Insurance — Homeowners — Sinkhole — Error to grant summary
judgment in favor of insurer on homeowners’ sinkhole claim where there was
material issue of fact concerning whether insureds timely reported their loss to
insurer — In considering insurer’s defense of untimely notice of claim, circuit
court must follow two-step analysis, which requires determining whether notice
was timely given and, if untimely, whether insurer was prejudiced by untimely
notice — Question whether insureds timely reported claim to insurer remains to
be determined by jury in instant case — If jury determines that notice was
untimely, insureds must overcome presumption of prejudice in order to prevail on
insurer’s defense of untimely notice

ANTHONY LoBELLO and PATRICIA LoBELLO, Appellants, v. STATE FARM FLORIDA
INSURANCE COMPANY, Appellee. 2nd District. Case No. 2D13-300. Opinion filed June
18, 2014. Appeal from the Circuit Court for Pasco County; W. Lowell Bray, Jr.,
Judge. Counsel: Charles M. Schropp and Charles P. Schropp of Schropp Law Firm,
P.A., Tampa; James J. Dowling of Law Offices of Berger & Dowling, Palm
Harbor; and Craig A. LeValley and Peter A. Napolitano of LeValley &
Napolitano, P.L., New Port Richey, for Appellants. Scot E. Samis of Traub
Lieberman Straus & Shrewsberry, LLP, St. Petersburg, for Appellee.

(WALLACE, Judge.) Anthony LoBello and Patricia LoBello (the LoBellos) appeal
a final summary judgment entered in favor of State Farm Florida Insurance
Company on the LoBellos’ sinkhole claim. Because there is a material issue of
fact concerning whether the LoBellos timely reported their claimed loss under
their homeowners’ policy to State Farm, we reverse.

The LoBellos moved into their new home in 2002. In late 2004, they noticed
cracking in their home. Initially, the LoBellos attributed the cracking to the
effects of normal settlement, and they did not associate the cracks with
sinkhole activity. Mr. LoBello, who is a professional painter, simply repaired
and repainted most of the damaged areas.

Sometime later, on the recommendation of a friend, the LoBellos consulted a
public adjuster concerning the cracking. The consultation with the public
adjuster led the LoBellos to make a sinkhole claim under their policy with State
Farm on February 20, 2008. State Farm took the examinations under oath (EUOs) of
the LoBellos in July 2008. In November 2008, State Farm sent the LoBellos a
letter denying coverage for the claim based on late reporting and the assertion
that State Farm had been prejudiced by its inability to perform a prompt
investigation. State Farm also alleged that the LoBellos failed to take
appropriate measures “to save or protect the property from further peril.”

In May 2009, the LoBellos filed an action on their claim against State Farm.
The LoBellos’ operative complaint had two counts. Count I was a claim for breach
of contract based on State Farm’s failure to pay the claim. In Count II, the
LoBellos alleged a second claim for breach of contract based on State Farm’s
failure to conduct testing for sinkhole activity in accordance with section
627.707, Florida Statutes (2007).1 State
Farm answered the complaint and raised various affirmative defenses, including
the LoBellos’ alleged failure to comply with the policy provision requiring
timely reporting of a claim of loss. The policy language upon which State Farm
relied in Section I concerning “Conditions” provided, in pertinent part, as
follows:

State Farm also alleged that the late notice prejudiced it in its handling
and investigation of the claim.

This much of the procedural history in the circuit court is straightforward.
However, the course of the proceedings relative to the parties’ respective
motions for summary judgment is somewhat unusual and complicated. In December
2009, State Farm filed its first motion for summary judgment. Based primarily on
the LoBellos’ EUOs, State Farm asserted that the undisputed facts established
that the reporting of their claim under the policy was untimely. State Farm also
asserted that the LoBellos were unable to overcome the presumption of prejudice
to State Farm resulting from the late notice. Later, the LoBellos moved for a
partial summary judgment on their breach of contract claim arising from State
Farm’s failure to conduct an appropriate sinkhole investigation.

In January 2011, the circuit court granted the LoBellos’ motion for partial
summary judgment based on State Farm’s failure to conduct the appropriate
sinkhole investigation. State Farm moved for reconsideration of the order
granting the partial summary judgment to the LoBellos and moved again for a
summary judgment based on the asserted late reporting by the LoBellos of their
claim. On April 29, 2011, the circuit court denied State Farm’s motion for
reconsideration and also denied its motion for summary judgment based on the
alleged untimely notice. In its order denying State Farm’s motion for summary
judgment, the circuit court said: “The Court finds that a question of fact
exists as to whether [the LoBellos] should have known that a claim would arise
when they observed damage in 2004.”

