November 16th, 2018
By, Alex Brockmeyer, Esq.,
Most insurance policies have some sort of provision that addresses what happens when an insured misrepresents or attempts to defraud an insurer. This provision, otherwise known as a “fraud provision” or “forfeiture provision” varies in effect depending on its breadth. In Flores v. Allstate Ins. Co., 819 So. 2d 740 (Fla. 2002), the Florida Supreme Court identified three types of fraud/forfeiture provisions:
- those that state any misrepresentation will void the entire policy or policy;
- those that state that any misrepresentation as to a particular coverage voids coverage under that part; and
- those that neither reference the “entire policy” nor “this coverage part.”
Id. at 748. Things become interesting when an insurance policy does not contain language that falls within either the first or second category. When a fraud/forfeiture provision does not clearly void the entire policy or a particular coverage, insurers may still attempt to prove fraud or misrepresentation to void the entire policy. In such circumstances, Flores directs courts to use Florida’s well-established rules of insurance policy interpretation. Id. at 750.
Insurers retain control over the scope of their coverage and can alter policy language when desired. To that end, insurers must incorporate unambiguous language into its policy. See Berkshire Life Ins. Co. v. Adelberg, 698 So. 2d 828, 830 (Fla. 1997). Ambiguity exists whenever terms of the policy are subject to different reasonable interpretations, one that provides coverage and one that does not, or where more than one interpretation of a policy provision fairly exists. Weldon v. All Am. Life Ins. Co., 605 So. 2d 911, 915 (Fla. 2d DCA 1992). Where ambiguity exists, Florida law requires courts adopt the interpretation affording coverage. Westmoreland v. Lumbermens Mut. Cas. Co., 704 So. 2d 176, 179 (Fla. 4th DCA 1997). Florida uses this standard because an insured is “entitled to a clear explanation of terms rather than a fine distinction which was never written into his contract for insurance coverage.” Adelberg, 698 So. 2d at 830.
Applying these principles, Flores held a fraud/forfeiture provision that does not fall into either the first or second categories, must be interpreted as only effecting the specific portion of the claim connected to the misrepresentation or fraud. Flores, 819 So. 2d at 750. For example then, a misrepresentation in connection with a PIP claim does not preclude the insured from recovering under the uninsured/underinsured portion of his policy. Id. In the homeowners’ insurance policy context, other courts have reached similar conclusions. For example, in Tempelis v. Aetna Cas. & Surety Co., 485 N.W. 2d 217 (Wis. 1992), the Wisconsin Supreme Court held that an insured was entitled to recover under the dwelling and contents portions of the insurance policy even though a misrepresentation occurred in connection with the insured’s additional living expenses. Id. at 222.
In conclusion, policy language matters and insureds, insurers, and courts alike should be mindful of policy language when a fraud/forfeiture provision is at issue.
June 29th, 2018
By, Alex Brockmeyer, Esq.
Rule 9.310, Florida Rules of Appellate Procedure, controls how a party can stay execution on a final or non-final order pending appellate review, including a money judgment. FLA. R. APP. P. 9.310(a). Traditionally, a party could only stay execution on a money judgment by posting a bond that encompassed the full amount of the judgment plus interest. E.g. Kulhanijan v. Moomjian, 105 So. 2d 783, 784 (Fla. 1958). Now, however, a conflict exists between the District Courts of Appeal on whether Rule 9.310(b)(1) is the only way to stay execution on a money judgment.
In Platt v. Russek, 921 So. 2d 5 (Fla. 2d DCA 2004), the Second District addressed under what conditions a party can stay of execution on a money judgment pending appellate review. Citing the Third District’s decision in Campbell v. Jones, 648 So. 2d 208 (Fla. 3d DCA 1994), the judgment-creditors argued the only way to obtain a stay of execution on a money judgment was by posting “a bond equal to the amount of the judgment plus two years of interest at the statutory rate….” Platt, 921 So. 2d at 7. The Second District disagreed with the Third District’s interpretation of Rule 9.310. Id. The court interpreted Rule 9.310 to permit two types of stays. First is an automatic stay obtained under Rule 9.310(b)(1) by posting the requisite bond. Id. Second is a stay obtained by motion under Rule 9.310(a), where a court imposes certain conditions, which may not guarantee full payment of the judgment but, at the same time, do not prejudice the judgment-creditor—a stay the Third District does not recognize. Id.
