60-DAY CLOCK FOR STATUTORY BAD FAITH “CURE PERIOD” STARTS WHEN CIVIL REMEDY NOTICE ELECTRONICALLY FILED

Posted on October 24, 2019April 24, 2020 by Edward Garber

The Second District Court of Appeal in Harper v. Geico General Insurance Company, 44 Fla.L.Weekly D618c (Fla. 2d DCA 2019) explained that the 60-day clock for a statutory bad faith cure period stars when the civil remedy notice is electronically filed with Florida’s Department of Financial Services:

Subsection 624.155(3)(d) plainly states that no action shall lie if the damages are paid or corrective action is taken within sixty days after the insured files the CRN [Civil Remedy Notice}. Under current procedures, an insured files a CRN with the Department electronically. See Fla. Admin. Code R. 69J-123.002(1). And while the Department also requires the insured to print a copy of the completed CRN from the Department’s website and send it to the insurer, the Department nevertheless considers the form to be “filed” when the insured clicks the “submit” button at the end of the electronic form. See Civil Remedy Notice of Insurer Violations FAQ, https://apps.fldfs.com/CivilRemedy/Help.aspx (follow “Continue” hyperlink; then follow “How do I file a Civil Remedy Notice?” hyperlink) (last visited Dec. 20, 2018). At that time, the CRN is assigned a “filing number” and any changes must be made by clicking on “edit filing.” Hence, the requirements of section 624.155(3)(d) are met when the insured electronically files the CRN with the Department, and that action starts the sixty-day cure period for the insurer.² Therefore, we hold that the sixty-day cure period under section 624.155 begins when the CRN is electronically filed with the Department, and to avoid a bad faith action, the insurer must pay the claim or take corrective action within sixty days from the date the CRN is electronically filed.
Harper, supra.

This is important because the insurer must fail to cure within this 60-day cure period to trigger the statutory requirements of a statutory bad faith claim. If the insurer fails to cure within this 60-day cure period, the insured has preserved an argument for a statutory bad faith claim. See Harper, supra (“Therefore, because GEICO did not pay Harper’s claim within sixty days of the date the CRN was electronically filed with the Department, it did not pay the claim within the sixty-day cure period, and Harper was entitled to pursue her action for GEICO’s alleged bad faith.”).

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.

CLAIMS MADE INSURANCE POLICIES

Posted on August 11, 2019August 11, 2019 by Edward Garber

“Claims-made policies are common in the professional liability insurance market. They “differ from traditional ‘occurrence’-based policies primarily based upon the scope of the risk against which they insure.” With claims-made policies, coverage is provided only where the act giving rise to coverage “is discovered and brought to the attention of the insurance company during the period of the policy.” In contrast, coverage is provided under an occurrence-based policy if the act giving rise to coverage “occurred during the period of the policy, regardless of the date a claim is actually made against the insured.” “The essence, then, of a claims-made policy is notice to the carrier within the policy period.”

Crowely Maritime Corp. v. National Union Fire Ins. Co. of Pittsburgh, PA, 2019 WL 3294003 (11^thCir. 2019)

The recent Eleventh Circuit Court of Appeal opinion in Crowely Maritime Corp. discussed the distinction between a claims-made insurance policy and an occurrence-based insurance policy. Professional liability policies are generally claims-made policies whereas commercial general liability policies are generally occurrence-based policies. While this opinion does not involve a construction matter, the case did concern the definition of a “claim” in a claims-made policy and whether such claim was timely reported to the insurer within the discovery period / extended reporting period.

The discovery period in a claims-made policy should coincide with an extended reporting period to report a claim, based on how the specific policy defines a claim. How a policy defines a claim is very important since policies contain different definitions. The discovery period will include language that allows the insured to report a claim that occurred DURING the policy period outside of the policy period within the extended period. The key is that even with a discovery period, the wrongful act giving rise to the claim must still have occurred during the initial policy period, although it can be reported to the insurer after the initial policy period and within the extended discovery period. If the wrongful act giving rise to the claim occurred AFTER the initial policy period, it will not matter if it was reported within the extended discovery period because the claim, itself, arose outside of the initial policy period.

Insurance is complicated and confusing and everything in between. Make sure you understand how your policy defines the term claim, whether you are operating under a claims-made or occurrence-based policy, and what constitutes timely notification of a claim, particularly if you are operating under a claims-made policy.

