VOLUME XXII, NUMBER 4
April, 2010

FROM THE CORNER OFFICE

Robyn Feibusch has been appointed to Co-Chair the Legal Committee of FACAP, the Florida Advisory Committee on Arson Prevention, an organization dedicated to fight the battle against arson through its commitment to provide the highest level of expert education, professional training, arson awareness, legislative oversight, legal review and evaluations on all matters related to arson, in addition to maintaining and providing for an Arson Rewards Program available to law enforcement and citizens alike.

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INSURER NOT ENTITLED TO SUMMARY JUDGMENT IN LIGHT OF DISPUTED ISSUES AS TO WHETHER POLICY LIMITS WERE TIMELY TENDERED 

In Gutierrez v. Yochim, 34 Fla. L. Weekly D2325 (Fla. 2 nd DCA, November 13, 2009), the Second District Court of Appeal held that summary judgment was improperly entered in favor of an insurer defending against a bad faith claim. An insured involved in an automobile accident with a motorcycle claimed the insurer acted in bad faith because it failed to tender policy limits after learning of the catastrophic nature of the motorcyclist’s injuries.

On August 12, 2003, the insured veered her van directly into the path of a motorcyclist. The motorcyclist was ejected nineteen feet from his motorcycle, and was hospitalized for thirteen days before being transferred to a nursing home. The insured immediately notified the insurer of the accident and a claims adjuster was assigned to the claim. The adjuster advised the insured that the policy limits were $10,000 in property damage, and $10,000 in bodily injury. He further concluded that the insured was likely at fault. On August 20, the adjuster obtained an accident report which stated that the motorcyclist sustained incapacitating injuries.

On August 26, the motorcycle was appraised as a total loss and the $10,000 property damage limit was authorized to be tendered. In an August 29 advisory letter to the insured, the adjuster noted that the motorcyclist “sustained serious bodily injuries,” therefore, resolving the bodily injury claim within the policy limits may not be possible. In an October 9 letter to the motorcyclist, the adjuster expressed that he would like to settle the bodily injury claim as soon as possible, but would require his medical records and bills to accomplish this. The medical records authorization forms were sent by the motorcyclist’s attorney on December 19 and the records were ordered by the adjuster on January 13, 2004. It was not until April 1, almost eight months after the accident, that the $10,000 policy limits were formally tendered. In the meantime, the motorcyclist filed suit against the insured directly. The insured in turn filed a bad faith action against the insurer.

The insurer moved for summary judgment arguing it did not act in bad faith because it orally offered to settle for the policy limits within a day of receiving the motorcyclist’s medical records. The insured claimed the insurer failed to conduct a prompt and thorough investigation, and to understand its duty to tender policy limits as soon as the adjuster determined the claim would exceed them. The trial court granted summary judgment in favor of the insurer and the defendant appealed.

The Second District Court of Appeal reasoned that when defending its insured against a claim, an insurer has a duty to use the same degree of care and diligence that a person would exercise in the management of his own business. The court further noted that an insurer has a duty to investigate facts, and give fair consideration to a reasonable settlement offer if a reasonably prudent person, faced with the potential of paying the total recovery, would do so. Since a court can only grant summary judgment when there is a complete absence of genuine issues of material fact, the court was required to ascertain whether material factual issues existed. Florida courts consider the totality of the circumstances in each case, and ordinarily the determination as to whether the insurer disregarded the interest of its insured and acted in bad faith is a question for a jury. Thus, the appellate court reversed the trial court and stated that determining whether it was reasonable for the insurer to insist on additional medical information after knowing the claim would exceed the policy limits should be determined by a finder of fact.

John A. Wagner

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INSURED TRANSPORTATION COMPANY ENTITLED TO NO FAULT COVERAGE FOR AUTO COLLISION DESPITE DRIVER NOT HAVING BEEN PRE-APPROVED

In Freeburg Enterprises, Inc. v. Transportation Cas. Ins. Co., 33 Fla. L. Weekly D2362 (Fla. 2d DCA 2008), the Second District reversed the trial court’s ruling of no coverage under a commercial liability policy because the insured failed to have its employee driver approved by the carrier before allowing him to drive. The insured auto transport company purchased a commercial lines policy which included an endorsement that defined as an insured only the drivers listed on the application schedule as of the date of the policy coverage began. Further, the endorsement provided that “[n]o coverage will apply to any driver newly placed in service after the policy begins until you report that driver to us and we advise you in writing that he/she is acceptable to us and that he/she is covered under the policy.” However, the endorsement also provided “[n]otwithstanding the foregoing, we will pay up to $10,000 in property damage and no fault benefits as required by Florida Law.”

Although insured’s driver had worked for the insured several times over the years, he was not employed by the insured when the policy was issued. Having rejoined the insured company several months after the policy was issued, the insured’s driver was involved in an accident.

