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

While waiver and estoppel have been held applicable to nearly every area in which an insurer may deny liability, some jurisdictions hold these concepts are not available to prevent an insurer from denying coverage where it knows the policyholder is not in compliance with policy conditions. The justification for this rule is the insurer should not be required by waiver or estoppel to pay a loss for which it did not charge a premium. Fortunately for policyholders, when an insurer issues a policy with knowledge that a condition under the policy is arguably not met, many courts find the insurer has waived that provision and is estopped from denying coverage.

The Supreme Court of Arkansas extended the waiver and estoppel doctrines to provide coverage under an insurance policy in Home Mut. Fire Ins. Co. v. Riley, 480 S.W.2d 957 (1972). In Riley, the insured notified the insurer that a tenant was moving out of the insured property. The agent made no mention of the policy requirement that coverage would be dropped if the house remained unoccupied for 30 days. The insured was told by the insurer that the residence was still covered, even though it remained unoccupied for more than 30 days. After a fire destroyed the insured property, the insurer denied coverage, citing the unoccupancy exclusion. The Court found this evidence was sufficient to show waiver of the occupancy requirement and ruled the insurer was estopped from denying coverage.

Likewise, the Supreme Court of Indiana, in Huff v. Travelers Indemnity Company, 363 N.E.2d 985, 993 (Ind. 1977), described this type of provision as a “broken condition” that cannot be breached. When a policy is agreed to, even though one of the terms is openly violated at the time of formation, the policy should be read and enforced as if the condition did not exist. A policy entered into with “broken conditions” cannot be breached for non-compliance with those conditions.

These courts, among others, continue to protect policyholders from unfair treatment by insurance companies. But policyholders cannot count on courts to protect them against their own mistakes. Policyholders should read their policies, and ask their insurers to clarify any questionable provisions.

In Boone, the Boones alleged that because Safeco unconditionally denied some of their claims, the denial waived Safeco’s right to seek appraisal. In its analysis, the Court referenced a recent Texas Supreme Court decision, State Farm Lloyds v. Johnson, 290 S.W. 3d 886 (Tex. 2009), which held that an insurer may dispute the extent of coverage and deny certain claims without waiving the right to appraisal. The Court followed the Texas Supreme Court’s ruling in State Farm Lloyds, and ruled in favor of Safeco on this issue.

The Boones also argued that Safeco waived appraisal by anticipatorily breaching the contract by failing to comply with another policy provision, however, the Court also found that argument unpersuasive. The Court noted that at least one Texas court had explicitly rejected breach of contract as grounds for finding that an insurance company had waived its right to seek appraisal. The Court quoted the recent decision in Sanchez v. Prop. & Cas., Ins. Co. of Hartford, No. H-09-1736, 2010 WL 413687 (S.D. Tex. January 27, 2010):

If insureds could escape appraisal by merely alleging an anticipatory breach (or repudiation) whenever there is a dispute over coverage or claims handling, appraisal clauses would be virtually a nullity. Such a result is in direct contravention of the strong public policy in favor of enforcing such clauses.

The Court noted that for the Boones’ argument to be successful, they would have to show that the insurance company’s failures with respect to complying with other policy provisions constituted an “intentional relinquishment of the right to seek an appraisal by evidencing an intent to dispense with the policy’s requirements that enable the insurer to arrive at the amount of the loss.” The Court concluded that the alleged breaches by Safeco did not show waiver and, therefore, did not preclude its invocation of appraisal.

As you can tell from Boone v. Safeco Ins. Co. of Indiana, Texas maintains a strong public policy in favor of appraisal. In Boone, the Plaintiff’s lawyers presented these two interesting arguments in favor of waiver, but the Court shot both of them down. Policyholder lawyers will continue to pursue innovative arguments to persuade Texas courts to find waiver of appraisal by the insurer.

The Florida appellate court found as follows:

We have held that “the insured must meet all of the policy's post-loss obligations before appraisal may be compelled.” U.S. Fid. & Guar. Co. v. Romay, 744 So.2d 467, 468 (Fla. 3d DCA 1999) (en banc). This includes the obligation to submit to an EUO. Id. at 469. Our court has said, “ ‘[T]he failure to submit to an examination under oath is a material breach of the policy which will relieve the insurer of its liability to pay.’ “ Stringer v. Fireman's Fund Ins. Co., 622 So.2d 145, 146 (Fla. 3d DCA 1993). The insurer argues that, at a minimum, the lawsuit must be dismissed and appraisal must be denied.

