QUICK NOTE: TYPES OF INSURANCE FOR CONSTRUCTION PROJECTS

Posted on January 2, 2022January 2, 2022 by Edward Garber

I did a presentation on types of insurance for construction projects outside of builder’s risk insurance. The presentation briefly discussed insurance beyond commercial general liability, commercial automobile liability, and workers compensation and employer’s liability insurance.

There are many other insurance products that are relied on and needed to cover the MANY risks that contractors face when dealing with a construction project. Insurance is a major part of construction to cover risk and making sure you have the RIGHT insurance to cover the risks you face on a construction project cannot be understated.

When drafting and negotiating a construction contract, it is important to spend time on the insurance requirements including consulting with your insurance broker and lawyer to make sure the right language is included and/or you have the requested insurance.

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Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

KNOW WHETHER YOUR COURSE OF BUSINESS OPERATIONS ARE COVERED OR EXCLUDED BY YOUR INSURANCE

Posted on December 11, 2021December 11, 2021 by Edward Garber

It is a good idea to know what your insurance covers and does not cover. This way, if your course of business has you performing a certain (risky) operation, you know whether that operation is covered or excluded under your policy. If you are not sure, discuss with your insurance broker — this is important. There is little value performing an operation that is NOT covered by your insurance policy, as you are now performing a risk that is not covered by insurance. If you know it is not covered by insurance you may elect to change your operations or see if there is insurance to cover the risk. Below is a case study of this occurrence dealing with a commercial automobile liability policy where an insured’s operations using a crane mounted to a super duty truck was not covered under their automobile liability policy.

In People’s Trust Ins. Co. v. Progressive Express Ins. Co., 46 Fla. L. Weekly D262a (Fla. 3d DCA 2021), homeowners hired a company to install a shed. The company hired another company to deliver and install the shed using a crane; the company used a crane mounted to a Ford F-750 super duty truck. This company improperly operated the crane resulting in the shed falling and damaging the homeowner’s roof. The homeowners submitted a claim to their property insurer and their property insurer subrogated to their rights and sued. The company operating the crane’s commercial automobile liability insurer denied coverage, and thus, denied the duty to defend. As a result, a Coblentz-type agreement was entered into where the company operating the crane consented to a judgment in favor of the property insurer (subrogee) and assigned its rights under its commercial automobile liability policy to the property insurer. The property insurer then sued the automobile liability carrier for coverage. The trial court granted summary judgment in favor of the automobile liability insurer finding there was no coverage and this was affirmed on appeal. Why?

The coverage issue focused on whether a crane mounted to a super duty truck (Ford F-750) was covered or excluded by the commercial automobile liability policy.

The policy included a mobile equipment exclusion; however, mobile equipment did not include, “land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state or province where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicles are considered autos.” The Ford F-750 super duty truck would not constitute mobile equipment excluded by the policy because it would be a land vehicle subject to a compulsory or financial responsibility law or other motor vehicles insurance law.

However, the crux of the issue was the crane mounted to the Ford F-750 super duty truck. The policy also excluded coverage for, “Bodily injury, property damage…arising out of the operation of:…b. machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is principally licensed or principally garaged.”

Based on this exclusion, the Court held:

The truck, “used primarily to provide mobility to a mounted crane,” would be excluded “mobile equipment” under the relevant definition, but for the fact that it is subject to a compulsory or financial responsibility law. The contract contemplates this exact situation. Next, we look to the “13.b. exclusion” which directs us to exclude any claim for property damage “arising out of the operation of . . . machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is licensed or principally garaged.” There is no dispute that the crane was in use at the time of the incident and that the property damage arose out of the operation of the crane. Where, as here, the record clearly established that the damage at issue was caused by the mounted crane, in operational use, on a vehicle that would otherwise qualify as mobile equipment, the trial court correctly granted summary judgment in favor of [the automobile insurer] on the policy exclusion and properly entered final judgment in accord with such findings.

People’s Trust Ins. Co., supra.

In other words, the company that used the crane mounted to its super duty truck performed an operation excluded by its commercial automobile liability insurance policy. The company would have been better to know whether this risk was covered or excluded under its policy, see if it could obtain coverage for this operation, or switch its operation appreciating the uninsured risk associated with performing the operation in this manner.

