News Room
Client Update – Florida Insurance Coverage
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By John Bond Atkinson and Tiffany A. Bustamante
EXECUTIVE SUMMARY
LMP Holdings, Inc. v. Scottsdale Insurance Company, Case No. 20-24099 (US District Court, SDFL 2021).
In LMP Holdings, Inc., the issue before the court was whether Plaintiff’s notice was “timely” under the policy’s notice provision. The court looked at the case’s specific facts in concluding that the notice given was not timely as a matter of law. The court emphasized how the very next day after Hurricane Irma’s impact on September 10, 2017, Plaintiff was aware there had been damage done to their roof, as demonstrated by their hiring of a handyman to patch it. The handyman also pointed out significant water damage to certain interior portions of the property. Almost a year after Irma’s impact, Plaintiffs noticed they were still having issues with their AC system that the handyman had fixed, and they still did not inform Defendants of damage. Plaintiff waited until December 10, 2019, over two years from the date of loss, to inform Defendant of these damages.
Linda J. Robles v. Geico Indemnity Company, Case No. 20-14651 (11th Cir. 2021).
In Linda J. Robles, the court determined that although the insurer could have handled its claims process better, it acted with sufficient due diligence in attempting to obtain a settlement with the insured, such that insurer was not liable for the insured’s $5,000,000 award in a wrongful death suit, as this conduct did not rise to the level of bad faith.
All Insurance Restoration Services, Inc. a/a/o Miguel Cediel and Mariela Cediel v. Citizens Property Insurance Corporation, Case No. 3d21-90 (Fla. 3d DCA, October 6, 2021).
In a suit brought by the insureds’ assignee alleging breach of contract for insurer’s failure to pay more than the policy’s emergency services limit for mitigation services, the Court ruled that requesting payment for the policy limits in addition to including the full cost of services, did not act as a request to exceed the policy limits. Therefore, insurer had no duty to respond, and satisfied all its contractual duties by paying only the policy’s $3,000 emergency services limit.
State Farm Florida Insurance Company v. Orlinda Gonzalez and Harmodio Diaz, Case No. 2d20-1268 (Fla. 2d DCA, October 1, 2021).
In Gonzalez, the trial court erred in finding that fungus related damages fell within the policy’s resulting loss provision, because it misinterpreted the language of the policy by failing to consider an endorsement that amended policy and specifically excluded coverage for fungus-related damages.
Maria Muguercia v. Citizens Property Insurance Corporation, Case No. 3D20-947, (Fla. 3d DCA, September 29, 2021).
In Muguercia, the court held the insurer provided sufficient evidence to show the loss was excluded from coverage under the policy’s terms, and therefore this shifted the burden to the insured to produce evidence that the loss fell within an exception to the policy’s exclusion of the loss.
RECENT CASES
LMP Holdings, Inc. v. Scottsdale Insurance Company, Case No. 20-24099 (S.D. Fla. Sept. 30, 2021).
LMP Holdings, Inc. (“Plaintiff”) brought a breach of contract and declaratory relief action against its insurer, Scottsdale Insurance Company (“Defendant”). Plaintiff operates a property insured by Defendant under an all-risk commercial property insurance policy. The policy states several conditions in the event of loss or damage:
3. Duties In The Event Of Loss Or Damage
a. You must see that the following are done in event of loss or damage to Covered Property: . . .
(2) Give us prompt notice of the loss or damage. Include a description of the property involved
(3) As soon as possible, give us a description of how, when and where the loss or damage occurred.
(4) Take all reasonable steps to protect the Covered Property from further damage . . .
(6) As often as may be reasonably required, permit us to inspect the property proving the loss or damage . . .
Plaintiff claims the property sustained damage due to Hurricane Irma on September 10, 2017. Plaintiff hired a handyman the next day, who observed punctures in the roof which he promptly fixed. The handyman also put the AC unit panel back in its place and observed extensive water damage in certain parts of the property’s interior. From 2018 to late 2019, Plaintiff noticed increasing signs of significant damage to the property and ultimately reported a damage claim to Defendant on December 10, 2019. Defendant’s engineer inspected the property and determined that there was no wind damage to the roof or exterior walls, and that there were areas of interior water damage in locations previously repaired by the handyman. On July 10, 2020, Defendant informed Plaintiff it was denying coverage for the damage to the roof and windows, and the interior water damage.
