Consider this hypothetical situation. An insured has submitted a claim to their insurance carrier with covered damage.  The insurance company invokes its right to repair the property.   The insurance carrier requests that the insured submit a proof of loss before they will proceed with the repairs.  The insurance carrier advises that if the policyholder does not submit a proof of loss, the insurance carrier will not start the repairs, or, even more stunningly, will assert that the insured has breached the policy and attempt to avoid affording coverage altogether.  What are the policyholder’s obligations under the insurance policy? 

The Florida Third District Court of Appeal addressed a similar scenario in Gonzalez v, People’s Trust Insurance Company. In Gonzalez, a tree fell on the insured’s house because of Hurricane Irma.  The insured immediately reported the claim to their insurance carrier, People’s Trust.  People’s Trust sent its preferred contractor to perform emergency mitigation prior to sending out a claims adjuster to estimate the cost of repairing the damage.  After the adjuster inspected the loss, People’s Trust sent a letter to the insured advising they had finished their investigation and that it was determined that there was coverage under the policy.  People’s Trust indicated that pursuant to its Preferred Contractor Endorsement, People’s Trust elected to repair the loss rather than make a payment of cash. 

Before beginning work, People’s Trust advised the insured that their adjuster had not completed his estimate and requested the insureds provide an executed sworn proof of loss within sixty days. (One could presume that People’s Trust took this approach to avoid providing the insured an opportunity to seek alternative dispute resolution options as to the scope of the loss and head off future litigation.) The insured submitted an executed work authorization and sworn proof of loss to People’s Trust.  Since the insured had not received an estimate from People’s Trust as to the amount of the loss, he filled in the “Whole Loss and Damage” and “Amount Claimed” sections in the proof of loss as being “pending.”  People’s Trust accepted the insureds’ work authorization but rejected the proof of loss as being deficient and advised that its contractor could not begin repairs.

Following the stalemate, the insured filed suit seeking declaratory judgment that People’s Trust must begin repair pursuant to the policy and alleging breach of the policy for failing to begin the repairs. People’s Trust responded and filed a counterclaim against the insured. People’s Trust alleged breach of contract by the insured for failure to comply with their post-loss obligations, executing a “compliant” proof of loss, and requested relief of complete avoidance of coverage. The trial court, following summary judgment hearing, found in favor of People’s Trust, effectively avoiding coverage for an otherwise covered claim.

Thereafter, the insured appealed. The issue for Florida’s 3rd DCA to resolve was whether the insured’s purportedly non-compliant proof of loss constituted a breach of the policy that justified a complete forfeiture of coverage. Again, People’s Trust had already conceded coverage.  The insured asserted that People’s Trust’s admission of coverage created an automatic waiver of formal proof of loss.  It argued that proof of loss was assumed immediately upon coverage being afforded.  People’s Trust argued that the insured continued to have a duty to comply with the policy’s proof of loss submission requirement even after the election to repair was invoked.

Rather than outright resolve the parties’ dispute, the Florida 3rd DCA reversed the previously issued final summary judgement for People’s Trust. In doing so, it concluded that the trial court failed to address whether the insured, in submitting the “pending” responses in its proof of loss, had substantially complied, cooperated to some extent, and satisfied the policy requirement. The 3rd DCA sent the case back to the trial court for further proceedings. The trial court docket reflects that the case is still open, though there has been no activity for over 30 days.

Considering the outcome in the 3rd DCA, the critical questions remain unresolved. Did the insured’s submission of a “pending” proof of loss comply sufficiently enough, such that People’s Trust was obligated to commence repair? Was the adjustment/repair tactic adopted by People’s Trust a contractually permissible way to avoid appraisal, and/or a lawsuit, and leave an insured in doubt as to the insurer’s agreed to scope or amount of loss? Is this type of claims practice regulated by the Florida Legislature in section 627.70131 and/or 624.155? Navigating policy requirements for submission of a proof of loss is a tedious task under normal circumstances. Add in the insurance company’s election to repair a loss pending your documentation of the appropriate amount of loss, and an onerous situation for an insured becomes that much more complex.

If you need help determining the appropriate way to respond to an insurance company’s post-loss requests for compliance with policy conditions, like submission of a proof of loss, Bennett Legal can help. Contact us today for a free consultation.

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