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Insurance Claims: Coverage Defense Waived by the Insurance Company because they Waited too Long to Assert it

Fire DamageA Florida appellate court recently concluded an Insurance Company’s coverage defense had been waived because the insurance company waited too long to assert them.

Axis Surplus Insurance Company vs. Caribbean Beach Club Association, Inc., 2014 WL 2900930, (2nd DCA 2014), involved a fire loss.  In April of 2003, a fire swept through the time share condominium in Ft. Myers Beach causing extensive damage to the property.  The insured had purchased an insurance policy that included coverage for fire damage.  The insured had also purchased Law and Ordinance coverage for an additional premium.

The insured made a claim for fire damage.  Both the insurance company and the insured knew that Lee County might enforce the “50% rule” contained in its ordinances. The 50% rule mandates that if a building is more than 50% damaged, any reconstruction or repair must comply with current building codes. If Lee County enforced the 50% rule, the insured would have to raise the entire building to meet existing flood elevation requirements.

Both the insurance company and the insured cooperated in a common goal of repairing, not replacing, the damaged building; they tried to convince Lee County not to enforce the 50% rule. Unfortunately, in November 2004, some nineteen months after the fire, Lee County informed both the insurance company and the insured that it would enforce the 50% rule. Therefore, the insured would be required to replace its building to satisfy current flood elevation codes.

After receipt of this news, the insured continued to cooperate with the insurance company.  But things changed some 19 months later when the insurance company, for the first time, informed the insured that it would rely on the two year clause in the Law and Ordinance Coverage endorsement to deny payment for the increased construction cost because the replacement was not completed.  Except for the general, non-specific, reservation of rights letter, the insurance company had never raised the two year clause previously with its insured.

Litigation between the insurance company and the insured followed.  The trial court granted summary judgment in the insured’s favor, and an appeal followed.  On appeal, the appellate court sided with the insured.  In so doing, the appellate court reasoned that the insurance company waited too long to assert the coverage defense.

The Appellate court concluded that the insurance company’s conduct had in fact waived the coverage defense it attempted to assert later.  It noted that that if an insurance company intends to rely on a reservation of rights, that it should specifically inform the insured of all the valid coverage defenses as soon as practicable.  In this instance, the insurance company simply waited too long.  In this case, the insurance company’s failure to bring the coverage defense to the insured’s attention, even though the insured expected the entire claim to be paid and the insurance company continued to adjust the entire claim after the two-year expiration, were unequivocal acts inconsistent with invoking the forfeiture. In other words, when an insurance company acquiesces to an insured’s failure to strictly adhere to a timetable of payment or performance, courts are inhospitable to the insurer’s sudden invocation of strict enforcement of forfeiture provisions.

Who Determines if the Examination Under Oath was Meaningful?

examination under oathExaminations Under Oath are an important part of an insurance company’s investigation of an insurance claim.  We have previously discussed the importance of EUO’s and how they impact your insurance claim.  But who determines  if the examination under oath (EUO) was meaningful?

We have previously discussed the importance of not only fully cooperating with an insurance company’s investigation of the claim, but to ensure that you attend an EUO when requested to do so.  Indeed, failure to sit for an EUO may result in the denial of the insurance claim.  On the other hand, however, EUO’s do have their limits.  They are not open ended expeditions for an insurance company to inquire on topics that go beyond the insurance claim at issue.

But what happens when an insured sits for an EUO and the information provided is less than “perfect.”  Is an “inadequate” EUO grounds for an insurance company to deny the claim?

That was the issue the issue the Fourth District Court of Appeal was confronted with him in Solano v. State Farm, 2014 WL 1908827 (4th DCA 2014).  In Solano, State Farm was initially presented with a Hurricane Wilma claim.  State Farm initially agreed to pay Solano for the damage.  After the initial payment was made by State Farm, Solano requested that the claim be re-opened in order to seek greater compensation.

Once the claim was re-opened, State Farm requested that Solano appear for an EUO.  Solano appeared for the EUO, and answered questions.  However, his wife failed to appear for an EUO.  State Farm requested that Solano’s public adjuster also appear for an EUO, but the public adjuster took the position that State Farm could not compel him to appear for an EUO.