The express and direct conflict between the Second and Third District has increased since Platt. In 2006, the Fourth District agreed with the Third District and held that a trial can only stay execution under Rule 9.310(b)(1). Caruso v. Caruso, 932 So. 2d 457, 458 (Fla. 4th DCA 2006). A little over a year ago, the First District joined the Second District and held “that [R]ule 9.310(b)(1) is not the only avenue for obtaining a stay of a money judgment. A trial court has the authority, upon the motion of a party pursuant to rule 9.130(a), to enter a stay upon conditions other than a bond, so long as the conditions are adequate to ensure payment.” Silver Beach Towers Property Owners Ass’n, Inc. v. Silver Beach Investments of Destin, LC, 231 So. 3d 494, 495 (Fla. 1st DCA 2017) (citations omitted).
Recognizing the conflict, the First District certified conflict with the Third District. But the Florida Supreme Court did not accept jurisdiction. Silver Beach Investments of Destin, LC v. Silver Beach Towers Property Owners Ass’n, Inc., 223 So. 3d 997 (Fla. 2017). For now then, the conditions on which a judgment-debtor can stay execution on a money judgment pending appellate review depends on the jurisdiction. In the Third and Fourth District, a stay can only be obtained under Rule 9.310(b)(1) by posting a bond in the amount of the judgment plus interest. * In the First and Second District, a party can obtain a stay of execution under Rule 9.310(a) predicated on conditions other than a bond.
* The Waves of Hialeah, Inc. v. Machado, 3D18-300 (Fla. 3d DCA 2018), indicates the Third District will deviate from this rule based on Section 45.045, Florida Statutes. Id. at 4-7. Section 45.045 gives courts discretion to stay execution pending review by imposing conditions other than a typical Rule 9.310(b)(1) bond. FLA. STAT. §45.045(2). However, Section 45.045(2) does not apply where the appellant has “an insurance or indemnification policy applicable to the case.” Id.
February 9th, 2018
By, Alex Brockmeyer, Esq.
Generally, Florida requires an insurance carrier assess its duty to defend based on the allegations set forth in the operative complaint and the provisions of the pertinent insurance policy. Jones v. Fla. Ins. Guar. Ass’n, Inc., 908 So. 2d 435, 443 (Fla. 2005). This standard is often referred to as the “eight corners” rule. Certainty regarding a carrier’s defense obligation is, as Judge Zehmer explained in Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So. 2d 810 (Fla. 1st DCA 1985), the reason why Florida utilizes this standard:
The Florida Supreme Court in National Union Fire Insurance Co. v. Lenox Liquors, Inc., supra, held that if coverage was not indicated by the allegations of the complaint, later stipulations filed in the action which indicate that insurance coverage would apply do not create a duty to defend. We hold that the reverse is also true. The later filings below, which tended to indicate that the damage claims pursued against appellant/insured were not covered by the insurance policy issued by appellee, do not defeat the duty to defend. Were this not the case, the indefiniteness as to whether the insurer should begin or should continue to defend a suit would create another major issue in many insurance lawsuits, placing insurer and insured on opposing sides. We think that result would not well serve either. With a duty to defend set by the initial pleading, each party knows his standing and need not examine every new document filed to determine if the claims may be focusing on noncovered damages.
Id. at 814 (quoting Kings Point West, Inc. v. North River Ins. Co.,412 So. 2d 379, 380 (Fla. 2d DCA 1980)) (emphasis added).
In Higgins v. State Farm Fire and Casualty Company, 894 So. 2d 5 (Fla. 2004), the Florida Supreme Court, among other issues, considered whether an insurer’s duty to defend is determined based on the underlying complaint’s allegations. Id. at 9. Ultimately, the Court reaffirmed the Florida’s commitment to the eight corners rule. Id. at 10.
In doing so, however, Higgins acknowledged that an exception to the eight corners rule might exist that would permit the use of a declaratory action to adjudicate a factual issue upon which an insurer’s duty to defend depended. Id. at 10 n. 2. Importantly, however, Higgins made clear this could only occur in the rare scenario where the “duty to defend is based on factual issues that would not normally be alleged in the underlying complaint.” Id. (emphasis added).