Consequential Damages can be Recovered Against Insurer in Breach of Contract

Posted on July 5, 2019August 8, 2019 by Edward Garber

In a favorable case for insureds, the Fifth District Court of Appeal maintained that “when an insurer breaches an insurance contract, the insured is entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy in consequential damages, provided the damages were in contemplation of the parties at the inception of the [insurance] contract.” Manor House, LLC v. Citizens Property Insurance Corp., 44 Fla. L. Weekly D1403b (Fla. 5thDCA 2019) (internal citations and quotation omitted). Thus, consequential damages can be recovered against an insurer in a breach of contract action (e.g., breach of the insurance policy) if the damages can be proven and were in contemplation of the parties at the inception of the insurance contract.

In Manor House, the trial court entered summary judgment against the insured holding the insured could not seek lost rental income in its breach of contract action against Citizens Property Insurance because the property insurance policy did not provide coverage for lost rent. However, the Fifth District reversed this ruling because the trial court denied the insured the opportunity to prove whether the parties contemplated that the insured, an apartment complex owner, would suffer lost rental income (consequential damages) if the insurer breached its contractual duties.

This ruling is valuable to insureds because Citizens Property Insurance, a creature of statute, cannot be sued for first-party bad faith. However, the Fifth District found that the consequential damages in the form of lost rental income did not require the insured to prove the insurer acted in bad faith, but merely, breached the terms of the policy. This holding can be extended to other breach of contract actions against an insurer when the insured suffered and can prove consequential-type damages caused by the breach.

INTERPRETING THE LANGUAGE IN AN INSURANCE POLICY

Posted on July 4, 2019April 23, 2020 by Edward Garber

Lawsuits by an insured against an insurer that include a claim for declaratory relief are common when an insurer denies coverage. The insured will argue that there are ambiguities in the policy. One argument may pertain to the use or definition of a term (or language) in the policy that is not defined in the policy. Another argument may pertain to an exclusion or limitation in the policy that ultimately renders insurance coverage illusory.

[I]n construing insurance policies, courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect. When the language of an insurance policy is clear and unambiguous, a court must interpret it according to its plain meaning, giving effect to the policy as it was written. A policy term is not ambiguous simply because it is complex or requires analysis.

Arguelles v. Citizens Property Insurance Corp., 44 Fla. L. Weekly D1726a (Fla. 3d DCA 2019) (internal quotations and citations omitted).

When a term in an insurance policy is not defined in the policy (and there is an argument that there is an ambiguity), a court may look to dictionary definitions. Id. (looking to dictionary definition of the term “reside” which was not a defined term in the policy). This is because a dictionary definition contains a common acceptance of the meaning of the word. Id.

If a limitation or exclusion completely swallows up an insuring provision, then there is an argument that coverage is illusory. Id. citing Warwick Corp. v. Turetsky, 227 So.3d 621, 625 (Fla. 4^thDCA 2017). “When limitations or exclusions [in the policy] completely contradict the insuring provisions, insurance coverage becomes illusory.” Purrelli v. State Farm Fire and Cas. Co., 698 So.2d 618 (Fla. 2d DCA 1997).

It is important to work with counsel when dealing with an insurance coverage dispute. Counsel will help you maximize insurance coverage based on the facts and the law.

DID THE INSURED FORFEIT PROPERTY INSURANCE COVERAGE BY FAILING TO COMPLY WITH POST-LOSS POLICY OBLIGATIONS?

Posted on June 30, 2019April 23, 2020 by Edward Garber

Have you complied with your property insurance policy’s post-loss policy obligations? Has your property insurer argued that your failure to comply with post-loss policy obligations has resulted in you forfeiting insurance coverage? Have you filed a lawsuit against your property insurer for coverage and the property insurer has asserted affirmative defenses based on your material breach of the policy by failing to comply with post-loss policy obligations?

These are common questions when an insured submits a claim under a property insurance policy. Knowing how to address these questions (and a property insurer’s coverage defenses relating to these questions) is important when pursuing a property insurance claim.

The Third District Court of Appeal in American Integrity Insurance Company v. Estrada, 44 Fla. L. Weekly D1639a (Fla. 3d DCA 2019), does a good job addressing these questions in a property insurance coverage dispute involving vandalism. The property insurer in this case raised various forfeiture of coverage affirmative defenses relating to its insured’s failure to comply with post-loss policy conditions, e.g., (i) failure to appear for an examination under oath, (ii) failure to promptly notify the insurer of the vandalism (the loss), (iii) failure to submit a sworn proof of loos, (iv) failure to provide all requested records, and (v) failure to protect the property from further damage by making repairs. These are fairly routine affirmative defenses raised by a property insurer. The procedural argument in this case is not relevant; what is relevant is the Court’s discussion of an insurer’s affirmative defenses based on its insured’s failure to comply with post-loss policy obligations.