Solano eventually filed a lawsuit against State Farm.  At the trial level, the trial judge granted summary judgment in State Farm’s favor on grounds that the Solano’s wife and public adjuster’s failure to appear for the EUO barred the claim.  On appeal, however, the Fourth District Court of Appeal reversed.

The appellate court noted that there was not a total failure to comply with the EUO request made by State Farm.  Indeed, Solano had appeared and answered questions during his EUO.  The appellate court also noted that State Farm could not demonstrate that it could compel the public adjuster to appear for an EUO.  Moreover, the appellate court also noted that while the public adjuster could not be compelled to the EUO, the public adjuster had nonetheless provided documentation to State Farm and even met with State Farm, at the property, to discuss the claim.  The appellate court noted that State Farm should have had enough information to either settle this claim with Solano or go to appraisal.

Is There Insurance Coverage for a Damaged Boat?

boatingPleasure boating is a popular pastime in South Florida.  But with boating comes problems.  One problem associated with boating is the unpredictable nature of damage to the boat.  As such, we are often asked whether or not there is insurance coverage for a damaged boat. 

When your boat is damaged, and you are unable to determine the cause, an insurance company may deny the claim.  A recent case decided by the United States Court of Appeals for the Eleventh Circuit helps us understand why insurance companies deny such claims, and also illustrates why that denial is wrong.

That claim came about when the insureds determined that the boat’s engine was beyond repair.  The insured’s 85 foot Broward Motor Yacht, the “Alica,” was powered by two turbo charged Detroit Diesel 12v71 engines.  While traveling back to Miami, from the Bahamas, black smoke was seen coming from the engines.

Upon safely arriving at Miami, the insured conducted an investigation of the engines.  The insured was unable to determine what was wrong with the engines, nor was he able to determine the exact nature of the loss.  He was also unable to repair the engine.  As a result, the insured reported the claim to its insurance company.

The insured had an all-risk policy which means that coverage is provided against all risks except fraudulent acts of the insured.  Under that policy, it was the insured’s burden to show that the loss arose from a covered peril.

The insurance company investigated the claim and determined that that the loss was due to wear and tear, which was not covered under the policy. They therefore denied the claim.

After the claim was denied, the insureds then had their expert inspect the vessel to determine the cause of the loss after they received the denial by the insurance company. The insureds were able to determine that the damage was caused by a relief valve in the oil system that was fixed in the open position that eventually caused the starboard engine’s failure.

A lawsuit was then filed in the United States District Court for the Southern District of Florida.  The trial court initially ruled in favor of the insurance company, and the insured appealed that adverse ruling to the 11th Circuit Court of Appeal.  On Appeal, the appellate court reversed and sided with the insured.

On appeal, the Appellate Court had to determine whether the Trial Court correctly interpreted the insurance policy to exclude coverage. They also had to determine whether the insureds met their burden of establishing an accidental and fortuitous loss under the all-risk marine insurance policy.

The Appellate Court noted that all the insured had to do was demonstrate that the loss was fortuitous.  On the other hand, they did not have to explain the precise cause of the loss.

The Appellate Court here reasoned that the insureds had satisfied their burden.  As a result, the insured should not have been made to prove the cause of the actual engine failure.  However, the court noted that the fact that the insured was able to prove the cause of the actual engine failure – something they did not have to do – further supported the conclusion that was an accidental and fortuitous loss.

The Court determined that the insureds had a light burden in this case and that making the insureds prove more than what was required seemed contrary to having an all-risk insurance policy.

Given the facts of this case, the Appellate Court concluded that the case should proceed at the trial level and that at the trial level the burden shifted to the insurance company to prove the applicability of one or more of the insurance policy’s exclusions.

Why Won’t Your Insurance Company Pay You If Your Boat Sank?

Sunken BoatYour boat sank.  You timely paid all of your insurance premiums.  Yet the insurance company does not want to pay you for your loss.  The question becomes, why won’t your insurance pay you if your boat sank?

