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By: Adam P. Reichel
Under Florida law, an insured may in certain situations avoid forfeiture of coverage, despite failing to submit a proof of loss statement. If the insured can show that the insurer was not prejudiced by the insured’s breach of the condition precedent or that the insurer issued its coverage decision before the time allotted to submit the proof of loss had expired, a court may determine that coverage is not forfeited for lack of a proof of loss. The purpose of the proof of loss provision in insurance policies is to inform the insurer of facts surrounding the loss, and to afford the insurer of an adequate opportunity to investigate, prevent fraud, and form an intelligent estimate of its rights and liabilities before it is obliged to pay. Allstate Fla. Ins. Co. v. Farmer, 104 So. 3d 1242, 1246 (Fla. 5th DCA 2012).
Since the start of 2023, two appellate courts have applied Florida law to reverse grants of summary judgment in favor of the insurer because the insured was able to show that its breach of the condition precedent to coverage did not prejudice the insurer as a matter of law. One of the decisions held that the condition had been waived.
First, in Martinez v. Universal Prop. & Cas. Ins. Co., Florida’s District Court of Appeals held that the trial court erred in granting summary judgment in favor of the insurer both because there was evidence that the insurer was not prejudiced by its insured’s failure to submit its proof of loss statement and because the insured had waived the condition. 355 So.3d 560 (Fla. 5th DCA 2023). The trial court had granted summary judgment because the insured failed to file a sworn proof of loss statement prior to filing suit against its insurer, a condition precedent under the policy. Id. at 561-62.
The insurer in Martinez denied coverage before the time for its insured to submit the proof of lost statement had expired. Id. at 562. The appellate court found that this “premature” denial served as evidence that the insurer was not prejudiced by the insureds’ failure to submit proof of loss as it showed that the insurer did not need the proof of loss to conduct its investigation. Id. Further, the appellate court held the insurer’s coverage denial actually amounted to a waiver of the condition, explaining that denying coverage before receiving a proof of loss renders “the formal filing of a proof of loss …useless and unnecessary” in the eyes of the law. Id. at 562 (quoting Keel v. Indep. Life & Acc. Ins. Co., 99 So. 2d 225, 227 (Fla. 1957)). The appellate court accordingly reversed the grant of summary judgment and remanded the case to trial. Id. at 563.
More recently, in New South Comm’ns Inc. v. Houston Cas. Co., the Court of Appeals for the 11th Circuit issued an unpublished opinion vacating a grant of summary judgment in favor of the insurer and remanded the case back to the trial court to determine whether the insurer suffered prejudice by the insured’s failure to submit its proof of loss statement. 2023 WL 3375530 (11th Cir., May 11, 2023). The court explained that once the insurer established that the insured failed to substantially comply with a contractually mandated post-loss condition, the burden shifts to the insured to show that the breach did not prejudice the insurer. Id. at *3.
The insurer in New South claimed that it was prejudiced by its insured’s failure to submit a proof of loss statement because it was put at risk of paying the wrong party. Id. at *2. The insureds were able to rebut this argument by pointing to tax documents in its insurer’s possession which showed the insureds owned the damaged property. Id. at *3. The insureds argued, and the court agreed, that the insurer’s possession of documents, whose accuracy was unquestioned, confirming the insureds’ ownership of the damaged property removed the risk of paying the wrong party. Id. at *3. Consequently, the insureds had met their burden of establishing a genuine issue of material fact as to prejudice and the Court remanded the case so a factual determination of prejudice could be made. Id. at *4.
While the proof of loss condition is a material term in an insurance policy, courts in Florida continue to examine fact issues regarding prejudice to the insurer when insurers rely on the condition in adjusting claims.