40 Fla. L. Weekly D262c
Insurance — Homeowners — Sinkhole claim — Rescission of policy —
Misrepresentation of condition of home on applications for coverage — Error to
enter summary judgment in favor of insurer based on insureds’ negative answer to
question whether they had knowledge of any prior repairs made to any structures
on insured location for cracking damage where insurer failed to establish beyond
factual dispute that the answer to the question in the application was incorrect
or a misrepresentation and further failed to establish that the representation
was material to the acceptance of insurer’s risk or that true facts would have
caused it not to issue policies
Misrepresentation of condition of home on applications for coverage — Error to
enter summary judgment in favor of insurer based on insureds’ negative answer to
question whether they had knowledge of any prior repairs made to any structures
on insured location for cracking damage where insurer failed to establish beyond
factual dispute that the answer to the question in the application was incorrect
or a misrepresentation and further failed to establish that the representation
was material to the acceptance of insurer’s risk or that true facts would have
caused it not to issue policies
LUIS MORA and ROSAURA MORA, Appellants, v. TOWER HILL PRIME INSURANCE
COMPANY, Appellee. 2nd District. Case No. 2D13-4125. Opinion filed January 23,
2015. Appeal from the Circuit Court for Hillsborough County; Michelle Sisco,
Judge. Counsel: A. Lee Smith and Aaron S. Kling of Thompson Trial Group, P.A.,
Tampa, for Appellants. Anthony J. Russo and Ezequiel Lugo of Butler Pappas
Weihmuller Katz Craig LLP, Tampa, for Appellee.
COMPANY, Appellee. 2nd District. Case No. 2D13-4125. Opinion filed January 23,
2015. Appeal from the Circuit Court for Hillsborough County; Michelle Sisco,
Judge. Counsel: A. Lee Smith and Aaron S. Kling of Thompson Trial Group, P.A.,
Tampa, for Appellants. Anthony J. Russo and Ezequiel Lugo of Butler Pappas
Weihmuller Katz Craig LLP, Tampa, for Appellee.
(ALTENBERND, Judge.) Luis and Rosaura Mora appeal a final summary judgment
entered in favor of Tower Hill Prime Insurance Company. The judgment rescinded
their homeowners insurance policy based on the theory that the Moras had
misrepresented the condition of their home in violation of section 627.409,
Florida Statutes (2007), when they submitted their applications for the
coverage. We reverse because the limited evidence in the record at the time of
the hearing on Tower Hill’s motion for summary judgment did not establish its
right to obtain a summary judgment on this defense. See Griffin v. Am.
Gen. Life and Accident Ins. Co., 752 So. 2d 621 (Fla. 2d DCA 1999).
entered in favor of Tower Hill Prime Insurance Company. The judgment rescinded
their homeowners insurance policy based on the theory that the Moras had
misrepresented the condition of their home in violation of section 627.409,
Florida Statutes (2007), when they submitted their applications for the
coverage. We reverse because the limited evidence in the record at the time of
the hearing on Tower Hill’s motion for summary judgment did not establish its
right to obtain a summary judgment on this defense. See Griffin v. Am.
Gen. Life and Accident Ins. Co., 752 So. 2d 621 (Fla. 2d DCA 1999).
The Moras, who happen to be realtors, decided to purchase a model home in
November 2005. The home had been built in 2002 and had been used for three years
as the builder’s office and model. In connection with this purchase, the Moras
obtained a homeowners insurance policy from Tower Hill. In 2007, apparently
because of a change in occupancy status, this policy was cancelled and replaced
with another Tower Hill policy. The replacement policy was renewed for the
period of November 30, 2009, to November 30, 2010.
November 2005. The home had been built in 2002 and had been used for three years
as the builder’s office and model. In connection with this purchase, the Moras
obtained a homeowners insurance policy from Tower Hill. In 2007, apparently
because of a change in occupancy status, this policy was cancelled and replaced
with another Tower Hill policy. The replacement policy was renewed for the
period of November 30, 2009, to November 30, 2010.
