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July 17, 2017 | Blog Post| The Innocent Co-Insured: Underestimating Definite and Indefinite Articles

I begin this with the following caveat for all my grammar gurus out there: I understand that the word “any” is not “technically” an article, but bear with me for the purpose of this discussion.

Four little words—a, an, any, and the—can mean a world of a difference with respect to coverage for an innocent co-insured.  A federal judge (applying Florida law) recently ruled that “that the phrase ‘any insured’ unambiguously expresses a contractual intent to create joint obligations.” Stettin v. National Union Fire Insurance Company of Pittsburg, PA, 2017 WL 2858768 (11th Cir., July 5, 2017) (emphasis added).  The Settin Court solidified a prior U.S District Court for the Southern District of Florida case, which held that an intentional loss provision precluded coverage for even innocent co-insureds when the intentional loss provision contained language prohibiting coverage for intentional acts by any insured.

So what does this mean?  Say, for example, you own a property with your brother.  Your brother has gotten himself into a sticky situation and owes some sharks a decent amount of money that he gambled away.  He comes up with the clever (and very illegal) solution to burn down the property to recover insurance proceeds.  You, being an upstanding citizen, do not know of your brother’s activities, and file an insurance claim.   Throughout the course of the investigation, your insurer determines that your brother intentionally set the fire to your jointly owned property, and denies your claim relying on the following policy language:

This entire policy shall be void if any insured has intentionally concealed or misrepresented any material fact or circumstance relating to this insurance.

Looks like you’re out of luck buddy, as both Florida and Federal Courts applying Florida law agree with your insurer. 

While the recent decision in Stettin did not specifically refer to the provisions for concealment or fraud or intentional loss, the theory remains the same; including the term “any” before the word “insured” unambiguously creates joint obligations, such that one insured’s acts may be imputed to the other.  This results in no coverage for the innocent co-insured.

Policies vary greatly as to how they qualify multiple insureds, using the terms “a,” “an,” “any,” and “the” as articles prior to the term “insured,” and these little words vary the result for the poor respectable brother.    

For example, in the Florida Second DCA case Auto-Owners Ins. Co. v. Eddinger, the court held that the fraud of a co-insured may not void the coverage of the innocent co-insured.  In that case, a husband and wife were co-insureds under a property policy and the husband intentionally and fraudulently committed arson. The husband and wife jointly filed a claim, and the insurer denied coverage as to both the husband and wife on the basis that the husband’s fraudulent conduct voided the policy.  The court found that the following concealment and fraud provision implied that the policy provided for several rather than joint coverage:

(The) entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstances concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto.

Several years later, the U.S. Court of Appeals for the Eleventh Circuit, in Michigan Millers Mut. Ins. Corp. v. Benfield, (again interpreting Florida law) held that an insured language in the intentional loss provision is ambiguous, and, therefore, found that coverage was not precluded for the innocent co-insured. 

Following these decisions, insurers have revised their policy language in order to avoid any ambiguity as to whether the policy provides joint or several liability.  Most recently, in Moustafa v. Omega Ins. Co., the Court of Appeals for the Fourth Circuit held that the following policy language is sufficient to impute material misrepresentations or concealments to the innocent co-insured:  “we provide no coverage for loss . . . if one or more ‘insureds’ have intentionally concealed or misrepresented any material facts or circumstance . . . relating to this insurance.”    It is common to see this or some close variation of this policy language to qualify both the intentional loss and concealment or fraud provisions.

So when you are skimming the policy pages and skipping over those four little words, make sure to consider the huge implications it may have on your analysis of the claim. 

Katelyn Mae Ferry

Katelyn is an associate in the firm’s Tampa office.  Katelyn’s practice focuses primarily on first-party property disputes, with an emphasis on arson and fraud. 

November 06, 2017 Blog PostContingency Fee Multipliers: Florida Supreme Court Rejects Rare and Exceptional Circumstances Requirement

The United States Supreme Court analyzed the availability of contingency fee enhancements under fee-shifting statutes in Burlington v. Dague, 505 U.S. 557 (1992). There, the Court held that a contingency enhancement was not permitted under fee-shifting provisions of the Solid Waste Disposal Act and Clean Water Act. It reversed a 25% lodestar enhancement. Justice Scalia wrote the majority decision. He emphasized that fees are “certain” or “contingent.” Id. at 560. A fee is certain if it is payable without regard to the outcome of the suit; it is contingent if the obligation to pay depends on a particular result obtained. Id. at 560-61.

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September 01, 2017 Blog PostHurricane Hindsight is 20/20

It took years of depositions and other discovery to realize that that most of my 2004-2005 hurricane condominium association claims were much simpler to defend than I thought.   The center of gravity of these claims was the proper calculation of Actual Cash Value (ACV).

