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.”