As shown below, an insured’s breach of a post-loss policy obligation MUST be material and MUST prejudice the insurer. An insured’s material breach of a post-loss obligation will result in a presumption of prejudice to the insurer, however, an insured can REBUT the presumption by showing the insurer was not prejudiced, which is a question of fact for the trier of fact.

1. Breach of Post-Loss Obligations Must be “Material”

The Third District explained:

Florida law “abhors” forfeiture of insurance coverage. See Axis Surplus Ins. Co. v. Caribbean Beach Club Ass’n, Inc., 164 So. 3d 684, 687 (Fla. 2d DCA 2014). “Moreover, ‘[p]olicy provisions that tend to limit or avoid liability are interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy . . . .’ ” Bethel v. Sec. Nat’l Ins. Co., 949 So. 2d 219, 223 (Fla. 3d DCA 2006) (quoting Flores v. Allstate Ins. Co., 819 So. 2d 740, 744 (Fla. 2002)).

With these basic principles in mind, it is, unsurprisingly, well settled that, for there to be a total forfeiture of coverage under a homeowner’s insurance policy for failure to comply with post-loss obligations (i.e., conditions precedent to suit), the insured’s breach must be material. See Drummond, 970 So. 2d at 460 (concluding that the insured’s failure to comply with a post-loss obligation “was a material breach of a condition precedent to [the insurer’s] duty to provide coverage under the policy”) (emphasis added); Starling, 956 So. 2d at 513 (“[A] material breach of an insured’s duty to comply with a policy’s condition precedent relieves the insurer of its obligations under the contract.”) (emphasis added); Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300, 303 (Fla. 4th DCA 1995) (“An insured’s refusal to comply with a demand for an examination under oath is a willful and material breach of an insurance contract which precludes the insured from recovery under the policy.”) (emphasis added); Stringer v. Fireman’s Fund Ins. Co., 622 So. 2d 145, 146 (Fla. 3d DCA 1993) (“[T]he failure to submit to an examination under oath is a material breach of the policy which will relieve the insurer of its liability to pay.” (quoting 13A Couch on Insurance 2d (Rev. 3d) § 49A:361 at 760 (1982) (footnote omitted) (emphasis added))).

Further, while the interpretation of the terms of an insurance contract normally presents an issue of law, the question of whether certain actions constitute compliance with the contract often presents an issue of fact. See State Farm Fla. Ins. Co. v. Figueroa, 218 So. 3d 886, 888 (Fla. 4th DCA 2017) (“Whether an insured substantially complied with policy obligations is a question of fact.”) (emphasis added); Solano v. State Farm Fla. Ins. Co., 155 So. 3d 367, 371 (Fla. 4th DCA 2014) (“A question of fact remains as to whether there was sufficient compliance with the cooperation provisions of the policy to provide State Farm with adequate information to settle the loss claims or go to an appraisal, thus precluding a forfeiture of benefits owed to the insureds.”) (emphasis added).

Estrada, supra.

2. If the Breach was Material, was the Property Insurer “Prejudiced”

Although there is a split between Florida’s Fourth and Fifth District Courts of Appeal on this prejudicial element (the Fourth District has taken a more pro-insurer friendly approach), the Third District agreed with the Fifth District’s more insured-friendly approach that “the insurer must be prejudiced by the insured’s non-compliance with a post-loss obligation in order for the insured to forfeit coverage.”

3. Party Bearing Burden to Establish Property Insurer was “Prejudiced”

The Third District held that while prejudice to an insurer will be presumed when an insured materially fails to comply with a post-loss policy obligation, the insured can rebut this presumption by showing the insurer was not prejudiced:

[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.

Estrada, supra.

CONSEQUENTIAL DAMAGES CAN BE RECOVERED AGAINST INSURER IN BREACH OF CONTRACT

Posted on June 1, 2019April 24, 2020 by Edward Garber

In a favorable case for insureds, the Fifth District Court of Appeal maintained that “when an insurer breaches an insurance contract, the insured is entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy in consequential damages, provided the damages were in contemplation of the parties at the inception of the [insurance] contract.” Manor House, LLC v. Citizens Property Insurance Corp., 44 Fla. L. Weekly D1403b (Fla. 5^thDCA 2019) (internal citations and quotation omitted). Thus, consequential damages can be recovered against an insurer in a breach of contract action (e.g., breach of the insurance policy) if the damages can be proven and were in contemplation of the parties at the inception of the insurance contract.

