Tag Archives: Coverage

The Florida Policyholders Bill of Rights Working Group Issues its Final Report

Florida Homeowners Insurance Claims and Litigation Handbook


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As discussed this summer, Florida’s Insurance Consumer Advocate Robin Westcott organized a Bill of Rights Working Group to create a Bill of Rights for Florida’s insureds.  They addressed the following issues in great detail:

  • education, transparency, and monitoring the insurance marketplace;
  • improvements to the claim process;
  • assignment of benefits and emergency remediation companies;
  • examinations under oath;
  • alternative dispute resolution;
  • post-claim underwriting; and
  • coverage provided by repair rather than indemnity payments.

The final report is here:

Download (PDF, 2.16MB)

The Group wants the Bill of Rights to have a lasting impact.  For the parts of the Bill that reflect existing case law, they want the Bill to codify the existing case law into statutory law.  For the parts of the Bill that are not yet law, they want the Bill to make new law. Lastly, there is an educational component.  To help insureds navigate claims, they want insurers to provide insureds with a copy of the Bill when they file a claim.

The report is a great snapshot of today’s insurance industry concerns.  I think the Group did a great job of addressing the current landscape.  My only criticism is that I would have liked the Group to disclose, in the Bill, some of the data on these claims.  To get the new recommendations turned into law, the Group should disclose the data that proves these concerns are justified.  In all fairness, the Group might not have needed the data.  The Group was comprised of several insurance professionals with decades of experience.  Thus, they likely used their private data to form their conclusions and recommendations, even if they did not disclose it.

I think the Bill of Rights will be very helpful for insureds when navigating a claim; however, the Bill’s primary impact on insurers appears to be focused on the assignment of benefit-water extraction claims.  If the legislature adopted all the recommendations, AOB contractors will have some new obstacles to deal with, including licensing requirements; limitations to the scope of their AOB contracts; and compliance with certain standards for water extraction.

Aside from the AOB-related recommendations, the rest of the Bill codifies/creates obligations and limitations for insurers, including more standards for communicating during the claim and examination under oath process; prohibitions on post-claim underwriting; and expectations for insurers when they elect to repair.  Ultimately, some of these obligations are already existing law, and I bet most insurers already comply with the majority of the recommendations.

Only time will tell the impact of the Group and its recommendations. There is no doubt that they discussed a lot of major concerns.  We will wait and see what the legislature does with these recommendations. When that time arises, I will keep you posted.

Takeaway:

The assignment of benefits issue is not going way, and its up to insurers to not let this be the next attorney-driven trend.

How can insurers deal with the assignment of benefits issue?  First, get the best management and attorneys together and decide exactly what to do on these cases. Second, pay for routine documents and evaluations only once, then automate any documents or processes that will occur in all of these cases.  Third, enter all of the case information into software (instead of Word documents and emails) so that you can use data to help guide you towards settlement.  Fourth, as failures and successes arise, continue to optimize your system to ensure you achieve the best possible outcomes while spending the least.

If you have any questions or would like to see checklists or guides for handling assignment of benefits cases, please message me.


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The Death of the Concurrent Cause Doctrine in Florida Homeowners Insurance Claims under Sebo v. American Home Assurance

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In a monumental September 18, 2013 holding, Florida’s Second DCA in Sebo v. American Home Assurance ruled that there should have never been a concurrent cause doctrine in Florida, and that the other DCAs have been mistaken for years.  Here is the full opinion:

Download (PDF, 58KB)

As background, many cases involve damage being caused by a combination of excluded and covered perils.  For years, when this occurred, courts would look at the facts and the policy to determine if the combination was dependent or independent of each other and whether the policy terms disposed of the concurrent cause doctrine.  If courts determined that the causes were independent and the policy did not “write out” the concurrent cause doctrine, then it wouldn’t matter if the excluded peril caused 99% of the damage, the damage was still covered so long as the covered peril caused at least 1%.  If the causes were dependent or if the policy had an anti-concurrent cause clause, then the question would be which peril was the efficient proximate cause of the damage – the excluded peril or the covered peril.  (I think I got that right … ).