It should come as no surprise, but insurance companies will argue that that the claim is either not covered or excluded based on the wording of the subject insurance policy.  Therefore, if your boat has sunk, and you are in doubt regarding the scope of your insurance coverage, then you should contact our office today to discuss your claim.

It is not uncommon for an insurance company to argue that the loss was not covered because an “accidental physical loss” had not occurred.  The basic requirement that there be some evidence of an “accident” in order for coverage to exist under a policy of marine insurance, termed the “fortuity rule,” is a basic and well established principle of federal maritime law.

In Great Lakes Reinsurance v. Soveral, 2007 A.M.C. 672 (S.D. Fla. 2007) the boat sank at its mooring located at the insured’s weekend home in the Bahamas.  The boat had been left uncovered by the insured so that rainwater accumulated and eventually sank the vessel when the batteries that powered the bilge pumps gave out.  Given those facts, the court concluded that the water entering an uncovered vessel during rainy season was not fortuitous that would call for the existence of insurance coverage.  The court reasoned that since nothing of an accidental nature had occurred that there could be no insurance coverage.

Moreover, a warranty of seaworthiness by the owner of the boat is implied in every policy of insurance insuring a boat.  A breach of this duty will result in the denial of liability for loss or damage caused by the proximity of such unseaworthiness.  So when a boat sinks, for instance, at its mooring in calm waters, a presumption often arises that the vessel was unseaworthy.  That unseaworthiness will often lead to a denial of the claim.

Then there are other provisions in the insurance policy that an insurance company will look to in order to attempt to deny the claim.  Some of the most common exclusions include exclusions for wear and tear or gradual deterioration and lack of maintenance.  In short, if you fail to take good care of your boat then the insurance company may use that lack of care to deny your claim.

Will your insurance company pay you if your boat sinks?

Boat insurance is like all insurance – you don’t need it until you need it.

But when you do need it, you expect the claim to be handled in good faith and a fair amount paid.  Which begs the question – will your insurance company pay you if your boat sinks?

The first place to look when answering that question is at your insurance policy.  Please do not hesitate to contact our office should you wish to review your insurance coverage, or if an insurance company is giving you a hard time with your sunken boat insurance claim.

Now is the time to review your boat insurance.  If you do that today you may be surprised to learn how little your boat insurance actually covers.

The reason for that is unlike other forms of insurance, boat insurance policies range from very little coverage to too much coverage.  And the price swings are often just as dramatic.

Therefore, it is critical to understand the full scope of your boat insurance and understand what coverage you have available should your boat sink.

Consequential Damage:   After hurricane damage, the top boat related claim is for sinking.  Typically, most sinking occurs at the dock when some part on the boat below the water line fails.   But the insurance company will often deem that the part that failed that caused the sinking failed because of wear and tear.  So if an insurance company concludes that the loss was as a result of normal wear and tear, then the insurance company will not pay for the loss.  And that means that the insurance company won’t pay for the consequential damage for the rest of the boat sitting at ocean’s bottom unless you have purchased “consequential damage” coverage that covers losses that often start with a failed part.

Fuel Spill Liability: In the event your boat sinks you will likely be responsible for paying for the fuel spill clean up.  Therefore, be sure to ensure that your policy pays for the full cost of fuel spill liability and provides coverage up to the maximum amount you can be held responsible for under the law for the cost of the fuel clean up.  Don’t assume that this cost is included in your coverage.

Salvage: You should check your policy to ensure that your policy provides distinct salvage coverage up to the insured value of the boat.  You should also include that your coverage also provides coverage to fix your boat or replace equipment.  The reason these two distinct coverages are important is because in the event of a hurricane it is common that boats get scattered around South Florida.  They will then need to be salvaged and safely brought back to the storage area.  Therefore, don’t be surprised and learn after the fact that your insurance subtracts the amount paid to salvage the boat from the amount you get paid to fix the boat.  Make sure you have the separate and distinct coverage so that you can be afforded the most financial protection.

Court Rules that Homeowner’s Insurance Claim is Not Time Barred

In Linares v. Universal, the Third District Court of Appeal again had to decide whether or not a homeowner’s claim against an insurance company for property damage was time barred.

