Insurance Company and Insurance Agent Were Deemed Same Entity Regarding Notice Requirements

In Siguenza v. Citizens Prop. Ins. Corp. (Fla. 3d DCA 2013), the insurer, Citizens, denied a claim based on late notice and insured sued for breach of contract, testifying that she gave prompt notice directly to insurance company.

Citizens contradicted testimony through affidavit, prompting insured to file affidavit clarifying that she gave prompt notice to insurance agent. The court granted summary judgment in insurer’s favor, finding the insured’s subsequent affidavit in contradiction with her testimony. Appellate court reversed, ruling a material question of fact existed regarding timeliness of loss since insured considered the insurance company and the insurance agent to be the same entity and since the policy provided that prompt notice could be given to either one.

A Bad Faith Action is Not Ripe Until Liability and Damages are Established

One area of insurance coverage that we receive questions about is the issue of when a bad faith action can be filed.  The Florida Supreme Court has held  that a bad faith lawsuit is not ripe until there has been a determination that the insured is liable and the extent of the plaintiff’s damages.  In Blanchard v. State Farm Mut. Auto Ins. Co., 575 So.2d 1289, 1291 (Fla. 1991) the Court held:

If an uninsured motorist is not liable to the insured for damages arising from an accident, then the insurer has not acted in bad faith in refusing to settle the claim. Thus, an insured’s underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. It follows that an insured’s claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.

The takeaway is the following rule: “Absent a determination of the existence of liability … and the extent of the plaintiff’s damages, a cause of action cannot exist for a bad faith failure to settle.”  The Florida Supreme Court later clarified:

Blanchard is properly read to mean that the “determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the [insured’s] damages” are elements of a cause of action for bad faith. Once those elements exist, there is no impediment as a matter of law to a recovery of damages for violation of section 624.155(1)(b)1 dating from the date of a proven violation

Vest v. Travelers Ins. Co., 753 So. 2d 1270, 1275 (Fla. 2000).  This rule has been dubbed the “Favorable Resolution Requirement.”

This rule undoubtedly makes sense.  An insurance company cannot be found to act in bad faith to settle on behalf of its insured until the insured is found liable.  For this reason, the Florida Supreme Court has made liability and damages an element of bad faith.  See Vest, 753 So. 2d at 1275.

Since Blanchard, other cases have debated what constitutes this “Favorable Resolution Requirement” and, for example, have found that resolutions such as a settlement, see Brookins v. Goodson, 640 So. 2d 110 (Fla. 4th DCA 1994), and appraisal awards in uninsured motorist cases (UM), see Hunt v. State Farm Fla. Ins. Co., Case No. 2D11-6484 (Fla. 2d DCA April 5, 2013), suffice.

Insureds and Insurers Behaving Badly – Insured Who Left During EUO Given a Second Chance

First Home Ins. Co. v. Fleurimond, (Fla. 1st DCA 2010)

Upon written request for an EUO relating to a claim for damage to a home under a homeowners policy, an insured appeared without counsel, but left in the middle of the EUO after, he claimed, the examiner badgered and yelled at him. Upon retaining counsel, the insured offered to resume the EUO, but the insurer refused, stating that it was too late. Upon the insured’s filing suit demanding an appraisal, the insurer opposed the demand citing breach of policy obligations for failure to comply with the cooperation provisions. The 1st DCA affirmed the lower court’s ruling in favor of the insured, partly because the insured partially attended the first EUO and offered to resume the EUO before the suit was filed.

Appraisal is Only Covered Under Ordinance and Law Coverage if Loss Actually Occurs During Policy Period

Jossfolk v. United Prop. & Cas. Ins. Co. (Fla. 4th DCA 2013)

The roof of an insured structure was damaged and submitted for appraisal. A neutral appraisal entered an award on damages, but stated that Ordinance and Law coverage (which represents the cost of bringing any structure into compliance with applicable ordinances or laws) had not been appraised. The insurer made payment to the insured based upon the award and the insured then applied for a roofing repair permit from the City of Weston, claiming that 34% of the roof area needed repair. The City of Weston rejected the permit since the repair exceeded the area allowed by the building code to be repaired without requiring replacement of the entire roof system. The insured then asked the insurer to pay for the entire roof repair under Ordinance and Law Coverage, but the insurer declined to increase payment.

As a result, the insured filed a declaratory judgment action, seeking a ruling that the insurer must participate in an appraisal for Ordinance and Law coverage. A trial court entered final summary judgment in favor of the insured, noting the insurer’s argument that the appraiser had denied Ordinance and Law coverage. On appeal, the fourth district disagreed, concluding that Ordinance and Law coverage is not recoverable until it is incurred. Stated differently, the fourth district ruled that because no Ordinance and Law Coverage was incurred at the time of the original appraisal, the appraisal never appraised Ordinance and Law Coverage.