This gave lawyers and drafters a lot to think about, but the Second DCA says that those exercises were a waste of time.  In any cases involving an excluded and covered peril causing damage together, the efficient proximate cause doctrine should apply.  This not only marks a major swing in the law; it is also at least a major swing in this case. The jury awarded Sebo roughly $7.7M.

Here is the verdict form from the trial court:

Download (PDF, 109KB)

Here is a photograph of this unbelievably amazing house:

 photo from http://www.naplesnews.com/photos/2007/jul/01/38552/

There’s something to think about this weekend.  I am going to think about what this means for sinkhole claims.  Feel free to email me your thoughts.  I hope you have a good weekend.

Takeaway:

This is such an important issue; however, I don’t think most insurers have implemented processes and procedures to take advantage of their rights under this holding.

The Sebo case calls for a whole new set of checklists and guides for handling cases in the Second DCA, and maybe even in Florida.  If you want to know more, please message me.


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Assignment of Benefit Homeowner Insurance Claims and Bill of Rights Working Group (Video)

Florida AOB & Industry Litigation Trend Report Image

First Party Property Insurance Blog is Proud to Announce our New E-Book: the Florida Homeowners Insurance Claims and Litigation Handbook.

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

We’re so confident in this E-Book that we offer you a money-back guarantee if it does not have the information you and your insurance claims business needed to improve. Click the link below to buy copies for you, your colleagues, and your partners.


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At the Bill of Rights Working Group recent meeting, Mr. Dry Out‘s Matthew Jerabek explained his concerns with the AOB contractors in the water damage claim industry.  Below is the video of his statements to the Working Group.  To be safe, I cannot promise that his statements are true because I have zero personal knowledge regarding the allegations; however, I think anyone who handles these claims would want to have the opportunity to hear his statements.

The Video

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Although this may lead some carriers to take approaches based on emotion, assignment of benefits cases are the perfect type of case for statistical data evaluations to drive decision making.  They are also the perfect type of case to use document automation and litigation project management to achieve better outcomes at a fraction of the costs.

Don’t hire attorneys to have junior associates get you nowhere on these files for thousands of dollars.  If you want checklists, guides, or legal document templates for handling claims like this one, please message me.


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AOB Claims and the Bill of Rights Working Group

Florida AOB & Industry Litigation Trend Report Image

Overview:

After a water leak, homeowners often hire a contractor to make emergency repairs.  Contractors and homeowners and insurers often disagree about the cost to repair.  Read this article to learn how insurers, contractors, and the legislature are trying to resolve this dispute.


First Party Property Insurance Blog is Proud to Announce our New E-Book: the Florida Homeowners Insurance Claims and Litigation Handbook.

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

We’re so confident in this E-Book that we offer you a money-back guarantee if it does not have the information you and your insurance claims business needed to improve. Click the link below to buy copies for you, your colleagues, and your partners.


Add to CartView Cart


Johnson Strategies authored a fantastic post today about the impact of assignment of benefit claims on insurers and how the Homeowners’ Policy and Claims Bill of Rights Working Group is trying to address this problem.

How much are insurers losing as a result of the AOB claims?  Here is a quote from the post:

Addressing fraud this systemic starts with understanding that water damage claims are number one across all insurers–approaching 50% of  the total annual claim payout, with an average claim often in excess of $10,000. Using Citizens as a gauge, the 2012 total forecasted payout just for bursting pipes (not weather related roof leaks, or back up of sewers, etc) was in excess of $142,000,000. 

Using a hypothetical carrier with 180,000 policies I showed how just the deductible and plumbers’ referral fee resulted in fraudulent claim inflation of $3,375,000 every year.  

For all Florida property carriers including Citizens that’s roughly $150 million annually.

Then…when you add in the cost of unnecessary repairs, unnecessary drying services or water detection and the rank-and-file up-charging that everyone knows (and ICA workshop testimony confirms) is rampant, well…you get the ugly picture.

See the full post here (parentheticals omitted)(emphasis added).

Johnson Strategies suggests the legislature address the following concerns:

  • the substantial financial incentive for plumbers to refer AOB contractors;
  • AOB contractors perform all of the water damage mitigation services;
  • loose licensing requirements;
  • no required permits;
  • no required inspections; and
  • no requirement for pre-work estimates.