We agree with the trial court in rejecting the insurer's arguments. First, the insured and his wife appeared for the EUO at the designated time and place. The substantial issue before the trial court was whether the insured and his wife were justified in leaving the EUO. The insured testified that he was badgered and yelled at, and that he was required to answer the identical series of questions twice, once in English and once in Creole.

After the insured's exit from the EUO, he obtained counsel who offered to present the insured and his wife for a resumption of the EUO. This was before the insured filed suit against the insurer. The insurer refused the offer. It was not until after the insurer refused the offer that the insured filed suit. On these facts we entirely agree with the trial court that the lawsuit was not premature, and appraisal was properly ordered. (emphasis added)

There are a number of lessons to be learned from this case. First, policyholders should seek to retain counsel to prepare them for and attend the examination under oath. Usually, reputable policyholder's counsel can move the matter along.

Second, the demeanor of opposing counsel and the insurer is important. Professional conduct is required of insurance counsel. Policyholders and policyholder's counsel should indicate on the record when the tone of the questioning by the insurer's counsel becomes badgering, demeaning, unfair, or unprofessional. Insurers and their representatives have an obligation to cooperate and treat their customers in good faith.

Finally, refusing to adjust, investigate or take any action in response to a reasonable request by  recently retained policyholder's counsel may not be the best course of action for an insurer, especially after prior problems dealing with the insured. The insurer should not force a situation where the insured is not in compliance with technical pre-loss conditions and then use it as an excuse to avoid payment obligations. This has become a frequent tactic by some insurers and their counsel.

"Wouldn't it be nice" if insurers and policyholders cooperated and got along with each other? 


 

In Sanchez v. Prop. and Cas. Ins. Co. of Hartford, No. 09-1736, 2010 WL 413687 (S.D. Tex. Jan 27, 2010), the United States District Court for the Southern District of Texas recently found that Hartford Insurance Company waived its right to appraisal by taking too long to invoke the process. In Sanchez, Hartford’s appraisal clause did not specify a time frame for when a party could invoke the appraisal process. The Court noted that:

[w]hen a policy is silent as to time, the law will require that the demand for appraisal be made within a reasonable amount of time.

Some of you may now be wondering how a court calculates a “reasonable amount of time.” Fortunately, the Court shed some light on this question in Sanchez:

The proper point of reference for determining whether an insurer waived the right to invoke appraisal by delay is the point at which the insurer knew the appraisal clause could be invoked because of a disagreement over the amount of damages, that is, the point of impasse with the insured.

In Sanchez, the insured first informed Hartford of his claim for damages to his house from Hurricane Ike on October 26, 2008. Following inspection, Hartford sent a letter to the insured denying any payment on October 31, 2008. On November 1, 2008, the insured called Hartford to dispute the repair estimate. Hartford’s representative informed the insured that because Hartford’s final position was that the amount of covered damages did not exceed the deductible, no payment would be issued. The Court stated that:

[t]he parties’ diametrically opposed positions on the amount of damages suffered from the Hurricane, clearly articulated in the phone call, establish[ed] that an impasse had been reached.

Hartford was then on notice that it had the right to invoke the appraisal clause, and the Court used November 1, 2008, as the date from which to determine whether Hartford waived appraisal by failing to timely invoke its right. The Court found that because Hartford invoked the appraisal clause on October 15, 2009, and because Hartford produced no evidence that its delay in requesting an appraisal was due to a good faith attempt to ascertain the amount of damages, Hartford had waived its right to appraisal.

I hope none of you take this to mean that Texas courts will find waiver in all cases where the insurer takes a long time to invoke its right to appraisal. Every case is different – with each having its own unique set of facts – and a court will determine waiver if and when the issue arises. However, this is definitely something to keep in the back of your mind for those instances when a carrier is seemingly dragging its feet with respect to appraisal. If the facts are right in your particular case, a carrier could find itself out of luck and unable to invoke its appraisal clause.

Given the age of the case precedent in Texas regarding appraisal disputes, it seems appropriate to remember some other “oldies but goodies.”

What is a waiver in Texas? It is an intentional relinquishment of a right actually known, or intentional conduct inconsistent with claiming that right; estoppel prevents one party from misleading another to the other’s detriment or to the misleading party’s own benefit.

If the insurance adjuster does not identify the coverage issue when presented with it and leads the insured into believing that he/she is insured for the loss, and in reliance on it, the insured makes business decisions that result in more of a loss from additional damages to the property or additional out of pocket expenses, has the insurance company waived the exclusions or is it estopped from denying coverage?

