Thought Leadership

Key Points:

• A total failure by the insured to comply with the proof-of-loss requirement is a material breach of the policy that will relieve the insurer of its liability to pay.
• The insured bears the burden of establishing that they cooperated to some degree with the proof-of-loss condition; specifically, that they complied with the request to submit the proof-of-loss.
• Insurers may not be able to avoid litigation when invoking the insured’s failure to comply with the proof-of-loss requirement if the subject jurisdiction requires the insurer to demonstrate prejudice in order to successfully establish a coverage defense.

        An insured’s failure to comply with conditions precedent prior to filing a lawsuit continues to be a concern for insurers in first-party property cases. Plaintiffs often rely on the argument that making an effort to comply with post-loss obligations, including the insurer’s request to submit a sworn proof-of-loss, is sufficient. That is, with the exception of lawsuits pending in the Fourth District Court of Appeals. A ruling in the Fourth District has made it clear that when relying on a defense relating to failure to comply with post-loss obligations, the insurer need not plead and prove that it was prejudiced by the insured’s failure to comply with his or her post-loss obligations in a homeowner’s insurance policy in order to have a valid coverage defense.

Beverly Edwards, the insured, suffered property loss due to an auto accident that damaged her fence, sprinkler and septic tank. Edwards did not provide her insurer with the requested sworn proof-of-loss. Thus, the insurer moved for summary judgment based upon Edward’s failure to submit the proof-of-loss, arguing it was a material breach of the policy that prevented coverage. The trial court agreed and granted summary judgment. The Fourth District affirmed, finding that “[a] total failure to comply with policy provisions made a prerequisite to suit under the policy may constitute a breach precluding recovery from the insurer as a matter of law. If, however, the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.” Contrary to the findings of the court, there was no evidence remotely suggestive of such an effort by Edwards and her public adjuster to comply with the request to submit a proof-of-loss. The evidence was abundantly clear that no proof-of-loss was ever submitted to the insurer prior to the lawsuit being filed, or at any point thereafter.

The dispositive issue in Edwards was the undisputed fact that Beverly Edwards failed to submit the sworn proof-of-loss. Consequently, there was a total failure to comply. Most notably, through this opinion, the Fourth District affirmed its ruling under Rodrigo v. State Farm Florida Ins. Co., 144 So.3d 690 (Fla. 4^th DCA 2014), where it found that an insurer need not show prejudice when the insured breaches a condition precedent to suit.

Insurers are often faced with insureds who refuse to comply with multiple requests for a sworn proof-of-loss, relying on having “substantially” complied with a request for documents, such as by providing a public adjuster’s estimate instead. However, this case makes it clear that abiding by a separate post-loss obligation does not relieve the insured from complying with the specific request to provide a proof-of-loss. A plaintiff who feels he has nothing to lose by refusing or failing to provide a proof-of-loss may now be compelled to provide it immediately upon request, or risk a judgment against them before the case ever makes it to a jury. Based upon Edwards, insurers in the Fourth District can successfully argue the “real issue” involved in the lawsuit is the plaintiff’s failure to comply with the post-loss policy provision to provide a proof-of-loss upon request and how that failure to comply is a material breach of the policy, which bars coverage related to the alleged breach of the policy. Because the real issue is a material breach by the insured, prejudice against the insurer is not rebuttable.

Regrettably, the case law on this issue is made no less confusing by the Edwards opinion. Notably, while the Fourth District does not require that the trial court also make a finding that the insured’s non-compliance caused prejudice to the insurer, the Fourth and Fifth Districts seem to be split on the prejudice issue. Specifically, the Fifth District has held that the insurer must be prejudiced by the insured’s non-compliance in order to be relieved of its obligation to provide coverage. See, Allstate Floridian Ins. Co. v. Farmer, 104 So.3d 1242 (Fla. 5th DCA 2012); Whistler’s Park, Inc. v. Fla. Ins. Guar. Ass’n, 90 So.3d 841 (Fla. 5th DCA 2012); see also, Hamilton v. State Farm Fla. Ins. Co., 151 So.3d 1 (Fla. 5th DCA 2014) (relying upon Whistler’s Park, Inc.). Thus far, the Third District also concurs with the Fifth District. See, Am. Integrity Ins. Co. v. Estrada, 276 So.3d 905, 916 (Fla. 3d DCA 2019) (when an insurer has alleged and established that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is thereby a rebuttable presumption).

Clearly, the Edwards decision is promising and provides some assistance to insurers who would like to utilize the failure-to-comply conditions precedent as a defense in breach of contract cases where no poof-of-loss has been provided prior to filing a lawsuit. However, until the Florida Supreme Court makes a ruling on this matter, jurisdictions will remain split on this issue.

* Carolin is an associate in our Orlando, Florida, office. She can be reached at 407.420.4394 or capacheco@mdwcg.com.

_{Defense Digest, Vol. 27, No. 4, September 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}