The Working Group made suggestions to address all of these concerns. Now, we must wait to see whether identifying these issues will be followed with a genuine solution from the legislature.

 Takeaway:

Although this may lead some carriers to take approaches based on emotion, assignment of benefits cases are the perfect type of case for statistical data evaluations to drive decision making.  They are also the perfect type of case to use document automation and litigation project management to achieve better outcomes at a fraction of the costs.

Don’t hire attorneys to have junior associates get you nowhere on these files for millions of dollars.  If you want checklists, guides, or legal document templates for handling claims like this one, please message me.


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Florida Homeowners Insurance Questions, the Loss Settlement Provision, and When is Alleged Underpayment Not a Breach of the Policy?

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Overview

The Loss Settlement provision is, without a doubt, the most overlooked homeowners insurance policy provision.  There are tens of thousands of lawsuits filed every year where the parties dispute what the homeowners insurer owes to the homeowner.

Do you want to know what neither side probably looked at?  The Loss Settlement provision – the provision that actually describes the homeowners insurer’s obligation to pay a claim.  Read this article to learn more about how this provision could decide your case.

Make sure to read until the end because we offer you a free Litigation Report analyzing the ways to improve your case outcomes while paying the least amount possible.


Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

If you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

Questions?

Have any questions about Florida’s homeowners insurers, policies, and claims, please feel free to contact us.


One of the most important questions in property insurance litigation is whether an insurer can obtain a summary judgment in a damages dispute. Stated otherwise, can an insurer prevail on a summary judgment motion when the insured alleges the insurer underpaid the claim? You might ask, “how is that possible?” How can an insurer and the Judge agree that even if the insurer allegedly underpaid the insured, the insurer did not breach the contract? If you can answer these questions, then you understand the difference between underpayment and breach.

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To understand the answers to these questions, you must examine the Florida cases discussing loss settlement provisions. Following are some examples:

 

1. Slayton v. Universal

Download (PDF, 13KB)

Slayton holds that even if an insured allegedly underpaid pursuant to the policy, the insurer could have simultaneously complied with its policy obligations as a matter of law. While Slayton is limited to the facts and statutes at issue in the case, its rationale may be applied to any insurance dispute.

Rather than promote litigation, judges should do what Slayton did and allow the insurer to rely on the insured to present a genuine policy dispute before bringing a lawsuit. In Slayton, the Court held that the insured should have used the benefits the insurer paid to the insurer to repair the home and then submit a supplemental claim to the insurer if the original payment was insufficient. Instead, the insured sued the insurer without attempting to conduct the repairs with the payments provided by the insurer. Ultimately, in Slayton, the Fifth DCA upheld the trial court’s finding that the insurer, by providing the payment to the insured, complied with the policy as a matter of law.

By enforcing the loss settlement provision’s requirements, the Fifth DCA in Slayton held that the insurer did not breach the contract, even if it arguably underpaid the claim.

 

2. Ceballo v. Citizens

Download (PDF, 46KB)

In Ceballo, the insureds alleged that they proved a total loss of Ordinance and Law coverage pursuant to the Valued Policy Law statute and argued the insurer should have paid the coverage. The insureds further claimed that the insurer’s failure to pay the coverage constituted a breach of the contract. The insurer responded that before the insureds could be entitled to this coverage, the policy required the insureds to incur Ordinance and Law damages. To put this into context, the policy and statute at issue in Ceballo provides that the insureds were not entitled to replacement cost coverage until they incurred the damages. Like the Fifth DCA in Slayton, Florida’s Supreme Court in Ceballo determined that the insurer did not breach the contract despite the insureds’ allegations that the insurer underpaid. Thus, the insureds could not present a damages dispute to the jury, and the insurer was therefore entitled to judgment in its favor on that issue.

 

3. Buckley Towers v. Citizens

Download (PDF, 96KB)

Likewise, the Eleventh Circuit in Buckley Towers considered the lower court’s finding that the insured was excused from incurring damages under the policy. Similar to the policy at issue in Ceballo, the policy at issue in Buckley Towers provided that if in insured wants replacement cost coverage, it must incur the damages. If the insured does not incur the damages, the insured can only obtain actual cash value. Despite this policy requirement, the lower court held that the insurer’s alleged underpayment excused the insured’s performance in that regard.