The carrier sought declaratory judgment of no coverage for the subject accident claiming that the insured was in violation of the policy’s requirement that it obtain preapproval for the driver. The insured filed a counterclaim for breach of contract. Following a non-jury trial the trial court held that the policy did not provide any coverage because the insured had not complied with the preapproval requirement for the driver. On appeal the Second District addressed whether notwithstanding the failure to obtain approval, the insured was entitled to limited no fault coverage for the accident. The carrier argued that the $10,000 in property damage and no fault benefits were not “required by Florida Law,” as provided by the endorsement, because Florida Statute section 627.7275 (2003) stated that “[t]he policy, as to coverage of property damage liability, shall meet the applicable requirements of s. 324.151, subject to the usual policy exclusions such as have been approved in policy forms by the office.” The carrier took the position that the policy language requiring the insured to have its drivers preapproved was a “usual policy exclusion,” which excused the policy from meeting the statutory requirement with respect to coverage for property damage liability.

The Second District disagreed with the carrier. When interpreting an insurance contract, the courts look at the plain language of the policy. In accordance with the plain meaning of the phrase “[n]otwithstanding the foregoing,” the Second District read the endorsement to include a waiver of the preapproval provisions as to give limited coverage for up to $10,000 in property damage and no fault benefits “as required by Florida Law.” Even assuming that the policy’s preapproval requirements are considered “usual policy exclusions” as contemplated by the statute, the Court, nevertheless, rejected the carrier’s argument as it would render the policy provision meaningless and ambiguous. The Court explained that in the “course of one sentence, it would both waive the driver preapproval requirement for the purposes of coverage . . . and enforce the very same requirement in order to deny the very same coverage.” The Court stated that given that the provision of the policy endorsement is ambiguous, it must be interpreted against the drafter and in favor of the insured. The Court found a more reasonable interpretation to be that the driver preapproval requirement are disregarded in the context of the no fault provision, and that the property damage and no fault benefits are payable when they are required by law, as in this case.

Anna Garber

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LOSS CAUSED BY SHIFTING OF EARTH UNDER HOME DUE TO WATER LINE RUPTURE EXCLUDED, HOWEVER, COST TO REPAIR PLUMBING COVERED

In Margaret Liebel v. Nationwide Insurance Company of Florida, the Fourth District Court of Appeal affirmed a trial court’s holding that the “earth movement” provision of the subject “all-risk” policy unambiguously excluded coverage for the insured’s loss caused by shifting of the earth under the home which was caused by a water line rupturing. Liebel v. Nationwide Ins. Co. of Fla., 34 Fla. L. Weekly D2032 ( Fla. 4th DCA, October 7, 2009). However, the appellate court also found that the policy language regarding repair of the plumbing system created an ambiguity and as such, held that the trial court erred by failing to hold that the policy covered the cost of repairing the plumbing system.

The insured reported a claim with her insurance carrier, Nationwide Insurance Company of Florida (“Nationwide”) after she discovered a gap between the floor and the wall and her living room floor began to intensely sag and bend over a period of weeks. Every room in the house became separated from the walls and a wide crack formed in the middle of the living room. Pursuant to an inspection by an engineer, Nationwide determined that the insured’s damage was a result of escaping water which caused the soil beneath the home to erode and the foundation to settle. Based upon the inspection findings, Nationwide denied coverage for the insured’s loss. The insured filed suit against Nationwide for breach of contract alleging that Nationwide failed to pay her for all of the losses she sustained as provided for in the policy.

The court referred to the “guiding principle” of insurance contract interpretation, “that insurance contracts are construed in accordance with the plain language of the policy as bargained for by the parties.” The court noted that where policy language is susceptible to two reasonable interpretations, one providing coverage and the other excluding coverage, the policy is considered ambiguous. The court further noted that ambiguous coverage provisions are always construed strictly against the insurer that drafted the policy and liberally in favor of the insured.

The policy’s earth movement exclusion excepts from coverage “loss to any property resulting directly or indirectly” from “earth movement due to natural or unnatural causes,” with earth movement including “earth shifting, rising, or shrinking.” The court found the meaning of this exclusion to be plain and unambiguous and affirmed the trial court’s holding that the policy’s earth movement exclusion included the loss to the insured property.

The appellate court held that the trial court erred by not holding that the policy covered the cost of repairing the plumbing system. The subject policy provided that it did not cover damage caused by water from plumbing system that was otherwise excluded, but the policy also stated that “[w]e also cover the cost of tearing out and repairing any part of a building necessary to repair the system or appliance.” The court explained that these provisions created an ambiguity, as two or more reasonable interpretations of these intersecting provisions are feasible. The court found that a reasonable person could interpret the policy to exclude from coverage the damage caused by earth movement, but include the cost of repairing the water line that caused the loss.

The appellate court held that the policy did not specifically exclude the cost of repairing a plumbing system from its coverage; rather, it only specifically excluded damage caused by earth movement. The appellate court therefore remanded the case with directions to enter judgment in favor of the insured for the cost of tearing out and replacing any part of the house necessary to repair the water line.

Morgan A. Fairthorne