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August 09, 2017 Blog PostTO FEE OR NOT TO FEE, THAT IS THE QUESTION: THE FLORIDA SUPREME COURT FINDS COVERAGE FOR PROPOSAL FOR SETTLEMENT SANCTIONS IN FAVOR OF THE PLAINTIFF UNDER AN AUTOMOBILE LIABILITY POLICY IN MACEDO II

Due to its holding in Macedo II, the Florida Supreme Court created a situation where, arguably, many auto policies now provide coverage for attorney’s fees and expenses awarded against an insured following an adverse verdict triggering the penalties under a proposal for settlement.

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On July 20, 2017, the Second District Court of Appeal issued an order that closed its books on the Sebo appeal.  Mr. Sebo made a homeowner’s claim to American Home contending construction deficiencies had allowed water to enter the residence at multiple points, causing, eventually, a complete destruction of the residence.  The trial court ruled the concurrent cause doctrine applied, and so that the combination of covered water damage and excluded faulty, inadequate and defective construction had resulted in coverage for the loss. 

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July 05, 2017 Blog PostEarth Movement: "Any" Means Any; Home-Owners Insurance Company v. Dominic F. Andriacchi (Michigan Court of Appeals)

For years, courts across the country have considered whether an earth movement exclusion in a policy applies only when the earth movement losses are caused by or stem from natural causes or phenomena, or whether it applies to earth movement losses from both natural and man-made causes.

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June 22, 2017 Blog PostBottini v. GEICO: Parties to Bad Faith Action Not Bound by $30.8 million-dollar Verdict Without Appellate Review

For years, when a bad faith action was brought pursuant to a jury verdict in excess of policy limits in the underlying UM claim, everyone assumed the jury verdict was binding in the bad faith action. Then, Bottini v. GEICO resulted in a $30.8 million-dollar verdict – over 600 times the policy’s UM limit of $50,000! GEICO appealed, and the Second DCA concluded that even if GEICO were correct that errors affected the jury’s computation of damages, any such errors were harmless in the context of this case.

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June 20, 2017 Blog PostFlorida's Third District Court of Appeals provides a warning: When insureds communicate about their policy needs, agents better listen and communicate back or insurance companies could be left holding the bag in a negligent procurement action.

In Kendall South Medical Center v. Consolidated Insurance Nation, No. 3D16-926, 2017 WL 1908376, *1 (Fla. 3d DCA May 10, 2017), the Third District Court of Appeals reversed the lower court’s fourth dismissal of Kendall South Medical Center’s complaint for negligent procurement, holding that there may be liability for negligent procurement where an agent fails to explain to an insured a coinsurance provision that could reduce coverage to less than the amount requested by that insured.

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May 19, 2017 Blog PostINSURANCE PROCEEDS PAYABLE TO TENANT DIVERTED TO PAY FOR PROPERTY OWNER'S BACK TAXES

The Third Circuit Court of Appeals sitting in Pennsylvania recently issued a precedential decision that interpreted the definition of a “named insured” under a tax delinquency statute to encompass tenants of a property even though the property owner, not the tenant, owed the delinquent taxes.

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March 23, 2017 Blog PostNebraska Supreme Court Rules that an Insurer Can Depreciate Labor in Determining Actual Cash Value

Property policies typically provide, if there is coverage, that the insured can recover for the costs to repair or replace the property damaged by loss.  But when an insured does not repair or replace the damaged property (or until such repairs are made), the insured is only entitled to the actual cash value of the property.  The calculation of actual cash value varies state to state, but generally courts either define it as replacement cost less depreciation or courts use the broad evidence rule. 

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March 21, 2017 Blog PostPennsylvania Superior Court adopts narrow interpretations of surface water exclusion and ensuing loss clause

In the Ridgewood Group LLC v Millers Capital Insurance Company, No. 1138 EDA 2016, February 27, 2017, the Superior Court of Pennsylvania analyzed two often troublesome policy provisions, the surface water exclusion and the ensuing loss cause .

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March 14, 2017 Blog Post2017 Florida State Legislature to Consider Bills Aimed at Assignments of Benefits, Water Losses, Appraisers, and Umpires

The 2017 Florida Legislative Session convened on March 7.  Of particular interest to property insurers are the following bills, which we are closely watching: SB 944, proposing licensing requirements upon appraisers and appraisal umpires; SB 1038 and HB 1218, proposing a statute concerning assignments of benefits; and SB 1218, proposing licensing requirements on those who perform water damage restoration and prohibiting policy provisions that preclude post-loss assignments of benefits.

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March 07, 2017 Blog PostFederal Diversity Jurisdiction: Proving Citizenship of Limited Liability Companies

Jurisdiction gives a federal court the power to hear a case. Jurisdiction matters at the outset of a lawsuit. It matters during discovery. It even matters after summary judgment. Jurisdiction matters because federal courts are courts of limited jurisdiction.

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February 16, 2017 Blog PostSurplus Insurers, Too, Can Rely on the Application to Interpret Policy

Section 627.419 of the Florida Statutes provides that “[e]very insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy and as amplified, extended, or modified by any application therefor or any rider or endorsement thereto.”  This statute has not applied to surplus lines insurers since the “Zota-fix” legislation of 2009, which generally exempted surplus lines insurers from Chapter 627.