The Eleventh Circuit Court of Appeals reversed, determining that the insured could not use the prevention of performance doctrine to avoid a requirement that the damages be incurred. Unlike the lower court, the Eleventh Circuit refused to “rewrite the policy.” The Eleventh Circuit held that the insured was required to make the repairs before he or she would be entitled to the replacement cost coverage. In other words, until the repairs were complete, the insurer was correct in issuing only the coverage for actual cash value. The court found that by using the prevention of performance doctrine, the lower court impermissibly rewrote the policy that was freely negotiated between the parties. Even when facing allegations of underpayment, the Eleventh Circuit determined the insurer did not breach as a matter of law. In short, Buckley Towers, like Ceballo and Slayton, shows that courts must adhere to the loss settlement provisions in a policy.

So what do these cases tell you?

First and foremost, beware when relying heavily on the black letter law in these cases because the statutes and policy forms have changed. Instead of focusing on the holdings of these cases, focus on the courts’ interpretations of the loss settlement provisions. In each case, the court determined that the insureds were not entitled to a trial on damages until they demonstrated compliance with the loss settlement provisions. Second, you must scrutinize your loss settlement provisions, whether you are dealing with a sinkhole claim, water claim, or tile claim, before accepting the opposing party’s allegations as fact. Ultimately, the loss settlement provision may make alleged underpayment a question for the judge and not the jury.

 Takeaway:

You shouldn’t allow your attorneys to overlook this provision, and you should have systems in place to make sure it isn’t overlooked.  Your provision is the same in every case, but it needs to be read in light of the case law.

Don’t trust this type of issue to junior associates.  Get your best management and best attorneys together, create a system for ensuring compliance, and never think about it again.

If you want checklists, guides, and legal document templates on the Loss Settlement provision, please message me.


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Did the Florida Supreme Court’s Decision in Geico v. Nunez Affect A Homeowners Insurer’s Right to an Examination Under Oath?

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Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

If you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

Questions?

Have any questions about Florida’s homeowners insurers, policies, and claims, please feel free to contact us.


On June 27, 2013, the Florida Supreme Court issued an opinion in Geico v. Nunez that appears to limit an insurer’s right to deny a claim based on an insured’s failure to comply with the examination under oath (“EUO”) provision.A more accurate interpretation, however, is that the Court opined that personal injury protection coverage (“PIP”) insurers cannot deny an insured’s claim based on a failure to submit to an EUO.

Download (PDF, 102KB)

In Geico, the insured was allegedly injured in a car accident on September 17, 2008.On October 26, 2009, Geico filed a declaratory action in a Florida trial court which was subsequently removed to federal court.Geico asked the court to determine whether the insured could obtain PIP benefits despite failing to submit to Geico’s requested EUO.Nunez argued in response that Geico’s position conflicted with Florida’s PIP statute, Fla. Stat. 627.736 (2008).The federal district court, finding no cases supporting Nunez’s position, held Geico was entitled to dismissal because Nunez failed to submit to the EUO. On appeal, the Eleventh Circuit “punted” the decision to the Florida Supreme Court.

from http://wklawyers.com/blog/wp-content/uploads/2011/11/florida_pip.gif

The Florida Supreme Court held in favor of Nunez, finding that Florida’s No-Fault statute was mandatory and the EUO provision was inconsistent with the statute’s purpose of promptly providing “virtually automatic” coverage for PIP claims.The Court further found the EUO provision was “unreasonable and unnecessary under Florida law.”The Court also determined the EUO provision was “invalid.”Accordingly, it appears that EUOs are no longer a condition precedent to PIP coverage.

Does this harsh language against insurers’ policy rights apply to property insurance claims?While the Court does not promise that property insurers are exempt from this holding, the Court does not disturb any property cases upholding an insurer’s right to demand an EUO.The Court also makes clear that this holding should be distinguished from cases that do not involve PIP claims.In other words, although the Court went to great lengths to say that its holding does not apply to any other type of claim at this time, the Court does not guarantee anything to property insurers.