In July 2010, nearly five years after the purchase of the home, the Moras
made a sinkhole claim. This claim was investigated by Tower Hill, and it
confirmed that sinkhole damage had occurred. The Moras and Tower Hill apparently
disagreed on the extent of the damage and the amount Tower Hill owed to the
Moras. As a result, the Moras sued Tower Hill in 2011.1
made a sinkhole claim. This claim was investigated by Tower Hill, and it
confirmed that sinkhole damage had occurred. The Moras and Tower Hill apparently
disagreed on the extent of the damage and the amount Tower Hill owed to the
Moras. As a result, the Moras sued Tower Hill in 2011.1
It is undisputed that the Moras signed an application for the original policy
and for the replacement policy. On page four of each of the form applications,
the question appears: “Do you have any knowledge of any prior repairs made to
any structures on the insured location for cracking damage?” On each
application, the box next to this question is checked “no.”
and for the replacement policy. On page four of each of the form applications,
the question appears: “Do you have any knowledge of any prior repairs made to
any structures on the insured location for cracking damage?” On each
application, the box next to this question is checked “no.”
During discovery, Tower Hill obtained a real estate inspection form that was
prepared when the Moras purchased this home. They also obtained a form
identified as the builder’s “Homeowner Orientation 1.1,” or homeowner
orientation report. On these forms, there are notations that a crack existed
around the pool deck and that a “large crack” existed on the ceilings of the
living room, the dining room, the family room, and the home theater. The
homeowner orientation report was signed by Mrs. Mora, and it has handwritten
notations that appear to be instructions for repairs. The handwritten notations
may be those of one of the Moras. These notations include: “repair 3 cracks in
drywall at ceiling,” “repair drywall at . . . stairwell base board,” “repair
nook window drywall cracks,” “repair cracks at entry under soffit (stucco),” and
“fix cracks” under three windows.
prepared when the Moras purchased this home. They also obtained a form
identified as the builder’s “Homeowner Orientation 1.1,” or homeowner
orientation report. On these forms, there are notations that a crack existed
around the pool deck and that a “large crack” existed on the ceilings of the
living room, the dining room, the family room, and the home theater. The
homeowner orientation report was signed by Mrs. Mora, and it has handwritten
notations that appear to be instructions for repairs. The handwritten notations
may be those of one of the Moras. These notations include: “repair 3 cracks in
drywall at ceiling,” “repair drywall at . . . stairwell base board,” “repair
nook window drywall cracks,” “repair cracks at entry under soffit (stucco),” and
“fix cracks” under three windows.
The Moras were not asked about these documents during their depositions. It
may be that the documents were obtained by discovery after those depositions
were taken. Tower Hill moved for summary judgment, relying on the questions
about “cracking damage” in the applications and on the two documents from the
home inspection. It submitted an affidavit from an assistant vice president of
underwriting that identifies these documents and then concludes:
may be that the documents were obtained by discovery after those depositions
were taken. Tower Hill moved for summary judgment, relying on the questions
about “cracking damage” in the applications and on the two documents from the
home inspection. It submitted an affidavit from an assistant vice president of
underwriting that identifies these documents and then concludes:
17. Had Tower Hill known of the existing cracking damage to the
property, as listed on the Real Estate Inspection report, and the Homeowner
Orientation report, it would not have issued [the original policy].
18. Had Tower Hill known of the existing damage to the property, as
listed on the Real Estate Inspection report, and the Homeowner Orientation
report, it would not have issued [the replacement policy].
When moving for summary judgment, Tower Hill did not file any photographs or
other evidence describing the nature or extent of the “cracks” mentioned in the
inspection reports from 2005. It filed a two-page affidavit from an employee of
the builder that simply authenticates the real estate inspection form and
homeowner orientation report as belonging to the Moras. There are no depositions
or affidavits from anyone who may have performed the requested repairs or who
was able to explain more about the “cracks” mentioned in these forms. Mr. and
Mrs. Mora each testified when deposed in 2012 that they did not recall noticing
any cracks in the house at the time of purchase seven years earlier.
other evidence describing the nature or extent of the “cracks” mentioned in the
inspection reports from 2005. It filed a two-page affidavit from an employee of
the builder that simply authenticates the real estate inspection form and
homeowner orientation report as belonging to the Moras. There are no depositions
or affidavits from anyone who may have performed the requested repairs or who
was able to explain more about the “cracks” mentioned in these forms. Mr. and
Mrs. Mora each testified when deposed in 2012 that they did not recall noticing
any cracks in the house at the time of purchase seven years earlier.