In Texas, the Supreme Court explained the law on waiver and estoppel:

If an insurance contract covers certain risks but the policy contains exclusions or limitations of coverage, when the insured makes a claim for loss from a covered risk, the insurer must assert any applicable exclusion or limitation to avoid liability. Ulico Casualty Company v. Allied Pilots Association, 262 SW 3d 773, 778(Tex. 2008); citing to Employers Cas. Co. v. Block, 744 SW 2d 940, 943-44 (Tex. 1988).

Earlier decisions in Texas are consistent with the analysis above. Republic Ins. Co. v. Hope, 557 SW2d 603 (Tex. Civ. App. 1977); T.I.M.E., Inc. v. Maryland Casualty Company, 157 Tex. 21, 300 S.W.2d 68, 73 (1957); Camden Fire Ins. Ass'n v. Moore, 206 S.W.2d 104, 107 (Tex.Civ.App. Galveston 1947, writ ref. n. r. e.).

In Hope, the insured was a builder for 20 years and was in the process of building a home when vandals stole thousands of dollars worth of equipment. Republic argued the vacancy provision, stating the property was not occupied for 90 days, so theft and vandalism were excluded causes of loss. The Court reasoned that when several instruments form one overall contract, the court will assume in its construction of the contract that the parties honestly intended the terms of the various instruments should be effective to accomplish their purposes, and will reconcile apparently conflicting provisions to give effect to all of them, if possible. The Court construed the instruments in question to provide plaintiffs Builders' Risk coverage on the structure of the house at an increasing value as construction progressed until thirty days after construction was completed. Having construed the insurance policy as an “all risk” policy, in failing to plead the vacancy exclusion, the court held Republic waived the vacancy exclusion.

What is the difference between your case with the secretary acting in an agent capacity and an adjuster acting in a claims settlement capacity for the insurer? Are the sales agent's actions more binding than the claims adjusters’ actions? I realize there are two topics here, but it would be very informative if you could enlighten the subscribers as to who may become an "agent" of the insurer during a claim, when estoppel applies, to whom it applies and if there is any case law on this issue.

First, let me say that there is generally not any significant difference between the ability of a claims adjuster and a sales agent to bind an insurer. Although someone on the loss adjustment side of the company and someone in the sales department have vastly different roles, their position is not the main determining factor. The main point to look at is whether an ordinary person would have a reasonable belief that the individual employee has the authority to make statements which would bind an insurer. This is usually fact intensive and can involve the individual’s title, what authority he held himself out as having, as well as what actions the company took to instill this belief. Therefore, depending on the situation, there is little difference in the ability of an adjuster and a sales representative when it comes to binding an insurer.

In general, everyone that works for an insurer is an “agent” of that company in some respect. I know there are probably some industry people who might not agree with that statement, but in the end, if someone is an employee, they are technically an agent. If a low level employee did something that reflected negatively on the company, he would likely be fired because his actions reflected badly on the company. Therefore, although a person may technically be an agent of the company, he may not have the authority to bind the company.

The determining question is whether the person has actual or apparent authority to bind the insurer. His position may be enough in some situations. For example, the night janitor might serve a vital function at the company, but would it be reasonable for someone to believe that he had the authority to make binding statements on company policy? Probably not. A director, on the other hand, likely would have the authority to bind the company because of his position alone.

Most of the issues of who has the authority to bind an insurer are not so clear cut. Insurance companies are large, complex organizations. Therefore, it is important to look at how the individual projects himself to the public as well as his job title. If the person flat out says that he has the authority to make binding decisions, the insurer will be hard pressed to show that the policyholder should not have relied upon his statements and actions. Similarly, if the individual has made binding decisions in the past, the same would be true.

Also, how the insurer has acted in regards to that individual’s ability to bind the company is important. If the individual has made binding decisions in the past and the insurer has not objected, the insurer will have a difficult time explaining why it is now saying that he does not have this power.

The legal terms for the types of authority are actual and implied. Actual authority occurs when the person is entitled to make binding decisions on behalf of the insurer. If this is the case, then there is likely no argument that his decisions were not final. Implied authority is more fact intensive and involves looking at the factors mentioned above.

While there is no comprehensive list of who is an “agent” with binding authority, some court cases have mentioned specific people that generally have the authority to do things like waive policy conditions.