QUICK NOTE: THIRD-PARTY CAN BRING COMMON LAW BAD FAITH CLAIM

Posted on May 18, 2019April 24, 2020 by Edward Garber

A third-party claimant may bring a common law bad faith claim against a defendant’s liability insurer. Mccullough v. Royal Caribbean Cruises, 2019 WL 2076192, *2 (S.D.Fla. 2019). “A bad faith claim may be brought by a third party absent an assignment from the [defendant] insured.” Id. This can only be done in the third-party bad faith context with the argument that the insurer’s “bad faith” conduct resulted in a judgment against the defendant-insured in excess of the policy limits. However, in any third-party bad faith claim (and, really, bad faith claim in general), coverage must first be determined under the policy. Mccullough, supra. (“An injured third party must therefore first obtain a resolution of some kind in favor of the insured’ on the coverage issue” before pursuing his bad faith against the insurer.”) (internal quotations omitted).

INSURER’S CONFESSION OF JUDGMENT THROUGH POST-LAWSUIT PAYMENT

Posted on May 11, 2019April 24, 2020 by Edward Garber

The recent opinion in the property insurance coverage dispute, Bryant v. Geovera Specialty Ins. Co., 44 Fla.L.Weekly D1232a (Fla. 4^thDCA 2019), discusses the doctrine known as an insurer’s “confession of judgment.” In this case, an insured suffered water damage from a pipe leak. The insurer paid the insured $6,000 because of sublimits in the property insurance policy. There was a $5,000 sublimit for mold and a $1,000 sublimit for water leakage that occurs over a period of 14 days or more. The insured sued the insurer for covered water damage arguing that the sublimits did not apply.

After the lawsuit was filed, an agreed order was entered that stayed the case pending an appraisal. The appraisal award did not apply the $1,000 sublimit to the water damage from the pipe leak and segregated out damage for mold. (The insurer already paid the mold sublimit). The insurer ended up paying the appraisal award for the water damage caused by the pipe leak after deducting its pre-lawsuit sublimit payment. The insurer paid the award and did NOT challenge the application of the $1,000 sublimit in court, although it could have since coverage issues are decided by courts.

An issue became whether the insurer’s post-lawsuit payment of the appraisal award above the $1,000 sublimit constituted an insurer’s confession of judgment.

“[I]t is well settled that the payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constitutes the functional equivalent of a confession of judgment.” Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla. 2016). The confession-of-judgment doctrine “applies where the insurer has denied benefits the insured was entitled to, forcing the insured to file suit, resulting in the insurer’s change of heart and payment before judgment.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007).

The confession-of-judgment doctrine is limited to situations where the filing of the lawsuit “acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.” See, e.g., State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932, 935 (Fla. 4th DCA 2016). However, “[i]t is the incorrect denial of benefits, not the presence of some sinister concept of ‘wrongfulness,’ that generates the basic entitlement to the fees if such denial is incorrect.” Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). Thus, “an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient” to constitute a confession of judgment and to allow the insured to recover attorney’s fees.

An attorney’s fees award is also appropriate “where, following some dispute as to the amount owed by the insurer, the insured files suit and, thereafter, the insurer invokes its right to an appraisal and, as a consequence of the appraisal, the insured recovers substantial additional sums.” Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009).

Even after Johnson, not all post-suit payments by an insurer will constitute a confession of judgment. We recently held that where an insurer valued a loss, issued payment, and was unaware of the insured’s disagreement with the damage valuation until the filing of the complaint, the insurer’s timely payment of an appraisal award during the litigation did not constitute a confession that the insurer breached the insurance policy. See Goldman v. United Servs. Auto. Ass’n, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018).

Bryant, supra.

Here, the appellate court held the insurer’s payment of the post-lawsuit appraisal award constituted a confession of judgment that it incorrectly denied benefits by invoking the $1,000 leakage sublimit. Once the insurer invoked the sublimits, it raised a coverage issue that only a court could decide and [t]his coverage issue went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy’s appraisal provision before filing suit.” Bryant, supra. (“Under Johnson, “[o]nce an insurer has incorrectly denied benefits and the policyholder files an action in dispute of that denial, the insurer cannot then abandon its position without repercussion.” Here, the insurer’s payment of the appraisal award…demonstrated that GeoVera [insurer] had abandoned its pre-suit coverage position that the claim was subject to the $1,000 sublimit for long-term water leakage.”) (internal citation omitted)

