Last week, a very able insurance defense attorney from Florida’s panhandle, Robert Palmer, brought Citizens Prop. Ins. Corp. v. Mallett, 7 So3d 552 (Fla. 3d DCA 2009), which involved prejudgment interest, to my attention. This case is not favorable to policyholders, especially in Northern Florida, and challenges a longstanding case, Independent Fire Ins. Co. v. Lugassy, which provides for prejudgment interest following denial.
The Mallett holding is fairly simple:
[T]he Malletts argue that the trial court erred in awarding prejudgment interest as of the date of the partial summary judgment rather than from the date their residence was damaged by the hurricane, September 16, 2004. …The policy issued to the Malletts provides that Citizens was not obliged to pay a claim for debris removal or law and ordinance coverage until twenty days after it reached a written agreement with the Malletts, or sixty days after entry of a final judgment on the claim or after the filing of an appraisal award or mediation settlement with Citizens. It is the terms of a contract for insurance which determine the date from which the coverage payment is due, as well as when interest is due on the amounts payable.
The court denied the award of prejudgment interest.
Following a denial of coverage, Independent Fire Ins. Co. v. Lugassy, 593 So. 2d 570 (Fla. 3rd DCA 1992), allowed prejudgment interest upon the following grounds:
Holding the insurer liable for prejudgment interest recoverable from the time of the loss-where there is a wrongful refusal to pay-is consistent with two public policies as expressed by the Supreme Court of Florida: (1) It encourages the prompt settlement of insurance claims, see Wollard v. Lloyd’s & Companies of Lloyd’s, 439 So.2d 217 (Fla.1983), and (2) corrects the inequity created in contracts crafted by insurers which would deny prejudgment interest to the insured as an element of just compensation for pecuniary loss. See Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212 (Fla.1985).
Obviously, the two cases cannot be reconciled. The issue will undoubtedly need resolution. Insurers should not feel they are safer to delay payment on this issue and escape the payment of interest. As discussed in Recent Third District Court Of Appeal Ruling Regarding Entitlement To Prejudgment Interest Following An Appraisal Award In Florida, Florida Statute §627.70131(5)(a), provides:
Insurer’s duty to acknowledge communications regarding claims; investigation.
(5) (a) Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of a claim or portion of a claim paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, shall bear interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy. If there is a right to prejudgment interest, the insured shall select whether to receive prejudgment interest or interest under this subsection. Interest is payable when the claim or portion of the claim is paid. Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.