Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

Beginning in 1992 or 1993, Lennar-owned Village Builders started using Exterior Insulation and Finish System (“EIFS”), an imitation stucco siding product on homes it built. Lennar later learned that EIFS allowed the siding to trap water behind it and the materials underneath EIFS, causing damage to the materials underneath the EIFS by ongoing exposure to moisture. Lennar decided to stop EIFS in the first part of 1998, but by that time, Village Builders had built about 400-500 homes in Houston.

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When a client decides to meet with me, the client is usually having a problem with the insurance company. If litigation is a possibility, one of the first questions a client asks is, "How long do I have until I need to file my case in court?" Unfortunately, the answer is not exactly clear cut.

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Whose law applies to insurance claims for hurricane damage? At first glance, one would expect the law of the jurisdiction where the hurricane took place to apply. Indeed, in most cases that would make the most sense for multiple reasons. However, this may not always be the case.

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Buckeye Technologies Inc., is a leading manufacturer and marketer of specialty fibers and nonwoven materials. Its goods are sold worldwide to makers of consumer and industrial goods. The publicly traded company is headquartered in Memphis, Tennessee, and operates several manufacturing facilities throughout the United States, Germany, and Canada. On Friday, February 17, 2012, Buckeye was forced to shut down its Foley Plant in Perry, Florida, following a malfunction in a high voltage electrical line and subsequent transformer failure in its power house.

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After four hurricanes hit Florida in 2004 and Hurricane Katrina’s massive Gulf Coast devastation in 2005, insurance companies cried wolf and cried poor. Many claims were wrongfully delayed and denied, and policyholders with and without claims were charged increased renewal premiums or lost insurance coverage all together. The rumors circulated that many insurance companies would go broke (and some did), but according to a Consumer Federation of America report released earlier this month, there was no noticeable impact on the overall profits or loss-ratios of property-casualty insurers in either 2004 or 2005.

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I often hear this question from public adjusters. First, have the policyholder hire an attorney, as I can not stress enough that an examination under oath is a critical point in the proceedings. Insureds may be easily tripped up by a savvy defense attorney, placing their claim in jeopardy. With that being said, there are several ways a PA may assist his/her policyholder in preparing for an examination under oath (EUO).

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Many policyholders face a thorny dilemma in disputing their insurance claim because of the fees and costs associated with litigation and the appraisal process. Even when a policyholder prevails and proves an insurer underpaid or a wrongfully denied a claim, the net recovery is reduced by litigation fees that were necessitated to obtain the benefits.

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Among the new proposed legislation making its way through the Colorado legislature this year is Colorado Senate Bill No. 38, “Concerning Measures To Protect Consumers Who Engage A Roofing Contractor To Perform Roofing Services On Residential Property.” The bill is sponsored by Democratic Senator Lois Tochtrop and Republican House Representative Glenn Vaad.

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I’d like to take this opportunity to tell you about a great symposium being put on by students at Texas Weslayan School of Law in Fort Worth, Texas.

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Generally speaking, when talking about bad faith claims in California, it involves unreasonable delay or withholding benefits to the insured. In most instances when an insurance carrier fully and promptly pays the benefits due to an insured, a bad faith claim is not viable. Even if the insurance adjuster’s conduct is hostile or over the top, in the absence of an unreasonable delay or withholding of benefit, case law indicates that no breach of contract or breach of the implied covenant of good faith and fair dealing exists. See Delgado v. Heritage Life Ins. Co.(1984) 157 Cal. App. 3d 262.

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On February 13, 2012, Jeremy Tyler wrote South Florida Juries Reach Different Conclusions In Late Notice Hurricane Cases, which discussed two recent hurricane cases that went to trial in South Florida courts. Following a verdict and judgment entered in a case, parties can seek review of the judgment by appeal. After a case proceeds through trial, the appellate court’s standard of review, or deference to the findings of fact and legal decisions at trial, can determine the outcome of an appeal.

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“If the facts don’t fit the theory, change the facts” – Albert Einstein

Unlike physicists and philosophers, lawyers, adjusters and accountants don’t have the luxury of changing hard facts when measuring, evaluating and adjusting business income claims. Einstein’s universal approach, however, does not mean that facts (or data in this context) should be destroyed or created to fit a particular accounting theory, it rather means that the source of data should be curiously evaluated to come up with simple solutions to the most complex problems.