The opinion seems to say that property insurers are exempt from its holding, however, expect insureds and their attorneys in property claims to make arguments similar to the one made by Nunez. Property insurance is not mandatory like PIP insurance, so the Court’s plain language should shield property insurers from its holding. Furthermore, because the Court limited its application to the PIP statutes, Florida law still holds that EUOs are still conditions precedent in property claims (depending on the jurisdiction).

In short, given that the Court did not disturb the holdings in all of the property cases cited in its opinion, I believe the Court has held that Nunez’s arguments will not suffice in the context of the property insurance claim.

 


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Testifying to the Facts of Someone Else’s Investigation

Florida Homeowners Insurance Claims and Litigation Handbook

A very informative article on Examinations Under Oath (“EUOs”) appears in the summer 2013 edition of Litigation Management. The article, written by Tower Hill’s Lincoln LeVarge and Butler Pappas’s Gerald Albrecht, can be accessed here:

http://www.litigationmanagementmagazine.com/litigationmanagementmagazine/summer_2013#pg1

The most interesting takeaway from the article that I want to emphasize is that insurers may have to submit representatives to testify about facts that attorneys obtain through the EUO process, especially if the insurer relies on those facts to issue a coverage determination.

This consequence of the EUO process is often overlooked. As you know, an insurer often retains an attorney to conduct to an EUO and relies on the information obtained during the EUO. If the case proceeds to litigation, the insured’s attorney will typically request that the insurer produce representatives to testify regarding how the EUOs led to coverage determinations, regardless of the insurers’ representatives’ level of involvement in the EUOs and without providing privileged information. A representative who can demonstrate active involvement in the coverage determination, as well as a strong grasp of the EUO results, will present well during the deposition and to a jury.

A similar situation is when insurers retain experts to investigate claims during the coverage stage. Often, expert reports are so detailed that claim examiners do not confirm the findings with the expert. If the case proceeds to litigation, however, an insured’s attorney will try to determine to what extent the insurer relied on the expert. Indeed, when an insured’s attorney conducts the deposition of the claims examiner, the attorney will typically ask about every fact surrounding the coverage process, including whether the representative called the expert to inquire about the report. Like the EUO process, if a claims examiner can testify that he or she spoke with the expert about the report, then the insurer’s reliance on the expert will be more credible. This is true for long term water claims, sinkhole claims, and, most importantly, late notice cases.

These are simple but helpful points to think about. Of course, insurers are entitled to a variety of privileges against disclosure of certain aspects of the coverage process, and I will discuss that in great detail in future posts. Privileges aside, all parties involved in a coverage investigation should still be aware that someone may ultimately have to testify testify to the facts supporting the defenses. If those facts involve an insurer’s reliance on his or her attorney and expert, then a claims representative should try to be able to testify why such reliance was reasonable.


Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

If you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

Questions?

Have any questions about Florida’s homeowners insurers, policies, and claims, please feel free to contact us.

 

Florida Homeowners Insurance Litigation Update: Tampa Sinkhole Insurance Claims: Verdict Forms in Sinkhole Trials

Overview:

Check out one of the most popular articles on homeowners insurance litigation there is.  Thousands of people make a living on homeowners insurance claims, but only a small percentage of them understand why homeowners were so successful at litigating these claims.  Although these claims are dwindling, many lessons can be learned for the next wave of insurance claims.

Make sure to read to the end of this article so you can apply for our free Litigation Report.  By giving us that moment of your time, you will receive a free comprehensive analysis and sets of solutions to bring you power and control over your homeowners insurance litigation cases.


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Good morning. I recently spoke with mediator, Robert Daisley, about the current state of sinkhole litigation. Rob is one of the most well respected mediators in Tampa. He is a great mediator because he emphasizes the uncertainties for the parties.

Rob has a strong grasp on the issues and uncertainties in sinkhole cases. Even when the insurer has done everything right in terms of payment and timeliness, Rob is not sure that the insurer will prevail. Why? Because there has been no direct appellate mandate on the proper jury instructions and verdict forms in sinkhole cases. Experienced trial lawyers start their evaluation of a case by crafting their jury instructions. As Rob suggested and as anyone who has handled sinkhole cases should know, judges are far from uniform in agreeing to jury instructions.

