January 13, 2020
This month we would like to share with you some recent opinions of the Florida District Courts of Appeals, as well as one significant Middle District of Florida case related to a COVID-19 claim for benefits, which may be of interest to you.
In People’s Trust Insurance Company v. Farua Portuondo, 45 Fla. L. Weekly D1429 (Fla. 3d DCA October 7, 2020), the 3rd DCA held that an insurance carrier does not waive its right to appraisal under the contract by abating the appraisal process or excluding coverage for a particular area of damage. The right to appraisal is protected even if the insurer is forced to participate in a lawsuit when a dispute arises regarding coverage or the appraisal process itself.
In Restoration Construction, LLC v. Safepoint Insurance Company, 2020 Fla. App. LEXIS 17528 (Fla. 4th DCA, December 9, 2020), the 4th DCA overturned a trial courts determination that an insured had failed to give prompt notice of a claim, and it was error to dismiss the insured’s claims based on their behavior post-loss. The fact question remains as to whether the insured adhered to the provisions of the policy, allowing coverage for a loss: even if the insured completely prevents the insurer from inspecting the loss by discarding allegedly damaged property in violation of the policy.
In Prime Time Sports Grill, Inc. v. DTW 1991 Underwriting Limited, No. 20-cv-771-T-36JSS (M.D. Fla. December 17, 2020), the Middle District of Florida upheld and expanded on business interruption claims for COVID-19 related closures and loss of income. Businesses seeking coverage for business interruption and lost profits must demonstrate “tangible damage” on top of the already prevalent standard of requiring “direct” and “physical” damage, established by the 11th Circuit in Mama Jo’s Inc. v. Sparta Ins. Co., 823 F. App’x 868, 879 (11th Cir. 2020). Generally, COVID-19 claims cannot specifically demonstrate that the property itself was directly physically damaged by the virus.
Finally, in Bessie Frederick v. Citizens Property Insurance Corporation, Case No. 3d18-1209, (Fla. 3d DCA December 9, 2020), the 3rd DCA held that a question of fact still exists as to coverage on an insurance claim even when the evidence presented by the insured may be considered less valuable than that presented by the insurer’s expert. A jury or fact find still must hear the evidence when comparing the opinion of a general contractor on the cause of loss against that of a professional engineer. Summary judgment is improper when opinions of experts are “clearly at odds” despite the disparity in the expert’s job titles or qualifications.
People’s Trust Insurance Company v. Farua Portuondo, 45 Fla. L. Weekly D1429 (Fla. 3d DCA October 7, 2020)
Facts and Procedural History
The named insureds reported a claim to People’s Trust for Hurricane Irma related damages to the interior and exterior of her home, including the roofing system. People’s Trust initially agreed to extend coverage for the interior damages, but denied the roofing system claim. The named insured filed suit on July 30, 2019. Before receiving service of the suit, People’s Trust demanded appraisal on August 26, 2019, and the process began in earnest. However, on September 16, 2019, People’s Trust was served with the complaint. People’s Trust immediately suspended the appraisal process, and filed its necessary responsive pleading in the form of a Motion to Compel Appraisal.
The trial court denied People’s Trust’s Motion, without significant reasoning. Through the transcript, however, it is relatively clear that the trial court’s position was that because People’s Trust disputed coverage for the roof, the claim as not ripe for appraisal.
Appellate Court Decision
On Appeal, the 3rd DCA explained the facts would be review for competent substantial evidence on a de novo standard. First, the court outlined its determination that despite completely denying coverage for the roofing system, the claim itself was not “wholly denied.” An insurer can deny coverage for a portion of the claim and still be entitled to an appraisal: “the insurer here covered interior damage resulting from damage to the roof in Portuondo’s home but excluded coverage for the roof itself because it was not covered by the policy.” The court determined that this was still sufficient for invocation of appraisal. The portions of the claim being denied do not affect the analysis that the insurer in this case did not wholly deny the claim.