AN INSURANCE POLICY ISN’T AMBIGUOUS JUST BECAUSE YOU WANT IT TO BE

Posted on December 5, 2021December 5, 2021 by Edward Garber

When it comes to insurance contracts, there is a rule of law that states, “where interpretation is required by ambiguity in insurance contracts[,] the insured will be favored.” Pride Clean Restoration, Inc. v. Certain Underwriters at Lloyd’s of London, 46 Fla. L. Weekly D2584a (Fla. 3d DCA 2021) (citation and quotation omitted). Stated another way: ambiguities in insurance contracts will be interpreted in favor of the insured and against the insurer.

With this rule of law in mind, insureds oftentimes try to argue ambiguity even when there is not one. This was the situation in Pride Clean Construction. In this case, the property insurance policy contained a mold exclusion that stated the policy did NOT insure for “a. loss caused by mold, mildew, fungus, spores or other microorganism of any type, nature, or description including but not limited to any substance whose presence poses an actual or potential threat to human health; or b. the cost or expense of monitoring, testing, removal, encapsulation, abatement, treatment or handling of mold, mildew, fungus, spores or other microorganism as referred to in a) above.” Not only did the policy not insure for loss caused by mold, it went further to state it was NOT insuring for any mold testing or abatement.

In this case, the insured sustained hurricane-related damage. This damage included mold remediation services. The insured (that assigned her benefits under the policy to the mold remediator) argued the policy was ambiguous because it does not identify whether it covers a covered loss that causes mold. In making this argument, the insured relied on Florida’s Supreme Court case, Sebo v. American Home Assurance Co., Inc., 208 So.3d 694 (Fla. 2016), that adopted what is known as the “concurrent cause doctrine,” holding: “[T]hat when independent perils converge and no single cause can be considered the sole or proximate cause [of the loss], it is appropriate to apply the concurring cause doctrine.” – “[T]he concurrent cause doctrine provides that coverage may exist where an insured risk constitutes a concurrent cause of the loss even when it is not the prime or efficient cause [of the loss].” Pride Clean Construction, supra (internal quotations and citation omitted).

Here, however, there was no reason to apply the concurrent cause doctrine to determine the cause of the loss and whether the loss was caused by mold [excluded] or a hurricane [covered], because the policy contained a blanket exclusion that excluded “the cost or expense of monitoring, testing, removal, encapsulation, abatement, treatment or handling of mold.” Mold remediation was blanketly excluded; hence, the cause of the mold was irrelevant for purposes of the policy covering mold remediation-type costs.

This brings up an important consideration. Read your policy and understand what is covered and what is not covered. If there is a concern regarding mold or mold remediation, you need to understand your rights as to whether there is a policy that can meet your insurance needs even if the policy includes a certain sub-limit to provide some coverage. But you can extend this beyond mold because blanket exclusions will automatically exclude certain coverage and you want to make sure you have an understanding as to what is excluded – no matter what – to ensure your rights are sufficiently insured!

HOW YOU PLEAD ALLEGATIONS TO TRIGGER LIABILITY INSURER’S DUTIES IS CRITICAL

Posted on October 10, 2021October 10, 2021 by Edward Garber

How you plead allegations in your lawsuit to trigger duties of a liability insurance carrier is a critical consideration. If the complaint is not pled appropriately, it can result in the carrier NOT owing a duty to defend its insured, which is the party(ies) you are suing. If there is no duty to defend, there will be no duty to indemnify the insured to cover your damages. For this reason, in a number of circumstances, this is NOT what you want because you want to trigger insurance coverage and potential proceeds to be paid by a carrier to cover your damages. There are times when you are confronted with a case that just is not a good insurance coverage case. This may result in you coming up with creative arguments to maximize insurance coverage. Even in these times, you want to plead the complaint to best maximize coverage under the creative arguments you have developed.

An example of not pleading allegations in a complaint to trigger an insurer’s duties can be found in the Eleventh Circuit Court of Appeal’s decision in Tricon Development of Brevard, Inc. v. Nautilus Insurance Co., 2021 WL 4129373 (11^th Cir. 2021). This case involved a general contractor constructing condominiums. The general contractor hired a subcontractor to fabricate and install metal railings. The subcontractor had a commercial general liability (CGL) policy that named the general contractor as an additional insured with respect to liability for property damage “caused in whole or in part” by the subcontractor’s direct or vicarious acts or omissions. (This is a good additional insured endorsement.)

