all defenses to coverage by acknowledging and paying Seville Place for the loss after the claim was made. In dismissing State Farm’s argument, the Court explained:

[T]he procedural trenches and hurdles proposed by State Farm would contravene the express objectives of the bad faith statute and the Florida Insurance Code: the fair and prompt investigation and adjustment of claims by insurers.

The Court found no authority to support State Farm’s contention that Seville Place must obtain a final judgment from a jury before it may proceed with its bad faith and punitive damages claim. To the contrary, the Florida Supreme Court has held that an arbitration award determining liability and extent of loss is a sufficient basis for the commencement of a bad faith claim. The Court further noted that State Farm bargained for the binding nature of the appraisal award in the policy it drafted. The Third District held the remaining calculations to the award, including subtraction of the three percent hurricane deductible and prior payments and the computation of prejudgment interest, were ministerial acts which did not affect the final nature of the award. The Court further held that Seville Place’s reserved motion for attorney's fees and costs allowed that issue to be determined at the conclusion of the entire case.

The Court also rejected State Farm’s argument that a bad faith claim is premature until the insurer exhausts all appellate remedies regarding liability and loss amount, noting no “decision by this Court or the Florida Supreme Court has held that liability and the extent of damages must also be “finally final,” surviving any appellate remedies sought by an insurer, before the insured's bad faith claim is ripe.”

The Court concluded with the following observation regarding State Farm’s conduct:

State Farm originally estimated the Association's covered loss at $324,017. This is less than eleven percent of the amount determined by the appraisal process. State Farm will have an opportunity to explain this fact, to explain the extraordinary length of time it has taken to resolve the Association's claim, and to defend State Farm's aggressive legal tactics (including the unfounded imposition of conditions on the contractually-stipulated appraisal provision and the last-minute attempt to remove the neutral umpire). For now, however, we find no basis in this record to quash the orders below as requested by State Farm.

Justice Shepherd dissented, writing that the majority’s decision to deny State Farm’s petition for certiorari conflicted with North Pointe Ins. Co. v. Tomas, 999 So. 2d 728 (Fla. 3d DCA 2008), and XL Specialty Ins. Co. v. Skystream, Inc., 988 So. 2d 96 (Fla. 3d DCA 2008). Shepherd took issue with the fact that no judgment had been entered in the case. According to Shepherd, it is prejudicial to allow issues of bad faith into a coverage case, with expanded bad faith discovery, before the underlying claim for damages has been determined.

As noted above, State Farm’s seemingly bad faith conduct in handling the claim was not relevant to the sole issue before the court-whether, by law, the bad faith action was ripe. Yet Justice Salter took care to detail the abusive tactics and even commented upon them in concluding his opinion. In this case, bad facts made good law.

Warfel v. Universal Ins. Co. of North America, No. 2D08-3134, ___ So. 3d ___ (Fla. 2nd DCA, December 9, 2009)

The issue in this case was whether the amended sections of Florida Statute sections 627.7065, 627 .7072, and 627.7073 (2005), which affected database information, testing standards, and reporting requirements for sinkhole claims, created a presumption that shifted the burden of proof to the homeowner to disprove an insurer’s expert’s opinion that damage was not caused by a sinkhole or whether it created a presumption that vanished once a homeowner produced evidence that a sinkhole damaged his or her property.

In August 2005, Mr. Warfel noticed damaged walls and floors in his home. He filed a sinkhole claim under his all-risk policy with Universal, and Universal retained experts to conduct the investigation required by Florida Statute section 627.707. Universal denied the claim after the experts it retained concluded that damage was caused by shrinkage, thermal stress, and differential settlement, all of which were excluded from coverage under the policy. Mr. Warfel then filed suit.

Universal asked the trial court to determine that Florida Statute section 90.304 allowed a jury instruction based on section 627.7073(1)(c) as a rebuttable presumption affecting the burden of proof. Florida Statute section 90.304 provided:

In civil actions, all rebuttable presumptions which are not defined in s. 90.303 are presumptions affecting the burden of proof.