Additionally, the court rejected the insureds’ allegations that the right to appraisal was waived when the insurer stopped the process after receiving service of the lawsuit. The 3rd DCA chose not to apply the waiver standard found in Fla. Ins. Guar. Ass’n, Inc. v. Martucci, 152 So. 3d 759, 761 (Fla. 5th DCA 2014), which states that when a party actively participates in a lawsuit or engages in conduct inconsistent with the right to appraisal, they waive that right. The 3rd DCA chose not to apply that standard to these facts as the insurer had not waived the right simply by responding to the complaint in a timely manner and holding off on appraisal until the legal procedures were followed. The case was remanded with instructions consistent.
This case presents interesting ramifications for insurers who prefer the appraisal process. The 3rd has readily indicated that fully denying a portion or one type of damage involved in a claim does not disallow the appraisal process to proceed. An insurer can fully deny that there is coverage for a major portion of the claim, like a roofing system, but still cover minor damages, and still participate in the appraisal process to avoid unnecessary litigation and attorney’s fees.
Restoration Construction, LLC v. Safepoint Insurance Company, 2020 Fla. App. LEXIS 17528 (Fla. 4th DCA, December 9, 2020)
Facts and Procedural History
Appellant Restoration Construction, LLC filed suit against Safepoint, as an assignee of the insureds’ claim for a water loss to their kitchen sink. The policy of insurance contained a standard requirement for the policyholder to timely report all claims to the insurer to prevent prejudice in the insurer’s investigation of the claim. The insureds failed to report the claim to Safepoint until five (5) days after the alleged loss. In that time, a repair company and the Plaintiff, Restoration Construction, LLC, had already removed the allegedly damaged plumbing in need of repair, performed water extraction, mold remediation, and additional repair work. Safepoint acknowledged the claim, but waited an additional five (5) days to send a representative to inspect the loss. Reasoning for this delay was not available on the record. After investigating the claim, Safepoint concluded the replacement and removal of the allegedly damaged items “within the kitchen area prior to its visit ‘severely hampered [their] investigation and impeded [their] ability to determine specific causes and origins of damage.” In its final coverage determination, Safepoint notified the insureds that it was unable to confirm damages, and therefore could neither accept or deny coverage. Id. at *2-4.
Restoration Construction, LLC filed suit against Safepoint for payment of its invoice. In response to Restoration’s Complaint, Safepoint filed two (2) separate motions for summary judgment. The first claimed Safepoint did not breach the contract as a matter of law, and the second claimed the insureds failed to satisfy two (2) contractual obligations, namely the prompt notice requirement and the obligation to “show the property.” The trial court denied the first outright, but granted the insurer’s motion, stating “waiting several days to report the water loss, while at the same time engaging contractors to repair and remediate the water loss, does not amount to providing ‘prompt’ notice of the loss under the circumstances.” Id. at *5-6.
Appellate Court Decision
On appeal, the 4th DCA reiterated Florida’s long-standing summary judgment standard, namely, if the information on the record “raises any issue of material fact, if it is conflicting, if it will permit different reasonable inferences, or if it tends to prove the issues, it should be submitted to the jury as a question of fact to be determined by it.” Moore v. Morris, 475 So. 2d 666, 668 (Fla. 1985).
In applying this standard to the facts of Restoration’s claim, the 4th DCA indicated that a determination on whether an insured gives “prompt” notice of a claim is certainly a material issue of fact, as it can affect the insurer’s coverage determination on the claim. See Himmel v. Avatar Prop. & Cas. Ins., 257 So. 3d 488, 492 (Fla. 4th DCA 2018). In fact, the court went on to state that whether an insured gives prompt notice of claim generally presents an issue of fact, based on the particular circumstances of the case. “Because the resolution of insurance claim cases involve different scenarios, whereby the timing of the insured’s notice is superimposed over a backdrop of other relevant facts, we do not wish to create a bright line rule for when notice to an insurer is no longer ‘prompt.’” Restoration at *7.
The court reversed and remanded, stating that based on the facts of this claim, the delay question must be heard by a jury, as both parties were guilty of some foot dragging in getting the claim resolved. The court, however, did accept that a five day delay in some cases could prejudice an insurer, but that the issue must be left to a jury, and not decided as a matter of law in a bright line rule.
