There is a lot of litigation from Hurricane Wilma still proceeding in Florida state and federal courts. Much of that litigation has concerned whether the policyholders have complied with their post-loss duties to submit information, documentation and appear for examination under oath. During the last year or so, probably the heaviest litigated issue concerns whether the policyholder gave adequate notice of the loss to the insurer as required by policy terms. Insurers that raise such a defense are looking for a judgment on a technicality, and request the court to declare that they have no responsibility for any damages because the policyholder breached their duty to notify them of the loss.

This was one of the issues recently addressed by a federal trial court in the case Oriole Gardens Condominiums, III v. Independence Casualty & Surety Company, 2012 WL 718803 (S.D. Fla. March 6, 2012). On November 14, 2005, the association notified the insurer it had sustained a loss from Hurricane Wilma. The insurer hired an independent adjusting company to inspect the property in 2005 and determined the damage to the property fell below the insurance policy deductible. The insurer informed the association on December 9, 2005, that no payment would be forthcoming. Four years later, the association retained a public adjuster, notified the insurer that it wished to reopen the claim, and submitted a sworn proof of loss for $6,592,532.49. The insurer requested that Oriole Gardens comply with several of post-loss duties under the policy, including submitting to an examination under oath, and furnishing all documents in its possession relating to fifty separate categories.

The association produced its Board President and two representatives of the public adjusting firm for examination under oath. The association also submitted numerous documents responsive to the insurer’s requests and provided proofs of loss. The insurer requested additional examinations under oath and documentation, claiming that the people it had spoken with did not possess certain knowledge regarding the claim and because not all requested documentation had been received.

On January 10, 2011, Independence informed Oriole Gardens that it was standing by its initial 2005 claim determination that the amount of loss fell below the policy deductible. The association filed a lawsuit for breach of contract in Florida state court on January 10, 2011. The case was removed to the U.S. District Court for the Southern District of Florida.

The insurer filed a summary judgment in the case, arguing that Oriole Gardens did not comply with its policy duties after loss to submit to an examination under oath, provide relevant documents and give prompt notice of the loss.

After conducting a hearing and considering all of the evidence, the federal court denied the insurer’s motion in respects. Of particular significance was the court’s opinion on the notice issue. The court cited the pertinent part of the policy:

Duties in the Event of Loss or Damage

a. You must see that the following are done in the event of loss or damage to Covered Property:

(2) Give us prompt notice of the loss or damage. Include a description of the property involved.

The court held that the clause requiring Oriole Gardens to provide “prompt notice” of the loss is ambiguous. The ambiguity involves whether Oriole Gardens’ duty to notify pertains only to the initial claim, or also imposes a time limit on supplementing its claim. The insurer conceded that Oriole Gardens provided initial notice of the loss within a reasonable time after Hurricane Wilma, but argued that the duty to provide prompt notice of loss was violated because Oriole Gardens waited four years to request that the claim be re-evaluated. The court noted that the policy contains no provision delineating when an insured may submit a revised proof of loss or contest a previous claim determination.

In light of the ruling, a jury will probably resolve the question of whether the association satisfied its policy duties after loss. This opinion is important as it recognizes that insurers ask the courts to apply a meaning to policy terms that is not defined in most policies. We will continue to provide updates as additional cases are decided.

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