In part one of this series, located here, I discussed the inherent contradiction that arises when insurers deny claims citing conflicting policy provisions. This follow-up is aimed at reviewing how Florida courts have dealt with this persistent issue.

As I previously discussed, perhaps the most prevalent example of insurers relying on inconsistent policy provisions is when a denial letter cites an excluded cause of loss while simultaneously alleging that it was prejudiced by late notice/reporting of the claim. The contradictory language contained in these denial letters demonstrate this logical inconsistency to such a great degree it is worth citing a second time.

These denial letters contain language such as the following:

Based on the inspection, our investigation determined that the damage to your roof appears to be related to a lack of maintenance, wear and tear, and deterioration, which is not covered by your policy. (Emphasis added).

Further, due to the amount of time that has elapsed since the alleged date of loss, [Insurance Company] is unable to determine the cause of the claimed damages, and therefore, has been prejudiced in its investigation. (Emphasis added).

Simultaneously relying on these two provisions in denying a claim represents a blatant contradiction, and Florida courts agree. The underlying principle at issue is as follows: Under Florida law, an insured’s failure to comply with a mandatory contractual provision requiring it to provide written notice to the insurer of a claim in a “timely” or “prompt” manner may negate an insurer’s coverage obligation, but only if the insurer is actually prejudiced by the late notice.1 The insured, however, can rebut that presumption by introducing evidence tending to show that the insurer was in fact not prejudiced by the late notice of the claim.

While this principle is relatively well established, the remaining controversy stems from determining whether the insurer was in fact prejudiced in its investigation due to “late notice” of the claim. This is where the courts have consistently held that relying on two conflicting policy provisions leads to a potential waiver of the late notice defense.

In Keenan Hopkins Schmidt & Stowell Contractors, Inc. v. Cont’l Cas. Co., 653 F. Supp. 2d 1255, 1262 (M.D. Fla. 2009), the United States District Court for the Middle District of Florida was tasked with reviewing a litany of issues contained in the insurer’s (Continental’s) motion for summary judgement. While the court ultimately granted the MSJ, the analysis of Continental’s late notice defense contained in Section B. “Continental Was Not Prejudiced by Late Notice of Keenan’s Claim” is worth considering.

The following demonstrates the court’s position regarding Continental’s attempt to allege prejudice due to late notice of the claim:

Florida courts have uniformly held that where an insured possesses enough information to permit it to deny the claim on other grounds (and it actually did deny the claim on other grounds), it waives its right to object to coverage on the basis that the insured failed to provide timely notice of the claim.2

In the present case, regardless of whether Continental was required to comply with the statutory guidelines for asserting a late-notice defense, the record reflects that Continental denied coverage—some ten months after receiving notice of the claim—premised not upon the late notice or any resulting detrimental effect on its ability to investigate the claim, but upon Continental’s interpretation and application of the terms of the contract itself. As the Florida Court of Appeals has also concluded under similar circumstances, this Court “cannot conceive that [the defendant] would not have also denied liability on these same grounds had the notice been timely.” (Citation omitted). The fact that Continental was able to investigate the claim sufficiently to permit it to deny the claim on other grounds effectively rebuts any presumption of prejudice arising from the late notice. Consequently, Continental has not established that it is entitled to summary judgment on that basis.3 (Emphasis added).

As this case demonstrates, an insurer’s ability to investigate and deny a claim on grounds other than late notice effectively rebuts any presumption of prejudice arising from the late notice. Applying this reasoning to correspondence such as that cited at the outset of this blog post leads to the same conclusion reached by the court in Keenan: Determining that the damages in a given claim are related to a lack of maintenance, wear and tear, deterioration, or any other excluded cause of loss effectively waives the right to rely on prejudice as a basis for denying claims.

One may speculate as to the number of different arguments insurers will seek to proffer refuting this self-evident principle, but the response to those efforts is simple and straightforward. Relying on two conflicting policy provisions concurrently is a logical inconsistency, and for those that are still not convinced, I refer you to a simple Google search of the following:

What does logical inconsistency mean?
Internal Contradiction
(also known as: internal contradiction, logical inconsistency) Description: In terms of a fallacious argument, two or more propositions are asserted that cannot both possibly be true. In a more general sense, holding two or more views/beliefs that cannot all be true together.4 (Emphasis added).

It cannot possibly be true that an investigation both determined that the loss was caused by an excluded peril, while the investigation was simultaneously unable to determine the cause of the claimed damage due to prejudice from late notice of the claim. That is a logical inconsistency.
1 Keenan Hopkins Schmidt & Stowell Contractors, Inc. v. Cont’l Cas. Co., 653 F. Supp. 2d 1255, 1262 (M.D. Fla. 2009), citing Tiedtke v. Fid. & Cas. Co. of New York, 222 So.2d 206, 209 (Fla.1969).
2 Id. citing Nationwide Mut. Fire Ins. Co. v. Beville, 825 So.2d 999, 1004 (Fla. 4th Dist.Ct.App.2002); Wegener v. Int’l Bankers Ins. Co., 494 So.2d 259, 259 (Fla. 3d Dist.Ct.App.1986); Hartford Accident & Indem. Co. v. Phelps, 294 So.2d 362, 365 (Fla. 1st Dist.Ct.App.1974).
3 Keenan, at 1263.
4 Definition of Logical Inconsistency via Google