In this case, the insurance company sought to defend the claim on technicalities.  It argued that the homeowner’s claim failed because the lawsuit was not filed within Florida’s five year statute of limitations.  The trial court agreed, and an appeal ensued.

On appeal, the appellate court reversed the trial court’s ruling.

Specifically, the homeowner had sustained damage to his property following Hurricane Wilma in 2005.  After that the homeowner then submitted a claim to his insurance company seeking payment for his damages.  The insurance company wrote a letter in Feb. of 2006 saying the value of the homeowner’s claim fell within his deductible.  However, the insurance company did not deny the claim.  Rather, the insurance company requested that the homeowner provide the insurance company with more information should the homeowner come up with more information to support his claim.

Some three years later, the homeowner provided the insurance company with a report of a private adjuster estimating the damages to exceed the policy deductible by tenfold.  The insurance company then sought to take the homeowner’s examination under oath and secure a sworn proof of loss from the homeowner.  The homeowner complied.  After that the insurance company denied the claim in August of 2012.  In July of 2012, the homeowner filed suit.

The insurance company fought the claim by arguing that the homeowner’s claim was time barred in that the lawsuit was not filed timely.  The appellate court disagreed and noted that the statute of limitations does not start to run until the last element constituting the cause of action occurs.  This typically occurs at the time the insurance contract is breached.  The appellate court reasoned that the insurance contract was breached at the time the insurance company sent its denial letter in August of 2012.

The appellate court also noted that  Florida’s legislature amended the statute of limitations for property insurance claims in 2011 by specifying that such actions begin to run from the date of loss.  However, that amendment does not apply retroactively and did not apply to this case.

Please feel free to contact us to discuss your property damage claim.

Are you ready for the 2014 hurricane season?

hurricaneAre you ready for the 2014 hurricane season?  If you have not already prepared, the time is now to prepare for hurricane season.  While the experts are predicting a below average hurricane season, it only takes one storm to cause chaos.  Remember that Hurricane Andrew was the first named storm of the 1992 hurricane season.  And if you were around in Miami in 1992, well then you just don’t need any reminding of the damage a hurricane can cause.  On the other end spectrum, we are reminded that even late in the year storms can cause extensive damage.  Hurricane Wilma in 2005 caused extensive damage right here in South Florida.

Advanced preparation is critical because right before a storm hits, supermarkets and home improvement stores are jam-packed with last minute shoppers.

Waiting until the last minute on important supplies is especially dangerous because items fly off the shelves and you risk being left without necessary supplies. It also important to stock enough supplies to last you through a storm and beyond.

The National Hurricane Center recommends including these items in your hurricane survival kit:

• Water – at least 1 gallon daily per person for 3 to 7 days

• Food – at least enough for 3 to 7 days

• Car chargers and back up car batteries

• Non-perishable packaged or canned food / juices

• Foods for infants or the elderly

• Snack foods

• Non-electric can opener

• Cooking tools / fuel

• Paper plates / plastic utensils

• Blankets / Pillows, etc.

• Clothing – seasonal / rain gear/ sturdy shoes

• First Aid Kit / Medicines / Prescription Drugs

• Special Items – for babies and the elderly

• Toiletries / Hygiene items / Moisture wipes

• Flashlight / Batteries

• Radio – Battery operated and NOAA weather radio

• Telephones – Fully charged cell phone with extra battery and a traditional (not cordless) telephone set

• Cash (with some small bills) and Credit Cards – Banks and ATMs may not be available for extended periods

• Keys

• Gas for your car

• Toys, Books and Games

• Important documents – in a waterproof container or watertight resealable plastic bag

insurance, medical records, bank account numbers, Social Security card, etc.

• Tools – keep a set with you during the storm

• Vehicle fuel tanks filled

• Pet care items

• Proper identification / immunization records / medications

• Ample supply of food and water.

Predicting the 2014 Hurricane Season

Predicting the 2014 Hurricane Season.