A dispute arose as to defective work by the subcontractor in fabricating and installing the railings. The general contractor, therefore, engaged another subcontractor to fabricate new railings and remove the current railing to install the new ones. The general contractor submitted a claim to its original railing subcontractor’s insurer. The insurer denied the claim and the general contractor filed a coverage action against the insurer as an additional insured under the CGL policy.

The problem, however, is that the general contractor’s complaint did not appear to truly consider insurance coverage, although it appeared to be a case where insurance coverage was not a great option. The Eleventh Circuit explained there was no coverage based on the allegations in the complaint:

Here, [the general contractor] alleges that the subcontractor’s railings were deficient due to having defects and damage, not being installed properly, and not satisfying the project’s specifications; it does not allege that the subcontractor’s faulty workmanship damaged otherwise non-defective components of the project…. Thus, the costs that [the general contractor] incurred in removing the subcontractor’s railings and the fabrication and installation of new railings do not constitute “property damage” under the policies….

Tricon Development of Brevard at *2.

This is obviously not what the general contractor wanted and had it pled allegations differently, the outcome may have turned out different. Although, the general contractor may have been faced with trying to come up with a creative argument recognizing it was not a great insurance coverage action.

Nonetheless, the Eleventh Circuit, finding there was no insurance coverage, includes a worthy paragraph when it comes to property damage in a construction defect/damage dispute so that parties recognize CGL policies do not cover defective workmanship. Take note of this discussion so that you can ensure allegations are pled to best maximize coverage:

The policies at issue in this appeal are post-1986 standard form commercial general liability policies with products-completed operations hazard coverage, which are governed by Florida law. We have held that such policies do not cover the costs of replacing defective products. In Amerisure Mutual Insurance Company v. Auchter Company, we examined a post-1986 standard form commercial general liability policy with products-completed operations hazard coverage. That policy “define[d] ‘property damage’ as ‘physical injury to tangible property, including all resulting loss of use of that property … or … loss of use of tangible property that is not physically injured.’ ” 673 F.3d 1294, 1298 (11th Cir. 2012) (cleaned up). Applying Florida law, we held that “there is no coverage if there is no damage beyond the faulty workmanship, i.e., unless the faulty workmanship has damaged some otherwise nondefective component of the project.” Id. at 1306 (citing U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.2d 871, 889 (Fla. 2007)). We also held that “if a subcontractor is hired to install a project component and, by virtue of his faulty workmanship, installs a defective component, then the cost to repair and replace the defective component is not ‘property damage.’ ” Id. (citing Auto-Owners Ins. Co. v. Pozzi Window Co., 984 So.2d 1241, 1248 (Fla. 2008)). We further held that “nondefective and properly installed raw materials can constitute a defective project component when the contract specifications call for the use of different materials, yet the cost to reinstall the correct materials is not ‘property damage’—even though the remedy for such a nonconformity is to remove and replace that component of the project.” Id. (citing Pozzi, 984 So.2d at 1248).

Tricon Development of Brevard at *2.

ELEVENTH CIRCUIT’S NOTEWORTHY DISCUSSION ON BAD FAITH INSURANCE CLAIMS

Posted on October 2, 2021October 2, 2021 by Edward Garber

The Eleventh Circuit Court of Appeal’s opinion in Pelaez v. Government Employees Insurance Company, 2021 WL 4258821 (11^th Cir. 2021) is a non-construction case that discusses the standard for pursuing a bad faith claim against an insurer. This case dealt with an automobile accident. While the facts of the case are interesting and will be discussed, the takeaway is the Eleventh Circuit’s noteworthy discussion on the standard for bad faith claims and how they should be evaluated. This discussion is included below–with citations–because while the term “bad faith” is oftentimes thrown around when it comes to insurance carriers, there is indeed an evaluative standard that is applied to determine whether an insurance carrier acted in bad faith.

In Pelaez, a high school student driving a car crashed with a motorcycle. The motorcycle driver was seriously injured and airlifted to the hospital. The accident was reported to the automobile liability insurer of the driver of the car. The insurer through its investigation initially believed the motorcycle driver was contributory negligent. Eleven days after the crash, after learning additional information, the insurer tendered its bodily injury policy limits of $50,00 to the motorcycle driver even though it never received a settlement demand. The insurer sent a tender package to the motorcycle driver’s lawyer that included a $50,000 check for the bodily injury claim and a proposed release. The accompanying letter told the attorney to contact the insurer with any questions about the release and to edit the proposed release with suggested changes. The insurer also wanted to inspect the motorcycle in furtherance of adjusting the property damage claim which also had a policy limit of $50,000. A location of where the motorcycle could be inspected was never provided.

