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The Rough Notes Company Inc.

Water, water everywhere

Water, water everywhere

July 27
09:26 2020

Water, water everywhere

In December 2008, Joan and Lucille Beseler returned home to find water on the kitchen floor near the sink. The water damaged the floors and cabinetry. The insureds submitted a claim under their homeowners policy to Avatar Property and Casualty Insurance Company.

The insurer sent an independent adjuster to inspect the loss. The adjuster inspected the property and submitted a loss report, which stated that the damage appeared to have been caused by a water leak under the kitchen cabinets. The report estimated that the repair would cost $10,853.49. The insureds submitted a counter repair proposal for $31,600.

The insurer accepted coverage and sent the insureds a check for $8,353.49, which represented the amount of its adjuster’s estimate less the $2,500 deductible. The insureds deposited the check. Intending to dispute the estimated loss, the insureds hired a public adjuster, who notified the insurer that the insureds demanded an appraisal to settle the claim pursuant to the policy. The insurer then decided to further examine the claim.

In compliance with the policy, the insureds submitted to examinations under oath nearly one year and five months after the loss. During the examination, Joan Beseler, who was 75 years old at the time and expressed difficulty remembering details surrounding the water damage, stated that she recalled looking underneath the sink to locate the source of the water and seeing water dripping from a pipe. She cleaned the water and tried to contact a plumber but was unsuccessful. A man she hired to clean the floors told her that the garbage disposal caused the water damage and that she should replace it with a new one.

Joan’s daughter, Lucille, was also examined. She stated that the water appeared to be leaking from the garbage disposal. During discovery, the insureds provided the insurer invoices for the floor and garbage disposal repairs that predated the claim of loss by one month.

In 2011, the insureds filed a petition to compel appraisal. After extensive litigation, the insureds moved to compel appraisal for the second time. The insurer withdrew its opposition and agreed to proceed with appraisal. After the appraisal panel awarded the insureds $30,225.21, the insureds moved to enforce the appraisal award. The insurer, however, asserted new coverage defenses.

The insureds then filed a breach of contract claim for nonpayment of the appraisal award.

The insurer deposed the insureds. Joan stated during her deposition that a pipe caused the water damage and that the water continued to leak after the disposal was repaired. Joan hired a plumber, who fixed the leak, but she could not remember the plumber’s name. Lucille could not state with certainty that water came out of the garbage disposal; she did say, however, that the water was gushing from that area under the sink.

The insurer moved to dismiss the action with prejudice for fraud upon the court. Specifically, the insurer argued that: (1) after the insureds’ initial statements, the insureds changed their account of the cause of loss during their depositions; (2) the invoices for the garbage disposal repair predated the notice of loss by a month, and (3) the insureds made prior fraudulent claims.

At the hearing on the insurer’s motion, the insurer’s plumbing witness testified that a garbage disposal will not leak unless water is running in the sink or dishwasher; likewise, the only other pipe under the sink would not leak unless water was running. The insurer also introduced letters from several insurance companies stating that the insureds had made prior unrelated claims for compensation and never made the repairs.

The neutral appraiser, who awarded the insureds $30,225.21, testified that a pipe leak or accidental discharge of water caused the water damage. The insureds did not testify at the hearing.

The court granted the motion to dismiss for fraud upon the court, ruling that the evidence provided at the hearing completely contradicted the position that the garbage disposal caused the water damage. The court noted that after five years of claiming that the garbage disposal caused the leak, the insureds suddenly stated that a pipe caused the water damage. The court found that these inconsistencies went to the heart of the claim and demonstrated the insureds’ intent to defraud the court and the insurer.

The court denied the insureds’ motion for rehearing and entered final judgment in favor of the insurer. The insureds appealed.

On appeal, the court found that the trial court abused its discretion in dismissing the suit because any inconsistencies between the insureds’ statements regarding the cause of damage were not significant enough to warrant dismissal. The insureds stated during their examinations under oath that the garbage disposal leaked. Joan also said, however, that the water dripped from a pipe. Lucille said it seemed that the garbage disposal caused the water damage. But during the deposition, she pointed to the area of the garbage disposal and stated only that the water was coming from that direction. Their testimony, while arguably inconsistent, did not show a scheme to defraud the court.

Neither of the insureds had plumbing expertise. Notably, whether it was the garbage disposal or the pipe that leaked, the general area of the alleged cause of the water damage was under the sink.

Although certain repair invoices did predate the cause of loss by one month, this evidence did not show that the insureds intentionally attempted to mislead the court.

The court reversed the trial court’s dismissal of the insureds’ claim for fraud upon the court and remanded the case for further proceedings.

Beseler v. Avatar Property & Casualty Insurance Company—District Court of Appeals for Florida, Fourth District—March 4, 2020—No. 4D18-3148.

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