The issue before the court was whether the Plaintiff violated the policy’s prompt notice provision such that the Defendant’s denial for coverage on this basis was proper. The court explained that the purpose of an insurance policy’s notice provision is to enable the insurer to “evaluate its rights and liabilities and afford it an opportunity to make a timely investigation.” Gemini II Ltd. v. Mesa Underwriters Specialty Ins. Co., 592 Fed. App’x 803, 806 (11th Cir. 2014) (quoting Laster v. U.S. Fid. & Guar., 293 So.2d 83, 86 (Fla. 3d DCA 1974)). “Under Florida law, a failure to provide timely notice of loss in contravention of a policy provision is a legal basis for the denial of recovery under the policy.” Mid-Content Cas. Co. v. Basdeo, 742 F. Supp. 2d 1293, 1335 (S.D. Fla. 2010); Ideal Mut. Ins. Co. v. Waldrep, 400 So.2d 782, 785 (Fla. 3d DCA 1981).
Late notice creates a rebuttable presumption of prejudice to the insurer. Basdeo, 742 F. Supp. 2d at 1336. Thus, the insured has the burden of rebutting this presumption by presenting competent evidence that the insurer has not been prejudiced by the late notice. Bankers Ins. Co. v. Marcias, 475 So.2d 1216, 1217–18 (Fla. 1985); Clena Invs., Inc. v. XL Specialty Ins. Co., Case No. 10-62028-CIVRNS, 2012 WL 1004851, at *4 (S.D. Fla. Mar. 26, 2012); see also Bankers Ins. Co. v. Macias, 475 So.2d 1216, 1218 (Fla. 1985). The insured must prove that the insurer has not been deprived of the opportunity to investigate the facts. Macias, 475 So.2d at 1218.
The legal issue in this case was whether the notice Plaintiff gave to Defendant was “timely”. Interestingly, while the court acknowledges that this issue of timeliness is usually a question of fact for the jury, the court states, “when the undisputed factual record establishes notice is so late that no reasonable juror could find it timely, Florida courts will deem the notice untimely as a matter of law.” see PDQ Coolidge Formad, LLC v. Landmark Am. Ins. Co., 566 Fed. App’x 845, 848 (11th Cir. 2014). When a policy does not specifically define the meaning of “prompt” notice, courts will construe it to mean notice must be given “with reasonable dispatch and within a reasonable time” under the facts of a particular case. Yacht Club on the Intracoastal Condo. Ass’n, Inc. v. Lexington Ins. Co., 599 Fed. App’x 875, 879 (11th Cir. 2015).
The Court ultimately held for the Defendant, stating that the Plaintiff’s notice under these specific facts was not timely as a matter of law. In its analysis, the court emphasized how the very next day after Hurricane Irma’s impact on September 10, 2017, Plaintiff was aware there had been damage done to their roof, as demonstrated by their hiring of a handyman to patch it. The handyman also pointed out significant water damage to certain interior portions of the property. Almost a year after Irma’s impact, Plaintiffs noticed they were still having issues with their AC system that the handyman had fixed, and they still did not inform Defendants of damage. Plaintiff waited until December 10, 2019, over two years from the date of loss, to inform Defendant of these damages.
The court emphasized that Florida courts have held that time delays far less than the one here were untimely as a matter of law. See e.g., Morton v. Indem. Ins. Co. of North America, 137 So.2d 618, 620 (Fla. 2d DCA 1962) (six-and-ahalf-month delay was untimely); Ideal Mut. Ins. Co. v. Waldrep, 400 So.2d 782, 785 (Fla. 3d DCA 1981) (two month delay in reporting after airplane accident was untimely); Deese v. Hartford Acc. & Indem. Co., 205 So.2d 328, 329 (Fla. 1st DCA 1967) (four-week delay was untimely).
Even though Plaintiff stated its reason for delay was that it did not believe the damage would meet the policy’s deductible, the court held this is not a justification for an insured to be excused from providing timely notice to its insurer.
The court was unpersuaded by Plaintiff’s argument that there existed a genuine issue of material fact because each party’s experts had differing opinions as to the cause of the damage. The court reasoned that contradicting expert opinions alone does not demonstrate the existence of a genuine dispute of material fact, and that Plaintiff had failed to put forward evidence to rebut the presumption that the Defendant was not prejudiced by the late notice. Therefore, the court granted summary judgment in favor of Defendant.
This case is significant because it provides an overview of how Florida courts construe insurance policies containing notice provisions, in determining whether or not notice is timely as a matter of law. The case also shows how the application of the federal summary judgment standard, which has been adopted by Florida, creates a higher burden for a nonmovant to demonstrate that a genuine dispute of material fact exists. One cannot simply point to the existence of a factual dispute, such as contradictory expert opinions, to defeat a motion for summary judgment, and rather must provide evidence showing that there exists a genuine dispute of material fact.