Shortly thereafter, counsel for the motorcycle driver rejected the policy limits tender offer claiming that the proposed release form included with the tender package was overbroad (and it was) since it did not specifically carve-out property damage claims. The insurer again told the lawyer to edit the release and asked for the location of the motorcycle because its intent was to treat the bodily injury and property damage claims separate. Instead of a response, the motorcycle driver sued the driver of the car. Clearly, the objective was not the $50,000 policy limits, but the potential bad faith exposure.

The property damage claim for the motorcycle ultimately settled but the bodily injury claim continued to trial. During trial, the parties consented to a judgment where a judgment was entered against the driver of the car for $14,900,000; the parties stipulated that the judgment shall not be recorded and cannot be collected against the car driver. Instead, the motorcycle driver agreed to collect solely against the car driver’s insurance policy. The car driver’s insurer was not a party to the judgment or stipulation.

Thereafter, both the car and motorcycle drivers sued the car driver’s automobile liability insurer for bad faith refusal to settle. The trial court entered summary judgment in favor of the car driver’s insurer finding no reasonable jury could find the insurer acted in bad faith under the totality of the circumstances. The Eleventh Circuit affirmed the trial court’s summary judgment in favor of the insurer based on the totality of circumstances including the insurer’s efforts to settle the bodily injury claim for policy limits. In doing so, the Eleventh Circuit includes the following noteworthy discussion on such bad faith insurance claims:

“It has long been the law of [Florida] that an insurer owes a duty of good faith to its insured.” Berges v. Infinity Ins. Co., 896 So. 2d 665, 672 (Fla. 2004). The duty has been well-defined for more than 40 years, since the Florida Supreme Court described it in Boston Old Colony Ins. Co. v. Gutierrez, 386 So. 2d 783 (Fla. 1980):

An insurer, in handling the defense of claims against its insured, has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business. For when the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, then the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured. This good faith duty obligates the insurer to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid same. The insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.

Id. at 785; see also, e.g., Harvey v. GEICO Gen. Ins. Co., 259 So. 3d 1, 6–7 (Fla. 2018) (quoting Boston Old Colony to define the duty); Kropilak v. 21st Century Ins. Co., 806 F.3d 1062, 1067–68 (11th Cir. 2015) (same). “Breach of this duty may give rise to a cause of action for bad faith against the insurer.” Perera v. U.S. Fid. & Guar. Co., 35 So. 3d 893, 898 (Fla. 2010). Florida’s bad faith law is “designed to protect insureds who have paid their premiums and who have fulfilled their contractual obligations by cooperating fully with the insurer in the resolution of claims.” Berges, 896 So. 2d at 682.

Where “liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations.” Harvey, 259 So. 3d at 7 (quotation marks omitted). “In such a case, where the financial exposure to the insured is a ticking financial time bomb and suit can be filed at any time, any delay in making an offer … even where there was no assurance that the claim could be settled could be viewed by a fact finder as evidence of bad faith.” Id. (cleaned up).

“In Florida, the question of whether an insurer has acted in bad faith in handling claims against the insured is determined under the ‘totality of the circumstances’ standard.” Berges, 896 So. 2d at 680. Indeed “the critical inquiry” in a bad faith action is not whether an insurer met the obligations set out in Boston Old Colony but instead “whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment.” Harvey, 259 So. 3d at 7 (noting that the Boston Old Colony obligations “are not a mere checklist”).

The “focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling its obligations to the insured.” Berges, 896 So. 2d at 677. For that reason, a claimant’s “actions can[not] let the insurer off the hook when the evidence clearly establishes that the insurer acted in bad faith in handling the insured’s claim.” See Harvey, 259 So. 3d at 11 (emphasis added) (rejecting the “conclusion that where the [claimant]’s own actions[ ] even in part cause the judgment, the insurer cannot be found liable for bad faith”) (quotation marks omitted); id. (noting that “an insurer can[not] escape liability merely because the [claimant]’s actions could have contributed to the excess judgment”) (emphasis added and footnote omitted); id. at 12 (rejecting the idea that, “regardless of what evidence may be presented in support of the [claimant]’s bad faith claim,” the “insurer could be absolved of bad faith” if it “can put forth any evidence that the [claimant] acted imperfectly during the claims process,” which “would essentially create a contributory negligence defense for insurers” that is “inconsistent with [Florida’s] well-established bad faith jurisprudence”).