Section 627.7073(1)(c) provided:

The respective findings, opinions, and recommendations of the professional engineer or professional geologist as to the cause of distress to the property and the findings, opinions, and recommendations of the professional engineer as to land and building stabilization and foundation repair shall be presumed correct.

Universal argued that its expert report findings were presumptively correct, and the presumption shifted the burden of proof to Mr. Warfel to prove that the damage was caused by a sinkhole. Mr. Warfel argued that the section 627.7073(1)(c) presumption was a “vanishing” presumption, which affected the burden of producing evidence but did not shift the burden of proof to him. The trial court agreed with Universal and instructed the jury:

You must presume that the opinions, findings, and conclusion in the SD II report as to the cause of damage and whether or not a sinkhole loss has occurred are correct. This presumption is rebuttable. The Plaintiff has the burden of proving by a preponderance of the evidence that the findings, opinions, and conclusions of the report are not correct.

Florida’s Second District Court of Appeal, however, sided with Warfel. The Court explained that in enacting the statutes relating to the expert reports, the Legislature did not clearly state that public policy requires a homeowner to bear the burden to disprove the findings and recommendations of the insurer's engineers and geologists. The Court also noted that all-risk policies traditionally give the insurer the burden to prove that a claimed loss is not covered. The Court then noted, it “must assume that the legislature was aware of this fact when it enacted section 627.7073(1)(c),” and that the Legislature “knows how to create burden-shifting presumptions under section 90.304.” Warfel v. Universal, 2009 WL 4640882 at *2 (Fla. 2d DCA 2009). In the absence of clear Legislative intent otherwise, the Court concluded the presumption under section 627.7073(1)(c) was a “vanishing” or “bursting bubble” presumption that affected only Mr. Warfel's burden of producing evidence. As Mr. Warfel produced credible evidence contradicting the presumption, the presumption vanished and the issue should have been determined on the evidence as though no presumption ever existed.

Because the trial court misapplied the presumption and gave the jury an instruction that improperly shifted the burden of proof, the Court awarded Mr. Warfel a new trial.

Justice Villanti dissented, writing that Florida Statute section 90.303 and the public policy behind Florida Statute sections 627.7065, 627 .7072, and 627.7073 support a burden shifting instruction.

State Farm Ins. Co. v. Nichols, 21 So. 3d 904 (Fla. 5th DCA, November 6, 2009)

In this case, several policyholders brought suit after State Farm refused to pay damages awarded for subsurface sinkhole repairs. The policyholders each received appraisal awards that separately listed the amount of above ground and subsurface damages caused by sinkholes. State Farm promptly paid the amounts designated for above ground damage but withheld the amounts designated for subsurface damage, arguing that Florida Statute 627.707(5)(b) (2007) authorized it to withhold the funds until the homeowners had contracted for the repairs.

The portion of the statute upon which State Farm relied stated:

The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs.

The insureds argued that that the language in their homeowners’ policies, which required payment within sixty days after the amount of the loss is settled by appraisal, controlled.

Finding that the language of Florida Statute 627.707(5)(b) was permissive and not mandatory, Florida’s Fifth District Court of Appeal agreed with the insureds and held State Farm to the terms of the policy it wrote.

We construe this language as permissive, not mandatory. Because it is permissive, the policy language that requires payment of subsurface repairs within sixty days after the appraisal award is not in conflict with the statute and is binding on the parties to the insurance contract.

American Capital Assurance Corp. v. Courtney Meadows Apts., No. 1D09-2940, ___ So. 3d ___ (Fla. 1st DCA, April 7, 2010)

A hailstorm damaged the roof of the insured apartment complex. On October 3, 2008, the insurer sent a final estimate, which indicated that only the office roof needed to be replaced and that the remaining roofs in the complex could be repaired. The final estimate also included other items of loss and estimated the total amount of damage at $168,285.98.