For example in Florida:

An insurance adjuster is a special agent for the company and his powers and authority are prima facie coextensive with the business intrusted to his care…which is ascertaining and determining the amount of any claim, loss or damage payable under an insurance contract, and/or effecting settlement of such claim, loss or damage. F.S. ss 626.0404 and 626.0405, F.S.A. The acts of an adjuster within the apparent scope of his authority are binding on the company without notice to the insured of limitations on his powers. Old Republic Ins. Co. v. Von Onweller Const. Co., 239 So.2d 503, 504 (2nd DCA 1970.)

The acts of an agent [referring to a broker], performed within the scope of his real or apparent authority, are binding upon his principal. The public have a right to rely upon an agent's apparent authority, and are not bound to inquire as to his special power, unless the circumstances are such as to put them upon inquiry.” Hughes v. Pierce, 141 So.2d 280, 284 (Fla. 1st 1961).

In Texas:

…it does not follow that one employed as an adjuster may not also be vested with authority to bind the insurance company by a waiver of a breach by the insured of some warranty on his part relative to his policy of insurance, to the same extent as any other representative of the company. And, in the absence of any proof to the contrary, we believe that the facts and circumstances related above, prima facie, were sufficient to show that it was in the apparent scope of the authority of [the adjuster] as a representative of the company to bind the company to waivers pleaded by the appellee, and to [the adjuster’s] agreement to pay the losses claimed by the plaintiff. Home Insurance Co. v. Moriarty, 37 S. W. 628 (Tex. Civ. App.)

These cases all stand for the proposition that many individuals on both the adjustment and sales side of insurance can bind the insurer, however, it is important to note that some cases go the other way. Over the past few months. I have heard horror stories about the plight of the policyholders in Texas, and the courts could come down on either side when evaluating these issues. Therefore, make sure everything is well documented and in writing, so that you have the best chances.

Also note that the NFIP has completely different rules when it comes to waiver and estoppel. As the policy states, only FEMA may waive the requirement that an insured submit a Proof of Loss. When a policy is this explicit, relying on a verbal or written waiver by someone other than the individuals listed in the policy may provide the insurer with a reason to deny the claim entirely. In the case of the National Flood Insurance Policies, you can almost be guaranteed of it. See Sanz v. United States Security Insurance Co., 328 F.3d 1314 (11th Cir.2003)(holding the Proof of Loss requirements may be waived, but to be effective the waiver must be made by the Federal Insurance Administrator and must be in writing).

Later, the insurer came back and demanded a Proof of Loss be submitted. At that point, the public adjuster wanted to dig in our heels and refuse to comply, however, I had a different perspective. Why not submit the Proof as requested, even though they have likely waived their right? Does the potential harm outweigh the good? In the end, we submitted the Proof as requested. The reasoning behind this decision is partially spelled out below. Keep in mind, these reasons applied to this specific case and other instances may call for a different response.

First, when dealing with any litigation it is important not to start so many battles that it takes the focus off the overall goal: recovering the amounts due and owed under the policy. We could have refused to submit a Proof and argued that the insurer waived its right to request one, however, it would have started battle that did not need to be fought. This would have taken our time and attention away from the more important task of proving coverage for the overall claim.

Second, the repercussions of not submitting a Proof of Loss can be far greater than the rewards. As I have discussed in previous posts, failing to submit a Proof of Loss when required to do so can be a breach of the insured’s post loss obligations. Sure, I could have argued that the insurer had waived its right to a Proof of Loss, and there is an excellent chance the court would have agreed. But is the risk worth the reward? Even in a case that seemed as clear as this one I did not believe it was.

Third, the information required for filling out the Proof of Loss was readily available to us. The PA had estimates already put together; it was just a matter of putting the information down on the form. I realize that in many instances the circumstances are different. All of the estimates may not be completed and filling out the Proof may be difficult or impossible because damages have not been fully established. In these cases, the insured should immediately request an extension, indefinite if possible, to make sure the timeframe for filing the Proof does not run out. Let the insurer know that you will comply with the demand, but that you need a longer period of time to gather the necessary information. As always, make sure you get the insurer’s response IN WRITING, so there is no confusion later.

Fourth, I find that avoiding small confrontations like this can help the claim move along much more smoothly. In some instances, complying with requests like this even when the insurer may not have the right to request it, can help garner some good will with the insurer or opposing counsel. Avoiding a potentially large fight by complying with a request that does not harm your client can help move the claim along to a favorable resolution.

