In Florida, an insurance policy should be read as a whole, with the court endeavoring to give every provision its full meaning and operative effect.[1] Florida courts are not required or permitted to “judicially rewrite an insured’s policy to exclude coverage where the language of the policy does not.” [2] Rather, courts are required to construe an insurance policy in accordance with its plain language.[3] Ultimately, courts must interpret insurance policies in the manner most favorable to the insured.[4]

But what happens if the insurer alleges the insured failed to satisfy a post-loss obligation such as the submission of a sworn proof of loss? Insurers typically argue such failure results in a total forfeiture of coverage. This is based on the premise that post-loss obligations enable insurers to evaluate their rights and liabilities, make timely investigations, and prevent fraud. This forfeiture is not automatic, though. The insurer must first establish an insured has failed to substantially comply with a post-loss obligation. From there, the total forfeiture occurs only when the insured’s breach is both material and prejudicial to the insurer. This is in line with Florida law’s abhorrence for the forfeiture of insurance coverage.[5]  The United States Court of Appeals for the Eleventh Circuit recently discussed the issue of prejudice in New South Communications, Inc., dba Florida Keys Media, LLC, and Robert Holladay, Florida Keys Media, LLC v. Houston Casualty Company, as well as Estrada’s application. Read on to learn more about Struble, P.A.’s recent Eleventh Circuit win.

New South is a case that had already been remanded to the lower court once before. In September 2017, two office buildings sustained damage following Hurricane Irma resulting in the submission of a commercial property insurance claim to Houston Casualty Company (“Houston”). Following its investigation of the claim, Houston issued a partial denial and determined the covered damages totaled $52,217.14. Despite this determination of covered damages, Houston never issued payment to its insured. Instead, it took the position that no named insured under the policy ever submitted a sworn proof of loss, and therefore, this resulted in a forfeiture of coverage. See New South, 835 F. App’x at 407, 411. 

On behalf of the Plaintiffs, we filed suit, and ultimately, the district court granted summary judgment in Houston’s favor and dismissed the case with prejudice. But on appeal, the Eleventh Circuit reversed and remanded.[6] The Eleventh Circuit held Florida Keys Media and Holladay had standing and were “real parties in interest to [the] breach-of-contract suit,” because they were “named insureds” and “the owners” of the insured properties and that insureds materially breached the insurance contact by failing to submit a sworn proof of loss. Id. at 410. The case was remanded for the district court to use Estrada’s prejudice inquiry to consider whether that breach in failing to submit a sworn proof of loss prejudiced Houston.

On remand, Florida Keys Media and Holladay moved for summary judgment, and the district court denied their motion and entered judgment again for Houston. The district court determined that as a matter of law Houston suffered prejudice without the signed and sworn proof of loss because it risked “paying the wrong party.” It reasoned this was “among the types of prejudice the Proof of Loss requirement in the Policy was intended to avoid”, therefore, this “risk” qualified as prejudice to the insurer. This resulted in the subject second appeal.

Whether an insurer has suffered prejudice is generally a question of fact. Pursuant to Estrada, a total forfeiture of coverage as a result of a failure to comply with post-loss obligations occurs only when the insured’s breach is both material and prejudicial to the insurer.[7] Remember, courts must interpret insurance policies in the manner most favorable to the insured. That means policy provisions that tend to limit or avoid liability are interpreted liberally in favor of the insured. Here, since the Eleventh Circuit concluded there was a material breach of a condition precedent in the prior appeal, the only issue left was whether prejudice was suffered as a result of that breach. In the instance where prejudice to the insurer from the insured’s material breach is presumed, the burden shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.[8] This means the insured bears the burden of establishing a genuine issue of material fact as to prejudice. Using Estrada’s prejudice inquiry, the Eleventh Circuit determined the insured met this burden because “reasonable minds could differ on whether the breach was prejudicial to Houston”.[9] This is because the lack of a signed proof of loss did not affect Houston’s investigation of the claim or its determination of covered damages. For example, Houston determined the amount of covered damages totaled $52,217.14 and was willing to issue payment in that amount but complained of being uncertain of who to pay. Further, the Eleventh Circuit noted the names of the property owners was not new information to Houston, the tax assessor’s office identified the owners of the properties as Holladay and Florida Keys Media, and it was undisputed that the tax records were accurate as to the ownership of the properties. In accordance with Florida law and its abhorrence of forfeiture and the notion that insurance coverage must be interpreted broadly, the  Eleventh Circuit ruled in favor of the insured, vacating the district court’s grant of summary judgment and remanding for further proceedings.

You can read the full opinion here.

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[1] Auto-Owners Ins. Co., v. Anderson, 756 So. 2d 29, 34 (Fla. 2000).

[2] Prudential Property and Casualty Ins. Co. v. Swindal, 622 So. 2d 467, 472 (Fla. 1993).  

[3] Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005).  

[4]   Praetorians v. Fisher, 89 So. 2d 329, 333 (Fla. 1956); Stuyveant Ins. Co. v. Butler, 31 So. 2d 567, 570 (Fla. 1975).

[5] Am. Integrity Ins. Co. v. Estrada, 276 So.3d 905, 914 (Fla. 3d DCA 2019).  

[6] See New S. Commc’ns, Inc. v. Houston Cas. Co., 835 F. App’x 405, 412–13 (11th Cir. 2020).

[7] Estrada, 276 So. 3d at 914; see New South, 935 F. App’x at 412.

[8] See Estrada, 276 So. 3d at 916.

[9] Id.