Based only on this evidence, the trial court granted summary judgment in
favor of Tower Hill declaring the homeowners policy void. The Moras appeal that
summary judgment.
favor of Tower Hill declaring the homeowners policy void. The Moras appeal that
summary judgment.
Section 627.409 allows an insurer to forfeit coverage when an insured makes
certain misrepresentations. This section provides in pertinent part:
certain misrepresentations. This section provides in pertinent part:
A misrepresentation, omission, concealment of fact, or incorrect
statement may prevent recovery under the contract or policy only if any of the
following apply:
(a) The misrepresentation, omission, concealment, or statement is
fraudulent or is material either to the acceptance of the risk or to the hazard
assumed by the insurer.
(b) If the true facts had been known to the insurer pursuant to a
policy requirement or other requirement, the insurer in good faith would not
have issued the policy or contract, would not have issued it at the same premium
rate, would not have issued a policy or contract in as large an amount, or would
not have provided coverage with respect to the hazard resulting in the
loss.
§ 627.409(1)(a)-(b).
The statute allows a policy to be forfeited under at least two distinctly
different circumstances. First, the misrepresentation may be an intentional act
of fraud. If the insured knowingly makes a false statement in hopes that the
insurance company will rely on that statement to issue the insurance policy,
there is no dispute that the policy can be rescinded. See, e.g.,
Gainsco v. ECS/Choicepoint Servs., Inc., 853 So. 2d 491, 492-93 (Fla. 1st
DCA 2003). Proof of such fraud, of course, is difficult. The insurer has the
burden of proof to establish a misrepresentation. Griffin, 752 So. 2d at
623. Thus, actual fraud is not the most common circumstance under which insurers
avoid paying claims under insurance policies. In this case, Tower Hill does not
argue that it established actual fraud as a matter of undisputed fact.
different circumstances. First, the misrepresentation may be an intentional act
of fraud. If the insured knowingly makes a false statement in hopes that the
insurance company will rely on that statement to issue the insurance policy,
there is no dispute that the policy can be rescinded. See, e.g.,
Gainsco v. ECS/Choicepoint Servs., Inc., 853 So. 2d 491, 492-93 (Fla. 1st
DCA 2003). Proof of such fraud, of course, is difficult. The insurer has the
burden of proof to establish a misrepresentation. Griffin, 752 So. 2d at
623. Thus, actual fraud is not the most common circumstance under which insurers
avoid paying claims under insurance policies. In this case, Tower Hill does not
argue that it established actual fraud as a matter of undisputed fact.
But a policy can also be rescinded when a misrepresentation is “material to
the acceptance of the risk” or “if the true facts had been known to the insurer
pursuant to a policy requirement or other requirement, the insurer in good faith
would not have issued the policy or contract.” See § 627.409(1)(a),
(b).2 It is well established that in these
instances a misrepresentation need not be knowingly made in order for the
insurer to void the policy. See Cont’l Assurance Co. v. Carroll,
485 So. 2d 406 (Fla. 1986). But “forfeitures of insurance policies are not
favored [in Florida], especially when the event that gives rise to the insurer’s
liability has occurred.” LeMaster v. USAA Life Ins. Co., 922 F. Supp.
581, 585 (M.D. Fla. 1996) (citing Johnson v. Life Ins. Co. of Ga., 52 So.