“[N]egligence is not the standard” for evaluating bad faith actions, Harvey, 259 So. 3d at 9, but “[b]ecause the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured, negligence is relevant to the question of good faith,” Boston Old Colony, 386 So. 2d at 785. And “[a]lthough bad faith is ordinarily a question for the jury, both this Court and Florida courts have granted summary judgment where there is no sufficient evidence from which any reasonable jury could have concluded that there was bad faith on the part of the insurer.” Eres, 998 F.3d at 1278 (cleaned up); see also State Farm Fire & Cas. Co. v. Zebrowski, 706 So. 2d 275, 277 (Fla. 1997) (concluding, in a statutory third-party bad faith action, that summary judgment was appropriate). “While an overbroad release can create a jury question about bad faith, it doesn’t necessarily do so.” Eres, 998 F.3d at 1279.

Palaez, supra, at *4-6.

DETERMINING OCCURRENCE FOR INJURY UNDER COMMERCIAL GENERAL LIABILITY POLICY WITHOUT APPLYING “TRIGGER THEORY”

Posted on June 26, 2021June 26, 2021 by Edward Garber

Oftentimes an occurrence in a commercial general liability policy is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” It is this occurrence that causes the bodily injury or property damage that may be covered by the policy.

An interesting non-construction case determined an occurrence under a commercial general liability policy occurred when the negligent act occurred irrespective of the date of discovery or the date the claim was discovered or asserted. See Certain Underwriters at Lloyd’s, London Subscribing to Policy No. J046137 v. Pierson, 46 Fla.L.Weekly D1288c (Fla. 4^thDCA 2021). This is interesting because the appellate court did NOT apply a “trigger theory” to first determine the occurrence’s policy period. The appellate court found it did not need to determine which “trigger theory” applied to determine the occurrence for the injury and relied on a cited case: “trigger theories are generally used in the context of deciding when damage occurred ‘in cases involving progressive damages, such as latent defects, toxic spills, and asbestosis’ because the time between the ‘injury-causing event (such as defective construction, a fuel leak, or exposure to asbestos), the injury itself, and the injury’s discovery or manifestation can be so far apart.” Pierson, supra, citing and quoting Spartan Petroleum Co. v. Federated Mut. Ins. Co., 162 F.3d 805, 808 (4^th Cir. 1998).

In Pierson, police officers were found civilly liable for civil rights violations that occurred twenty-years earlier when the officers physically and verbally forced a 15-year old boy to confess to a crime. Many years later, DNA evidence proved the boy did not commit the crime he was forced to confess and was incarcerated for. The officers sued the police department’s commercial general liability policy for failing to indemnify them in the civil lawsuit. The policy, however, was NOT in effect twenty years earlier when the officers verbally and physically forced the confession. “Since it is undisputed that the Officers’ misconduct occurred twenty years prior to the execution of the policies, there can be no duty to indemnify in this case…. [T]he fact that [the boy] suffered the consequences of the Officers’ wrongful conduct throughout his incarceration, including while the subject policies were in effect, is irrelevant for purposes of determining whether the Insurer has a duty to indemnify. Likewise, the fact that [the boy] was exonerated while the 2009 policy was in effect is of no consequence.” Pierson, supra.

What does this holding mean? It could likely mean outside of a latent defect scenario or a pollution liability issue–or property damage scenario–a “trigger theory” to determine when an occurrence occurred or is triggered is not applicable. An occurrence will be deemed to occur when the accident causing the injury occurred, as defined by the policy.

COURTS WILL NOT REWRITE YOUR POST-LOSS PROPERTY INSURANCE OBLIGATIONS

Posted on May 16, 2021May 16, 2021 by Edward Garber

In the preceding posting, I wrote about making sure you comply with your property insurance policy’s post-loss policy obligations. By failing to comply, you can render your policy ineffective meaning you are forfeiting otherwise valid insurance coverage, which was the situation discussed in the preceding posting. As an insured, you should never want this to occur!