Now, I know some of you may think that I am being naïve that there is nothing you can do to make some insurance representatives and defense attorneys behave like civilized and caring human beings. It is important to remember that, for the most part, they do have feelings and a little good will may go a long way. And hey, even if it doesn’t, you can still use the instance to show the court how hard the policyholder tried to cooperate.

With that said, it is important to note that, as I discussed in a previous post, What is a Proof of Loss, and What Purpose Does it Serve?, the Proof of Loss requirement protects the insurer. It helps the insurer gain a clearer perspective on the scope of the loss and aids it in determining coverage issues. This protection, like many other policy provisions designed to protect the insurer, can sometimes be waived. When this waiver occurs, the policy is read as if the Proof requirement has been struck from the contract.

There is a split of authority on when waiver may occur, if at all. Some courts have held that for waiver to be effective the insurer must do so before the end of the time period for filing the Proof, in accordance with an applicable policy provision or statute. In other circumstances, such as when a claim has been denied, some courts have found that waiver can occur outside of the normal 60 day period. See Connecticut Fire Ins. Co. v. Fox, 361 F.2d 1 (10th Cir. 1966). Either way, anyone involved in a claim should keep a thorough timeline detailing all statements and actions which might give rise to a claim for waiver so that it can be more easily determined when the waiver was actually effectuated.

There are generally two ways by which an insurer can waive a Proof of Loss requirement. First, the insurer may expressly waive the requirement either verbally or in writing. Second, waiver may be implied from an act or pattern of conduct by the insurer or its authorized agents that reasonably tends to create a belief in the mind of the policyholder that Proofs of Loss will be unnecessary.

Because of the breadth of information on both express and implied waiver, I have decided to break this down into a two week section. This week, I will focus on express, and next week we will delve into implied.

An insurer can expressly notify the insured in writing or verbally of its intent to waive the requirement. There are many reasons why an insurer may want to waive the Proof of Loss requirement, but, as with many other aspects of a claim, it is always a good idea for the insured to obtain a written confirmation. This can help head off any attempt by the insurer to later deny that the waiver occurred. Also, many policies state that no policy provision may be waived except by written agreement or endorsement. If this is the case, you should make every effort to get the waiver in writing. Doing this follow up could make all the difference in a claim and could prevent a plethora of headaches as you go forward.

There are some jurisdictions, however, which have held that such language may not prevent an insurer from orally waiving the Proof requirements. One Colorado case, for instance, stated:

The plaintiff here has raised the issues of waiver and estoppel in his summary judgment pleadings. Although timely compliance is generally a condition precedent to the insurer's liability, a satisfactory excuse for noncompliance may be shown. Capital Fixture & Supply Co. v. National Fire Insurance Co., 131 Colo. 64, 279 P.2d 435 (1955). A subsequent waiver of the conditions would constitute a valid excuse. Thus, there exists a genuine issue of fact as to whether plaintiff was induced by an agent of defendant to delay his filings.

Defendant argues that such a result is precluded here as a matter of law because the policy required all waivers to be in writing. We disagree.

The question of whether a provision in an insurance contract requiring all waivers to be in writing applies to post-loss conditions was settled definitively as early as 1931. Concordia Insurance Co. v. School District No. 98, 282 U.S. 545, 51 S.Ct. 275, 75 L.Ed. 528 (1931). In Concordia, the Supreme Court held that non-waiver provisions “ha[ve] reference to those provisions and conditions which constitute part of the contract of insurance and [do] not apply to a waiver, after the loss occurs, of stipulations in respect of things to be done subsequent to the loss as prerequisites to adjustment and payment.” The overwhelming majority of modern cases follow the Concordia rule. See 5 S. Williston, Contracts § 766 (W. Jaeger 3d ed. 1961).

We are in accord with the Concordia rule and its rationale as expressed in the Tenth Circuit court opinion. In fact, it applies with special strength here, because the language of the non-waiver provision construed in Concordia does not differ in any significant way from the provision construed here. Thus, we hold that the contract's requirements for submitting a proof of loss statement and for filing suit could be waived, even in the absence of a writing, because they were both conditions required to be performed after the loss occurred.

Circle C Beef Co. v. Home Ins. Co., 654 P.2d 869 (Colo. Ct. App. 1982).

This case, and others like it, may afford some important protection to policyholders in various jurisdictions, however, this protection is not certain. Some jurisdictions will hold that any waiver that is not in writing is not effective, and therefore, failing to get a written confirmation of the insurer’s waiver could be problematic to a claim.

So what is the best course of action? Of course, if at all possible, file the Proof of Loss! However, be aware that there may be some circumstance where the requirement may be waived.