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January 11, 2017 Blog PostWhat Is An Offer of Judgment And Can It Really Lower the Cost of or Shorten Litigation?

Insurance coverage litigation today is often time consuming and expensive.  Many cases include claims for “bad faith” damages, and some cases seek punitive damages.  To support their allegations, litigants will usually seek a wide-array of documents and testimony.  Accordingly, litigating such matters can also become expensive. 

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The state of water loss claims abuses in Florida, the water loss marketplace, and water loss damage claims on a national scale were presented by the Division of Insurance Fraud, Bureau of Property & Casualty, and the National Insurance Crime Bureau, respectively. 

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Policyholders who seek coverage for the monetary consequences of a violation of the statute under the “personal and advertising injury” or general liability coverage in their insurance’ policies are likely to find themselves looking elsewhere for funds.

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September 08, 2015 Blog PostNJ: Insurers Still On The Hook To Pay Innocent Parties Under Fraudulent Policies

The decision offers further guidance in the somewhat inconsistent world of rescission and automobile policy statutes, which – when accounting for the application misrepresentation, policy, and statutes – can be a tricky process.

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Takeda appealed the ruling to the Fifth Circuit Court of Appeals, but it reached a settlement in the MDL litigation in May of 2015 before appellate briefing commenced.  The Actos ruling is isolated to date; no other court has applied this holding or followed its interpretation.

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August 11, 2015 Blog PostInsurers Don't Sleep on Your Rights: Insurer's Motion to Intervene Denied as Untimely

The court noted that Cincinnati had been defending the action since 2012, but did not file the motion until 2015 and only on the eve of trial.  With regard to the damage interrogatories themselves, the parties argued that neither party’s expert had broken down the damages in the manner proposed by Cincinnati.

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June 10, 2015 Blog PostPost-Complaint Communications by Insurer's Employees Protected from Discovery in Bad Faith Litigation

The insured failed to articulate any type of argument that he could not obtain the substantial equivalent by other means without undue hardship.  The court recognized that the insured has the opportunity to conduct bad faith discovery, which may include deposing State Farm adjusters, to obtain the substantial equivalent...

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April 09, 2015 Blog PostCan an Insured Sue His Adjuster When the Insured is Injured Cleaning Debris, Because the Adjuster Incorrectly Denied Coverage for Debris Removal?

Imagine a gigantic tree limb weighing over 7,000 lbs falling onto your home.  You dutifully call your insurance company to report the loss. So when the adjuster inspects your home and (verbally) tells you that debris removal is not covered by your policy and that you need to clean up the debris (glass, limbs, branches) all by yourself, you clean it up yourself, right?  And when you hurt your hand in the process ...

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April 08, 2015 Blog PostFourth Circuit Sets Stage For Interpreting Contingent Business Interruption

CBI insurance provides coverage for loss of sales or revenue sustained when business is interrupted due to property damage that occurs away from the insured premises and, consequently, disrupts the flow of goods and services from/to a supplier or customer (referred to as the “dependent” or “contributing” properties). There are a limited number of cases discussing issues relating to CBI insurance; and the Fourth Circuit’s ruling provides greater clarity as to what constitutes a “direct” supplier, which is a common...

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Both parties cited to the SEACOR Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675 (5th Cir. 2011) case. The SEACOR case held that flood limits did not apply to Hurricane Katrina-generated water damage. In the SEACOR policy, there were definitions for flood, windstorm and named windstorm. The definition of windstorm and named windstorm did not include the phrase “storm surge,” but the definition of flood included wind-driven water. The SEACOR court held that all damage caused by Katrina was the result of a named windstorm...

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September 26, 2014 Blog PostWhen It Comes to Sinkholes, Contracts, Statutes and Regulations Do Matter

On August 21, 2014, the United States Court of Appeals for the Eleventh Circuit vacated the decision of the U.S. District Court for the Middle District of Florida in Shelton v. Liberty Mutual, Case number 13-15371 / D.C. Docket No. 8:12-cv-02064-JSM-AEP. This decision confirms that the statutory definitions for structural damage under the May 17, 2011 amendments to the Florida sinkhole statutes apply to property policies issued after those amendments were enacted. The court’s order reversed the positions taken by the District Court that seemed bent on plotting a new course for Florida jurisprudence.

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July 22, 2014 Blog PostFeng Shui: Direct Physical Loss Does Not Include Damage to Invisible Forces

A federal judge recently ruled that an insurer was not obligated to pay $50,000 for a feng shui consultant following a fire loss in a dentist’s office. Patel v. American Economy Insurance Co. et al., No. 12-cv-04719, 2014 WL 1862211 (N.D. Cal. May 8, 2014). While the cost to repair the physical damage from the fire was insured under the policy, the court found that the cost to repair damage to any invisible forces that may have been at work in the office was not.

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