When Florida property owners experience a loss in the form of damage to their home, they often are shocked when their insurer handles the claim in less than an expeditious manner. While the purpose of insurance is to cover unexpected losses, the insurance industry maximizes its profits by finding ways to avoid paying valid claims. When homeowners file a property damage claim, insurance companies frequently look for justifications to deny coverage. As an insurer investigates a claim, the process often begins with scrutiny of the insurance application. In this blog, our Florida homeowners insurance claim attorneys explain how questions that are answered incorrectly may lead to a denial based on claims of misrepresentation or non-disclosure.
Florida Law Authorizes Rescission for Some Application Inaccurracies
Although inaccuracies or lies in a policy application can constitute a valid basis to deny a claim, insurance companies cannot automatically refuse to settle a claim because of incorrect or missing information in the application. By the same token, our Miami homeowners claim lawyers recognize innocent mistakes by policyholders can have devastating consequences in certain situations. The relevance of the inaccurate information to the decision to issue a policy, policy limits, and the amount of the premium will determine whether the omission or misstatement allows the insurance to rescind the policy and deny the claim. Florida Statutes, Section 627.409 authorizes insurers to rescind an insurance contract under certain circumstances based on false statements or non-disclosures.
2nd DCA Reaffirms the Misrepresentation Must be “Material”
The Florida 2nd District Court of Appeals in Mora v. Tower Hill Prime Insurance Company reaffirmed the requirement that the non-disclosure is material to the insurer’s decision-making in issuing the policy under the agreed terms. The policyholders in Mora filed a sinkhole damage claim several years after purchasing their policy. The policy included a question that asked if the insured had knowledge of prior repairs to “cracking damage.”
The insurer obtained two forms during the discovery process that the insurance company claimed established that the policyholders did not answer the question accurately. The documents were inspection forms that included notations regarding crack around the swimming pool and a large drywall crack in the ceiling. Handprinted notes on the report referenced the following:
- “repair drywall at . . . stairwell base board”
- “fix cracks under window”
- “repair 3 cracks in drywall at ceiling”
- “repair cracks at entry under soffit (stucco)”
The policyholders indicated that they did not remember these notations nor any repairs to the stucco and drywall during their deposition. A representative of the insurer submitted an affidavit that indicated the insurance company would not have approved the policy application if it had been aware of the prior repairs. These notations constituted the sole evidence offered by the insurer in support of its Motion for Summary Judgment.
While the trial court granted summary judgment based on the affidavit from the insurance company representative, the 2nd DCA reversed the decision based on a commonsense analysis. The appellate court observed that an innocent misrepresentation could be the basis for denial of a claim if the insurer relied on the inaccurate information to its detriment. The court also indicated that such a denial is only proper if the insurer provides a good faith rationale for why it would have declined coverage or insisted on other terms.
Under this standard, the court found the references to the repair of cracks was not material to the insurer’s decision to approve the terms of the policy. The court indicated that the reference to “cracking damage” was ambiguous regarding its application to the language in the inspection documents. The court observed that policyholders would not assume that “crack damage” applied to common maintenance issues like cracks in stucco and drywall. If the policy were read to include such ordinary maintenance as grounds for denying coverage, the insurance company would have essentially no customers because virtually every property in Florida would have such cracks.
Greenberg, Stone, & Urbano: Seeking Maximum Recovery for Policyholders from Homeowner’s Insurance Companies
While the court’s ruling was favorable for the policyholders, the analysis should make clear that it is very important to be accurate when completing an insurance application. Our Miami property damage attorneys at Greenberg, Stone & Urbano will tenaciously pursue the full compensation you deserve. For over 130 collective years, our firm has assisted in pursuing the fullest compensation for homeowners insuance claims. We seek to obtain compensation for your tangible and intangible damages. Our skill and dedication have earned us an AV rating from Martindale-Hubbell and recognition as one of South Florida’s top firms by the Miami Herald. Call us at (888) 499-9700 or (305) 595-2400 or visit our website to schedule your initial consultation.