Property Insurer Was Not Permitted to Limit Sinkhole Coverage to Less Than Dwelling Coverage Limit

Fla. Farm Bureau Cas. Ins. Co. v. State of Fla., Office of Ins. Regulation (1st DCA 2013)

At issue in this case is the proper interpretation of Florida Statute § 627.706(1), which provides that:

Every insurer authorized to transact property insurance in this state must provide coverage for a catastrophic ground cover collapse. The insurer shall make available, for an appropriate additional premium, coverage for sinkhole losses on any structure … to the extent provided in the form to which the coverage attaches…. A policy for residential property insurance may include a deductible amount applicable to sinkhole losses equal to 1 percent, 2 percent, 5 percent, or 10 percent of the policy dwelling limits, with appropriate premium discounts offered with each deductible amount.

Relying on this statute, the Office disapproved of a property insurer’s proposed amendment to its endorsement form limiting sinkhole coverage to 25% of the overall coverage amount for the insured dwelling. The Office’s reasoning was that the statutory phrase “to the extent provided in the form to which the coverage attaches” refers to the base property insurance property and, consequently, requires insurers to offer sinkhole loss coverage in an amount equal to the dwelling coverage limit.

The property insurer appealed, arguing that this interpretation was clearly erroneous and that the form to which sinkhole loss coverage attaches is really the policy endorsement setting out the extent (limit) of such coverage, which lies solely with the discretion of the insurer. The first district affirmed, concluding that the defining the term “form” to mean the base policy is within the permissible range of interpretations and thus not clearly erroneous: “Because the deductibles are tied to casualty coverage limits in the base policy, it is reasonable to conclude that the amount of sinkhole loss coverage is intended to be the same as the amount of casualty coverage provided for in the base policy.”

Insured’s Failure to Comply With EUO Requirements Was a Breach of the Policy’s Cooperation Clause

Citizens Prop. Ins. Corp. v. Ifergane (Fla. 3d DCA 2012)

This case involved a coverage dispute with regard to a wind-only dwelling policy issued by Citizens Property Insurance Corporation. The policy was issued solely to Alexandra Ifergane and provided coverage with respect to a house in which Alexandra resided with her then-husband, Haim.

In October of 2005 the house sustained damages during Hurricane Wilma. The following month Alexandra and Haim divorced and Alexandra thereafter executed a quit claim deed to Haim, assigning him all of her rights and interests in the home. When a tender was made to Citizens for the 2005 damages, Citizens sought to take examinations under oath of Haim and Alexandra. Alexandra declined to comply with the requests, asserting that she was not obligated to sit for an EUO since she had assigned to Haim all of her rights and interests in the property.

In response, Citizens filed an action for declaratory judgment against the Iferganes, seeking a determination regarding its coverage obligations. Citizens sought, inter alia, a determination as to the validity of the quit claim assignment, a declaration that Alexandra is obligated to appear for an EUO (examination under oath) and to comply with other policy conditions, and a determination that Alexandra’s failure or refusal to comply with the EUO request and policy conditions constituted a breach of contract precluding recovery under the policy as a matter of law. Alexandra moved to dismiss the complaint and Haim, in turn, filed a cross-motion insisting that Alexandra’s alleged failures could not be imputed to him because he was an innocent resident spouse co-insured under the policy.

Ultimately, the proceedings led to the entry of three distinct orders which were all at issue on appeal before the Third District. First, was an order granting, with prejudice, Alexandra’s motion to be dismissed as a party. The Third District ruled that this order was properly entered since, by virtue of the valid assignment, Alexandra no longer had an “actual, present, adverse and antagonistic interest in the subject matter of the amended complaint ….” There were two other orders reviewed: an order of final judgment and an order granting Haim’s motion for partial summary judgment as to coverage. The court reversed both, ruling that these orders were erroneously entered. The two reasons provided were, first, because there were genuine issues of material fact as to whether Haim was entitled to coverage as a resident spouse on the date of loss and, second, because the assignment from Alexandra to Haim did not relieve Alexandra of her post-loss obligations (as opposed to rights) as a named insured under the policy.

Florida 4th DCA Opines on the Definition of “Marring” under an Insurance Policy

Ergas v. Universal Property & Casualty Co., Case No. 4D11-3803 (Fla. 4th DCA April 24, 2013)

This case came out this week detailing the definition of “marring” in the 4th DCA and upholding the marring exclusion to exclude coverage in dropped object cases.  It held, “Damage caused by the hammer dropping constituted marring and thus was excluded from policy coverage.”

