AVOID THE HEADACHE – SUBMIT THE SWORN PROOF OF LOSS TO PROPERTY INSURER

Property insurance policies (first party insurance policies) contain post-loss obligations that an insured must (and should) comply with otherwise they risk forfeiting insurance coverage.   One post-loss obligation is the insurer’s right to request the insured to submit a sworn proof of loss.  Not complying with a post-loss obligation such as submitting a sworn proof of loss can lead to unnecessary headaches for the insured.  Most of the times the headache can be avoided.  Even with a sworn proof of loss, there is a way to disclaim the finality of damages and amounts included by couching information as estimates or by affirming that the final and complete loss is still unknown while you work with an adjuster to quantify the loss.  The point is, ignoring the obligation altogether will result in a headache that you will have to deal with down the road because the property insurer will use it against you and is a headache that is easily avoidable.  And, it will result in an added burden to you, as the insured, to demonstrate the failure to comply did not actually cause any prejudice to the insurer.

By way of example, in Prem v. Universal Property & Casualty Ins. Co., 45 Fla. L. Weekly D2044a (Fla. 3d DCA 2020), the insured notified their property insurer of a plumbing leak in the bathroom.  The insurer requested for the insured to submit a sworn proof of loss per the terms of the insured’s property insurance policy. The insurer follow-up with its request for a sworn proof of loss on a few occasions. None was provided and the insured filed a lawsuit without ever furnishing a sworn proof of loss.  The insurer moved for summary judgment due the insured’s failure to comply with the post-loss obligations, specifically by not submitting a sworn proof of loss, and the trial court granted the insurer’s motion.  Even at the time of the summary judgment hearing, the insured still did not submit a sworn proof of loss.

On appeal, the appellate court affirmed that the insured failed to comply with its post-loss obligation by not submitting a sworn proof of loss.  That decision seemed easy.  However, it remanded back to the trial court to determine whether the insurer was prejudiced by the insured’s failure to comply with the post-loss obligation in accordance with case law putting a burden on an insured to establish the insurer was not prejudiced by the failure to comply:

By failing to submit a sworn proof of loss to [the property insurer], the Insureds deprived [the property insurer] of the “opportunity to make a timely investigation, and to prevent fraud and imposition upon it.”  Not only did the Insureds fail to provide the information required under the policy, but they also objected to [the property insurer] obtaining information from their public adjuster via subpoena and failed to coordinate any depositions prior to the filing of and hearing on the motion for summary judgment.

As a result of the Insureds’ failure to submit a sworn proof of loss at any point in time prior to the trial court’s entry of summary judgment, the trial court correctly found, based on this record, that the Insureds materially breached a post-loss contractual condition precedent to the commencement of a lawsuit against [the property insurer]. We affirm the trial court’s finding on the Insureds’ lack of compliance with their post-loss obligations because the Insureds failed to provide [the property insurer] with a sworn proof of loss prior to filing suit and failed to provide any evidence sufficient for a jury to find that they had substantially complied with that requirement.

A panel of this Court recently held, “when 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, 276 So. 3d at 916 (certifying conflict with Rodrigo v. State Farm Fla. Ins. Co., 144 So. 3d 690 (Fla. 4th DCA 2014) and Goldman v. State, 660 So. 2d 300 (Fla. 4th DCA 1995)). We are bound by that decision.

At the time the trial court heard and ruled on [the property insurer’s] motion for summary judgment, this Court had not issued its opinion in Estrada. The record on appeal, therefore, does not contain any discussion of the shifting burden of proof and whether [the property insurer] was prejudiced by the Insureds’ failure to submit any sworn proof of loss.

Lacking the subsequently provided analysis in Estrada, the trial court cannot be faulted for ending its analysis at summary judgment as to whether the insured complied or substantially complied with the post-loss obligations. Under Estrada — applicable to this appeal, which was pending at the time of Estrada‘s release — trial courts are required to analyze whether the insurer was prejudiced by the insured’s failure to comply prior to determining that the insured forfeited coverage by the breach. Thus, we reverse and remand to permit the parties to make supplemental filings and for the trial court to consider and analyze the question of prejudice, as set forth in Estrada.

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.

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

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 coverageSee 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 factSee 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.

 

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.

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

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.

 

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.

 

 

PROPERTY INSURER INVOKING APPRAISAL UNDER PROPERTY INSURANCE POLICY

shutterstock_398442106Property insurance policies routinely contain an appraisal provision.   The provision may read something to the effect:

 

 

 

If you and we fail to agree on the amount of loss, either may request an appraisal of the loss. However, both parties must agree to the appraisal. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. . . . If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of the loss.

 

Safepoint Insur. Co. v. Gomez, 44 Fla.L.Weekly D239b (Fla. 3d DCA 2019).

 

In Safepoint, the Third District Court of Appeal maintained if the property insurer invokes appraisal, it waives the right to subsequently demand compliance with post-loss conditions in the policy as a condition precedent to that appraisal.  (“‘Appraisal exists for a limited purpose – the determination of the amount of loss.’” By invoking appraisal pursuant to the terms of the insurance policy, Safepoint [insurer] waived the requirement of compliance with post-loss obligations as a condition precedent to that appraisal.”)  Safepoint, supra (internal citation omitted). 

 

In Safepoint, the insured (policyholder) submitted a property insurance claim.  The insurer sent payment for the covered loss, but the amount of payment was disputed.  As a result, the insurer invoked the appraisal process in the property insurance policy, and the insured agreed.  As the appraisal process was underway and an umpire selected, the insurer sent a letter to the insured demanding a sworn statement in proof of loss, examinations under oath, and additional documentation—post-loss requirements of the insured in the insurance policy.  The insured did not comply and the insurer used this non-compliance as an excuse to deny the claim.  This prompted the insured to file a breach of contract lawsuit against the insurer and move to compel the insurer to complete the appraisal process that it invoked. The trial court agreed, as affirmed by the Third District.  The insurer could not refuse to complete the appraisal process that it invoked by thereafter requiring the insured to comply with post-loss conditions in the policy.

 

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.