Florida Insurance Law Blog : Florida Insurance Lawyer & Attorney : Mark Nation Law Firm : Orlando, Longwood, Gainesville

On May 28, 2009, I blogged on Diaz-Hernandez v. State Farm Casualty Insurance Company, ____ So.3d ____, (May 27, 2009), wherein the 3rd DCA held that:

the provision in the UM policy, requiring the Insured to join the uninsured motorist in the lawsuit filed against the UM carrier, State Farm, is against public policy, we reverse the order dismissing the Insured's second amended complaint with prejudice, and remand for further proceedings.

State Farm moved for rehearing, and on October 14, 2009, the 3rd denied the rehearing

on the basis of the rule, well-stated by the panel, that a policy provision cannot lawfully restrict the rights of a UM insured beyond those specifically provided by statue.

In its ruling, the Court relied on the Supreme Courts ruling in Metropolitan Casualty Insurance Co. v. Tepper, 2 So.3d 209 (Fla. 2009) (which I blogged on February 24, 2009).  The Court further noted that the 11th Circuit's ruling in Bodden v. State Farm Mutual Automobile Insurance Co., 195 F. App'x 858 (11th Cir. 2006) upholding the validity of this very same clause, "could not survive the majority decision in Tepper.

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In State Farm Florida Insurance Company v. Seville Place Condominium Association, Inc., ____ So.3d ____ (Fla. 3rd DCA October 14, 2009) a group of condos was damaged by Hurricane Wilma.  Seville submitted the claim to State Farm.  Seville presented an estimate of damage in excess of $4.6 million.  State Farm initially paid a total of $90,564.62 on the claim.  Thereafter, Seville requested appraisal, which State Farm agreed to if Seville would agree to two conditions: 1) that the appraisal award "must be a line item document, broken down by building and unit number, including the pricing that establishes the award of that item;" and 2) that the insured provided State Farm with a proof of loss form. 

In response, Seville filed suit in Circuit Court for breach of the insurance contract, and declaratory relief regarding coverage and State Farm's waiver of policy defenses.  Seville also requested that the court enforce the appraisal provision without State Farm's required conditions. 

The Court ordered the appraisal without State Farm's conditions.  The Court further ordered that the appraisal be completed in 60 days.  State Farm later moved for an additional 60 days.  The Court granted the extra time, and set a final appraisal hearing for June 28, 2008.  The day before that hearing, State Farm filed an emergency motion seeking removal of the neutral umpire previously appointed by the Court.  State Farm later supplemented this motion with a "request for an 'entirely new panel to conduct a new appraisal,' asserting that otherwise it would "require many weeks, months, and possibly even years to sort through the multiple issues related only to this highly problematic and invalid appraisal gone wrong.'"  State Farm's motion was denied.   

Seville's appraiser and the umpire ultimately agreed on a final appraisal award of $2,960,405.  The trial court confirmed the award, and Seville moved to amend its complaint to add claims for bad faith and punitive damages.  State Farm objected, claiming that Seville could not add bad faith an punitive damage claims until there was a "final judgment" and until all of State Farm's appeals were "finally final."  The Court granted the insured's motion to amend.  State Farm sought cert from the 3rd DCA.

The 3rd totally rejected all of State Farm's arguments holding that the final appraisal award was sufficient basis for the commencement of a bad faith claim, and that there is no requirement for an insured to wait until the exhaustion of all appeals before commencing the bad faith and punitive damages claim.  In conclusion, the 3rd stated:

State Farm originally estimated the Association's covered loss at $324,017.  This is less than eleven percent of the amount determined by the appraisal process.  State Farm will have an opportunity to explain this fact, to explain the extraordinary length of time it has taken to resolve the Association's claim, and to defend State Farm's aggressive legal tactics (including the unfounded imposition of conditions on the contractually-stipulated appraisal provision and the last-minute attempt to remove the neutral umpire).  For now, however, we find no basis in this record to quash the orders below as requested by State Farm. 

Ouch. 

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On Monday, we received Summary Judgment in our client's favor in a federal court ERISA life insurance case against Sun Life Assurance Company of Canada. The Plaintiff was the son of the decedent. The decedent was a nurse employed by a local nursing home. She ceased working in February 2007 as a result of some health problems. While out of work, her employer changed life insurance carriers for its employees.  Shortly after the changeover our client's mother died. 

The life insurance claim was submitted to Sun Life - the employer's new insurance company - which denied the claim.  Sun Life argued that the employer, to whom the policy was issued, failed to list Plaintiff’s mother as a disabled employee, and that she was still entitled to life insurance from the previous insurance company at the time of her death.  However, the Sun Life policy included a provision relating to “continuity of coverage.”  This provision provides that an individual will be covered, under the new policy, if the employee had been covered under the prior life insurance company and was not actively at work at the time the change in carriers took place.

We filed suit in the United States District Court for the Middle District of Florida.  The parties agreed that the claim was governed by ERISA, and thereafter, the parties filed cross motions for summary judgment.  Sun Life’s motion was denied, Plaintiff’s motion was granted.  Plaintiff’s son was awarded full life insurance benefits. The issue of our attorneys fees and costs remains pending before the court. 

A copy of the Court's ruling can be downloaded here. 

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In the first half of 2009, insured property losses from natural disasters topped $11 Billion.  Of those losses, thunderstorms led the way by causing more than $6 Billion in insured property losses in the first half of 2009.  Interestingly, while thunderstorms generate a wide variety of types of losses -  from wind to water - losses due to lightning are continuing to rapidly increase.  According to the Insurance Information Institute, in 2008, lightning losses exceeded $1 Billion for the first time.  "The reason for this, we believe is the fact that homes are absolutely loaded with electronics today.  That part of the loss, particularly with homeowners but also businesses, is growing very, very rapidly." 

