Insurer Was Not Required to Participate in Appraisal Where the Insured Failed to Comply With Appraisal Requirements

Citizens Prop. Ins. Co. v. Casar (Fla. 3d DCA 2013)

The Casars, insured with Citizens under a homeowners’ policy, filed a claim for water damage alleged to have been caused by a refrigerator line leak. After two inspections, Citizens concluded that the damage to only some of the items claimed were caused by the leak. Because Citizens also valuated the damages at a disagreeable amount, the Casars sent a written demand for appraisal of the entire claim.

In response, Citizens forwarded an appraisal agreement that listed for appraisal only those items all parties agreed were damaged by the water. Because Citizens excluded from appraisal any of the items determined not to have been damaged by the leak, the Casars refused to sign the agreement and Citizens, in turn, declined to proceed with appraisal.

The trial court granted the Casars’ ensuing motion to compel appraisal, but the third district reversed on appeal. The court’s rationale was grounded in contract law: “The appraisal provision of the Citizens’ policy unambiguously requires a written request for appraisal and a written agreement between the parties in order for appraisal to take place. …. Citizens complied with the appraisal provisions of the Policy [by] forward[ing] an Agreement for Appraisal. The Casars would not agree to the terms. Therefore, appraisal could not take place. Citizens complied with the policy provisions and, as such, the trial court had no basis to compel Citizens to appraisal.”

Third Party Bad Faith Claim May Not Be Brought in Underlying Tort Action

GEICO Gen. Ins. Co. v. Harvey (Fla. 4th DCA 2013)

In August of 2006, Harvey’s vehicle collided with a motorcycle at an intersection, killing the motorcyclist. The decedent’s estate sued Harvey for negligence and obtained a jury verdict in the amount of $8 million damages. Pursuant to Florida’s nonjoinder of insurers statute (§ 627.4136), the estate added as a defendant GEICO—who insured Harvey pursuant to an automobile liability policy with limits of $100,000—in order to facilitate the entry of final judgment.

Harvey filed a crossclaim against GEICO, raising a new cause of action for insurance bad faith, alleging (1) that GEICO failed to settle the claim when it should have and (2) that GEICO’s failure to notify Harvey that the plaintiff wanted to take a presuit statement led to the filing of suit.

GEICO attempted to remove the action to federal court, but the notice was found to be untimely and the case was remanded to state court where GEICO moved to dismiss or sever the bad faith crossclaim. The motion was denied and GEICO petitioned for a writ of certiorari.

The fourth DCA granted the petition, observing that the denial of GEICO’s motion to dismiss defeated its right to have the action removed to federal court. It then quashed the order denying the motion to dismiss, explaining that per Florida Rule of Civil Procedure 1.170(g), a third party bad faith claim against an insurer for failure to settle may not be brought in the underlying tort action but must be raised in a separate cause of action:

Florida Rule of Civil Procedure 1.170(g) provides [that] “[a] pleading may state as a crossclaim any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter of either the original action or a counterclaim therein, or relating to any property that is the subject matter of the original action.” The wrongful death action in this case sounds in tort and arose from the August 2006 automobile accident. By contrast, defendant’s third party bad faith crossclaim against his insurer arises from the insurer’s alleged breach of its duty to act in good faith in handling the estate’s claim against the defendant. We conclude that these causes of action accrued at different times and do not arise out of the same transaction or occurrence for purposes of rule 1.170(g).

Failure to Sign and Accept the Terms of a Life Insurance Policy Rendered Coverage Void

Roi Thi Do & Chau Thai Ha v. Lincoln Benefit Life Co. (Fla. 2d DCA 2013)

In this case, a woman and her boyfriend filed suit against an insurance company, alleging that the company wrongfully withheld their survivor benefits pursuant to a life insurance policy that was issued to the woman’s father.

At trial, the insurance company successfully moved for summary judgment by arguing that recovery was barred since the insured had never signed the policy documents nor provided any other form of written consent to the policy and its terms prior to its issuance. The undisputed underlying facts were that the only document actually linking the insurance application to the father was a paramedical exam and consent form. All other documentation had actually been signed by the daughter’s boyfriend, who had even posed as the insured during a telephonic interview with the insurance company.