While there is plenty of appellate guidance on the issue, that guidance has been twisted and turned into a wide range of jury instructions and verdict forms. Thus, according to Rob, unless a party is prepared to pay its attorneys to litigate at the trial and appellate level, then that party is better off settling the case. The bottom line: knowing how many variations of jury instructions and verdict forms have been issued by the courts, you must be committed to both the trial and appeal to make sure that the court used the right verdict form.

The most critical variation at this time is the burden of proof in a denied sinkhole case. Some judges place the burden of proof on the homeowners to prove sinkhole activity caused the damage, while other judges require the insurers to prove the exclusions caused the damage. This issue is on appeal right now, however, we are months away from a ruling. Rob’s point here is unless you are committed to appealing a problematic verdict form, then trying the case might not be for you.

Another variation in the jury instructions is determining if the verdict form should be limited solely to whether the claim was allegedly underpaid. Some believe the verdict form should consider an insurer’s compliance with the policy and statutes. Others believe the verdict form should should only ask whether the claim was underpaid.

Rob believes that if a party is not committed to trying and appealing these issues, then the party runs the risk of trying the case with unfavorable jury instructions. The following set of verdict forms (check the variations) support his position:

Download (PDF, 102KB)

Download (PDF, 96KB)

Download (PDF, 31KB)

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Download (PDF, 94KB)

Download (PDF, 131KB)

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Download (PDF, 73KB)

Download (PDF, 72KB)

Download (PDF, 137KB)

Download (PDF, 131KB)

Download (PDF, 414KB)

Download (PDF, 35KB)

Download (PDF, 12KB)

The inconsistencies in these forms are glaring, and insurers and homeowners alike should hope that the Second DCA narrows the issues in an effort to eliminate these inconsistencies. While many lawyers seem to believe they can prevail despite the verdict form, properly framed questions for the jury to answer are crucial. Kudos to Rob Daisley for stressing how these issues should impact insurers’ and homeowners’ outlooks on trying the cases.

So what went wrong here?  

There’s only one way to find out, by contacting me and subscribing to First Party Property Insurance Blog.

Takeaway:

If you want the legal forms and checklists to make your desired jury forms a reality, please message me.


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Florida Homeowners Insurance Claims for Water Leaks and Damage, and the Constant or Repeated Seepage Exclusion

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

What happens when a homeowners insurance company denies a claim for constant or repeated seepage or leakage?

Generally, homeowners insurers’ personnel will look at the damage and, based on (1) experience or (2) an expert opinion, the insurer will determine that it is long term damage that is not covered.

If a person has a roof leak, pipe break, supply line burst, or something else that she thought happened quickly, then she might think the constant or repeated seepage exclusion is unfair.  Depending on (1) the way that the exclusion is written in the policy and (2) the investigation the homeowners insurer conducted, the homeowner might be right.

In this article, you will see what homeowners insurers need to prove that a water leak and its damage are excluded using the constant or repeated seepage exclusion for long term water damage.

So don’t forget to read all the way to the end, contact me, and subscribe.


Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Before we go on, if you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.


Do you think you need to understand this subject? I’d say you should be an expert on it.  

The most common dispute in the Florida homeowners insurance industry is whether water damage is covered or excluded by homeowners insurance.  Florida is a rainy and humid place, so there is plenty of water damage.  The question is whether the damage is sudden or long-term.  You better know the difference.

How do you find out the difference? Read this article to find out how homeowners insurers must prove that damage was excluded by the constant or repeated seepage exclusion.

The Policy

The exclusion has many variations; however, in general, it excludes long term water damage. With respect to the variations, some of these exclusions expressly provide that the seepage must come from within a plumbing, heating, or air system. Others contain language that excludes the leakage “whether hidden or not.” In addition, some describe the exclude time period as “weeks” or “months” whereas others specifically exclude damage that occurs over a period of more than 14 days.

Hoey v. State Farm

The main case on the issue is the Fourth DCA’s 2008 decision in Hoey v. State Farm, 988 So. 2d 99 (Fla. 4th DCA 2008). In Hoey, the Fourth DCA determined that the evidence in the record was enough to show that the insurer was entitled to a judgment that the damage was long term and, therefore, excluded from insurance coverage. By analyzing the steady increase in the water bills for roughly three months, the insurer was able to show that there was a failure in the nylon of the toilet supply line. Contrary to many of the litigated cases on this provision, this case had enough evidence in the insurer’s favor to allow the trial court to determine the insurance company clearly did not cover the damage.

