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Insurer tries to have it both ways

Insurer tries to have it both ways

May 29
07:23 2018

Insurer tries to have it both ways

Juan Castro and Myriam Lopez owned a house that was covered by a homeowners policy issued by Homeowners Choice Property & Casualty Insurance Company.

On May 4, 2010, Castro and Lopez noticed damage to their house that appeared to have been caused by sinkhole activity. They filed a notice of claim with Homeowners Choice. On June 15, 2010, Homeowners Choice retained SDI Engineering to conduct a sinkhole investigation. SDI did not find any evidence of sinkhole activity, and Homeowners Choice denied coverage on July 12, 2010, based on the policy exclusion for damage caused by the movement of the earth beneath the residence. It was undisputed that prior to denial of the claim Homeowners Choice did not request that either Castro or Lopez submit to an examination under oath (EUO), file a sworn proof of loss, or submit records and documents in accordance with the “Your Duties After Loss” section of their policy. Further, the denial of coverage letter did not reference the policy provisions that addressed their duties after loss or advise of any conditions that needed to be met prior to their filing suit.

Four years later, Castro and Lopez retained FTE Engineers & Planners, which conducted an investigation and concluded that the damage to the house was caused by sinkhole activity. On November 4, 2014, Castro and Lopez sent letters to Homeowners Choice that included a copy of the FTE report and a request that Homeowners Choice “reconsider” its denial of coverage within fourteen days. Homeowners Choice replied by faxed letter acknowledging that Castro and Lopez had provided new information and requesting that Castro and Lopez each submit to an EUO, provide a sworn proof of loss, and provide copies of all documentation from FTE. Homeowners Choice did not provide a date, time, or location for the EUOs.

On December 18, 2014, Castro and Lopez filed suit against Homeowners Choice for breach of insurance contract. On December 30, 2014, Homeowners Choice provided Castro and Lopez dates for the EUOs. On December 31, 2014, counsel for Homeowners Choice informed Castro and Lopez that filing their lawsuit violated the “Suit Against Us” provision of their policy and demanded that Castro and Lopez withdraw their lawsuit and coordinate the EUOs by January 9, 2015. Castro and Lopez did not withdraw their lawsuit, and the record included emails between their attorney and counsel for Homeowners Choice that demonstrated an agreement to schedule the EUOs in January 2015. The last email from Castro and Lopez’s attorney was dated January 8, 2015, and provided a date and time for the EUOs. Homeowners Choice did not respond.

Homeowners Choice filed a motion for summary judgment based on Castro and Lopez’s refusal to comply with its demand for EUOs and the submission of a sworn proof of loss. Homeowners Choice argued that Castro and Lopez’s provision of the FTE report along with their request to reconsider the claim constituted a reopening of the claim that allowed it to require Castro and Lopez to comply with the policy’s conditions precedent to filing suit.

In response, Castro and Lopez asserted that Homeowners Choice waived compliance with the conditions precedent to filing suit when it unequivocally denied coverage. The court disagreed and entered final summary judgment in favor of Homeowners Choice. Castro and Lopez appealed.

On appeal, the court cited case law to support its finding that when Homeowners Choice denied Castro and Lopez’s claim, it foreclosed its right to later assert their failure to comply with the policy’s conditions precedent, leaving Castro and Lopez free to file a lawsuit for breach of the insurance contract at any time within the five-year statute of limitations period.

The court also rejected Homeowners Choice’s contention that Castro and Lopez’s subsequent submission of the FTE report and request to reconsider the claim constituted a reopening of the claim that somehow nullified its previous denial of coverage. Castro and Lopez’s policy did not include any reference to or definition of the term “reopened claim,” nor did it include any language that would inform an insured that an attempt to negotiate a settlement after a denial of coverage would act as a reopening of a claim that required the insured to comply with policy conditions precedent that it never initially invoked or requested. The court noted further that Florida insurance law did not define what constitutes the reopening of a claim of loss after a denial of coverage or reference any obligation that an insured comply with policy conditions precedent after the denial of coverage.

The court also pointed out that to file suit, Castro and Lopez were under no obligation first to provide Homeowners Choice the FTE report that contradicted the conclusion of the insurer’s engineer that the damage to the house was not caused by sinkhole activity.

The trial court’s decision was reversed and the case remanded for further proceedings. Castro vs. Homeowners Choice Insurance Company-District Court of Appeal of Florida, Second District-August 23, 2017-No. 2D15-5456.


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