A hailstorm damaged the roof of the insured apartment complex. On October 3, 2008, the insurer sent a final estimate, which indicated that only the office roof needed to be replaced and that the remaining roofs in the complex could be repaired. The final estimate also included other items of loss and estimated the total amount of damage at $168,285.98.

On October 22, 2008, the insurer gave the insured a check for $168,285.98, asked the insured to file a sworn proof of loss, and stated that if the parties were unable to resolve the dispute the insurer may wish to proceed with appraisal.

November 11, 2008, the insured rejected the insurer's check and refused to provide the sworn proof of loss. The insured agreed with the portion of the final estimate regarding the heat, vent, and air conditioning; window reglazing; and painting the gazebo. The insured also claimed additional items that were not included in the final estimate. On November 18, 2008, the insurer demanded appraisal. On December 23, 2008, the insured filed a complaint, seeking declaratory relief and alleging numerous breaches of contract. The insurer in turn moved to dismiss and/or abate the action and to compel appraisal, arguing that it had properly invoked the appraisal process under the terms of the policy.

As the insurance policy did not specify a time limit for demanding appraisal, Florida’s First Circuit Court of Appeal held that, under the terms of the policy, the insurer's demand for appraisal was not untimely. Further, the insurer did not waive its right to appraisal because it did not act inconsistently with that right from the time of demand. In addition, the trial court erred in granting appraisal of the items not included in the final estimate as those items had yet to be adjusted. Without adjustment, it is impossible to know whether the parties dispute the amount of loss so that appraisal is appropriate.

Quiroga v. Citizens Prop. Ins. Corp., No. 3D08-2942, ___ So. 3d ___, (Fla. 3rd DCA, April 7, 2010)

A homeowner brought suit against his insurer to recover proceeds for hurricane damage to his home. The law firm representing homeowner under contingency-fee agreement secured proceeds for the homeowner, and, after the homeowner terminated the non-secured contingency-fee contract and refused to pay for the legal services, the law firm moved to impress a charging lien on the proceeds.

A homeowner brought suit against his insurer to recover proceeds for hurricane damage to his home. The law firm representing homeowner under contingency-fee agreement secured proceeds for the homeowner, and, after the homeowner terminated the non-secured contingency-fee contract and refused to pay for the legal services, the law firm moved to impress a charging lien on the proceeds.

Florida’s Third District Court of Appeal held that proceeds were constitutionally exempt homestead property not subject to attachment by means of a charging lien. The homeowner could not, as a matter of public policy, enter into an enforceable contract to divest himself from the exemptions afforded him through the Florida Constitution.

Blake v. First Home Insurance Company, Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County, Case No. 09-245 AP. L.T. Case No. 06-012026-CC-05, May 12, 2010

Miami Dade’s Eleventh Circuit Court, sitting in an appellate capacity, reversed a county court’s grant of summary judgment in favor of the insurer for failure to submit to an examination under oath. Although the policyholder’s husband was not named in the homeowners policy and, at the time of the insurer’s EUO request, the husband had permanently moved out of the policyholder’s home, he was an additional insured under policy, because he resided in the home on the date of the loss. Accordingly, he would be required to attend an EUO, had he filed a claim under the policy. The policy at issue, however, did not require all insureds to submit to EUO as condition precedent to coverage, so the insurer could not deny coverage to the fully compliant wife/policyholder based on her estranged husband's failure to attend an EUO.

Buckley Towers Condo., Inc. v. QBE Insurance Corp., No. 09-13247, 2010 WL 3551609 (11th Cir. Sept. 14, 2010)

Buckley Towers Condominiums incurred millions of dollars in damage from Hurricane Wilma in 2005. Buckley Towers filed a claim with QBE, and QBE refused to pay the claim. Without the insurance benefits, the condominium did not have the money to make necessary repairs and was forced to file suit. Under a literal interpretation of the insurance policy at issue, Buckley Towers was required to actually make repairs before it was entitled to replacement cost value benefits. At the trial court, Buckley Towers successfully argued the doctrine of prevention of performance: by not paying at least actual cash value benefits (replacement cost minus depreciation) on the claim, QBE prevented Buckley Towers from making repairs which would entitle it to replacement cost value benefits. The jury awarded Buckley Towers $11,395,665 in actual cash value (ACV) damages, $18,708,608 for replacement cost value (RCV) damages, as well as ordinance and law damages and prejudgment interest. The final award was $24,986,750.87.

