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

In a unanimous decision, the Mississippi Supreme Court has explained how the anti-concurring cause clause (ACCC) in the standard homeowners insurance policy should be interpreted.  Although this decision was from Mississippi, it will prove to be informative in Florida as there is very little Florida law on this important issue.  I've previously blogged extensively on the ACCC in Florida and the related topic of efficient proximate case.  That blog can be accessed by clicking here.  (A word of warning...whenever I write on the ACCC, by necessity, it is long and tedious.  Sorry). 

In Corban v. USAA, the Corban's home was damaged by wind and flood during Hurricane Katrina.  The Corbans had previously purchased a flood policy and a homeowners policy from USAA.  The homeowners policy contained an exclusion for flood and an ACCC which purported to exclude coverage for covered losses that "combine" with excluded losses to bring about the loss. 

During the adjustment of the claim, USAA concluded that a majority of the damage was caused by flood, and that much of the remaining damage was caused by a combination of flood and wind.  USAA did make payments for wind damage to the roof.  USAA denied the remainder of the dwelling claim under the ACCC provision of the homeowners policy.  Experts employed by the Corbans opined that the home was destroyed by wind before the storm surge arrived. 

The trial court found that the homeowners policy barred "coverage for any damage caused by water as defined in the policy or caused concurrently or sequentially by wind and water in combination."

 On interlocutory appeal, the Mississippi Supreme Court undertook to answer three questions:

1.  Whether the circuit court erred in finding that 'storm surge' is included in the 'water damage' exclusion.

2.  Whether the circuit court erred in finding that the ACC clause is applicable in the case sub judice.

3.  Which party bears the burden of proof. 

Initially, the Court ruled that

'storm surge' is contained unambiguously within the 'water damage' exclusion.  This Court finds that 'storm surge' is plainly encompassed within the 'flood' or 'overflow of a body of water' portions of the 'water damage' definition, and no other 'logical interpretation' exists.

With regard to the second question, the Court first noted that

No reasonable person can seriously dispute that if a loss occurs, caused by either a covered period (wind) or an excluded peril (water), that particular loss is not changed by any subsequent cause or event.  Nor can the loss be excluded after it has been suffered, as the right to be indemnified for a loss caused by a covered peril attaches at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured.  An insurer cannot avoid its obligation to indemnify the insured based upon an event which occurs subsequent to the covered loss.  The insured's right to be indemnified for a covered loss vests at time of loss.  Once the duty to indemnify arises, it cannot be extinguished by a successive cause or event....  The same principle applies in reverse. In the case of a loss caused by an excluded peril, that particular loss is not changed by any subsequent covered peril or event.  Nor can that excluded loss become a covered loss, after it has been suffered. 

Next, and still with regard to the second issue, the Court analyzed the "concurrent" and "in any sequence" language of the ACCC.  With regard to "concurrent" causes, the Court held that in order for the exclusion to apply, covered and excluded events must "act in conjunction, as an indivisible force, occurring at the same time, to cause direct physical damage resulting in loss."  The Court then noted that "[b]ased on the record as it now stands, and as presented by both parties, the subject perils acted in sequence, not concurrently, i.e., at different times, causing different damage, resulting in separate losses.

The Court then held that the "in any sequence" language of the ACCC was ambiguous when read in conjunction with other portions of the policy, and held that this language

applies only if and when covered and excluded perils contemporaneously converge, operating in conjunction, to cause damage resulting in loss to the insured property.  If the insured property is separately damaged by a covered or excluded peril, the ACC clause is inapplicable.  If damage is caused by a covered peril, the insured is entitled to indemnification for the covered loss, as the insured's right to recover for the loss has vested.  Conversely, if the damage is caused by an excluded peril, the insured is not entitled to indemnification for that uncovered loss. 

 The Court then noted that

[b]ased on the evidence thus far presented, the same loss with multiple causes is not at issue here.  Thus, a finder of fact must determine what losses, if any, were caused by wind, and what losses, if any, were caused by flood.  If the property suffered damage from wind, and separately was damaged by flood, the insured is entitled to be compensated for those losses caused by wind.  Any loss caused by '[flood] damage' is excluded.  If the property first suffers damage from wind, resulting in loss, whether additional '[flood] damage' occurs is of no consequence, as the insured has suffered a compensable wind-damage loss.  Conversely, if the property first suffers damage from flood, resulting in a loss, and then wind damage occurs, the insured can only recover for losses attributable to wind.

The Court then stated

We conclude the ACC clause has no application for losses caused by wind peril.  An insurer may not abrogate its duty to indemnify for such loss by the occurrence of a subsequent, excluded cause or event....

