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Insurance Coverage and Bad Faith

Florida 3rd DCA Clarifies Duties of Insurance Carriers for Policy Change Notifications to Insureds

On June 2, 2020, the Florida Third District Court of Appeal put insurers on notice that they (1) must provide their insureds with written disclosure notices summarizing the changes in their policies upon renewal and (2) provide notices to their insureds when claims become disputes. People’s Tr. Ins. v. De Las Mercedes Lavadie, Nos. 3D19-962, 3D19-810, 2020 WL 3443456, at *3–4 (Fla. 3d DCA June 24, 2020).

The Case

In People’s Trust Insurance, the insurer brought an action seeking specific performance of appraisal provisions and declaratory relief against its insureds following a dispute between the parties. Id. at *1. Specifically, in May 2016, approximately two months following the insureds’ policy renewal for which notice of changes was provided, the insureds filed a claim of loss for damage caused by a water leak inside the insureds’ property. Id. In June 2016, the insurer notified the insureds that it intended to repair the damage. Id. Its notice included a detailed list of work that was to be performed and materials to be used by a designated contractor to complete the repairs, which were estimated at approximately $65,000.00. Id. Shortly thereafter, the insureds submitted their sworn proof of loss, which included a private estimate of $172,000.00 for the total cost of repairs. Id. at *2. The insurer then provided the insureds notice advising them that mediation was available through the Florida Department of Financial Services (“DFS”). Id. Through counsel, the insureds argued that the insurer’s estimate was “severely deficient” and demanded that the insurer pay the insureds’ estimate amount within ten days. Id. About a week later, the insureds filed suit. Id. The insureds filed two partial motions for summary judgment seeking to “(1) invalidate the notice of policy changes . . . and (2) [to] determine that [the insurer] waived any right to appraisal by failing to comply with the statutory procedure for offering mediation . . . .” Id. The trial court granted both motions, and the insurer appealed both motions separately. Id.

The Third District consolidated the two appeals and decided both motions for summary judgment in one opinion. Id. at *1. The Third District’s full opinion can be found here.

The Court’s Findings

The Court addressed the summary judgments in turn. See id. at *2–4. As it relates to the first motion for summary judgment, the court found that the trial court erred in finding that the insurer had not adequately notified its insureds of changes to its policy upon the policy’s renewal. Id. at *3. The Court reasoned that, because section 627.43141(2), Florida Statutes (2016), merely required the insurer “to notify the insured and the insured’s agent in writing that the policy for the new policy would be different, but it did not require the insurer to identify every amendment to the form [,]” the insurer sufficiently notified the insureds that their policy had changed when it provided notice to the insureds stating “Your policy, in its entirety, has changed.” Id. at *1–2. The Court also made clear that, after 2018, insurers need only provide “advance written notice summarizing the change [in policy to their insureds.]” Id. at *3 (emphasis added) (quoting § 627.43141(2), Fla. Stat. (2018)).

Regarding the second motion for summary judgment at issue, the Third District found that the insurer complied with their statutory duty to notify their insureds’ of the opportunity to mediate. Id. at *4–5. In so holding, the Third District adopted its sister court’s reasoning in State Farm Fla. Ins. v. Lime Bay Condo., Inc., 187 So. 3d 932, 936 (Fla. 4th DCA 2016), in which the Fourth District held that “the requirement for giving notice of the right to participate in mediation regarding a claim does not ripen until the insurer is put on notice that there is a dispute . . . .” The Third District noted that insurers only need to send mediation notices where claims “rise[] to the level of a ‘dispute[]’ . . . .” People’s Tr. Ins., 2020 WL 3443456, at *4. The court went on to note that an insured’s threat of litigation indicates that a dispute has arisen. Id. The Third District also highlighted that section 627.7015, Florida Statutes (2019), does not impose upon an insurer a period within which an insured may seek mediation under the DFS mediation program. See People’s Tr. Ins., 2020 WL 3443456, at *4.

What Does This Mean for Insurers?

The Third District makes clear that insurers must provide notice summarizing changes made to their insureds policies after 2018. Because the updated language in section 627.43141(2) came into effect in 2018, insurers need not worry about summarizing changes pre-2018. Insurers should also note that their requirement to provide their insureds notice of their right to participate in mediation triggers when a dispute arises between the parties, not when a mere claim arises. Therefore, for instance, if an insured files a claim and the adjustment phase begins, a claim is initiated, but it is not a “claim” under section 627.7015 that would trigger the insurer’s obligation to provide notice to the insured Alternatively, a claim arises where the insured files suit against the insurer or vice versa. Moreover, insureds are not entitled to a specific period within which insureds may seek mediation under the DFS mediation program after insurers provide notice.

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