2d 813, 815 (Fla. 1951), and Travelers Protective Ass’n of Am. v. Jones,
91 F.2d 377, 378 (5th Cir. 1937)). Thus, on a claim to rescind a policy based on
a misrepresentation that falls short of fraud, the insurer must prove that the
insured’s statement is a misrepresentation, that it is material, and that the
insurer detrimentally relied on it. See Griffin, 752 So. 2d at 623
(citing Douglas v. Mut. Life Ins. Co. of N.Y., 191 So. 2d 483 (Fla. 2d
DCA 1966)). Under subsection 627.409(1)(b), the insurer needs to provide an
explanation as to why “in good faith” and “pursuant to a policy requirement or
other requirement” it would not have issued the policy or would not have issued
it under the same terms.
the acceptance of the risk” or “if the true facts had been known to the insurer
pursuant to a policy requirement or other requirement, the insurer in good faith
would not have issued the policy or contract.” See § 627.409(1)(a),
(b).2 It is well established that in these
instances a misrepresentation need not be knowingly made in order for the
insurer to void the policy. See Cont’l Assurance Co. v. Carroll,
485 So. 2d 406 (Fla. 1986). But “forfeitures of insurance policies are not
favored [in Florida], especially when the event that gives rise to the insurer’s
liability has occurred.” LeMaster v. USAA Life Ins. Co., 922 F. Supp.
581, 585 (M.D. Fla. 1996) (citing Johnson v. Life Ins. Co. of Ga., 52 So.
2d 813, 815 (Fla. 1951), and Travelers Protective Ass’n of Am. v. Jones,
91 F.2d 377, 378 (5th Cir. 1937)). Thus, on a claim to rescind a policy based on
a misrepresentation that falls short of fraud, the insurer must prove that the
insured’s statement is a misrepresentation, that it is material, and that the
insurer detrimentally relied on it. See Griffin, 752 So. 2d at 623
(citing Douglas v. Mut. Life Ins. Co. of N.Y., 191 So. 2d 483 (Fla. 2d
DCA 1966)). Under subsection 627.409(1)(b), the insurer needs to provide an
explanation as to why “in good faith” and “pursuant to a policy requirement or
other requirement” it would not have issued the policy or would not have issued
it under the same terms.
Tower Hill fell short of its burden of proof for this summary judgment in at
least two respects. First, it did not establish beyond factual dispute that the
answer to the question in the application is incorrect or is a
misrepresentation. Second, assuming the statement is a misrepresentation, Tower
Hill’s proof does not establish that the representation is material to the
acceptance of its risk or that the true facts would have caused it not to issue
these policies.
least two respects. First, it did not establish beyond factual dispute that the
answer to the question in the application is incorrect or is a
misrepresentation. Second, assuming the statement is a misrepresentation, Tower
Hill’s proof does not establish that the representation is material to the
acceptance of its risk or that the true facts would have caused it not to issue
these policies.
As to the first deficiency, Tower Hill seems to equate “cracking damage” in
its application with “cracks” or “repair” of cracks on the inspection forms. We
conclude that an insured might not regard repair of common drywall or stucco
cracks as a matter that involved more than normal maintenance. In other words,
an insured might conclude that Tower Hill added the word “damage” to the
question to limit the inquiry to events more significant than common drywall
“cracking.” As explained in Mercury Insurance Co. of Florida v. Markham,
36 So. 3d 730, 733 (Fla. 1st DCA 2010):
its application with “cracks” or “repair” of cracks on the inspection forms. We
conclude that an insured might not regard repair of common drywall or stucco
cracks as a matter that involved more than normal maintenance. In other words,
an insured might conclude that Tower Hill added the word “damage” to the
question to limit the inquiry to events more significant than common drywall
“cracking.” As explained in Mercury Insurance Co. of Florida v. Markham,
36 So. 3d 730, 733 (Fla. 1st DCA 2010):
An insurer may not deny coverage under this statute, however, if the
alleged misrepresentation was in response to an ambiguous question. See
Boca Raton Comty. Hosp., Inc. v. Brucker, 695 So. 2d 911, 913 (Fla. 4th
DCA 1997); Comprehensive Benefit Adm’rs, Inc. v. Nu-Cape Constr., Inc.,
549 So. 2d 700 (Fla. 2d DCA 1989). A question is ambiguous when it is
susceptible to two reasonable interpretations, one in which a negative response
would be correct and one in which an affirmative response would be
correct.