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Folk singer Kevin Roth, thinks now is the time for Floridians to do something about the state run property insurance corporation and has put his thoughts to music. Roth was inspired to write his song about Citizens after he received a notice from Citizens indicating his coverage would now exclude his screened-porch and carport. Roth contacted his agent and learned that his premiums would also rise. The prospect of paying much more for less inspired Roth to write this song. He hopes it will raise awareness of the issue and that individuals will join together and take initiative to fix what Roth calls a "broken system." He recognizes that the problems with Citizens did not start because of Governor Rick Scott's action but he thinks policyholders need to voice their concerns to Governor Scott and not be apathetic to the situation.

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As most people have never had the pleasure of being browbeaten by an overzealous insurance defense attorney, insureds usually have no idea what is in store for them at an Examination Under Oath (EUO). First and foremost, I implore everyone reading this to hire an attorney before sitting for an EUO. While I know that sounds self-serving, I mean it. If a carrier requests an EUO, its representative will undoubtedly say something like, “We are here to evaluate all facts and circumstances surrounding this claim so that the carrier may make an informed assessment of the claim.” And while this may be true, many EUOs are called so insurance companies can find reasons to deny claims.

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My August 10, 2011 post, How Will Colorado Courts Calculate Damages and Penalties Under Colorado's Prompt Payment Statutes? discussed the relatively new statutes in Colorado which provide penalties against insurers including two times the covered insurance benefit, attorney’s fees, and costs to first party policyholders whose insurance benefits were unreasonably delayed or denied. The post specifically discussed the Vaccaro v. American Family Insurance Group district court opinion because it is one of the few cases where a court calculated damages and penalties under C.R.S. 10-3-1115 and 10-3-1116 (“the Statutes”).

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Reading an insurance policy can be extremely cumbersome to almost anyone. Many times it feels like the language is muddled and the policy is written in a foreign language. It may be even more disconcerting to an insured to find out that the courts do their best to strictly interpret insurance policies when a breach of contract claim arises between an insured and the insurance company. After all, what did the policy say in the first place? In California, we are fortunate because the law is clear. The law says that when the language of a contract (in this case the policy) is ambiguous, the ambiguous language must be construed against the insurer in favor of applying coverage to the claim. Two recent Eastern District Cases that came down in November 2011 just one day apart show that the courts are doing their best to strictly interpret the insurance policies that apply to coverage.

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In Bender Square Partners v. Factory Mutual Insurance Company, Bender Square Partners sought to recover for losses it suffered as a result of Hurricane Ike to one of its properties it leased to PNS Stores, Inc. According to the Plaintiff, the amounts it sought to recover were covered under a Commercial Property Insurance Policy that Factory Mutual Insurance Company (“FM Global”) issued to Big Lots, Inc. and its subsidiaries, one of which is PNS Stores (the “Policy”). Plaintiff alleged that FM Global improperly refused to pay and indemnify Plaintiff for all losses covered under the policy. As a result, Bender sought damages and other relief for FM Global’s alleged breach of the policy.

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After two recent trials in federal court in South Florida, two different juries found different results in allegedly late filed hurricane insurance claims. Most property insurance policies require that the policyholder notify the insurance company of loss or damage with some degree of expediency, however most policies do not specify when notice will be late enough to deny the claim. Under current Florida law, late notice will only bar an insurance claim if it prejudices the insurance company. If the notice is determined to be late, the insurance company is entitled to a presumption of prejudice that may be rebutted by the policyholder. See Bankers Ins. Co. v. Macias, 475 So. 2d 1216 (Fla. 1985).

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The issue of whether the 2005 Florida Statute sections 627.7065, 627 .7072, and 627.7073 (2005), which affected sinkhole database information, testing standards, and reporting requirements, created a presumption that shifted the burden of proof to the homeowner in litigation to disprove an insurer’s expert’s opinion that damage was not caused by a sinkhole has been in question for several years. Last month, the Florida Supreme Court definitively held the statutes do not create a presumption in litigation.

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It was 1992, the average price for a new home was approximately $122,500.00, Nirvana was topping the charts, and Jay Leno was taking over for Johnny Carson. The pop culture buzz surrounded the separation of Prince Charles and Princess Diana. Hurricane Andrew would hit the coast of Florida in August and cause a recording breaking amount of damage and destruction for our state. But there was another property damage issue in Florida that was not making national news.

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As noted in my previous legislative update, the Florida Legislature continues to move quickly on several relevant insurance bills. Today marks the midway point in the 2012 legislative session, and we’ve seen a lot of activity on insurance related bills in recent days. Many of the most egregiously anti-consumer bills have steadily move their way through the committee process, with only one or two stops left before a floor vote. Conversely, almost all of the bills we identified early on as pro-consumer seem dead on arrival – the exception being HB 1127 and SB 1347.

