Eliminate Low Cost Risks Especially Where the Benefits Are Great

LOW HANGING FRUIT - ELIMINATE LOW COST RISKS, ESPECIALLY WHERE THE BENEFITS ARE GREAT

By: Robert S. Tanner, Esq.

Whether to put forth effort to reduce or eliminate unnecessary risks may be evaluated on a cost-benefit basis. In the context of insurance, the costs of reducing or eliminating issues that might interfere with your right to coverage are sometimes very low, while benefit of doing so is quite high. For example, in a previous article of ours which can be found here, we discussed the importance of timely informing an insurer of a claim. While the law is fairly liberal in protecting insureds in that area, the cost of timely informing the insurer of a claim is low, yet the failure to do so can be costly. In this article, we discuss the rigmarole (cost) an insured went through over the timing of submitting a proof of loss to his insurer.

In Makryllos v. Citizens Property Insur. Co., Case No. 2D11-2842 (Fla. 2d DCA Dec. 28, 2012), Citizens Property Insurance Company ("Citizens") issued an insurance policy to Nicholas Makryllos ("Insured") for a residential property. After rain allegedly caused damage to the roof and the interior of the home, Insured submitted a claim to Citizens. Citizens denied the claim for the roof damage but paid for damages to the interior.

Insured later submitted a supplemental claim asserting additional roof and interior damage. Citizens, through its counsel, responded to Insured by advising that it invoked the right to examine him under oath. The letter stated:

Pursuant to the terms of the policy of insurance, the Citizens Property Insurance Corporation requires that you submit a Sworn Proof of Loss. Although the policy provides that the Proof of Loss must be submitted within sixty (60) days from the date of the loss, this claim cannot be adjusted until after the Proof of Loss has been submitted, and therefore, you are expected to submit the Proof of Loss prior to or a the examination under oath.

The policy actually said something somewhat different, namely that Insured was required to provide a Sworn Proof of Loss within 60 days of Citizens' request for it, not within 60 days from the date of the loss. Citizens initially scheduled the examination for a date that was within 60 days of the date of its letter requesting the examination and advising that Citizens requested the Sworn Proof of Loss. However, the examination was rescheduled several times. Each time it was rescheduled, the letter from Citizens included the statement that Insured was expected to submit the Proof of Loss either before or at the time of the examination. Ultimately, the examination proceeded approximately six months after Citizens' request.

Shortly after the examination, Insured filed suit against Citizens. During the litigation, Citizens filed a motion for summary judgment which is a vehicle for bringing a case to a head prior to trial when one or more of the parties believes that some or all of the dispositive facts are so clear (essentially uncontested) that they do not need to be weighed at trial. Citizens argued that Insured was barred from recovery under the policy due to his failure to timely submit the sworn proof of loss. The trial court agreed and granted summary judgment in favor of Citizens. Insured appealed.

The appellate court reversed, finding that there were two issues of material fact that could not be determined at summary judgment. First, summary judgment was not proper because the facts could have allowed the factfinder (whether a jury or the judge at trial) to conclude that Citizens waived its right to rely on the policy condition requiring a sworn proof of loss within 60 days. That is, at trial a factfinder could have concluded that Citizens, by rescheduling and each time telling insured that he could submit the Proof of Loss at the examination, induced Insured to rely upon the statement and therefore waived the requirement that the Proof of Loss be submitted within 60 days. Such a finding would have defeated Citizens' defense.

Second, the fact that Insured submitted the Proof of Loss before the litigation and before summary judgment was entered demonstrated that, at the very least, Insured partially cooperated. That "partial compliance" created another issue of fact requiring trial. Specifically, the factfinder could determine that the partial compliance could defeat Citizens' claim that Insured breached the insurance contract and was deprived of recovery under the policy.

It is not clear from the appellate opinion whether Citizens or its lawyers intended deprive Insured of his rights by causing the delay. Whether or not they did, Insured's lawyer was savvy, fought for Insured's rights, and won the Insured his day in court. Nevertheless, the takeaway for anyone intending to make an insurance claim is to read the policy carefully and ensure timely compliance with all requirements. The small cost of timely providing a proof of loss or a notice of claim can avoid substantial litigation costs and the potential for losing rights under the policy.