Failing to Provide Sufficient Information to Your Insurance Company When Making a Claim May Void Your Insurance Coverage

FAILING TO PROVIDE SUFFICIENT INFORMATION TO YOUR INSURANCE COMPANY

By: Robert S. Tanner, Esq.

About the Author: Larry Leiby, Esq. was the founder and first chairman of the Florida Bar Construction Law Committee in 1976. He is the author of the Florida Construction Law Manual. He is Board Certified in Construction Law and was on the Construction Law Certification Committee that creates and grades the tests for construction law board certification. He was awarded the lifetime achievement award by the Florida Bar Construction Law Committee and teaches construction law at the Florida International University College of Law. He can be reached at leiby@mkpalaw.com. For more information, please visit www.mkpalaw.com.

Most insurance policies contain a requirement of cooperation that will protect the insurer's denial of the claim if the insured fails to cooperate. But, just how demanding can an insurer be in its demands for cooperation?

In El Dorado Towers Condominium Association, Inc. v. QBE Insurance Corporation, 2010 WL 2400082 (S.D. Fla. June 16, 2010), the El Dorado Towers Condominium (the "Association") sustained damages as a result of Hurricane Wilma. At the time of the hurricane, the Association was insured under a commercial property insurance policy issued by QBE Insurance Corporation ("Insurer"). The policy contained provisions requiring the Association, in the event of a claim for coverage, to provide a signed, sworn proof of loss within 60 days of the Association's request and to permit Insurer to: (i) make copies of the Association's books and records, and (ii) "examine any insured under oath . . . at such times as may be reasonably required . . . ."

Shortly after Hurricane Wilma struck, the Association submitted an initial notice of loss. Approximately one month after the hurricane, Insurer's adjuster inspected the property along with the Association's public adjuster. Thereafter, the Association notified Insurer that its claim was for $31,754,520.25 and provided Insurer with the public adjuster's estimate, which consisted of 2,939 pages. Insurer requested additional documents and the Association produced documents, (although first and second lawyers refused to produce unit owner files and other documents). The Association also produced a corporate representative and the property manager for examination under oath, but refused to produce other persons (including its public adjuster) as Insurer requested. Approximately one year after Hurricane Wilma, Insurer took the position that the Association's refusal to produce all requested documents and witnesses had impeded its investigation and on December 14, 2006, made a final demand for them and provided the Association with a form for the sworn proof of loss.

On February 26, 2008, the Association (through its third attorney since the hurricane) provided a sworn proof of loss to Insurer, although not on Insurer's required form, and demanded that Insurer give its appraisal. Subsequently, the Association provided a sworn proof of loss using Insurer's form and produced all documents that Insurer requested, including board meeting minutes showing that just before Wilma the Association committed to multiple repair projects. Insurer scheduled the additional examinations under oath. The Association refused the examinations and filed suit on January 8, 2009.

Insurer moved for summary judgment (i.e., judgment without a trial) on its defense that the Association had failed to comply with the policy requirements by (a) refusing the additional examinations, (b) submitting its sworn proof of loss 14 months after Insurer's request, and (c) failing to allow Insurer to examine the books and records "as often as may reasonably be required."

The trial court noted the rule that, "where an insured fails to comply with policy conditions and conditions precedent to filing suit under an insurance contract, the insured has materially breached its contract and may not" enforce the insurance contract. The court further noted that, "Two commonly recognized conditions precedent in insurance contracts are the requirements that an insured: (1) submit to an examination under oath, and (2) submit a sworn proof of loss."

The trial court ruled that the Association's refusal to produce the additional witnesses for examination under oath did not rise to a failure to cooperate as a matter of law but, instead, a trial was necessary to determine the issue. Regarding the sworn proof of loss that was supposed to be provided to Insurer within 60 days of its request but that the Association initially provided 14 months after and ultimately provided on the form required by Insurer 16 months after, the trial court ruled that because it was provided before suit was filed, a trial was required to determine whether the lateness amounted to a breach material enough to preclude the Association's claim. Similarly, regarding the books and records, the trial court ruled that although the requested documents "were not produced until months and at times years after [Insurer's] repeated requests," a trial was required to determine whether the Association materially breached so as to forfeit coverage.

The law the court relied upon in support of its rulings is that if an insured cooperates to some degree or provides an explanation for its noncompliance with the provisions of the policy, the insurer is not entitled to summary judgment and the questions must be resolved at trial. So, although sufficient evidence existed for Insured to defeat the motion for summary judgment, Insured still could lose at trial if the trier of fact finds that Insured failed to cooperate and thereby breached the policy.

Paying insurance premiums and then failing to cooperate with the insurer's investigation of the claim does not make much sense. In this case, the Association's failure to timely provide the documents requested by the Insurer may lead to a total loss of coverage. If, at trial, the Court decides that the Association should have produced the documents and witness sooner, the Association stands to lose nearly $32,000,000.