LIABILITY INSURER’S DUTY TO DEFEND INSURED IS BROADER THAN ITS DUTY TO INDEMNIFY

Posted on May 3, 2019April 24, 2020 by Edward Garber

When it comes to liability insurance, an insurer’s duty to defend its insured from a third-party claim is much broader than its duty to indemnify. This broad duty to defend an insured is very important and, as an insured, you need to know this. “A liability insurer’s obligation, with respect to its duty to defend, is not determined by the insured’s actual liability but rather by whether the alleged basis of the action against the insurer falls within the policy’s coverage.” Advanced Systems, Inc. v. Gotham Ins. Co., 44 Fla. L. Weekly D996b (Fla. 3d DCA 2019) (internal quotation omitted). This means:

Even where the complaint alleges facts partially within and partially outside the coverage of a policy, the insurer is nonetheless obligated to defend the entire suit, even if the facts later demonstrate that no coverage actually exists. And, the insurer must defend even if the allegations in the complaint are factually incorrect or meritless. As such, an insurer is obligated to defend a claim even if it is uncertain whether coverage exists under the policy. Furthermore, once a court finds that there is a duty to defend, the duty will continue even though it is ultimately determined that the alleged cause of action is groundless and no liability is found within the policy provisions defining coverage.

Advanced Systems, supra(internal citations and quotations omitted).

In Advanced Systems, an insurer refused to defend its insured, a fire protection subcontractor. The subcontractor had been third-partied into a construction defect lawsuit because the foam fire suppression system it installed had a failure resulting in the premature discharge of foam. The owner sued the general contractor and the general contractor third-partied in the subcontractor. However, the subcontractor’s CGL carrier refused its duty to defend the subcontractor from the third-party complaint because of the pollution exclusion in the CGL policy. In other words, the insurer claimed that the foam the subcontractor installed constituted a pollutant within the meaning of the exclusion and, therefore, resulted in no coverage and, thus, no duty to defend the insured in the action.

To determine the foam was a “pollutant”–which the policy defined as any “solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste”—the insurer relied on extrinsic evidence, specifically the Material Safety Data Sheet (MSDS Sheet) for the foam. The insured objected to the insurer’s reliance on extrinsic evidence since it was beyond the scope of the insurer’s duty to defend which should be based on the allegations in the underlying complaint. (The insurer tried to support its reliance on extrinsic evidence under a very limited exception that supports the reliance on extrinsic facts to form the refusal to defend when the extrinsic facts are uncontroverted and manifestly obvious, not normally alleged in the complaint, and that place the claim outside of coverage. However, this is a very narrow exception that the court was not going to apply here.)

It is important to consult with counsel if you have an issue with your insurer refusing to defend you in an underlying action and/or your insurer denies coverage.

INSURED UNDER PROPERTY INSURANCE POLICY SHOULD COMPLY WITH POST-LOSS POLICY CONDITIONS

Posted on April 29, 2019April 24, 2020 by Edward Garber

Your property insurance policy will contain post-loss policy conditions. Examples include submitting a sworn statement in proof of loss, providing documentation to your insurer, and sitting for an examination under oath. Insurers will require you, as the insured, to comply with post-loss policy conditions unless they elect to promptly deny coverage. If you do not comply with such post-loss policy conditions you can forfeit coverage under the policy and/or give the insurer the argument that any lawsuit you filed against the property insurer is premature. Thus, there really is no upside in refusing to comply with the post-loss policy conditions, which should be done in consult with an attorney or, as the case may be, a public adjuster.

For instance, in Safepoint Ins. Co. v. Sousa, 44 Fla. L. Weekly D994a (Fla. 3d DCA 2019), an insured submitted a property insurance claim for hurricane damage. The insurer requested the insured submit a sworn statement in proof of loss and provide documentation. The insured never did although she did submit for an examination under oath. The insurer ended up tendering insurance proceeds based on its adjustment of the claim. Thereafter, the insured sued its insurer and moved to compel an appraisal per the terms of the property insurance policy. In doing so, the insured provided an adjustment / estimate from her public adjuster that was approximately $100,000 more than the proceeds the insured received (which had never been provided to the insurer). The insurer opposed the motion based on the insured’s failure to comply with post-loss policy conditions (i.e., submitting the sworn statement in proof of loss and documentation). The appellate court agreed that the insured’s failure to comply with these post-loss policy conditions clearly spelled out in the property insurance policy rendered it PREMATURE for the insured to compel an appraisal.