Once Senate Bill 408 began limiting Florida insurance sinkhole claims under newer policies, homeowners insurers started to see more “back-dated” claims. “Back-dated claims” involve homeowners reporting claims with dates of loss two, three and four years old. Many homeowners insurers reacted by denying the claims with the late notice defense.
Florida’s Second DCA recently issued an opinion that touches on the subject, but does not answer the most important questions. Regardless, if you handle homeowners insurance claims, you must read the article to see what the Second DCA had to say about the late notice defense for sinkhole claims.
In LoBello v. State Farm, Florida’s Second DCA teases us with a ruling on the late notice defense for a homeowners sinkhole claim, but if you read closely, you will notice that the Second DCA left the door open for a homeowners insurer to use the right arguments and evidence to prevail on this issue.
What do I mean by that?
The Second DCA determined that the Circuit Court failed to apply the two-prong test for late notice claims in Florida homeowners insurance cases:
- Was the notice late? and
- If so, can the homeowner overcome the presumption that the late notice prejudiced the homeowners insurer?
If you already read First Party Property Insurance Blog’s articles on late notice, then I know you would never allow the Court to miss the two prong late notice test.
Unfortunately, in LoBello, there is no indication that State Farm had evidence to support either of the prongs.
First, although the homeowners reported the claim four years after first noticing the damage to their property, State Farm failed to tie that together with the required proof that the homeowners should have known they had a claim at that time. I could go on for days about how tricky of an issue this is considering most engineers will attribute most cracking to excluded causes; however, that is for another post.
What you do need to realize is that the Second DCA wanted State Farm to prove why the homeowners should have known to report the claim at that time. Some examples of this could have been asking the homeowners under oath whether their neighbors had any claims, whether they knew about them, whether they knew about sinkhole activity and sinkhole claims, and whether they had consulted with anyone.
In fairness, State Farm’s attorneys could have asked these questions, but the Second DCA’s opinion suggests that State Farm’s attorneys solely relied on the time that passed – 4 years – without discussing why the homeowners should have known to report the claim when they saw the cracks.
Next, the Second DCA also dismissed the Circuit Court’s reasoning because it never went on to the second prong of the late notice analysis – prejudice.
When the Circuit Court determined the notice was late, then it was required to consider the evidence and make a ruling as to whether the homeowner could overcome the presumption that the late notice prejudiced State Farm. There is no mention of an affidavit from an engineer stating that it could not determine the timing of the damages due to the late notice, which I have been recommending to homeowners insurers since my first late notice sinkhole case. That would have been the evidence necessary to support the prejudice, and the homeowner would have had to produce some expert testimony stating that cause and timing still could be determined four years later.
Essentially, by failing to go through this two prong analysis, the Circuit Court gave the Second DCA no choice but to reverse the ruling.
Although there were some other issues in this case that you should read, this late notice discussion was the main focus.
Importantly, the Second DCA did not remand the case for a further review of the evidence by the Circuit Court Judge; instead, the Court determined that the jury would have to decide whether the homeowners failed to timely report the claim by reporting 4 years after noticing the cracks and, if so, whether they could overcome the presumption of prejudice.
Another issue that homeowners insurers need to address for these late notice sinkhole cases – new policy language may give the homeowners a 2 year “safe harbor” to report sinkhole claims, depending on how the Courts interpret it. If you are familiar with the new policies, then you know what I am talking about. If you are not, then I encourage you to quickly contact me to discuss this issue. (This was not relevant to the LoBello case because the policy was written well before Senate Bill 408’s amendments took effect.)
Here is the complete LoBello v. State Farm order:
The Second DCA in LoBello discussed several of the recent Florida late notice cases, and I have very comprehensive articles on these cases here.
Homeowners insurers need to get a firm grasp on the late notice law. Not only do they need to make sure they have the right arguments and evidence for these “back-dated” sinkhole claims; more importantly, they need to be prepared if another hurricane hits.
Like any claim, a late notice sinkhole claim can be broken down into a scope of work. Homeowners insurers have groups of very skilled attorneys that, together, could have solved this issue years ago. There are key questions and evaluations insurers must ask their counsel every time, and State Farm missed them in this case. Why? Because it is clear that State Farm did not automate the process of gathering claim and case information that it needs. Otherwise, it would have been forced to make sure that all of its attorneys agreed with the strategy, and it would have built a system around the best combined strategy from all of its attorneys. Its unlikely this strategy would have included the mistake discussed in Lobello.
You can supervise/adjust these claims the old fashioned way, or you can supervise claims and cases using software that automates the checklist nature of a cases like these. Don’t just hand claims and cases off without a structured system for evaluating and communicating the key information. If you are interested in learning more about checklists and software for supervising sinkhole claims, especially late notice sinkhole claims, please message me.
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