In August 2011, State Farm moved for summary judgment for a third time. In
its renewed motion for summary judgment, State Farm did not rely on any facts
that were not previously known or available. Instead, State Farm asserted that
the LoBellos’ claim was “barred” as a matter of law as untimely based on what
were then two recently decided cases: (1) Kroener v. Florida Insurance
Guaranty Ass’n, 63 So. 3d 914 (Fla. 4th DCA 2011); and (2) Hochberg v.
Thomas Carter Painting, Inc., 63 So. 3d 861 (Fla. 3d DCA 2011).

At the hearing on its renewed motion for summary judgment, State Farm’s
counsel had this to say about the Fourth District’s decision in the
Kroener case:

In this case, the LoBellos first became aware of the cracking in late 2004,
but did not file a claim with State Farm until November 2008, approximately four
years later. According to State Farm’s counsel, Kroener required a ruling
that the LoBellos’ claim was barred as a matter of law. State Farm’s counsel
also argued to the circuit court that — in accordance with Kroener — a
conclusion that the LoBellos did not timely report their claim to the insurance
company in accordance with the policy made it unnecessary to address the issue
of whether the insurance company had sustained any prejudice because of the late
notice.

At the hearing, State Farm’s counsel also relied heavily on the following
statement from the Hochberg case: “[W]here there is an obvious
manifestation of a defect, notice will be inferred at the time of manifestation
regardless of whether the plaintiff has knowledge of the exact nature of the
defect.” 63 So. 3d at 863 (quoting Performing Arts Ctr. Auth. v. Clark
Constr. Grp., Inc., 789 So. 2d 392, 394 (Fla. 4th DCA 2001)). In counsel’s
paraphrase of the quotation from Hochberg, “If they know about it, that’s
when the clock starts to click.” Because the cracking first manifested itself in
the LoBellos’ residence in 2004 and they did not make a claim until 2008,
counsel concluded that State Farm was entitled to a summary final judgment based
on its defense of untimely notice.

In response, the LoBellos’ counsel argued that the Kroener and
Hochberg cases were distinguishable and inapplicable. Perhaps because of
State Farm’s insistence that Kroener and Hochberg entitled it to a
summary judgment as a matter of law based on an untimely notice, no one
addressed the issue of prejudice at the hearing. At the conclusion of the
hearing, the circuit judge announced — without explanation — that he would
grant State Farm’s renewed motion for summary judgment. The written order
memorializing the circuit court’s ruling does not contain any findings or
conclusions of law and merely cites to Kroener and Hochberg.
Somewhat inconsistently, the circuit court did not vacate its earlier order in
which it found that there was a material issue of fact concerning “whether [the
LoBellos] should have known that a claim would arise when they observed damage
in 2004.” Similarly the circuit court did not vacate its earlier order granting
the LoBellos’ motion for summary judgment based on State Farm’s failure to
conduct an appropriate investigation.

Based on the order granting the renewed motion for summary judgment, the
circuit court entered a final judgment in favor of State Farm. The LoBellos
filed a motion for rehearing; the circuit court denied the motion. This appeal
followed.

The standard of review for an order granting a motion for summary judgment is
de novo and requires a two-pronged analysis. Volusia Cnty. v. Aberdeen at
Ormond Beach, L.P., 760 So. 2d 126, 130 (Fla. 2000). Summary judgment is
proper only if (1) no genuine issue of material fact exists, viewing every
possible inference in favor of the party against whom summary judgment has been
entered, Huntington Nat’l Bank v. Merrill Lynch Credit Corp., 779 So. 2d
396, 398 (Fla. 2d DCA 2000), and (2) the moving party is entitled to a judgment
as a matter of law, Aberdeen at Ormond Beach, 760 So. 2d at 130. “If the
record reflects the existence of any genuine issue of material fact or the
possibility of any issue, or if the record raises even the slightest doubt that
an issue might exist, summary judgment is improper.” Holland v. Verheul,
583 So. 2d 788, 789 (Fla. 2d DCA 1991).