The 2013 hurricane season went down in the record books as one of the tamest on record.  Recall that 2013 was supposed to be a very busy season especially in light of the fact that 2012, 2011 and 2010 produced at least 19 named storms each season.  Yet 2013 only produced only two hurricanes.                                                                                                                 Hurricane2014Forecast

If the predictions hold, then 2014 promises to be just as uneventful as 2013.  The experts predict 2014 to be comprised of 9 named storms, three hurricanes and one major hurricane.

It is never to early to start planning for hurricane season.

2014 Hurricane Season

Insurance Coverage Disputes – Appellate Court Rules That Fluids Excreted From a Dead Body Are Not Covered By Insurance

We as lawyers are often see the same type of case over and over again.  But every now and again a strange case leaps off the pages of the law books containing some obscure or bizarre facts.

A case decided by Florida’s Fourth District Court of Appeal is such a case.  In that case, the appellate court was left with the daunting task of deciding an insurance coverage dispute as to whether or not a claimant was entitled to damages caused by the fluids excreted by her neighbor’s dead body.  The appellate court concluded that such a claim was not covered.

The facts of this case are unusual.  A condo owner felt she was entitled to relief as a result of the damages caused by her neighbor’s dead body. The decomposing dead body leaked body fluids that caused damage to the aggrieved condo owner.  The decomposed body leaked bodily fluids, which infiltrated the walls and the apartment causing damage.

That condo owner was then presented with the difficult task of convincing the courts that a dead and decomposing body, which leaks bodily fluids, is considered an explosion under a home insurance policy.

Both the county courts judge and the state’s Fourth District Court of Appeal ruled in favor of the insurance company.

The condo owner tried to claim that the damages caused by the decomposed body constituted an explosion, because an affidavit from a doctor said that the internal contents of the neighbor’s body explosively expanded and leaked. The courts found that this did not fall under the term explosion, although State Farm’s policy does not specifically define the term explosion. The courts decided to define the term explosion as a plain and unambiguous meaning, which could be understood by the ordinary person. They explained that the meaning of explosion “does not include a decomposing body’s cells explosively expanding, causing leakage of bodily fluids.

The insurance company originally offered the condo owner a settlement, which was rejected because the owner felt that it lacked the sufficient amount of money necessary to properly compensate her for her damages. The owner wanted the initial appraisal invalidated and a neutral party to do a second appraisal. Although the owner did suffer losses to her condo, the courts did not see it fit to grant her relief because the decomposing of a body which leaks bodily fluids will not be interpreted as an explosion in the eyes of the courts. Rather, the appellate court reasoned that home insurance policies inclusion of coverage for explosions relates only to the plain meaning of the term explosion.

How Much Time Do You Have to File an Insurance Claim

How much time do you have to file an insurance claim?  In Florida, all claims are governed by the applicable statute of limitations as well as applicable provisions contained within the insurance policy.  Generally, speaking one has five (5) years from the date of incident to file a breach of contract claim.

Whether or not a lawsuit was filed on time was the issue the Third District Court of Appeal needed to decide recently.

The Third District Court of Appeal overturned a lower court decision, which found that Angela M. Rizo’s insurance claim was time barred due to the statute of limitations.

In October of 2005 Rizo incurred damages to the home due to Hurricane Wilma. The insurance company made payments in January and April of 2006 as a result of the Hurricane Wilma damage. In October of 2010 Rizo submitted an additional claim to State Farm, which had not been adjusted or paid. That claim was not paid and Rizo filed her lawsuit against State Farm in July of 2011.

In defense of these claims State Farm asserted that the five-year limitations had passed and that the lawsuit should be barred.  State Farm argued that the five year statute of limitations on breach of contract claims began to run no later than the last payment (April 2006) and as such the July 2011 was barred. Rizo, however, did not allege any breach of contract until 2010.

State Farm relied on the fact that they insured’s last payment was in April of 2006, which the court found to be correct, although it did not qualify that payment as the last and final payment.

The payment made during April of 2006 was instead considered to be evidence of performance under the insurance policy, which did not constitute a breach. This was because the checks that were sent during this time were not marked with the phrase “full and final payment.”

Due to this there was no breach in the contract and her claim in January of 2011 was still considered to be timely. As a result, the Florida’s Third District Court of Appeal reversed the judgment and remanded for further proceedings.

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