                                                             *  *  *

After a thorough examination of Mississippi case law, the evidence presented to date in this case, the briefs of the parties and amici, and the USAA policy at issue, this Court declares the ACC clause inapplicable.  We respectfully reject the proposition that, under the subject ACC clause, 'indivisible damage caused by both excluded perils and covered perils or other causes is not covered.'

The Court next turned its attention to the all-important issue of burden of proof.  The Court held:

This Court finds that with respect to the 'all-risk' coverage of 'Coverage A - Dwelling' and 'Coverage B - Other Structures,' the Corbans are required to prove a 'direct, physical loss to property described.'  Thereafter, USAA assumes the burden to prove, by a preponderance of the evidence, that the causes of the losses are excluded by the policy, in this case, '[flood] damage.'  USAA is obliged to indemnify the Corbans for all losses under 'Coverage A - Dwelling' and 'Coverage B - Other Structures' which USAA cannot establish, by a preponderance of the evidence, to have been caused or concurrently contributed to by '[flood] damage.'  'Contributed to' comes into play only when '[flood] damage' is a cause or event contributing concurrently to the loss.  Pursuant to the policy language, only if proof of a 'concurrent' cause is presented to a jury for consideration would the jury receive an instruction including the policy phrase 'contributing concurrently.'  Likewise, striking the proper balance, under 'Coverage C - Personal Property,' discussed in PP 52-53 infra, the plaintiff must prove that the loss was caused by a peril insured against, not 'caused or contributed to."  Upon proper instruction, these determinations are for a jury. 

A copy of the Corban decision can be downloaded by clicking here.

You can access and view the actual Mississippi Supreme Court Oral argument by clicking here.

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Today, in Massie v. Progressive Express Insurance Company, ____ So.3d ____ (Fla. 1st DCA November 17, 2009), the Circuit Court sitting in its appellate capacity reversed the trial judge's order awarding a multiplier.  The Circuit Court reversed because the insured did not testify that she had difficulty securing counsel to represent her in the cause without a multiplier.   

The 1st DCA reversed and reinstated the multiplier.  The Court held that

expert testimony that a party would have difficulty securing counsel without the opportunity for a multiplier supposts a multiplier's imposition.  Here, Petitioner presented such testimony, and the Circuit Court departed from the essential requirements of law by failing to apply a principle of law previously enunciated by this Court rather than that of our sister Fifth Disctrict Court of Appeal. 

The 5th DCA decision which the Court was referring to is Progressive Express Insurance Co. v. Schultz, 948 So.2d 1027 (Fla. 5th DCA 2007).  I was actually the fee expert in Schultz and have been regretting this holding for about 2 years now.  Hopefully, now that there is conflict between Schultz and Massie the Supreme Court will rule on this issue. 

A copy of the Massie decision can be downloaded by clicking here.

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In United Automobile Insurance Co. v. Garrido, a/a/o Rodriguez, ____ So.3d ____ (Fla. 3d DCA October 28, 2009), the 3rd once spoke on the circumstances under which a PIP insurer can withdraw future PIP benefits.  According to the 3rd,

a 'valid report,' even where appropriately required under section 627.736(7)(a) [i.e. when withdrawing future benefits - as opposed to denying past bills], need not be predicated on either a physical examination conducted by the reporting physician or on a physical examination conducted on behalf of the insurance company. 

The Court also confirmed once again, that a "valid report" is only necessary when a PIP insurer is withdrawing future PIP benefits, and is not needed where the PIP insurer is denying past bills.

[I]n cases such as this, where no payments have been made resulting in a total rejection of a provider's bills, section 627.736(4) of the Florida Statutes applies.  This provision permits an insurer to deny a PIP claim at any time, either before or after that claim becomes 'overdue [because not paid within thirty days]' provided is has 'reasonable proof' that it is not responsible for payment.  And, while such proof may come in the form of a report described in section 627.736(7)(a), such a report is not necessary to deny a claim under section 627.736(4)(b). 

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In United Automobile Insurance Company v. Garrido, a/a/o Alarcon, ____ So.3d ____ (Fla. 3rd DCA October 28, 2009), United Auto - a PIP insurer - denied payment for past services rendered by Dr. Garrido to the insured.  United Auto did not first obtain a written report from a physician saying that the denied charges were not reasonable, necessary or related to the crash. 