Key Evidence

In cases where summary judgment is not appropriate, juries must decide whether the evidence shows that the leakage occurred for an excluded time period. Naturally, insureds’ and insurers’ attorneys should pay attention to the following factors to assess what the jury will think of the damage:

1. The Photographs

The photographs tell the story and are typically the most important evidence. Do they show staining and warping? For an insurer, it is going to be hard to convince a jury that the water loss was long term if there is no staining or warping of particle board cabinets. For an insured, if the particle board has rings and rings of deep brown stains and appears to be falling apart, then how can he or she convince a jury that the damage happened from a single leak?

The most important photographs will come from the field adjuster and, if the insurer promptly hired an engineer who quickly visited the property, then the engineer should have good photographs. Because these losses often occur in obscure areas of the property (kitchen cabinets, wall space), an insured generally does not have prior photographs of the damaged areas. Ultimately, the photographs will be the most critical evidence in the case.

2. The Water Bills

The water bills also can help guide the parties’ understanding of what happened. If there was a sudden and extreme toilet leak or pipe burst, then, depending on where the burst was, there may be a huge surge in the water bills. If the bills constantly crept up for a few months, however, that might suggest there was a pinhole leak that allowed water to seep out over a long period of time. According to the Fourth DCA, the water bills in Hoey were sufficient to allow the trial court’s finding that the damage was excluded.

3. The Experts

The experts in this field are very skilled and can provide the parties with highly detailed evaluations of an infinite amount of different types of water losses. Many of the experts I deal with rely on the studies done by Dr. Ralph Moon from HSA Engineers.I have worked with Dr. Moon a great deal. He has published volumes of studies showing what each housing material looks like after it has been exposed to water for days or months. The studies are very intricate and detailed, and, in some cases, can even tell you what temperature the water was in your case. There are several other outstanding experts that rely on Mr. Moon’s studies. I find that a lot of these experts are very good at explaining why a particular type of damage had to have been caused by long term seepage.

Despite having handled well over 100 of these types of cases, I have not had the chance to meet any experts in this area that are hired by insureds and their attorneys. I would like to hear their counterarguments to the very well reasoned theories laid out in the water duration studies I mentioned above.

If you would like a copy of any of Dr. Moon’s articles or the names of any of the other highly qualified experts, please feel free to email me. If you handle these types of cases, I highly recommend reading Dr. Moon’s articles and sharing them with your team as soon as possible. As you know, the experts will be responsible for explaining the issue to the jury.

4. The Nature of the Source

To determine whether the damage was long term, the parties have to understand the nature of the event. Was the leak coming from the roof? If so (and so long as there was not a wind event), the only seepage that could have entered must have been rain and other moisture over a period of time. If a slight “leak” caused a substantial amount of damage, that is a strong example of a long term water loss. Was the leak coming from a deficiency in the shower stall or tub surround? One might logically expect that the damage occurred each time the person showered or took a bath. Understanding the exact source of each portion of the loss is crucial to determining whether the source, by its nature, is something that would happen over time or all at once.

5. The Policy

To evaluate the claim, insurers and insureds must also go to the heart of the issue – the insurance policy. Interestingly, and as mentioned above, these policies have many variations. Not only are the excluded durations different, but the sources of the loss can often be different. For example, some policies’ constant or repeated seepage exclusions may exclude long term seepage coming only from within a plumbing, heating, or air conditioning system. If the loss was long term but not from one of those systems (for example, through the roof), then insureds and insurers might need to reevaluate whether the loss was “sudden” or not, which is also required by virtually every homeowners insurance policy. As also noted above, some policies contain language that excludes the damage “whether hidden or not.” This is arguably the first place to look when evaluating one of these claims.

If you are an insured, a claims handler, or an attorney in this field, then you certainly need to understand the significance of these issues. This exclusion is as litigated as any other exclusion in any type of insurance policy. Although this was not meant to be an exhaustive review of the issues, I hope that it helped you in some way. As noted above, if you want any of the materials from Dr. Moon or you want to discuss any of the other experts in the field, please email me.