In another case, discussed here, the property insurance policy had a preferred contractor endorsement. This means that instead of paying the insured insurance proceeds, the insurer could perform the repairs with its preferred contractor. Typically, the insured will pay a discount on their premium for this preferred contractor endorsement. The insurer elected to move forward with the repairs based on the preferred contractor endorsement but the insured performed the repairs on his own and then sold the house. By doing this, the appellate court held the insured rendered his policy ineffective by breaching his own policy (and failing to allow this post-loss obligation to take place). The explicit terms of the policy allowed the insurer to perform the repairs instead of paying the insured insurance proceeds. The court could NOT rewrite the post-loss obligations in the policy by requiring the insurer to pay insurance proceeds when the insurer, per the preferred contractor endorsement, elected to perform the repairs.

Your insurance policy is a contract and will be treated as a contract. Please make decisions with this in mind and consult counsel before taking positions that may be violative of your own contract and render your policy ineffective.

COMPLY WITH YOUR INSURANCE POLICY’S CONDITIONS PRECEDENT (POST-LOSS OBLIGATIONS)

Posted on May 15, 2021May 15, 2021 by Edward Garber

I am of the opinion that if your property insurer requests a sworn proof of loss, furnish one with the assistance of counsel (preferably). Ignoring the insurer’s request or refusing to comply with insurer’s request is NOT value-added; it is simply placing you at a disadvantage based on the insurer’s argument that you, as the insured, materially breached the policy. I generally find no value having to confront this expected argument. Instead, I find value making an effort to comply with post-loss obligations including the insurer’s request to submit a sworn proof of loss. Working with counsel can help you comply with post-loss obligations (conditions precedent) while not weakening the value or merits of your claim.

By way of example, in Edwards v. Safepoint Ins. Co., 46 Fla. L. Weekly D1086a (Fla. 4^th DCA 2021), the insured did not provide its property insurer with the requested sworn proof of loss. The insurer moved for summary judgment that the insured’s failure to submit the sworn proof of loss was a material breach of the policy that rendered the policy ineffective. The trial court agreed and granted summary judgment. The Fourth District Court of Appeal affirmed explaining “[a] total failure to comply with policy provisions made a prerequisite to suit under the policy may constitute a breach precluding recovery from the insurer as a matter of law. If, however, the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.” Edwards, supra, quoting Haiman v. Federal Ins. Co., 798 So.2d 811, 812 (Fla. 4^th DCA 2001).

In Edwards, however, it was undisputed the insured failed to submit the sworn proof of loss. Thus, there was a total failure to comply. More so, the Fourth District held that under Rodrigo v. State Farm Florida Ins. Co., 144 So.3d 690 (Fla. 4^th DCA 2014), “(1) an insurer need to show prejudice when the insured breaches a condition precedent to suit, (2) proof of loss is a condition precedent to the insured’s suit, and (3) the insurer did not waive the sworn proof of loss requirement by tendering payment because [i]nvestigating any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim does not constitute a waiver of a sworn proof of loss requirement.” Edwards, supra (internal quotations omitted).

Clearly, this is not the outcome that any insured wants. But this outcome was due to the insured not complying with its post-loss obligation, or condition precedent to suit, that was requested by the insurer. As you can see, not doing so was not value-added, it disadvantaged the insured to the point where its failure was deemed to render the policy ineffective to its detriment.

BLINDLY RELYING ON PUBLIC ADJUSTER OR LOSS CONSULTANT’S FALSE ESTIMATE CAN PLAY OUT BADLY

Posted on April 3, 2021April 3, 2021 by Edward Garber

Insurance policies, particularly property insurance policies, have a concealment or fraud provision that, in essence, gives the insurer an out if the insured submits a fraudulent claim, a false claim, or conceals material facts. Unlike a traditional fraud claim where a party needs to prove intent, the provision is broad enough that it does not require any intent behind making a false statement. See Mezadieu v. Safepoint Ins. Co., 46 Fla.L.Weekly D691c (Fla. 4^th DCA 2021). For this reason, and as exemplified below, do NOT blindly rely on a public adjuster or loss consultant’s estimate that contains false statements because those false statements, particularly if you know they are false, can play out badly for you! Review the estimate and ask questions about it to make sure you understand what is being included in the loss or damages estimate.

In Mezadieu, a homeowner submitted a claim to her property insurance carrier due to a second-floor water leak emanating from her bathroom. She submitted an estimate from her public adjuster that included damages for her kitchen cabinets directly below the second-floor bathroom, as well as other items on her first-floor. Her carrier denied coverage based on the exclusion that the policy excludes damage caused by “[c]onstant or repeated seepage of water or steam…which occurs over a period of time.”