The 3rd held:

In United Automobile Insurance Co. v. Millennium Diagnostic Imaging Center, Inc., 12 So.3d 242, 246-47 (Fla. 3d DCA 2009), we held that an insurer may at any time challenge whether treatment is RRN, and is permitted to rely on a report obtained pursuant to section 627.736(7)(a) even when the report is obtained more than thirty days after the claim was submitted.  Building on this conclusion, we explained in United Automobile Insurance Co. v. Santa Fe Medical Center, No. 3D08-547, 2009 WL 3188957 (Fla. 3d DCA October 7, 2009), that an insurer's obligation, pursuant to section 627.736(7)(a), to first obtain a medical report, applied only to withdrawal - as opposed to denial - of payment to a treating physician.  Here, United denied payment.  Accordingly, the 'first obtained' language of section 627.736(7)(a) is not controlling and the court erred in finding otherwise.

What does it all mean...For a PIP insurer to deny past bills, it can obtain a report/expert/opinion that the bills are not RRN at any time - presumably up until the insured files for summary judgment at which time the PIP insurer probably needs to come up with some evidence.  For a PIP insurer to withdraw future treatment, the insurer must first obtain a written report from a physician pursuant to 627.736(7)(a).  (Does that report need to based on a physical examination performed by the insurance company physician?  Stay tuned, I'm blogging on that in exactly 1 minute). 

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In Progressive Express Insurance Company v. Hartley, ____ So.3d ____ (Fla. 5th DCA October 30, 2009), Progressive provided Hartley with PIP insurance.  Hartley was injured in an accident and sought treatment from Michael C. Durant, D.C.  Upon seeking treatment from Dr. Durant, Hartley executed an assignment of benefits to "Atlantic Coast Chiropractic Clinic." 

From 1993 - 1998, "Atlantic Coast Chiropractic Clinic" was a registered fictitious name for Durant Chiropractic Clinic, Inc.  However, in 1998, that corporation failed to renew the fictitious name as required under section 865.09(6)(a), Florida Statutes (1998).  Dr. Durant's clinic continued to operate under both the name Durant Chiropractic Clinic and Atlantic Coast Chiropractic Clinic.  Dr. Durant submitted claims to Progressive under the name Durant Chiropractic Clinic.  Progressive paid some bills and denied others. 

In November 2003, Dr. Durant executed a reassignment of benefits back to Hartley, and Hartley filed suit against Progressive for the unpaid bills.  Progressive moved for summary judgment asserting that Hartley lacked standing to bring the action.  The trial court granted Progressive summary judgment, and the circuit court reversed, finding that the initial purported assignment of Hartley to "Atlantic Coast Chiropractic Clinic" was invalid because the entity did not exist in 2003 or thereafter.  Accordingly, Hartley had retained the right to bring the suit. 

In its Petition for Cert. to the 5th DCA, Progressive argued that under section 865.09(9)(b), the initial assignment was valid.  That section provides that the failure of a business to comply with the fictitious name registration does not impair the validity of any contract of such business.  However, according to the 5th,

While that section may have supported Progressive's argument if the initial assignment was to Durant Chiropractic Clinic, Inc., d/b/a Atlantic Coast Chiropractic Clinic (notwithstanding a failure to comply with the fictitious name registration statute), it provides no relief to Progressive in the instant case.  The fact remains that the assignment was made to a non-existent entity.  Furthermore, if we were to accept Progressive's argument, no party could bring an action against Progressive for the alleged unpaid PIP benefits.

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In State Farm Florida Insurance Company v. Nichols, ____ So.3d ____ (Fla. 5th DCA November 6, 2009), the insured homeowners submitted a claim to State Farm for sinkhole damage.  The amount of the loss was settled by appraisal.  Although the appraisal awarded an amount for subsurface sinkhole repairs, State Farm refused to pay for the subsurface repairs until after its insureds' entered into contracts for the performance of the repairs. 

State Farm based its position on Florida Statute Section 627.707(5)(b) which states:

The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs.

The homeowners argued that, notwithstanding the 627.707(5)(b), State Farm's policy itself required State Farm to pay the full amount of the appraisal award within 60 days after the amount of the loss was settled by the appraisal. 

State Farm's policy stated:

 SECTION I - CONDITIONS. . . .

10. Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable:

a. 20 days after we receive your proof of loss and reach agreement with you; or

b. 60 days after we receive your proof of loss and:

(1) there is an entry of a final judgment; or

(2) there is a filing of an appraisal award with us.

The 5th DCA agreed with the homeowners.  According to the Court, the language of the statute is

permissive, not mandatory.  Because it is permissive, the policy language that requires payment of subsurface repairs within sixty days after the appraisal award is not in conflict with the statute and is binding on the parties to the insurance contract. 

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On Tuesday my client was granted summary judgment against Nationwide on the issue of coverage.  I originally blogged on this case on February 16, 2009, when we filed suit. 