Linda J. Robles v. Geico Indemnity Company, Case No. 20-14651 (11th Cir. 2021).
The 11th Circuit Court of Appeals affirmed the district court’s holding that the dispute between Geico Indemnity Company (“Insurer”) and Linda Robles, representing the estate of Miguel Mercado (“Insured”), did not constitute bad faith.
In 2008, Miguel Mercado died as a result of a car accident with a driver insured by Insurer. The Insurer’s personal automobile policy provided a bodily injury liability limit of $10,000, which Insurer tendered to Insured for a settlement of bodily injury claims. Before the parties finalized the hold harmless release, the personal representative of Mercado’s estate filed a wrongful death action, and in 2016, a jury awarded the estate almost $5,000,000.00 in damages. The insured argued Insurer rejected the original 2009 settlement offer, and that this constituted bad faith, entitling the insured to the full $5,000,000.00 in damages awarded by the trial court. In response, Insurer defended its actions, stating that they acted diligently and there simply was no reasonable opportunity for settlement.
The Insured argued that the Insurer failed to strictly comply with the settlement terms, but the district court held that the Insured was including “overbroad release language” and ignoring the totality of the circumstances. These circumstances include the fact that the Insurer’s adjuster faxed the Insured’s attorney a proposed hold harmless release, along with a blank affidavit in accordance with the demand letter and advised the Insured of the potential liability if there was a failure to settle. Crucially, Insurer also issued a check tendering the policy limits, and over the next three months the adjuster followed up with the Insured seven times before the settlement language was rejected. The 11th Circuit reasoned, “While Geico owes a fiduciary duty to act in the insured’s best interest and did not immediately accept all conditions of the demand letter” the claims adjuster provided ample opportunity for the Insured to remove any language in the agreement it did not consent to. Further, the court explained “[w]hen viewed as a whole it is difficult to see how the adjuster put Geico’s interest before the insured’s,” and that “[t]hese facts at worst show ways in which Geico might improve processing claims” but that the conduct was not a demonstration of bad faith.
All Insurance Restoration Services, Inc. a/a/o Miguel Cediel and Mariela Cediel v. Citizens Property Insurance Corporation, Case No. 3d21-90 (Fla. 3d DCA, October 6, 2021).
All Insurance Restoration Services, Inc., a/a/o Miguel Cediel and Mariela Cediel (“Plaintiff”), appealed from a final summary judgment entered in favor of Citizens Property Insurance Corp. (“Defendant”). On appeal, the Fourth DCA affirmed. The relevant facts are as follows.
On October 22, 2017, the home of Miguel and Mariela Cediel (“Insureds”) suffered water damage due to a plumbing issue. At the time of the loss, the property was insured by a homeowners policy issued by Citizens. Under the policy, following a loss, the Insureds have a duty to “[t]ake reasonable emergency measures that are necessary to protect the covered property from further damage, as provided under Additional Coverage F.2.” As to “reasonable emergency measures,” the Insureds’ homeowners policy states:
F. Additional Coverages
2. Reasonable Emergency Measures
a. We will pay up to the greater of $3,000 or 1% of your Coverage A limit of liability for the reasonable costs incurred by you for necessary measures taken solely to protect covered property from further damage, when the damage or loss is caused by a Peril Insured Against.
b. We will not pay more than the amount in a. above, unless we provide you approval within 48 hours of your request to us to exceed the limit in a. above. In such circumstance, we will pay only up to the additional amount for the measures we authorize.
If we fail to respond to you within 48 hours of your request to us and the damage or loss is caused by a Peril Insured Against, you may exceed the amount in a. above only up to the cost incurred by you for the reasonable emergency measures necessary to protect the covered property from further damage.
The policy’s Declaration page states:
IN CASE OF A LOSS TO COVERED PROPERTY, YOU MUST TAKE REASONABLE EMERGENCY MEASURES SOLELY TO PROTECT THE PROPERTY FROM FURTHER DAMAGE IN ACCORDANCE WITH THE POLICY PROVISIONS (MAY NOT EXCEED THE GREATER OF $3,000 OR 1% OF YOUR COVERAGE A LIMIT OF LIABILITY UNLESS YOU CALL US FIRST AND RECEIVE OUR APPROVAL). PROMPT NOTICE OF THE LOSS MUST BE GIVEN TO US OR YOUR INSURANCE AGENT, EXCEPT FOR REASONABLE EMERGENCY MEASURES, THERE IS NO COVERAGE FOR REPAIRS THAT BEGIN BEFORE THE EARLIER OF: (A) 72 HOURS AFTER WE ARE NOTIFIED OF THE LOSS, (B) THE TIME OF LOSS INSPECTION BY US, OR (C) THE TIME OF OTHER APPROVAL BY US. TO REPORT A LOSS OR CLAIM CALL 866.411.2742.