Since Higgins, carriers have attempted to extend this narrow exception beyond that contemplated by the Florida Supreme Court. One of the more recent attempts occurred in Addison Insurance Company v. 4000 Island Boulevard Condominium Association, 2017 WL 6616690 (11th Cir. 2017). In 4000 Island, the carrier attempted to expand the exceptions to the eight corners rule to include instances where the operative complaint’s allegations are “unsupported by evidence….” Id. at *7. According to the carrier, Higgins entitled it to venture outside the eight corners of the operative complaint and turn the duty to defend analysis into a fact-intensive inquiry. Id. The Eleventh Circuit squarely rejected this contention:
In Higgins, the Florida Supreme Court, answering a certified question from a lower state appellate court, held that Florida’s declaratory judgment statutes “authorize declaratory judgments in respect to insurance policy indemnity coverage and defense obligations in cases in which it is necessary to resolve issues of fact in order to decide the declaratory judgment action.” Higgins, 894 So.2d at 15. The Florida Supreme Court concluded, in other words, that a declaratory judgment action does not become unavailable to an insurer merely because some issue of fact is disputed. Id.
Higgins in no way abrogated the normal principles of summary judgment. Nor did it hold, as [carrier] contends, that any time an insurer disputes a fact, the insurer is “entitled to a determination of such facts … particularly where the underlying allegations at issue appear baseless.” To the contrary, Higgins expressly reaffirmed the eight corners rule: “[A]n insurer’s obligation to defend is determined solely by the complaint if suit has been filed.” Id. at 10. And the very next year, the Florida Supreme Court reaffirmed the eight corners rule again in Jones, 908 So.2d at 442-43. We find no reason to disturb the district court’s application of this settled Florida law.
Id. The Eleventh Circuit’s opinion in 4000 Island is an important because it reaffirms Florida’s commitment to the eight corners rule and the certainty the rule promotes.
May 16th, 2017
By, Alex Brockmeyer, Esq.
“Mend the hold.” The phrase originates from wrestling parlance where it meant “to get a better grip (hold) on your opponent.” Harbor Ins. Co. v. Continental Bank Corp., 922 F. 2d 357, 362 (7th Cir. 1990). The first appearance of the phrase in a judicial opinion occurred in a case where the Supreme Court held a party in a contract suit could not justify its nonperformance with a defense it did not raise prior to the commencement of litigation:
[w]here a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold. He is estopped from doing it by a settled principle of law.
Railway Co. v. McCarthy, 96 U.S. 258, 267-68 (1877). Estoppel and waiver form the underlying basis for this doctrine, which at its most basic level precludes a party from changing its defense to performance of a contract in the middle of litigation. E.g. Baquero v. Lancet Indem. Risk Retention Group, Inc., 2013 WL 5237740, *6 (S.D. Fla. Sept. 17, 2013) (citing Harbor Ins. Co. v. Continental Bank Corp., 922 F. 2d 357, 362-65 (7th Cir. 1990)).
The “mend the hold” doctrine is particularly suited for insurance disputes where an insurer changes its reason for denying a claim. Id. In fact, some commentators have observed that courts have expressed a willingness to apply the “mend the hold” doctrine out of “an intolerance for insurers to adjust legal positions like chameleons adjust their color.” Michael Laurato, Mending the Hold in Florida: Getting a Better Grip on an Old Insurance Doctrine, 4 FLA. A&M U. L. REV. 73, 74 (2009) (citing Eugene R. Anderson & Nadia V. Holober, Preventing Inconsistencies in Litigation With a Spotlight on Insurance Coverage Litigation: The Doctrines of Judicial Estoppel, Equitable Estoppel, Quasi-Estoppel, Collateral Estoppel, “Mend the Hold,” “Fraud on the Court,” and Judicial and Evidentiary Admissions, 4 CONN. INS. L.J. 589, 692 (1997-98)).
Application of the doctrine has yielded two approaches. Robert Stikoff, “Mend the Hold” and Erie: Why an Obscure Contracts Doctrine Should Control in Federal Diversity Cases, 65 U. CHI. L. REV. 1059, 1059-60 (1998). The minority approach precludes a party from changing its position during litigation from its pre-suit position absent a good faith justification for the change in position. Id. at 1062-71. The majority approach limits the nonperforming party’s defenses in litigation to those provided pre-suit at the time it refused to perform. Id.