In more detail, the insured brought suit based on the denial of a claim for damage as a result of a dropped hammer on a tile floor. Universal determined that the damage to the tile, about the size of a quarter, was not covered by the insured’s homeowner’s policy as such was excluded under exclusion number 2., which excludes damage  “Caused by: . . . (e) Any of the following:(1) Wear and tear, marring, deterioration . . . .”

Specifically, the marring exclusion was the basis for the denial and on which summary judgment was granted at the trial court level. The Fourth District upheld the order granting the carrier’s Motion for Summary Judgment holding that the loss was a “…disfiguring mark; blemish… ” and not the same as “wear and tear.” The Fourth District concluded that the term marring was unambiguous and not covered based on the relevant exclusion.

 

Carrier’s Decision to Pay the Amount of its Estimate and then Consider Supplemental Claims for Additional Damages Did Not Violate Florida Statute Section 627.7011

Slayton v. Universal Prop. & Cas. Ins. Co. (Fla. 5th DCA 2012)

A couple months after obtaining a homeowner’s insurance policy, an insured’s home suffered damage from a windstorm. The insured submitted an estimate prepared by a public adjustor for $61,638.00, although the insurer estimated the cost of repair to be $28,915.87. The insurer thus tendered a check to the insured in the amount of $27,915.87 (the total of the insurer’s estimate minus the $1,000.00 deductible), along with a letter advising that the payment did not necessarily constitute a full and final settlement of the claim and inviting the insured to submit supplemental claims for additional damages discovered in the property’s covered reconstruction and repair. Rather than filing supplemental claims, the insured sued the insurer for breach of contract, a suit which resulted in a directed verdict in the insurer’s favor.

The court reasoned that the insurer’s decision to pay the amount of its estimate (less the deductible) and then consider supplemental claims for additional damages discovered during or arising from the repairs was consistent with the terms of its insurance policy. On appeal, the insured argued that such a construction of the policy violated section 627.7011, Florida Statutes, which states that “[i]n the event of a loss for which a dwelling or personal property is insured on the basis of replacement costs, the insurer shall pay the replacement cost without reservation or holdback of any depreciation in value, whether or not the insured repairs the dwelling or property.” The fifth district summarily affirmed the trial court, noting that the insured’s statutory argument had not bee preserved.

Lack of a Sworn Proof of Loss Was No Excuse for a Carrier’s Failure to Issue a Coverage Decision Since There Was No Prejudice

Allstate Floridian Ins. Co. v. Farmer (Fla. 5th DCA 2012)

In October 2006 a home, owned by Thomas and Margaret Farmer (“Farmer”) and insured by a subsidiary of Allstate Insurance Group, was struck by lighting, causing damage to amateur radio equipment. The next month the Farmers’ pickup truck, which was also insured by an Allstate subsidiary, was stolen, resulting in its destruction and the loss of additional personal property, including other radio equipment.

A few days later the Farmers gave their Allstate agent two handwritten inventory lists of their damaged personal property—one for the items damaged by the lightning strike and the other for the items lost due to the truck theft.

The late filing of the lightning damage claim and a duplicative item on both inventory lists apparently raised red flags, resulting in the involvement of Allstate’s special investigation unit (“SIU”) in the claims process. The SIU representative sent the Farmers an authorization and proof of loss form to be filled out, signed, and notarized. After a number of follow-ups by Allstate, the Farmers eventually complied with the request, although the proof of loss was never notarized.

Although Allstate would later concede that it had all the necessary information to process the Farmers’ property claims, it still had not rendered a decision as to coverage eleven months after the claims’ submission. Therefore, the Farmers filed suit in October of 2007 for breach of contract.

At trial, the court denied Allstate’s motion for a direct verdict on the basis that the Farmers were barred from recovery because a completed proof of loss was a precondition to suit and, over Allstate’s objection, permitted the jury to consider (1) whether the Farmers’ actions in the claim-filing process substantially complied with the proof of loss condition under the policy and (2) whether Allstate was prejudiced by any failure to comply with the condition.

A verdict was returned for the Farmers on the theory that Allstate had not been prejudiced by the Farmers’ failure to provide Allstate with signed, sworn proofs of loss. When the court denied Allstate’s motion to enter judgment in accordance with the motion for directed verdict, Allstate filed an appeal arguing that the jury should not have been permitted to determine the issues of noncompliance and prejudice. The fifth district disagreed and affirmed, explaining that in both notice of loss and proof of loss cases, prejudice is a necessary issue in determining whether forfeiture results from an insured’s breach: “[T]he trial court did not err in allowing the Farmers to prove to the jury that Allstate was not prejudiced by their failure to substantially comply with the proof of loss condition. The overarching question before the jury was whether there was a material breach. The jury found Allstate was not prejudiced by the Farmers’ failure to submit a signed, sworn proof of loss form and, therefore, there was no material breach of the contract.”

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.”