If Tower Hill intended “cracking damage” to include all repairs of any crack
in drywall or stucco, then it would seem the questions on its applications were
ambiguous. In this record, Tower Hill has not established beyond factual dispute
that the Moras made a misrepresentation on their applications when they
indicated that they were unaware of any prior repairs for “cracking damage” on
their home.
in drywall or stucco, then it would seem the questions on its applications were
ambiguous. In this record, Tower Hill has not established beyond factual dispute
that the Moras made a misrepresentation on their applications when they
indicated that they were unaware of any prior repairs for “cracking damage” on
their home.
As to the second deficiency, on this record the “true facts” for purposes of
section 627.409 are nothing more than facts that the house had drywall, stucco,
and other cracks that were resolved without complication by the builder before
the sale to the Moras in 2005. It is a simple fact of life that most new Florida
homes develop nonstructural cracks in drywall, stucco, and other areas in the
several years following their construction. Tower Hill cannot seriously contend
that it refuses to insure all homes in Florida that have a history of minor
maintenance to drywall and stucco at the time of the application. If that were
true, then it would only insure a handful of homes in Florida.
section 627.409 are nothing more than facts that the house had drywall, stucco,
and other cracks that were resolved without complication by the builder before
the sale to the Moras in 2005. It is a simple fact of life that most new Florida
homes develop nonstructural cracks in drywall, stucco, and other areas in the
several years following their construction. Tower Hill cannot seriously contend
that it refuses to insure all homes in Florida that have a history of minor
maintenance to drywall and stucco at the time of the application. If that were
true, then it would only insure a handful of homes in Florida.
We would expect that a positive answer to Tower Hill’s question about
cracking damage on its application would lead to further investigation to
determine if the true facts indicate a condition material to the risk or a
matter that might cause Tower Hill to underwrite the risk in a different manner.
But at this point in the litigation, our expectations are not important to the
outcome of the case. The conclusory opinion of Tower Hill’s assistant vice
president of underwriting in the affidavit simply does not present sufficient
facts to explain why the answers to this specific question on the applications
were material to the risk and something on which Tower Hill detrimentally relied
or why the “true facts” in the inspection reports were a matter that would have
caused Tower Hill “in good faith” not to issue the two policies “pursuant to a
policy requirement or other requirement.”
cracking damage on its application would lead to further investigation to
determine if the true facts indicate a condition material to the risk or a
matter that might cause Tower Hill to underwrite the risk in a different manner.
But at this point in the litigation, our expectations are not important to the
outcome of the case. The conclusory opinion of Tower Hill’s assistant vice
president of underwriting in the affidavit simply does not present sufficient
facts to explain why the answers to this specific question on the applications
were material to the risk and something on which Tower Hill detrimentally relied
or why the “true facts” in the inspection reports were a matter that would have
caused Tower Hill “in good faith” not to issue the two policies “pursuant to a
policy requirement or other requirement.”
Accordingly, we reverse the summary judgment and remand for further
proceedings.
proceedings.
Reversed and remanded. (CRENSHAW, J., and DAKAN, STEPHEN L., ASSOCIATE SENIOR
JUDGE, Concur.)
JUDGE, Concur.)
__________________
1The Moras filed for bankruptcy in 2009 or
2010, but there is nothing in the record indicating that this has affected the
matters on appeal in this case.
2010, but there is nothing in the record indicating that this has affected the
matters on appeal in this case.
2In most, if not all, circumstances in
which disclosure of the “true facts” would have led the insurer in good faith
not to issue the policy — satisfying subsection 627.409(1)(b) — the insured’s
misrepresentation would also be “material to the acceptance of the risk” under
subsection (1)(a). Thus, there is a great degree of overlap between the two
provisions of the statute.
which disclosure of the “true facts” would have led the insurer in good faith
not to issue the policy — satisfying subsection 627.409(1)(b) — the insured’s
misrepresentation would also be “material to the acceptance of the risk” under
subsection (1)(a). Thus, there is a great degree of overlap between the two
provisions of the statute.
* * *