The Insureds assigned their benefits of the policy to Plaintiff in exchange for its water mitigation services, which were completed on October 30, 2017. On November 29, 2017, Plaintiff emailed Defendant, attaching its’ “water mitigation package,” which included the assignment of benefits and an invoice for $7,238.75. Importantly, approval from Defendant to exceed the policy’s $3,000 limit for reasonable emergency services was never explicitly requested.
On December 2, 2017, Defendant sent Plaintiff a $3,000 check representing the policy’s reasonable emergency measure liability limit. Plaintiff then cashed the check and filed the underlying action against Defendant for breach of contract for failure to fully compensate Plaintiff for their water mitigation services.
At the trial court, Defendant moved for summary judgment against Plaintiff based on the undisputed facts and the language in the homeowner’s policy limiting coverage for “reasonable emergency measures” to $3,000, which Defendant had already tendered. Plaintiff opposed this motion, arguing that its email attaching the assignment and invoice served as a request to exceed the policy’s $3,000 coverage limit for reasonable emergency services.
Plaintiff also argued that under section F.2.b. of the Reasonable Emergency Measures provision, Defendant was obligated to pay the full value of services rendered due to its failure to respond to this alleged request within 48 hours.
The trial court entered an order granting Defendant’s motion for summary judgment and reasoned, “Defendant has fully satisfied its obligations under the insurance policy by paying the $3,000.00 Reasonable Emergency Measures policy limit. Plaintiff failed to meet its burden to show that Defendant breached the terms of the insurance Policy.”
On appeal, the Third DCA held that Plaintiff never made a request to Defendant to seek approval to go above the policy’s $3,000 limit covering reasonable emergency measures. The Court reasoned the November 29, 2017, correspondence did not explicitly request approval to render services exceeding $3,000, and that under the policy’s terms, a demand for payment more than $3,000.00 via an invoice for services that had already been completed was not a request to exceed the Reasonable Emergency Measures $3,000 policy limit. The Court stated that to hold otherwise would frustrate the intent and purpose of the policy’s Reasonable Emergency Services provision, which is to give Defendant the ability to mitigate costs by requiring approval of services costing more than $3,000. Defendant satisfied all its contractual duties under the policy by tendering the $3,000 check to Plaintiff, and there the Court affirmed the trial court’s order granting summary judgment in Defendant’s favor.
State Farm Florida Insurance Company v. Orlinda Gonzalez and Harmodio Diaz, Case No. 2d20-1268 (Fla. 2d DCA, October 1, 2021).
In this case, the insurer, State Farm (“Insurer”), appealed the trial court’s final summary judgment entered in favor of the insureds, Orlinda Gonzalez and Harmodio Diaz (“Insureds”), on their claim that Insurer’s refusal to pay out the appraised value of damage constituted a breach of contract.
The Insureds had a homeowners insurance policy with Insurer, under which they made a $68,247.62 claim after their home sustained water damage. The Insurer disputed the claim amount, paid out $6,230.30 to the Insureds, and began the appraisal of the claim amount to determine its validity.
The appraisal panel concluded that due to “fungus related damages” the replacement cash value of the damage was worth $39,260.28. In response, Insurer filed an answer and affirmative defenses claiming that the subject policy did not provide coverage for these “fungus related damages,” due to the policy’s fungus endorsement, which they argued did not cover any damage caused by fungus. The Insureds then filed a motion for summary judgment in the amount determined by the appraisal panel, on the basis that their policy’s “resulting loss” provision included the damages at issue, and that the Insurer’s invocation of appraisal rights effectively waived their rights to assert any coverage defenses. The lower court ruled for the Insureds, reasoning that the fungus related damages fell within the scope of the policy’s “resulting loss” provision, and thus the Insurer was in breach of the policy by not providing coverage for the full amount of these damages.