On appeal, the daughter and her boyfriend argued that the court erred in finding that the insured had not consented in writing to the insurance policy. Their argument was that the paramedical exam consent form satisfied the requirement for “written consent,” as required by statute 627.404(5). The second district rejected the argument and affirmed, concluding that the father’s written consent to the paramedical exam provided by a third party was not “consent in writing” to the life insurance contract and its terms because the form lacked critical information such as the name of the beneficiaries, the terms of the insurance contract, pricing, or any other substantive terms of the insurance contract.

Interlocutory Appeal in Declaratory Action Denied Because Facts of All Counts Were Intertwined

Universal Underwriters Ins. Co. v. Stathopoulos & W. Gen. Insurance Co. (Fla. 2d DCA 2013)

Shortly after a woman drove a newly-purchased car off a dealership lot, her application for financing was rejected and she was instructed to return the car to the dealership. Before she could do so, the car was involved in an accident that resulted in the death of another person.

Western General Insurance Company (“WG”) defended and indemnified the driver in that action, which resulted in a $3 million consent judgment and an assignment of any proceeds of any causes of action against Universal Underwriters Insurance Company (“Universal”), the insurer that had written the dealership’s “garage” policy. Although Universal had declined coverage for the wrongful death suit, it was potentially responsible for coverage because, absent financing, the car arguably belonged to the dealership while in the driver’s possession.

A three-count suit was filed against Universal for (i) declaratory relief; (ii) breach of contract; and (iii) bad faith. As to the count for a declaratory relief, the trial court entered an order declaring that the driver was an insured under Universal’s policy. Although the counts for breach of contract and bad faith remained pending, Universal filed an appeal. The second district dismissed the appeal without reviewing the merits explaining that “[b]ecause the amended complaint reflects that the three counts are based on the same facts and are intertwined, … allowing an appeal of the declaratory count at this stage would foster impermissible piecemeal review.”

Plaintiffs Did Not Have Private Causes of Actions Against Insurance Companies For Allegedly Selling “Worthless” Policies

Lemy v. Direct General Fin. Co. (U.S. District Court for M.D. Fla. 2012)

Two individual plaintiffs brought suit against eleven insurance companies for allegedly selling worthless and illegal surplus line automobile insurance policies. More specifically, the plaintiffs alleged violations of (1) § 626.924, which requires a surplus line policy to include two specific disclaimers; (2) § 626.916(1)(a), which requires a diligent search for a general line before the sale of a surplus line; (3) §§ 627.062 and 627.0651, which regulate a general line policy’s price; § 627.410, which requires a general line insurer to report policy information to the Office of Insurance Regulation; and (4) § 627.8405, which prohibits the financing of an automobile club membership or of a product “not regulated” by the insurance code.

The Middle District rejected the claims, emphasizing that none of the sections allegedly violated provided a private right of action. Therefore, the individual plaintiffs lacked the right to sue under the statute.

Insured Entitled to Attorney’s Fees For Cost of Improper Deduction of Depreciation by Insurer in Wind Damage Claim

Sunshine State Ins. Co. v. Davide  (Fla. 3d DCA 2013)

Underlying this case is a claim for wind damages pursuant to an insurance policy. The damages were submitted to appraisal, but based on the award’s wording, the insurer was unsure whether the award had already taken into account deductions for depreciation.

When the insurer was unable to receive clarification on this issue, it presumed that depreciation had not been factored in and thus deducted from the award the amount that it unilaterally concluded would be the amount of depreciation.  The insured then filed a complaint against the insurer for breach of contract, bad faith, and to confirm the appraisal award.

Then, after the insurer received a letter from the appraiser noting that depreciation had already been deducted, the insurer paid its insured the depreciation amount it had previously withheld. Multiple motions and pleadings ensued, including the insured’s motion for attorney’s fees and costs for having recovered the depreciation payment.

The trial court granted the motion and held an evidentiary hearing to determine the appropriate amount. The trial court, in a very detailed order, awarded 150 hours at $450.00 per hour plus a multiplier of 2.0 with costs and expert fees. The third district affirmed the order, declining to find an abuse of discretion particularly since the trial court had concluded that the 150 hours “were necessary and crucial to reaching the results that were obtained.”

