Homeowners who have attempted to pursue their own property damage claim often come to us after their claim has been denied. Frequently, these policyholders will have attempted to provide supplemental information to their insurer to navigate around the initial denial, to no avail. Insurance carriers take advantage of their thorough understanding of Florida insurance law and the language in their policies to frustrate consumers and deny claims.
A decision from the First District Court of Appeals of Florida illustrates the complex policy interpretation rules and the interplay between policy language and state law that can result in an unpaid claim without legal representation. In Universal Property and Casualty Insurance Company v. Johnson, 114 So.3d 1031 (Fla. 1st DCA 2013) the homeowners filed a claim with their insurer after their residence was destroyed in an accidental fire. The insurance carrier denied the claim after an investigation revealed an alleged misrepresentation by the homeowners on the policy application. A question on the policy asked if the policyholders had ever been convicted of a felony within the preceding ten year period. The policyholders (a husband and wife) answered “no,” but the wife had been convicted of five felonies within the relevant period.
However, the court initially withheld adjudication in the criminal cases during a period of probation. When the wife violated the terms of her probation, the judge entered a judgment of guilty and imposed the sentence on all five felonies. The initial probation was imposed more than ten years prior to submission of the insurance application, but the actual guilty verdicts and sentence were carried out less than ten years prior to the homeowners’ application. There was no dispute regarding the homeowners’ testimony that they were confused regarding how old the convictions were because of the original withholding of adjudication. Based on this misunderstanding, the policyholders contended that their policy should not have been rescinded because the misrepresentation was not intentional. The trial court accepted this argument, and the insureds received a jury verdict in the amount of $463,158.89.
The appellate court considered the language of the provision delineating the right of an insurance carrier to rescind a policy based on misrepresentation or fraud. Section 627.409(1) Florida Statutes permits an insurer to cancel and deny payment based on a “misrepresentation, omission, concealment of fact, or incorrect statement” if it is material to the insurance company accepting the risk of issuing the policy under the existing terms. In other words, knowledge of the true information would have impacted the insurer’s decision to issue the policy with the same premium rate, term of coverage, and policy limits.
Further, the language of the statute did not limit material misrepresentations that would justify rescinding the policy to cases of “knowing” or “intentional” misstatements or omissions. The court observed that false information in an application was sufficient to deny a claim even if the error by the policyholder was innocent. The relevant consideration under the statute was whether the insurer’s decision to issue the policy as written would have been impacted by the inaccurate information, rather than whether the misleading responses were intentional.
The homeowners contended that this statutory provision was not applicable because a provision in the insurance policy applied a more stringent standard regarding the insurers’ right to rescind the policy and deny a claim based on inaccurate information in the policy application. The insurance policy provided:
“SECTIONS I AND II—CONDITIONS
… 2. Concealment or Fraud. The entire policy will be void if, whether before or after a loss, an insured has:
- Intentionally concealed or misrepresented any material fact or circumstance;
- Engaged in fraudulent conduct; or
- Made false statements.”
The homeowners argued that since the entire section was captions “Concealment or Fraud,” the policy imposed a more rigorous standard on the insurer seeking to rescind the policy. According to the policyholders, this provision limited the insurer’s right to rescind the policy to situations involving intentional misrepresentation. Because the heading to the provision referred only to conduct that is intentional in nature, the policyholders argued that the claim was covered.
However, the court rejected this claim by relying on certain contract interpretation rules when analyzing the provision. The court acknowledged that a policy can override a statutory provision provided the policy does not conflict with statutory law or public policy. The court noted that prior decisions have ruled that headings and sub-headings in agreements do not dictate the meaning of a contract, especially when the “literal language of the heading is contrary to the agreement’s overall scheme.” The court noted that section 2(c) above would be superfluous if it referred only to intentional conduct since an intentional false statement would be covered under section 2(a). Based on this analysis, the court found that the only function of 2(c) given the language of the other subdivisions was to authorize rescission of the contract based on inaccurate representations or non-disclosures that are inadvertent.
While this case involves denial of coverage and cancellation of a policy based on inaccurate information in the application, this decision demonstrates the complex analysis of both policy language and the interplay between specific policy provisions and Florida law involved in determining such issues. This case reveals the importance of carefully reviewing your policy and seeking legal advice if your insurer denies coverage based on allegedly omitted information or false representations in the application.
You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].