“The purpose of a provision for notice and proofs of loss is to enable the
insurer to evaluate its rights and liabilities, to afford it an opportunity to
make a timely investigation, and to prevent fraud and imposition upon it.”
State Farm Mut. Auto. Ins. Co. v. Ranson, 121 So. 2d 175, 180 (Fla. 2d
DCA 1960), overruled in part on other grounds, Am. Fire & Cas. Co.
v. Collura, 163 So. 2d 784, 793-94 (Fla. 2d DCA 1964); see also
Ideal Mut. Ins. Co. v. Waldrep, 400 So. 2d 782, 786 (Fla. 3d DCA 1981)
(noting that the insured’s extended delay in reporting the accident or
occurrence deprived the insurer of its right “to notice and an opportunity to
eliminate or reduce its loss”). “The failure of an insured to give a timely
notice of loss in contravention of a policy provision is a legal basis for the
denial of recovery under the policy.” Waldrep, 400 So. 2d at 785 (citing
Boyd v. Pa. Nat’l Mut. Cas. Ins. Co., 195 So. 2d 259 (Fla. 4th DCA
1967)).

The question of whether an insured’s untimely reporting of loss is sufficient
to result in the denial of recovery under the policy implicates a two-step
analysis. See 1500 Coral Towers Condo. Ass’n v. Citizens Prop. Ins.
Corp., 112 So. 3d 541, 543-45 (Fla. 3d DCA 2013) (applying a two-step
analysis to the question); Clena Invs., Inc. v. XL Specialty Ins. Co.,
2012 WL 1004851 at *3 (S.D. Fla. Mar. 26, 2012) (not reported in F. Supp. 2d)
(“[M]ost Florida cases appear to treat the issue in two step fashion.”). The
first step in the analysis is to determine whether or not the notice was timely
given. See 1500 Coral Towers, 112 So. 3d at 543-44;
Waldrep, 400 So. 2d at 785-86; Clena Invs., 2012 WL 1004851 at *4.
If the notice was untimely, then prejudice to the insurer is presumed.
Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 1985);
Soronson v. State Farm Fla. Ins. Co., 96 So. 3d 949, 952-53 (Fla. 4th DCA
2012). However, the presumption of prejudice to the insurer “may be rebutted by
a showing that the insurer has not been prejudiced by the lack of notice.”
Macias, 475 So. 2d at 1218.

A determination that the notice was, in fact, timely concludes the analysis
with the first step. However, if the notice was untimely, then the analysis
proceeds to the second step. 1500 Coral Towers, 112 So. 3d at 544-45;
Waldrep, 400 So. 2d at 786; Clena Invs., 2012 WL 1004851 at *4. In
the second step, the insured must overcome the presumption by proving that the
insurer was not prejudiced by noncompliance with the condition of timely notice.
Macias, 475 So. 2d at 1218; Soronson, 96 So. 3d at 952-93. The
burden of overcoming the presumption of prejudice is on the insured.
Macias, 475 So. 2d at 1218; Soronson, 96 So. 3d at 953. If the
insured is unable to overcome the presumption of prejudice, then the insurer
will prevail on a defense of untimely notice.

An event must be of sufficient consequence to trigger an insured’s duty to
provide notice. “Notice is necessary when there has been an occurrence that
should lead a reasonable and prudent man to believe that a claim for damages
would arise.” Waldrep, 400 So. 2d at 785 (citing Mountainair Mun. Sch.
v. U.S. Fid. & Guar. Co., 461 P.2d 410 (N.M. 1969)). “[T]he duty to
provide notice arises when a reasonable person, viewing all available facts and
information, would conclude that an award implicating the policy is likely.”
Vision I Homeowners Ass’n v. Aspen Specialty Ins. Co., 674 F. Supp. 2d
1333, 1338-39 (S.D. Fla. 2009) (quoting Bray & Gillespie IX, LLC v.
Hartford Fire Ins. Co., 2009 WL 1513400 at *7 n.9 (M.D. Fla. May 27, 2009)).

