According to a recent Florida appellate court, it has. What a great description of the strategic basis for the increasing litigation in Florida regarding compliance with examinations under oath. Attorneys, adjusters and others involved in the first-party property insurance claims industry are likely aware of the tactics some insurers use to pull the rug out from under their policyholders by raising a technical failure to comply defense and arguing it is a complete bar to coverage for a claim.
[S]everal of Florida’s district courts of appeal have concluded that the failure of an insured to appear for an EUO prior to filing suit to recover an unpaid claim is a material breach of contract, requiring forfeiture of coverage. These decisions have led to a cottage industry of EUO litigation. If an insurer can procure a failure to comply—or, even better, a refusal to comply—with the EUO requirement, they have a perfect defense to payment. Similarly, if counsel for insureds can bait the insurer into refusing payment without adequate justification, this may trigger a bad faith claim. The actual, if unglamorous, true purpose of the EUO—verification of the insured’s loss—has been lost in this larger battle. No doubt there can be genuine instances of insurance fraud, but the recent and ever—escalating number of EUO cases that have arisen all over the state appear to be more about strategy than truth.
The case stemmed from an August 2004 Hurricane Charley claim. Whistler’s Park is currently a condominium association, but at the time of the loss was an apartment complex named Banana Cay Apartments, Inc., and doing business as Bristol Bay Apartments. The loss was reported to Southern Family Insurance, and after inspecting the property, the insurer issued a $363,000.00 payment to the insured for damages. The policyholder filed a Civil Remedy Notice of Insurer Violation with the Florida Department of Financial Services due to what it considered to be a grossly underestimated value of the loss. Southern Family requested an examination under oath of the policyholder’s representative, as well as voluminous documents. The policyholder’s attorney listed the corporate representative of the policyholder and informed Southern Family that it was now a condominium association operating under a new name.
In December 2005, the policyholder attorney’s letter to Southern Family stated that the insured is “assembling appropriate documents in response to your request. These documents will be made available for inspection and copying at my client’s headquarters . Given the holidays and related travel absences, I anticipate that the assembled documents will be ready for examination by mid to late January. As I mentioned yesterday, my client’s corporate representative is Kenneth G. Dixon.”
On December 20, 2005, Whistler’s Park filed suit against Southern Family for breach of the insurance contract and violations of chapter 624, Florida Statutes. Southern Family moved for summary judgment, asserting that the policyholder materially breached the policy by filing the lawsuit before complying with the EUO request. The Florida Insurance Guaranty Association (“FIGA”), became the successor to Southern Family, and was eventually named and involved in the lawsuit.
On January 15, 2007, the policyholder’s attorney requested that FIGA withdraw its motion for summary judgment because an EUO was never actually scheduled and there had been no refusal to attend one. The letter also reiterated a willingness to appear for an EUO or deposition. FIGA did not respond, and refused to withdraw its motion for summary judgment. It argued to the trial court that the policyholder failed to comply with the EUO request before filing the lawsuit, material breach by the policyholder that relieved the insurer from coverage. The trial court granted FIGA’s summary judgment and entered a final judgment in FIGA’s favor in June 2010, holding that the policyholder recover nothing due to the breach. This appeal followed.
The appellate court noted Southern Family requested an EUO, but never set a time or place for it. The policyholder’s attorney provided the name of the corporate representative, and when FIGA raised the failure to submit to an EUO as a defense, the offer to submit was renewed. Instead of taking the EUO, FIGA asserted that nothing could revive the claim.
The Fifth District held that in light of their recent decision in State Farm Mutual Automobile Insurance Company v. Curran, 83 So. 3d 793 (Fla. 5th DCA 2011), FIGA carried the burden of pleading and proving a breach that caused prejudice. FIGA did not plead or assert prejudice. The Court concluded its opinion with the statement:
The record evidence in this case indicates that the delay in obtaining Banana Cay’s EUO caused by Banana Cay’s failure to comply with Southern Family’s request to schedule an EUO prior to filing suit did not prejudice FIGA.
The Court reversed the trial court’s order and sent the case back to the trial court, where the policyholder will be able to continue to pursue the claim.
The downside to all of this and the “cottage industry of EUO litigation” is that, judicial resources, attorney’s fees and costs spent on a case like this are wasted. Not to mention the several years. In this light, the appellate court’s comment that cases litigated in this way appear to be “more about strategy than truth” seems an accurate observation.