The Insurance Information Institute also noted that

The industry remains well capitalized despite the financial crisis, despite the recession, and despite last year's catastrophe losses.  In other words, it's a very resilient industry that is designed to withstand major catastrophes and market crashes simultaneously.  Insurance markets continue to operate normally, and the industry's promise to pay remains intact.

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In Liebel v. Nationwide Insurance Company of Florida, ____ So.3d ____ (Fla. 4th DCA October 7, 2009), the homeowner had a leaky plumbing system which led to subsidence under the home, which in turn led to damage to the home itself.  Nationwide refused to pay for the damage to the home under an exclusion for losses caused by natural and unnatural earth movement.  Nationwide also refused to pay to tear out and replace the leaky plumbing system.

The 4th DCA agreed that the damage to the home was excluded under the earth movement exclusion.  The court reasoned that the earth movement in this case was due to an unnatural cause - the leaky plumbing - and was therefore excluded. 

The Court next dealt with whether Nationwide was required to pay to tear out and replace the plumbing system.  The exclusion dealing with this aspect of the case provided that the Nationwide Policy covers water losses which are due to wear and tear, or deterioration unless "otherwise excluded."  In a subsequent sentence, the exclusion goes on to state that: "We also cover the cost of tearing out and replacing any part of a building necessary to repair the system or appliance." 

Initially, the Court noted that that water loss in this case was "otherwise excluded" under the earth movement exclusion.  But, the held that:

In the instant case, the trial court erred by not holding that the Policy covered the cost of repairing the plumbing system.  This is because the Policy, by providing that it does not cover damage caused by water from a plumbing system that is otherwise excluded, but then stating that it covers the cost of repairing a system that caused water damage, has created an ambiguity, as two or more reasonable interpretations of these two intersecting provision are feasible.  Specifically, one may interpret the 'otherwise excluded' language to preclude coverage for all damages caused by a matter otherwise excluded, including the cost of tearing out and replacing any part of Liebel's home necessary to repair the ruptured water line.  In contrast, a reasonable person could interpret the Policy to exclude from coverage the damage caused by earth movement, but include the cost of repairing the water line that caused the loss, as it is a plumbing system that caused water damage due to its deterioration from wear and tear.  As such there is an ambiguity....  [W]e hold that the cost of repairing the water line was covered by the Policy and reverse the trial court's order to the extent that it held to the contrary. 

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In Phoenix Insurance Co v. Trans World Forwarding, Inc., ____ So.3d ____ (Fla. 3rd DCA September 23, 2009), the insured filed a first-party breach of contract case against its insurer.  As part of that case, the insured sought discovery directed to the "insurer's business practices and alleged statutory bad faith."  The trial court ordered the production, and the insurer sought certiorari review. 

The 3rd DCA held that the discovery requests which were not geared toward "claim, the circumstances of alleged loss, and the policies at issue," were "premature 'unless there has been a determination of liability and extent of damages owed the insured under the first-party insurance policy.'"  quoting, Government Employees Ins. Co. v. Rodriquez, 960 So.2d 794, 795 (Fla. 3d DCA 2007).  

However, the 3rd DCA did reiterate that that while the insurer need not produce materials that were privileged, it "must, however, prepare and serve a privilege log to preserve any such claims."  The Court then advised the trial court that on remand the trial court "shall consider the items sought to be discovered and shall enter an order permitting, and prohibiting discovery in accordance with this opinion."

Thus, the 3rd DCA confirmed the process that must be followed in all cases where the insured requests information that the insurer claims to be privileged.  In those circumstances, the insurer must prepare and serve a privilege log describing the materials it claims are privileged.  The insured can then review the privilege log and then ask the trial court to perform an in camera inspection of any materials which the insured believes may fall outside the privilege.  The insurer cannot simply refuse to turn over the documents, and also refuse to provide a privilege log; likewise, the trial court cannot simply order that the documents be turned over without performing an in camera inspection of materials which the insurer feels are privileged.  If the trial court orders production of materials which the insurer still believes to be privileged, the court must then give the insurer time to seek certiorari review of the order compelling production. 

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In Florida Insurance Guaranty Association, Inc. v. Castilla, ____ So.3d. ____, (Fla. 4th DCA September 30, 2009), the insureds submitted a Hurricane Wilma claim to their homeowners insurer.  The insurer paid a portion of the claim, and refused to pay any more.  The insurer then went into liquidation at which point the claim was taken over by FIGA.  

The insureds then submitted the claim to FIGA.  (This was smart because the only way to obtain attorneys fees from FIGA is if FIGA denies a claim through "affirmative action."  See, Fla. Stat. 631.70)  FIGA then refused to pay the claim. 

The insureds filed suit, and in its response FIGA asked for appraisal.  FIGA also requested that the court dismiss/abate the lawsuit and compel appraisal.  The 4th DCA opinion characterized the insured's position as asserting that FIGA waived its right to appraisal by "denying their claim without reserving any rights under the insurance policy."    

The trial court denied the request for appraisal, and the circuit court sitting in its appellate capacity affirmed.  The 4th DCA granted certiorari and reversed, stating: 

FIGA never acted inconsistently with its right to an appraisal, having raised that right at the earliest opportunity in this suit and continued to claim it through its subsequent pleadings.  Asserting that the insured meet all other conditions precedent to claiming a loss is not inconsistent with demanding an appraisal.  Claiming that the loss is not covered is also not inconsistent with a demand for appraisal.

From the opinion, it is unclear if FIGA simply refused to pay more money on a covered claim - thus bringing about a dispute as the amount of the loss; or if FIGA denied coverage for the claim.  Appraisal is appropriate where there is a dispute as to the "amount" of a claim, but is generally not appropriate where there is a denial of coverage. 

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