Depositors Ins. Co. v. CC & C of Lake Mary, LLC, No. 5D14—2206, 2015 WL 4486563 (Fla. 5th DCA July 24, 2015).
The court held that a protective safeguard condition was a condition subsequent, so the insurer could deny coverage if it had been prejudiced by the lack of an opportunity to evaluate the effect of the breach of the protective safeguard condition.
The policyholder owned a surf shop insured under a policy that required a central station burglar alarm as a protective safeguard. The policy stated that the insurance would be “automatically suspended” if the policyholder failed to notify the insurer when the policyholder either failed to maintain the protective safeguard or knew of a suspension or impairment in the protective safeguard.
The policyholder had a security alarm system and a contract for alarm monitoring services. However, the alarm monitoring contract was canceled due to nonpayment. Three weeks later, the surf shop was burglarized in such a way that the theft would not have been detected even if the alarm monitoring contract had been active. The alarm monitoring contract was reinstated one day after the burglary.
After the policyholder made a claim, the insurer took the position that the policy had been suspended during the three weeks between the cancellation and the reinstatement of the alarm monitoring contract. The insurer also remitted a check for a return premium for this three-week period.
The policyholder sued the insurer for breach of contract. The insurer moved for summary judgment based on the policyholder’s failure to comply with the protective safeguard condition. And the policyholder moved for summary judgment based on the argument that its breach did not prejudice the insurer. The trial court agreed with the policyholder because the burglary would not have been detected even if the alarm monitoring contract had been in effect.
The appellate court addressed two issues: (1) whether the insurer was required to show prejudice based on the plain language of the policy; and (2) whether summary judgment was precluded by a genuine issue of material fact as to whether the insurer had been prejudiced.
As to the first issue, the appellate court held that a showing of prejudice was required to support a denial based on a breach of the protective safeguards condition. The appellate court explained that the protective safeguards condition was a condition subsequent, as defined by the plurality opinion in State Farm Mutual Auto. Ins. Co. v. Curran, 135 So. 3d 1071, 1078 (Fla. 2014).
As to the second issue, the appellate court held that a genuine issue of material fact precluded summary judgment. The appellate court ruled that the trial court incorrectly focused on whether the loss would have occurred if the policyholder had not breached the protective safeguard condition. Instead, the appellate court held that the analysis should center on whether the insurer was prejudiced by the lack of an opportunity to evaluate the effect of the breach of the protective safeguard condition.
The policyholder, as the moving party, had the burden of showing it was entitled to summary judgment based on the undisputed facts. But the record was largely devoid of facts showing whether the insurer had been prejudiced by the policyholder’s failure to give notice of the suspension of the alarm monitoring contract. For this reason, the appellate court reversed the summary judgment and remanded for further proceedings.