This is the second installment in our two-part blog post reviewing the impact of the failure to comply with a “condition subsequent” included in an insurance policy. The first part of this blog series examined the facts of a recent decision that denied coverage for property loss incurred during a burglary. Part II focuses on the court’s analysis of the effect of non-compliance with a policy condition and the important takeaway from this recent decision by Florida’s 5th DCA.
The trial court entered summary judgment for the insured. According to the appellate court, any failure to comply with the condition of maintaining alarm monitoring did not prejudice the insurer since the system would not have been activated by the burglars. While the insurer did not dispute that the alarm system would not have detected the intruders during the burglary, the 5th DCA indicated that the trial court inappropriately focused on the wrong issue.
The 5th DCA found that the insurer was prejudiced because the insurer was deprived of the opportunity to terminate the policy, continue coverage with a higher premium, or waive the breach by the insured. The court indicated that the fact the alarm would not have been triggered by the insurer was irrelevant because the lack of notice regarding the termination of monitoring deprived the insurer of the opportunity to adjust or eliminate coverage based on the increased risk of loss.
As the appellate court pointed out, the insured receive a significant premium discount based on the condition that central alarm monitoring would be maintained. When the insurer was deprived of the chance to increase the premium payment or terminate coverage, this amounted to prejudice resulting in suspension of coverage under the express terms of the policy.
The reasoning of the 5the DCA was based on a prior case, Indep. Fire Ins. Co. v. NCNB Nat’l Bank of Fla. The fire insurance policy in Independent Fire included a condition requiring the insured to notify the carrier of “any change of ownership or occupancy or increase of hazard . . . .” The policy also provided that the coverage would become null and void if the insured failed to comply with this condition. After the subject property was damaged in a fire, the insurance company discovered that the property had been sold to another owner; been occupied, and been flooded. The insurer refused to pay the fire damage claim because of the insured’s failure to comply with the notice condition regarding the change in ownership, occupancy, and increased risk.
In Independent Fire, the court did not consider whether the fire would have occurred even if the required notice had been given. Rather, the court found that the insurance company had been prejudiced because the carrier was denied the opportunity to cancel the policy or demand a more substantial premium due to the lack of notice.
This case demonstrates the critical importance of understanding all conditions imposed by your insurance policy. If you are deemed to be in non-compliance with such a condition, the insurance company might deny a claim which would fall squarely within the terms of your policy. When reading through your policy, you also need to make sure that you understand all of the conditions that might impact your right to benefits. If there are conditions that you do not understand, you should ask your agent prior to committing to a policy.
If you have questions about an insurance policy or your insurer refuses to pay your claim, we invite you to contact us to learn about your legal rights and options. My law firm represents policyholders in claims disputes in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.