In this case, the policy condition called for “immediate notice” of a “loss
to which this insurance may apply.” Such a provision will be read as meaning “as
soon as practicable” and “call[s] for notice to be given with reasonable
dispatch and within a reasonable time in view of all the facts and
circumstances of each particular case.” Collura, 163 So. 2d at 792.
“All of the Florida cases bearing upon the question of the requirement of notice
being given to the insurer seem to be uniform in the proposition that what is a
reasonable time depends upon the surrounding circumstances and is ordinarily a
question of fact for the jury.” Renuart-Bailey-Cheely Lumber & Supply Co.
v. Phoenix of Hartford Ins. Co., 474 F.2d 555, 557 (5th Cir. 1972) (citing
Hartford Accident & Indem. Co. v. Mills, 171 So. 2d 190 (Fla. 1st DCA
1965)); see generally Steven Plitt et al., Chapter 190. Time
Requirements-Introduction & General Principles; Standards & Measure of
Compliance, in 13 Couch on Insurance, § 190:30 (3d ed. 2013)
(discussing notice provisions in insurance policies and stating that “an
‘immediate notice’ provision merely imposes a reasonable requirement”).

The determination of whether the insured gave timely notice to the insurer is
ordinarily a question to be resolved by the jury or the trial judge when acting
as the trier of the facts. See King Cole Condo. Ass’n v. USPlate Glass
Ins. Co., 45 So. 3d 833, 833 (Fla. 3d DCA 2010); Waldrep, 400 So. 2d
at 785; Solano v. Fed. Title & Ins. Corp., 229 So. 2d 312, 313 (Fla.
1st DCA 1969); Renuart, 474 F.2d at 557; Clena Invs., 2012 WL
1004851 at *4. On the other hand, if the undisputed evidence will not support a
finding that the insured gave notice to the insurer as soon as practicable, then
a finding that notice was timely given is unsupportable. Waldrep, 400 So.
2d at 785; Midland Nat’l Ins. Co. v. Watson, 188 So. 2d 403, 405 (Fla. 3d
DCA 1966); Clena Invs., 2012 WL 1004851 at *4.

We begin our discussion of this case by noting that the circuit court had the
right to change its interlocutory rulings on the various motions for summary
judgment that the parties had presented to it. “It is well established that a
trial court may reconsider and modify interlocutory orders at any time until
final judgment is entered.” Oliver v. Stone, 940 So. 2d 526, 529 (Fla. 2d
DCA 2006) (citing Hunter v. Dennies Contracting Co., 693 So. 2d 615 (Fla.
2d DCA 1997)). “An order granting summary judgment is an interlocutory order,
and a trial court has inherent authority to reconsider and modify its
interlocutory orders.” AC Holdings 2006, Inc. v. McCarty, 985 So. 2d
1123, 1125 (Fla. 3d DCA 2008) (citing Bay N Gulf, Inc. v. Anchor Seafood,
Inc., 971 So. 2d 842, 843 (Fla. 3d DCA 2007)).

However, two things are noteworthy about the circuit court’s order granting
State Farm’s renewed motion for summary judgment. First, the circuit court never
vacated its earlier order granting the partial summary judgment in favor of the
LoBellos on their breach of contract claim based on State Farm’s failure to
conduct a sinkhole investigation. In addition, the circuit court never vacated
its earlier order denying State Farm’s initial motions for summary judgment in
which it ruled that there were genuine issues of material fact underlying the
issue of whether the LoBellos had given timely notice of the claimed loss to
State Farm. Second, the circuit court did not base its ruling in favor of State
Farm on any new facts. Instead, the circuit court granted State Farm’s renewed
motion entirely on the authority of two recently decided cases — Kroener
and Hochberg — that State Farm presented as requiring a different result
in light of the facts that were already known.

In this case, the circuit court initially ruled that there was a material
issue of fact underlying the question of whether the LoBellos had complied with
the policy condition requiring timely notice to State Farm of their sinkhole
claim. Based on this ruling, the circuit court’s consideration of the matter
properly ended with the first step in the two-step analysis. The presence of a
material issue of fact concerning the timeliness of the notice made it
unnecessary to reach the second step and to consider the question of prejudice.

At the hearing on the renewed motion for summary judgment, State Farm argued
that — under Kroener — the substantial period of time that had elapsed
since the LoBellos first noticed the cracks in their new home before they
reported the claimed loss was sufficient in itself to “bar” their claim.
Accordingly, it was unnecessary to proceed to the second step in the analysis
and to consider whether the LoBellos could overcome the presumption of prejudice
to State Farm resulting from the late reporting of the claim. The circuit court
apparently agreed and entered a final summary judgment without regard to its
earlier order ruling that there was a material issue of fact underlying State
Farm’s defense based upon the alleged untimely report of the claim.