The homeowner filed a lawsuit against her property insurance carrier. In interrogatory answers, she verified she was seeking the damages per the estimate prepared by her public adjuster. During her deposition, she reiterated this point. However, and this is a big however, she acknowledged that her public adjuster’s estimate contained false statements: “when asked if the reported leak caused damage to the kitchen cabinets, [she] disclosed that the cabinets had actually been damaged by a prior leak in the kitchen – a leak which [she] made a claim for with a different insurer – and the leak did not cause any damage to the kitchen cabinets.” Mezadieu, supra. Indeed, she conceded that her second-floor bathroom leak caused no damage to her kitchen and she did see any water damage on her first floor, although such damage was included in her public adjuster’s estimate.

The insurance carrier, after amending its affirmative defenses, moved for summary judgment based on the concealment or fraud provision which excluded coverage if an insured: “(1) Intentionally concealed or misrepresented any material fact or circumstance; (2) Engaged in fraudulent conduct; or (3) Made a false statement; relating to this insurance.” Mezadieu, supra.

The trial court granted summary judgment attributing the false statements to the homeowner “because she adopted the estimate as her own in both her sworn interrogatory answers and deposition testimony, and because [her adjuster] was acting as her agent.” Mezadieu, supra. The appellate court concurred because: (a) she adopted the estimate as her own statement; and (b) even if she did not intend to rely on false statements in her public adjuster’s estimate, the policy does not require that a false statement needs to be made with intent. As the appellate court explained, and reinforcing why reviewing and asking questions about any estimate is a must:

[An] insured cannot blindly rely on and adopt an estimate prepared by his or her loss consultant without consequence. This is not to say that an insured will always be bound by the representations made in an estimate prepared by his or her loss consultant. However, when an insured relied on or adopt an estimate containing material false statements to support his or her claim, the insured is bound by the estimate and cannot avoid application of the concealment or fraud simply because he or she did not prepare the estimate.

DO NOT FORFEIT COVERAGE UNDER YOUR PROPERTY INSURANCE POLICY

Posted on February 6, 2021February 6, 2021 by Edward Garber

If you have read prior articles (see here and here as an example), then you know that when it comes to first-party property insurance policies, an insured must comply with post-loss obligations in the policy. Failure to comply with a post-loss obligation gives the insurer the argument that the insured materially breached the policy and, therefore, forfeited rights to coverage. Naturally, this is avoidable by ensuring post-loss obligations are complied with, ideally under the guidance of counsel and qualified public adjusters to ensure your rights are being preserved and maximized.

[W]hen an insurer has alleged, as an affirmative defense to coverage, and thereafter has subsequently established, that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.

Universal Property & Casualty Ins. Co. v. Horne, 46 Fla.L.Weekly D201b (Fla. 3d DCA 2021) quoting American Integrity Ins. Co. v. Estrada, 276 So.3d 905, 916 (Fla. 3d DCA 2019).

This means when an insured fails to comply with a post-loss obligation (e.g., sworn statement in proof of loss, examination under oath), the property insurer will assert this failure as an affirmative defense. There is an “if-then” framework to determine whether there is “to be a total forfeiture of coverage under a homeowner’s insurance policy for failure to comply with post-loss obligations.” Horne, supra. First, the insurer has the burden to establish that its insured failed to substantially comply with a post-loss obligation in the policy. If the insurer establishes this, prejudice to the insurer is presumed. Then the burden shifts to the insured to demonstrate the breach (failure to comply with post-loss obligations) did NOT prejudice the insurer.

In Horne, the property insurer raised as an affirmative defense that its insured failed to timely comply with its post-loss obligation of submitting a sworn statement in proof of loss within 60 days. The insured argued, and the trial court agreed, that the insurer waived this argument by acknowledging coverage by tendering some payment to its insured for the loss. The appellate court held this was incorrect because “[i]nvestigatig any loss or claim under any policy or engaging in negotiations looking toward a possible settlement of any such loss or claim does not constitute a waiver of a ‘sworn proof of loss’ requirement.” Horne, supra (internal citations and quotation omitted). Without waiver applying, this means the insured’s failure to timely submit its sworn statement in proof of loss must fall within the “if-then” framework discussed above to determine prejudice to the insurer and, thus, total forfeiture under the policy.