Takeaway:

At least 60% of your claims and lawsuits are probably water damage claims. It’s time to approach these on a more global level.

  • What if I told you that you could use a system to search your old claims and cases to determine how much the next case will settle for?
  • What if I told you that you could pay for the legal documents for these claims only once?

Well, its no longer 2001, and these systems are freely available.  If you want to know more about the systems we use, or you want free checklists and guides for handling water damage claims, please message me.


Questions?

If you have any questions about this article or anything else Florida homeowners insurance-related, please contact us.

Does a Defense Based on an Insured’s Failure to Submit to an Examination Under Oath Require the Insurer to Show Prejudice?

Florida Homeowners Insurance Claims and Litigation Handbook

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*April 30, 2014 Update: I want you to read this article because it has the best explanation of the hotly debated condition precedent vs. condition subsequent issue on this site; however, when you are finished, you need to read this article to learn about the latest developments from courts evaluating what type of condition the EUO provision is.*

If an EUO does not happen, can the insurer move for summary judgment and get an order by simply showing that the insurer requested the EUO and it did not happen? In other words, can an insurer obtain a summary judgment on that issue without pleading and proving prejudice? Yes and no, depending on where in Florida you live.

picture from http://www.florida-lawblog.com/2010/05/examination-under-oath-euo.html

The Fifth DCA is the DCA making some waves. While old news, the Fifth DCA in State Farm Ins. Co. v. Curran held that a failure to appear at a compulsory medical examination was a breach, but maybe not a material breach because the insurer did not plead and prove prejudice. 83 So. 3d 793 (Fla. 5th DCA 2011). Following that decision, the Fifth DCA issued another opinion denying an insurer summary judgment based on an insured’s alleged failure to submit to an EUO. Whistler’s Park, Inc. v. FIGA, 90 So. 3d 841 (Fla. 5th DCA 2012). In Whistler’s Park, Inc., the Fifth DCA considered the insured’s arguments that it responded to the insurer’s EUO request by naming a corporate representative to testify at the EUO and promising to produce the documents. The insurer had previously asked the insured to call the insurer to schedule the EUO. Leading up to the summary judgment hearing, the insured continued to offer to submit to the EUO, but did not call to schedule. The Fifth DCA once again held that the insurer’s failure to plead and prove prejudice thwarted its ability to obtain summary judgment on the EUO provision, which they called a condition subsequent. The Fifth DCA said that to show a breach of a condition subsequent was material, the insurer needs to plead and prove prejudice. So we know where the Fifth DCA stands: an insurer must plead and prove prejudice.

No other DCA has expressly taken this position. The Third DCA, however, has denied an insurer’s motion for summary judgment on the issue when counsel for the insurer asked improper questions to an insured that the insured refused to answer. De Leon v. Great American Assur. Co., 78 So. 3d 585 (Fla. 3d DCA 2011).

The Fourth, Fifth, and Second DCAs all have opinions suggesting there is no need to plead and prove prejudice. The Fourth DCA’s decision in Goldman v. State Farm suggests that an insurer does not need to plead prejudice to obtain summary judgment in that jurisdiction. 660 So. 2d 300 (Fla. 4th DCA 1995). However, the Fifth DCA in Curran suggested that a portion of the Goldman decision considered the prejudice issue when it discussed how remanding the case to proceed with the EUO would be fruitless because two years had passed since commencement of the suit. Insurers often point to two other decisions suggesting that prejudice does not need to be pled and proven to obtain summary judgment in the Second and Fifth DCAs. See Amica Mutual Ins. Co. v. Drummond, 970 So. 2d 456 (Fla. 2d DCA 2007); Starling v. Allstate Floridian Ins. Co., 956 So. 2d 511 (Fla. 5th DCA 2007).

So the answer to the question posed is, once again, that it appears to depend on the jurisdiction. In November of 2012, the Florida Supreme Court heard oral arguments in Curran. I am not sure when to expect the Florida Supreme Court to issue the order but hopefully it will shed some light on whether the Fifth DCA is right, or whether the issue will return to a bright line rule. Until the Supreme Court issues its opinion, it might be best to plead and prove prejudice just to be safe.

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

If you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.

Questions?

Have any questions about Florida’s homeowners insurers, policies, and claims, please feel free to contact us.

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