Prime Time Sports Grill, Inc. v. DTW 1991 Underwriting Limited, No. 20-cv-771-T-36JSS (M.D. Fla. December 17, 2020)
Facts and Procedural History
Plaintiff insured operates a bar and restaurant in Tampa, Florida. Like many service industry businesses, plaintiff insured suffered significant losses in business and operating costs during periods of lockdown or curfew due to the COVID-19 pandemic. Through the defendant insurer, plaintiff held an all-risk policy purchased through the Lloyd’s of London marketplace. The policy of insurance included coverage for loss of business income “you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration’. The ‘suspension’ must be caused by a direct physical loss of or damage to the property premises which are described in the declarations…” Plaintiff filed suit seeking a declaration of its rights under the policy, stating losses totaling more than $15,000.00 in profit and over $120,000.00 in operating costs due to the 30 day bar and restaurant closure ordered by Governor DeSantis on March 17, 2020.
DTW 1991 responded to the complaint with a Motion to Dismiss, stating a failure to allege a claim that falls within the Business Income policy provision. Plaintiff responded with a number of arguments, most notably, that the failure of the property to perform its function is a direct and physical loss to the property within the meaning of the policy.
Written Opinion and Extension of Mama Jo
The court determined that the question of coverage turned on whether closure of a restaurant due to Governor DeSantis’ executive order could be considered a “direct physical loss of or damage to the Covered Property.” DTW 1991’s policy did not directly define “direct physical loss,” and therefore, the Court chose to use the definition outlined in Florida jurisprudence found in a number of 3rd DCA cases. “’Direct’ and ‘physical’ modify loss and impose the requirement that the damage be actual.” Homeowners Choice Prop. & Cas. v. Miguel Maspons, 211 So. 3d 1067, 1069 (Fla. 3d DCA 2017). Since this decision, the court also acknowledged the acceptance of this test on the federal level for damages in a Florida policy of insurance in Mama Jo’s Inc. v. Sparta Ins. Co., 823 F. App’x 868, 879 (11th Cir. 2020) (citing Maspons, 211 So. 3d at 1069).
Following the 11th’s acceptance of this standard, the court reiterated that for a loss to become direct and physical, it must manifest as “tangible damage to property, which causes it to become unsatisfactory for future use or requires repairs.” Based on this interpretation, the Middle District determined that plaintiff restaurant had not suffered any such “tangible damage.” The suspension of plaintiff’s business was not caused by tangible damage, nor had plaintiff alleged as such. A closure was due instead to a mandate, not any particular damage to this property. The Middle District dismissed the complaint with prejudice, as further amendments, it determined, would be futile.
Bessie Frederick v. Citizens Property Insurance Corporation, Case No. 3d18-1209, 2020 Fla. App. LEXIS 17479, (Fla. 3d DCA December 9, 2020)
Finally, and very briefly, the 3rd DCA reversed summary judgment granted by the lower court to Citizens because conflicting evidence had been presented by the insured’s expert. After a significant windstorm loss, and an initial denial of the claim, Citizen’s retained a Professional Engineer to evaluate the home, who opined the interior damages to the home were cause by wear and tear, a cause of damage excluded by the policy. In response, the insured hired a general contractor to opine on the cause of damage. The general contractor provided a report, affidavit, and deposition, all indicating the damage to the home was related to micro-fractures in the roofing system, caused by the significant storm event. The lower court originally granted summary judgment to Citizens, by determining that that the general contractor’s expert opinion provided in opposition to summary judgment “was insufficient to withstand summary judgment as to whether a covered peril caused an opening in the building’s roof.” The record indicates emphasis was placed on the fact that a general contractor was not equivalent to an engineer in providing opinions regarding damage to structural roofing systems.
The 3rd DCA, however, overturned this decision. In a very brief opinion, the court determined the insured had in fact met her burden, stating simply that summary judgment is inappropriate where an insurer’s expert, and an insured’s expert were “clearly at odds.” The court made no determination on the competency or strength of witnesses, but simply equated an expert in the field to another, regardless of title, education, or professional license.
As always, we will continue to keep you appraise regarding any pertinent coverage law developments. Should you have any questions, please do not hesitate to contact us.
Very Truly Yours,
TIFFANY A. BUSTAMANTE
JOHN P. ROBINS