Fourth District Court of Appeal Reinstates Insurer’s Prompt Notice Defense, Reverses Trial Court’s Waiver Finding

In a dispute over an alleged undervaluation of their insurance claim, the insureds sued for breach of contract. The defendant responded with an affirmative defense, asserting the insureds failed to comply with post-loss conditions by delaying notice of the loss for three months, thereby prejudicing Universal’s investigation. Although the insureds eventually replied, they did not specifically address the prompt notice defense. The trial court sided with the insureds, finding the defendant had waived the defense by accepting coverage and issuing partial payment. On appeal, however, the Fourth District Court of Appeal reversed, holding that waiver must be specifically pleaded and that the defendant’s partial payment did not constitute a waiver of its prompt notice defense.

In suing Universal for breach of contract, the insureds alleged their claim was undervalued. As an affirmative defense, Universal alleged that the insureds did not satisfy their post-loss conditions precedent to recover under the policy because they did not provide prompt notice of their loss—the insureds waited three months to report their loss—and the delay in reporting prejudiced Universal’s investigation. 

The insureds then did not timely reply to Universal’s affirmative defenses. But when they replied five months later, they did not directly respond to the allegation that they failed to provide prompt notice. Instead, they generally denied all affirmative defenses, demanded strict proof thereof and moved to strike all defenses as improperly asserted. The insureds moved for partial summary judgment on Universal’s lack of prompt notice defense, asserting Universal waived compliance of the prompt notice provision by confirming a covered loss had occurred and issuing a coverage determination in the insureds’ favor, i.e. accepting liability and issuing coverage on the claim. 

Universal argued that by tendering payment for some, but not all, claimed damages, it did not waive its right under the policy to require the insureds to comply with all post-loss obligations. Universal also argued the court should not consider the insureds’ waiver argument as it was not raised in a timely reply to Universal’s answer. The trial court ruled in favor of the insureds by finding Universal waived compliance by accepting liability and issuing coverage on the loss, i.e. acknowledgment of coverage and payment under the policy.

On appeal, Universal argued that the insureds failed to plead a waiver of their compliance with post-loss obligations to recover under the policy. The insureds argued that their assertion in their complaint was enough to plead waiver and that they did not need to raise the waiver argument in their reply. The Fourth District Court of Appeal found that the insureds’ argument was inconsistent with Florida law, which requires that waiver is a matter that must be specifically pleaded. The court noted that the Third District Court of Appeal, in Gamero v. Foremost Insurance Co., 208 So.3d 1195 (Fla. 3d DCA 2017), had already determined that the trial court correctly did not consider the argument that the insurer waived its right to rely on a particular policy exclusion asserted as an affirmative defense since the insured failed to reply or avoid the affirmative defense. 

Further, the Fourth District Court agreed with Universal’s alternate argument that Universal did not waive its prompt notice defense with its initial acceptance of coverage and partial payment under the policy, citing to their prior decision in Rodrigo v. State Farm Fla. Ins. Co., 144 So.3d 690, 692 (Fla. 4th DCA 2014) and the Third District Court’s decision in Universal Prop. & Cas. Ins. Co. v. Horne, 314 So.3d 688, 692 (Fla. 3d DCA 2021). Both decisions found that an insurer does not waive an affirmative defense based on an insured’s failure to comply with post-loss conditions precedent by tendering payment. 

The Fourth District Court of Appeal remanded the case with instructions to allow Universal to proceed to trial with its prompt notice defense. 

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