Florida Ins. Guaranty Ass’n v. B.T. of Sunrise Condo. Ass’n, Inc., No. 4D09-5300, 35 Fla. L. Weekly D2124b (Fla. 4th DCA Sept. 22, 2010)

After Hurricane Wilma damaged all seven of Sunrise Condominium’s buildings in 2005, Sunrise filed a claim with Southern Family Insurance Company. Southern Family issued a single claim number with a suffix for each damaged building, seven separate checks totaling almost $269,000, and divided the nearly $3 million policy limit between the seven buildings. Southern Family became insolvent, and the Florida Insurance Guaranty Association (FIGA) took over the claim.

Unsatisfied with the amount Southern Family paid on the claim. Sunrise requested additional benefits from FIGA. FIGA paid an additional $299,900, the statutory maximum for a single claim. FIGA took the position that the claims constituted a lump sum obligation for only one claim under the Southern Family policy, so that FIGA had only one $300,000 limit of liability under section 631.57(1)(a)2, Florida Statutes. Sunrise demanded appraisal, which FIGA refused, and then filed a Petition for Declaratory Relief, seeking a determination by the trial court that Sunrise was entitled to $300,000 on each of the seven properties.

The trial court granted summary judgment for Sunrise, ordering seven separate appraisals, and FIGA appealed. The Fourth District Court of Appeal agreed with the trial court that each of the seven buildings was covered separately. The Court distinguished policies which contain an “aggregate” value for several insured buildings, and Sunrise's policy with Southern Family, which had separate schedules for each of the seven buildings. In Sunrise’s policy each building was, in effect, covered by a separate contract of insurance and the amount recoverable with respect to a loss affecting such property is determined independently of other items of property. Thus, FIGA’s $300,000 coverage limit would apply to each building and not the aggregate claim.

Hartford Casualty Insurance Company v. 600 La Peninsula Condominium Association, Inc., No. 09-501, 2010 WL 2431858 (S.D. Fla. June 15, 2010)

The United States District Court for the Southern District of Florida granted Hartford’s motion to dismiss La Peninsula’s counterclaim for a violation of Florida Statute § 627.70131, which provides:

Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment.... Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.

The Court noted that the statute became effective on June 11, 2007, long after the claim arose from Hurricane Wilma in 2005, so that no cause of action could be stated because it would be solely based on the statute. Further the plain language of the statute provides that “failure to comply with this subsection shall not form the sole basis for a private cause of action.”

Hartford also sought to dismiss La Peninsula’s claim for a breach of implied covenant of good faith and fair dealing. La Peninsula argued that contract law recognizes the cause of action in every contract. Noting, it “is un-clear whether a common law claim supports a distinct cause of action from a statutory bad faith claim on an insurance contract, or whether the statutory claim is to be construed as an exclusive remedy,” and that the issue was currently before the Florida Supreme Court, the Court denied the motion.

Royal Marco Point I Condominium Ass'n, Inc. v. QBE Ins. Corp., Slip Copy, 2010 WL 2757240 (M.D.Fla. July 13, 2010)

On October 24, 2005, Hurricane Wilma caused significant damage to the condominiums operated by Royal Marco. Royal Marco submitted a claim to its insurer, QBE, two days later. A preliminary investigation by QBE's adjuster revealed “extensive damage,” exceeding $1,000,000. Royal Marco began submitting bills to QBE for incurred repair expenses within a month. Within three months, Royal Marco exhausted its $789,000 maintenance reserves and was forced to assess a $437,500 levy on its unit owners for repair costs. QBE made no payments on the claim. In a February 14, 2006, letter, QBE’s adjuster requested a partial payment of $475,060.75, which reflected undisputed amounts QBE owed. The adjuster wrote that Royal Marco “is doing everything they can to keep costs to a minimum,” is “sincere in their attempts to return the property to pre-hurricane conditions and [is] not attempting to better the property unless it is at [its] own expense,” and “ha [s] incurred costs far exceeding their deductible and [is] looking to be reimbursed for these expenses as soon as possible.” Despite this letter, QBE did not make its first payment to Royal Marco until March 16, 2006, and it paid only $250,000.

