Hurricanes are known for outrageously destructive forces that can reduce manmade structures to rubble in the blink of an eye. If man can build a structure once, man can rebuild it or repair it after a hurricane damages it. When repairing or rebuilding, it is important to keep track of the construction, especially if insurance is paying for those repairs. Records of what was damaged, what was not, what has been repaired, and what still needs to be repaired will help a property owner avoid complications if the owner changes insurance companies or if another hurricane hits. Unfortunately for the property owner, in Landmark Am. Ins. Co. v. Moulton Properties, Inc., 09-15396, 2011 WL 3962636 (11th Cir. Sept. 8, 2011), a second hurricane hit and it had just changed insurance companies.
Hurricane Ivan struck the Florida panhandle in September of 2004, causing significant damage to the Moulton properties. The Moulton owner filed a claim with its insurer, St. Paul / Travelers Insurance Company. St. Paul estimated the damage at around $2.2 million and notified the owner that it would not renew the policy upon expiration. The Moulton owner shopped for new insurance and ultimately procured it with Landmark American Insurance Company and Arch Specialty Insurance Company. In July of 2005, just a few days after the new policies were in place, Hurricane Dennis made landfall on the Florida panhandle. The Moulton owner filed an insurance claim for the damage Dennis caused, but Landmark’s adjusters attributed much of the reported damage to Hurricane Ivan rather than Dennis. Landmark then sought to rescind the policy, alleging that the Moulton owner misrepresented the damage and repairs that had been completed after Hurricane Ivan.
Landmark sued to rescind the policy, and the Moulton owner counterclaimed alleging that Landmark did not properly pay for damage caused by Hurricane Dennis. The district court effectively dismissed all claims and gave Landmark the opportunity to pay for Hurricane Dennis damage. Both sides appealed. The Eleventh Circuit Court of Appeals looked at several issues in the appeal, but ended up sending the case back down to the district court to determine whether the Moulton owner made misrepresentations in the application for insurance to Landmark. The Court focused on the following statement in the application:
IVAN—all repairs have been completed, the total loss (on the master program which includes several buildings that are not on our schedule—total loss was estimated @ $2.2MM).
This statement appears to have contradicted other statements made by the Moulton owner and its representatives that the damage was still being worked out when it applied for insurance with Landmark. Although the Landmark policy provided coverage subject to the prior Hurricane Ivan damage, the Eleventh Circuit held that the district court needed to address whether the statement that repairs had been completed was a material misrepresentation in the application. Under the facts listed in the opinion, it appears that the statement may not have been true, but in light of Landmark’s issuance of the policy “subject to” Hurricane Ivan damage, questions remain as to whether this statement was material in issuance of the policy. For more information on what errors in an insurance application are material, see Corey Harris’ post “Errors in Insurance Applications May Leave You With No Coverage” on the Condominium Insurance Law Blog, and my post, “More on Errors in Insurance Applications.” As always, if you have an issue with an insurance application, please contact competent legal counsel.