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Whether an insurer acted in bad faith is not always a clear. The resolution of a bad faith claim depends on the particular facts of each loss, when the insurer became aware of the facts, and the insurer’s intent in reacting to them. Often, a full trial is necessary to develop and present the facts necessary to resolve a bad faith claim.

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The Florida Legislature is currently in session and we are all anxiously waiting to see what changes are made to Florida’s insurance laws. But there is another important issue currently being considered that many non-lawyers are not aware of. This issue involves replacing Florida’s Frye test for the admissibility of expert witness testimony with the federal Daubert test.

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Fracking is the process of forcing water, chemicals and sand deep into underground shale formations to release natural gas. Fracking has recently become controversial because some allege it causes earthquakes sinkholes, or seepage, and water contamination.

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A few weeks ago, I wrote about a policyholder who refused to answer questions during his EUO. Hand-in-hand with that is: What if an insured gives an inaccurate answer during an EUO? The analysis should begin with the policy language – where else? Almost every insurance policy contains a fraud, misrepresentation, and concealment provision. Fraud is the willful intent to deceive. Misrepresentation is the willful act of giving information known to be incorrect. Concealment is the willful act of hiding facts or circumstances. The common thread is that all three acts must be willful.

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Over the years, the appraisal process seems to have become more complicated. Appraisal was meant to be an informal way for an insurance company and its insured to resolve claims. In recent years, appraisal has become a big ordeal in California. In order to properly prepare for appraisal, it’s now advisable to have counsel and an appraiser who is an expert. Selecting an umpire experienced in calculating and handling the damages is also important to the appraisal’s outcome. Essentially, appraisal is now like a mini-trial. When an appraisal award is granted, the insured may seek to have the appraisal award vacated if the insured disagrees with the award damages calculations. Appraisal has limitations. It’s good to keep in mind that appraisal is not the only way to resolve a claim without litigation. If an insurance company is amenable, there are other alternatives, one of which is mediation.

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In June 2007, the city of Lubbock contracted with Lee Lewis Construction to build Phase 1 of the Lubbock Youth Sports Complex. Lee Lewis entered into a subcontract with Allen Butler Construction, Inc. (“Allen Butler”) to handle site clearing, excavation, grading, paving, sidewalks and related work. Allen Butler later entered into a subcontract with DHD Concrete L.L.C. (“DHD”) to construct the concrete apron and sidewalks. The Allen Butler contract with DHD required DHD to obtain commercial general liability coverage, which DHD purchased from American Economy Insurance Company (“AEIC”).

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In a recent case before the U.S. District Court in Ft. Lauderdale, the Court had to decide whether a policyholder’s expert should be allowed to testify on certain issues in the trial of the case involving Hurricane Wilma damages. Clena Investments, Inc. v. XL Specialty Ins. Co., 2012 WL 266422 (S.D. Fla. January 30, 2012). Often in litigation, parties challenge the validity of the opposing side’s expert testimony, and the courts must resolve these disputes. In essence, courts acts as a gatekeepers in deciding whether to admit expert testimony.

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I attended the 13th Annual Windstorm Insurance Conference^® in Orlando last week. Windstorm is one of those rare meetings that bring all types of industry professionals together (regardless of affiliation) to engage in professional debates about the trends and issues recurring in the first party property and casualty industry.

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When Senate Bill 408 passed last May, several changes were made to Florida Statute 626.854, which defines public adjusters and limits the profession. Many of these changes and additions went into effect on January 1, 2012.

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Counsel for insurance companies often begin an Examination Under Oath (EUO) by informing the insured that they have a contractual obligation to give an EUO and that it is only necessary so that the insurance company can make an informed decision about the claim. I often have a hard time believing those attorneys, as it seems many EUOs are really used to delay the claim, intimidate the policyholders, and to find reasons to deny the claim. But where does the truth lie? What are the practical reasons insurance companies demand an EUO?

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On January 6, 2012, a trial judge in Hernando County, Florida, held that a specific monetary “cure amount” and specific policy language are not required in a Civil Remedy Notice. The filing of a Civil Remedy Notice is a condition precedent to bringing a statutory bad faith action under Florida Statute 624.155.

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Last week, I blogged about California case law and how California has influenced the modern day tort of bad faith in almost nineteen (19) different states. As I research and come to familiarize myself with the laws of Hawaii and insurance bad faith in Hawaii, I find that Hawaii’s bad faith laws and statues are not only heavily influenced by California case law, but that Hawaii is truly a jurisdiction where bad faith is just beginning to emerge.

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