Royal Marco hired counsel and engaged its broker to secure payment from QBE, but QBE’s payments were not sufficient to keep pace with the repair invoices, which exceeded $4 million by April 2006. On November 30, 2006, more than a year after the hurricane struck, Royal Marco filed a Civil Remedy Notice (CRN) pursuant to Florida Statute § 624.155. In December 2006, QBE offered to pay an additional $1,476,302.87 to settle Royal Marco's claim, in addition to previous payments totaling $1,842,000. Royal Marco rejected the offer, claiming it was more than $2 million less than needed for the repair costs. Meanwhile, Royal Marco levied another assessment of $848,125 on its unit owners and secured a $1.5 million small business loan.

On January 12, 2007, Royal Marco filed suit against QBE, and, two months later, QBE invoked the policy’s appraisal clause. On June 8, 2008, Royal Marco was awarded $2,244,455, less prior payments already made by QBE. QBE paid the award.

On September 5, 2008, Royal Marco filed a Second Amended Complaint alleging breach of insurance contract and statutory bad faith under Florida Statute § 624.155. When QBE filed a motion for summary judgment, only the bad faith claim remained.

In support of its motion for summary judgment, QBE first argued that Royal Marco’s CRN was insufficient because it did not claim “a specific dollar amount.” The Court rejected this claim, noting “the case law on the subject is clear that “a specific cure amount is not necessary to validate a Civil Remedy Notice.”

The Court also rejected QBE’s argument that Royal Marco's claims for property damages were improper because they were caused by Hurricane Wilma and not QBE’s bad faith. Noting there was no law which supported QBE’s argument and that Florida’s bad faith statute “creates an economic incentive for insurers to settle claims in good faith” by raising the specter of “potentially large bad-faith damages” where “an insurance company acts in bad faith by dragging out disputes and forcing a lawsuit simply to delay paying the insured,” the Court concluded there was sufficient evidence in the record that could support a jury finding that Royal Marco's claimed damages were a “reasonably foreseeable” and direct consequence of QBE's alleged bad faith. The Court further noted that Royal Marco’s damages could include attorney's fees incurred in the underlying action and the bad faith action, so that Royal Marco's claim for attorney's fees could not be dismissed.

Next, QBE argued that the earlier appraisal award had a res judicata and collateral estoppel effect which barred Royal Marco's claims for bad faith damages. Explaining that the appraisal award was based on Royal Marco's breach of contract claim and that the bad faith claim was separate and independent of the contract claim because it was grounded upon a legal duty to act in good faith, the Court rejected this argument. The Court also declined to dismiss Royal Marco's claims for appraisal costs, despite policy language providing that such fees would be split. Royal Marco alleged that QBE's bad faith delay in settlement forced the case to appraisal, so the appraisal costs could be consequential damages authorized by § 624.155.

Relying on 316, Inc. v. Maryland Casualty Co., 625 F.Supp.2d 1187 (N.D.Fla.2008), QBE argued that because it participated in the appraisal process and paid the appraisal award, Royal Marco could not prove it acted in bad faith. The Court found 316 distinguishable from this case. As QBE made no payments for almost five months after Royal Marco filed its claim, QBE did not invoke appraisal until after Royal Marco filed suit, and the evidence suggested that QBE prolonged the claims process and did not promptly pay money it knew it owed under the policy, the Court could not rule on the bad faith issue as a matter of law at the summary judgment stage. Likewise, the Court concluded that Royal Marco demonstrated an adequate evidentiary basis to preclude summary judgment on its claim for punitive damages.