Florida follows a version of the majority approach. To apply the “mend the hold” doctrine in Florida, it appears that a party to contract must prove: (1) the insured detrimentally relied on the insurer’s conduct; and (2) the insurer had sufficient information at the time of its initial denial to have waived the additional defense it seeks to assert during litigation. Trovillion Const. & Development, Inc. v. Mid-Continent Cas. Co., 2014 WL 201678, *9 (M.D. Fla. Jan. 17, 2014); Square at Key Biscayne Condo. Ass’n, Inc. v. Scottsdale Ins. Co., 2014 WL 11946882, *4 (S.D. Fla. Dec. 15, 2014); Baquero, 2013 WL 5237740 at *6 Principal Life Ins. Co. v. Alvarez, 2011 WL 4102327, *6-7 (S.D. Fla. Sept. 14, 2011). Application of this doctrine also appears to be limited to instances where an insurer seeks a forfeiture of the policy as opposed to invoking a policy exclusion. Square at Key Biscayne, 2014 WL 11946882 at *4. The conclusion reached by these courts stems from Florida’s intermediate appellate courts utilizing estoppel and waiver principles in determining whether to permit insurers to engage in the very conduct prohibited by the “mend the hold doctrine.” See Salcedo v. Asociacion Cubana, Inc., 368 So. 2d 1337, 1339 (Fla. 3d DCA 1979) (citing McCarthy, 96 U.S. at 268); see also American States Ins. Co. v. McGuire, 510 So. 2d 1227 (Fla. 1st DCA 1987); Six L’s Packing Co., Inc. v. Fla. Farm Bureau Mut. Ins. Co., 268 So. 2d 560 (Fla. 4th DCA 1972).
As such, it appears the “mend the hold” doctrine has limited applicability. One such area where the doctrine seems particularly applicable is where an insurer attempts to invoke a condition precedent—such as a proof of loss or prompt notice of a loss—during litigation after not raising the issue pre-suit. Allstate Floridian Ins. Co. v. Farmer, 104 So. 3d 1242, 1246-50 (Fla. 5th DCA 2012). Failure to comply with a condition precedent results in a forfeiture of the policy. Id. at 1249-50. An insurer will certainly be able to raise these conditional defenses pre-suit and would know of an insured’s failure to comply with any condition precedent set forth in the policy. Finally, the insured’s detrimental reliance on its insurer’s failure to raise the condition precedent is easy: the insured relies on the insurer’s failure to raise the condition precedent pre-suit in determining its ability to file suit.
November 2nd, 2015
By, Alexander Brockmeyer, Esq.
Preservation of error is a concept litigators know all too well. Generally, to raise an error on appeal a litigant must object at trial when the alleged error occurs. F.B. v. State, 852 So. 2d 226, 229 (Fla. 2003) (citing J.B. v. State, 705 So. 2d 1376, 1378 (Fla. 1998)). “The contemporaneous objection requirement originated in the English legal system as a mechanism for preserving error for appellate review, and the requirement was carried forward and generally adopted in America. Murphy v. International Robotic Systems, Inc., 766 So. 2d 1010, 1016 (Fla. 2000) (citations omitted). The Florida Supreme Court explained the rationale of the objection requirement as being:
“…based on practical necessity and basic fairness in the operation of a judicial system. It places the trial judge on notice that error may have been committed, and provides him [or her] an opportunity to correct it at an early stage of the proceedings. Delay and an unnecessary use of the appellate process result from a failure to cure early that which must be cured eventually.” Id. (quoting Castor v. State, 365 So. 2d 701, 703 (Fla. 1978)).
However, how does a litigant preserve an alleged error of defect that appears for the first time in a judgment? File a motion for rehearing. Generally, a litigant need not file a motion for rehearing if he or she is “displeased with a trial court’s decision on a matter because it found the opposing argument more persuasive….” Pensacola Beach Pier, Inc. v. King, 66 So. 3d 321, 324 (Fla. 1st DCA 2011). However, Florida’s appellate courts require a litigant to file a motion for rehearing in order to preserve an error appearing for the first time in the judgment itself, an error that occurred at trial, or a judgment entered after a jury trial. Id.; New Hampshire Indem Co. v. Gray, 2015 WL 5845240, *2 (Fla. 1st DCA 2015); Lake Sarasota, Inc. v. Pan. Am. Sur. Co., 140 So. 2d 139, 142 (Fla. 2d DCA 1962).
Therefore, the next time you receive a final judgment ask yourself, should I file for rehearing? If the final judgment contains something you are seeing for the first time, the answer is most likely yes. Failure to do so may result in the appellate court refusing to consider an otherwise meritorious argument based on preservation issues.