Our client maintains and services sewage lift stations. He purchased a "Contractor's Liability Insurance Policy" from Nationwide Insurance in order to protect himself against claims arising out of his business operations.  Nationwide clearly knew that its insured maintained and serviced sewage lift stations, as that information was set forth in the application and the premiums were based on the proposed insured’s SIC designation as a lift station maintenance company.  Nationwide wrote the policy and charged a rather high premium for the liability insurance.  According to Nationwide's underwriting documents, the liability premium was calculated based on the fact that my client was involved in the business of "septic tank installation, repair and maintenance."  Nationwide offers this type of "Contractor's Liability" policy to 32 different kinds of contractors, and the premium charged for sewage related work is only exceeded by the premium charged to those involved involved in excavation work - an ultra hazardous activity. 

During the policy periods, a bank which utilized a lift station serviced by our client was flooded with a backup of raw sewage. As hard as it is to believe, the bank took offense, and filed suit against our client for negligently maintaining the sewage lift station. The insured presented the claim to Nationwide Insurance to defend and indemnify, if necessary.

Nationwide denied the claim, claiming that the policy did not cover any losses dealing with sewage.  Nationwide tried to exclude coverage under its “pollution” exclusion.  The pollution exclusion does not specifically state that sewage is pollution.    

I filed suit for breach of contract. Section 627.419(1) states that the application for insurance is part of the policy and can expand, extend and modify the coverage provided under the policy.  In this case, the application identified the insured as being in the business of sewage, and Nationwide charged and collected a premium based on the fact that my client dealt with sewage. 

On Tuesday, the Seminole County Circuit Court heard cross motions for summary judgment and ruled that the Policy does indeed cover this loss.  The Court held that the policy as modified by the application provided the insured with liability coverage for losses dealing with sewage. 

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In United Automobile Insurance Company v. Santa Fe Medical Center, ____ So.3d ____ (Fla. 3d DCA October 7, 2009), the medical provider took an assignment of PIP benefits from its patient.  Santa Fe submitted bills to United Auto for treatment rendered, and United Auto denied payment claiming that the treatment was not reasonable, necessary or related to the subject accident. 

United Auto did not obtain a written report from a physician prior to denying the claim.  Much later, in response to Santa Fe's motion for summary judgment, United Auto did obtain an affidavit from a physician supporting its denial of the claim.  The trial court rejected United Auto's affidavit because: (1) it was based upon his review of the patient's treatment records, rather than a physical examination of Mr. Lopez, and (2) United Auto's physician did not conduct his review or submit his affidavit within thirty days of United Auto's receipt of the claim.  United Auto appealed to the Circuit Court which affirmed the trial court on these two issues.  United Auto sought certiorari review from the 3rd DCA.  

The 3rd DCA reversed.  The Court noted a clear distinction between the denial of a past bill which is controlled by subsection (4)(b) of the PIP statute; and the withdrawal of future benefits which is controlled by subsection (7)(a).  According to the 3rd,

[b]ecause this is a denial case, subsection (4)(b) applies.  Subsection (4)(b) provides that the insurer must pay benefits that are reasonable, related, and necessary within thirty days after receiving written notice, and the failure to do so could subject the insurer to penalties.  However, if the insurer believes that the claim is not reasonable, related, and necessary and denies the claim, it may obtain and offer reasonable proof at any time to establish that the insurer is not responsible for payment of the claim....  'Reasonable proof' is not defined, but it is clear that subsection (4)(b) does not require that a 'valid report' be obtained to protect an insurer from being assessed statutory penalties when denying a claim.  It is important to note that the statute does not require the insurer to obtain a report or proof under subsection (4)(b) before denying a claim. 

In conclusion, the Court stated:

If the insurer believes the claim is not reasonable, related, and necessary, it may: (1) deny the claim; or (2) pay the claim until it obtains a valid medical report under subsection (7)(a) and withdraw further payment.  'Reasonable proof' when defending an insurer's decision to deny payment of a claim under subsection (4)(b) does not require that the insurer obtain a valid report pursuant to subsection (7)(a), and the insurer may contest its responsibility to pay a claim at any time, and present evidence obtained after the thirty-day period has expired.  Subsection (7)(a), which requires that the insurer obtain a valid medical report, only applies to instances where the insurer withdraws the payment of further PIP benefits, not to the denial or reduction of benefits claimed. 

Be aware, that in its opinion, the Court also noted that in withdrawal cases under subsection (7)(a), that an insurer's "valid report" "may be based on the reporting physician's review of another physician's examination," or the reviewing physicians own physical examination. 

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