Royal Bahamian Association, Inc. v. QBE Insurance Corporation, No. 10-21511, 2010 WL 4123989 (S.D. Fla. October 20, 2010)

A U.S. magistrate judge concluded that Royal Bahamian’s corporate representative’s examination under oath testimony was an admission by a party opponent through its designated corporate representative. As an admission, the EUO testimony is not hearsay and is admissible at trial pursuant to Federal Rule of Evidence 801(d)(2). As Royal Bahamian’s representative was represented by counsel at her EUO and had virtually all of the protection that would have been afforded at a deposition, there was no practical reason to distinguish her EUO testimony from that which could have occurred at a deposition and which would have been admissible at trial as an admission.

Citizens Property Insurance Corporation v. Ashe, 35 Fla. L. Weekly D2534a (Fla. 1st DCA November 17, 2010)

The insured’s home was destroyed by Hurricane Ivan, and the insured filed claims with both its windstorm insurer, Citizens, and USAA, which issued a flood policy in accordance with the National Flood Insurance Program. One adjuster adjusted the loss for both insurers, and he determined the actual cash value of the house was $233,720, the total replacement cost value was $258,716.51, and the actual cash value of the total loss was $228,216.51. The adjuster also estimated that wind caused $30,530.32 in damage. USAA paid the flood policy amount of 225,200, and Citizens paid $26,770.32, which was the adjuster's estimate less the deductible provided in the Citizens policy. In total, the insured collected $251,970. The insured filed suit to recover a total loss under his Citizens wind-only VPL policy.

The First District held that the trial court erred in precluding the insured from arguing that wind caused a total loss to insured property under valued policy law and that the trial court did not err in denying Citizens’ motion for summary judgment under the “total loss recovery rule.” If the insured could prove that wind alone caused a total loss before the storm surge, the valued policy law would require Citizens to pay the policy proceeds, even though the insured also received full benefits under the flood policy.

Underwriters at Lloyds of London v. Osting-Schwinn, 613 F.3d 1079 (11th Cir. August 5, 2010)

The Eleventh Circuit Court of Appeals held that to obtain diversity jurisdiction to file a case in federal court pursuant to 28 U.S.C. § 1332, Lloyd’s syndicates, as unincorporated associations, must plead the citizenship of each member who underwrote a particular policy at issue. With Lloyds, each individual Name, not the syndicate’s, is directly liable for the portion of risk he or she assumed. In the event of loss, the Names are treated as if each had a contract with the insured.

Florida Farm Bureau General Insurance Company v. Jernigan, No. 09-145, 2010 WL 3927816 (N.D. Fla. September 30, 2010)

Farm Bureau, as a Write-Your-Own Program Carrier participating in the National Flood Insurance Program (“NFIP”), issued a Standard Flood Insurance Policy (“SFIP”) covering the defendant’s property. The insured’s home was destroyed during Hurricane Ivan, and Farm Bureau tendered policy limits for the dwelling and contents. Farm Bureau also issued the insured a separate homeowner’s policy for $138,500 in coverage for damage due to a covered peril, which included wind but excluded flood. After receiving the policy limits from the SFIP, the insured filed a claim under the homeowners policy. That claim went to trial, the jury found the property was a total loss as a result of wind damage, and the insured was awarded the policy limits.

Farm Bureau filed suit, asserting a claim for unjust enrichment and seeking to recover the proceeds it paid the insured under the SFIP.

As Farm Bureau sought to recover funds paid under a SFIP, the U.S. District Court for the Northern District of Florida concluded that any remedy was limited to those set forth by FEMA in the federal flood insurance regulations and the NFIA, as interpreted under federal common law insurance principles. As there was no provision for the relief requested by Farm Bureau in the above mentioned law and the Court could not create federal common law cause of action, the Court concluded there was no cause of action for which Farm Bureau could recover.


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