On appeal, the Insurer argued that the trial court’s interpretation of the policy was erroneous because the policy contained an endorsement that excluded coverage for fungus related damages, and the court failed to consider this endorsement in their ruling. The relevant policy provisions are as follows:
SECTION I – LOSSES NOT INSURED
1. We do not insure for any loss to the property described in Coverage A which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through n. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage,
arises from natural or external forces, or occurs as a result of any combination of these:
i. mold, fungus or wet or dry rot;
However, we do insure for any resulting loss from items a. through m. unless the resulting loss is itself a Loss Not Insured by this Section.
2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events.
We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damages, arises from natural or external forces, or occurs as a result of any combination of these: (the policy then lists excluded events from a-f)
The crucial fungus endorsement at issue here states:
FUNGUS (INCLUDING MOLD) EXCLUSION ENDORSEMENT
SECTION I – LOSSES NOT INSURED
Item 1.i. is replaced with the following:
i. wet or dry rot;
In item 2., the following is added as item g.:
g. Fungus. We also do not cover:
(1) any loss of use or delay in rebuilding, repairing or replacing covered property, including any associated cost or expense, due to interference at the residence premises or location of the rebuilding, repair or replacement, by fungus;
(2) any remediation of fungus, including the cost to:
(a) remove the fungus from covered property or to repair, restore or replace that property; or
(b) tear out and replace any part of the building or other property as needed to gain access to the fungus; or
(3) the cost of any testing or monitoring of air or property to confirm the type, absence, presence or level of fungus, whether performed prior to, during or after removal, repair, restoration or replacement of covered property.
Since the interpretation of a contract is a question of law, and not of fact, the Second DCA applied the appropriate de novo standard of review to the lower court’s ruling. Fla. Peninsula Ins. Co. v. Cespedes, 161 So. 3d 581, 584 (Fla. 2d DCA 2014). “If the language in an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning so as to give effect to the policy as written.” Id. (citing Wash. Nat’l Ins. Corp. v. Ruderman, 117 So. 3d 943, 948 (Fla. 2013)). “In construing insurance contracts, courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.” Id. (quoting Ruderman, 117 So. 3d at 948).
Ultimately, the court reversed the trial court’s ruling, and held for the Insurer explaining that the trial court’s failure to consider the fungus endorsement of the policy was an erroneous interpretation of the policy’s scope of coverage. The court reasoned that the fungus endorsement amended the policy so that fungus was no longer addressed in Item 1 SECTION I – LOSSES NOT INSURED, but instead was addressed in item 2, which did not include the “resulting loss” language found in item 1. The trial court failed to acknowledge or consider the endorsement in its ruling, and upon the Second DCA’s de novo interpretation, it concluded that the policy, when considered with the endorsement, specifically excluded fungus-related damages in item 2. and that the trial court therefore erred in ruling that the “fungus-related damages” fell within the “resulting loss” language in item 1.
Maria Muguercia v. Citizens Property Insurance Corporation, Case No. 3D20-947, (Fla. 3d DCA, September 29, 2021).
In Muguercia, the Third DCA affirmed a trial court’s award of summary judgment in favor of insurer, Citizens Property Insurance. The court reasoned that the insurer in this instance produced sufficient evidence demonstrating that the insured’s loss was excluded under the policy’s coverage provisions, and therefore this shifted the burden to the insured to provide evidence that the loss at issue fell within an exception to the exclusion cited by the insurer, such that there existed a genuine dispute of material fact precluding an award of summary judgment. Deshazior v. Safepoint Ins. Co., 305 So. 3d 752, 754-55 (Fla. 3d DCA 2020); E. Fla. Hauling, Inc. v. Lexington Ins. Co., 913 So. 2d 673, 678 (Fla. 3d DCA 2005)
(“Once the insured shows coverage, the burden shifts to the insurer to prove an exclusion applies to the coverage. If there is an exception to the exclusion, the burden once again is placed on the insured to demonstrate the exception to the exclusion”).
This case demonstrates the importance of understanding how and when the burden of proof is shifted in cases between an insurer and insured regarding a coverage dispute. An understanding of this burden shifting is especially important in light of Florida’s adoption of the federal summary judgment standard, which generally makes courts more inclined to grant summary judgment by increasing the nonmovant’s burden of demonstrating that no genuine dispute of material fact exists.
Atkinson, P.A. is committed to providing you with sound guidance, representation, and defense in response to these complex legal issues and we will continue to monitor noteworthy cases. Should you have any questions with respect to this update, please feel free to contact our partners directly.
Very truly yours,
JOHN BOND ATKINSON
TIFFANY A. BUSTAMANTE
JBA/TAB