Florida Supreme Court Reforms (and Limits) Economic Loss Rule

Receding from years of its prior case law in which it expanded the use of the economic loss rule (ELR) to bar tort claims that are not independent of a claim for breach of contract, the Florida Supreme Court today issued an opinion strictly limiting the ELR to product liability cases.

Those familiar with the doctrine will recall that it has its origins in products liability cases, and today is routinely deployed as an affirmative defense to any tort claim brought where the parties are also in contractual privity. No more.

In Tiara Condominium Association, Inc. v. Marsh & McLennan Cos., No. SC10-1022 (Fla. March 7, 2013), the Florida Supreme Court found that there had been “over-expansion of the rule,” and concluded that this expansion beyond the doctrine’s origins in products liability “was unwise and unworkable in practice.” The dissent notes that the majority opinion “greatly expands the use of tort law at a cost to Florida’s contract law.”

Stay of Trial Court Was Proper in Breach of Contract Case Where Appraisal Was Ongoing

Subirats v. Fidelity Nat’l Prop. (Fla. 3d DCA 2013)

This case concerned an appeal from a non-final order in which a trial court stayed a breach of contract action pending completion of appraisal in connection with a claim for water damage to a residential home. The insureds argued on appeal that the trial court had erred in ordering the stay since the insurer had waived its right to appraisal by failing to notify the insureds of the right to mediation within five days from the date the claim was filed.

The insured’s argument was premised upon (i) Florida Statute section 627.7015(7), which provides that failure to give notice excuses an insured from participating in any contractual loss appraisal process and (ii) Florida Administrative Rule 69J-166.031(4)(a)(1), a rule promulgated by the Florida Department of Financial Services (the “Department”) pursuant to section 627.7015(4), which stated that “within five days of the insured filing a first-party claim which falls within the scope of this rule, the insurer shall notify the insured of their right to participate in this program.”

The court rejected the insureds’ argument and affirmed the stay, explaining that the Department exceeded its rulemaking authority in adopting the five-day rule: “[W]here a statute does not contain a specific grant of legislative authority for a certain rule, any such rule is an invalid exercise of delegated legislative authority. The most casual perusal of section 627.7015(4) reveals the Department was not granted the authority to promulgate a deadline for notifying an insured of the right to mediation. In so doing, the Department impermissibly modified and enlarged the scope of the statute.”

Additional Insureds in Florida May Be Entitled to Seperate Counsel in Conflict Situations

Univ. of Miami v. Great Am. Assurance Co. (Fla. 3d DCA 2013) 

In this case, the third district reversed a final summary judgment in favor of Great American Assurance Company (“Great American”) and, based on the facts of the underlying claim, ruled that the University of Miami (“UM”) was entitled to be indemnified for attorney’s fees and costs.  The underlying facts were that UM and a summer camp that used UM’s pool were sued in negligence for injuries sustained by a camper. Great American accepted defense of the action under a policy it issued to the summer camp. That policy listed UM as an additional named insured and included a condition that the rights or duties applicable to the first named insured applied as if each named insured were the only named insured and applied separately to each insured. Although UM requested its own counsel, Great American refused to provide UM with separate independent counsel and assigned one law firm to represent both UM and the summer camp.

UM accordingly retained its own counsel to protect its interest and, after the case settled, brought an indemnification declaratory action requesting declaration by the trial court that Great American had breached its contractual duty to UM by refusing to provide separate and independent counsel.

The trial court granted summary judgment to Great American, accepting Great American’s argument that because the summer camp was contractually bound to indemnify and hold harmless UM for any liability arising out of the use of its facilities, there could be no conflict of interest.

The third district reversed, explaining that a conflict existed since the complaint alleged that the two defendants were each directly liable and the defendants each sought to place the entire blame on the other: “These conflicting legal positions presented in defense to individual active negligence claims against [the camp] and UM exist separate and apart from issues of coverage or excess policy limits. … [I]n defense of both codefendants, Great American’s counsel would have had to argue conflicting legal positions, that each of its clients was not at fault, and the other was, even to the extent of claiming indemnification and contribution for the other’s fault. In so doing, legal counsel would have to necessarily imply blame to one codefendant to the detriment of the other. On these facts, we believe this legal dilemma clearly created a conflict of interest between the legal defenses of the common insureds sufficient to qualify for indemnification of attorney’s fees and costs for independent counsel.”