There are two problems with this reading of the Fourth District’s decision in
Kroener. First, it short-circuits the two-step analysis required by the
supreme court’s decision in Macias and numerous other reported Florida
cases. The Fourth District has issued multiple opinions correcting this
misinterpretation of Kroener. See Kings Bay Condo. Ass’n v.
Citizens Prop. Ins. Corp., 102 So. 3d 732, 733 (Fla. 4th DCA 2012);
Soronson, 96 So. 3d at 953 n.1; Kramer v. State Farm Fla. Ins.
Co., 95 So. 3d 303, 307 n.1 (Fla. 4th DCA 2012); see also Hope v.
Citizens Prop. Ins. Corp., 114 So. 3d 457, 459 (Fla. 3d DCA 2013) (citing to
the Fourth District’s “later cases that receded from and clarified the
Kroener holding”); Stark v. State Farm Fla. Ins. Co., 95 So. 3d
285, 287-88 (Fla. 4th DCA 2012) (applying the prejudice analysis set forth in
Macias and not citing to Kroener).2

Second, State Farm’s reading of Kroener in the circuit court purports
to establish a bright-line rule “barring” an insured’s claim that is reported
later than a designated period of time, e.g., two years, after the loss. Once
again, this is a misreading of Kroener. The Fourth District did not
attempt in Kroener to establish such a bright-line rule. See
Slominski v. Citizens Prop. Ins. Corp., 99 So. 3d 973, 978-79 (Fla. 4th
DCA 2012); see also Banta Props., Inc. v. Arch Specialty Ins. Co.,
2011 WL 5928578 at *3 (S.D. Fla. Nov. 23, 2011) (not reported in F. Supp. 2d)
(distinguishing Kroener and noting that under Florida law “there is no
per se timeliness bar for filing a notice of a claim and that notice must
be considered under the circumstances”). State Farm’s misreading of
Kroener in the circuit court ignored this court’s opinion in
Collura and many other Florida decisions holding that what is a
reasonable time to give notice of a claim to the insurer must be considered “in
view of all the facts and circumstances of each particular case.”3 Collura, 163 So. 2d at 792.

To its credit, State Farm no longer relies on Kroener in support of
the circuit court’s final summary judgment. State Farm now relies on
Hochberg — the other case that it cited in the circuit court — as
authority for affirmance. Hochberg is a construction defect case
involving a question about when the statute of limitations began to run on the
owners’ claims against certain subcontractors. 63 So. 3d at 863-64. We find
nothing in Hochberg that undermines the circuit court’s initial ruling —
never vacated — that there was a genuine issue of material fact about when the
LoBellos should have known that they might have a claim under their policy
against State Farm. It follows that the circuit court erred in entering the
final summary judgment in favor of State Farm.

We reverse the final judgment in favor of State Farm and remand this case for
further proceedings consistent with this opinion. In considering State Farm’s
defense of untimely notice of the claim, the circuit court must follow the
two-step analysis outlined above. The question of whether the LoBellos timely
reported their claim to State Farm remains to be determined by a jury. If the
jury determines that the LoBellos’ notice was untimely, then the LoBellos must
overcome the presumption of prejudice in order to prevail on State Farm’s
defense based on their alleged failure to comply with the policy’s condition
requiring timely notice of the claim.

Reversed and remanded for further proceedings. (KHOUZAM and SLEET, JJ.,
Concur.)

__________________

1The LoBellos initially asserted a claim
for declaratory judgment in Count II, alleging that they were in doubt about
whether their loss was covered under the policy. The parties stipulated to an
order permitting the LoBellos to amend the complaint in August 2010, and the
LoBellos filed an amended complaint asserting a breach of contract claim in
Count II.

2In fairness to the circuit court and to
State Farm’s counsel, we note that all of the decisions cited here were issued
after the entry of the final summary judgment under review in this case.

3We observe that the circuit court was
obligated to follow the applicable decisions of the supreme court and this court
on the issues presented by State Farm’s renewed motion for summary judgment
instead of an apparently contrary decision from another district court of
appeal. Pardo v. State, 596 So. 2d 665, 666-67 (Fla. 1992); Miller v.
State, 980 So. 2d 1092, 1094 (Fla. 2d DCA 2008). The circumstance that
Kroener had then been “recently decided” by the Fourth District did not
trump the numerous authoritative decisions from the supreme court and this court
that were directly controlling on the issues presented.