Misrepresentation by Insured? It’s Complicated, Florida Appeals Court Rules

William Rabb | Insurance Journal

Proving that an insured misrepresented the extent of damage from a storm may have just become a little more complicated for Florida insurance companies.

Florida’s 5th District Court of Appeals last week reversed a trial court’s summary judgment order, which found that a homeowner in Orlando had made false statements about existing roof problems, allowing Security First Insurance Co. to deny coverage. The appellate court remanded the case to the Orange County Circuit Court, noting that the trial judge should have let a jury decide the credibility of the insured’s statements.

“The general rule remains intact: Credibility determinations and weighing the evidence ‘are jury functions, not those of a judge,’ when ruling on a motion for summary judgment,” the DCA wrote, citing 1986 and 2018 federal appeals court decisions.

The case could ultimately end up in the insurer’s favor, after a trial and appeal. But for now, it could put insurers on notice that courts generally “abhor forfeiture of insurance coverage,” as the DCA noted in the Sept. 9 Gracia vs. Security First opinon. Insurers also may need to take extra steps to show a claimant intentionally concealed or misrepresented information, and a carrier probably should think twice before asking a judge to dismiss a suit based on that.


“Yes, it complicates things in that the court commented about how courts are so anti-forfeiture of insurance coverage,” said Michael Packer of Fort Lauderdale, managing attorney and co-chair of the insurance practice group at Marshall Dennehey law firm. “But it also shows that if someone has truly misrepresented, there are ways to demonstrate that.”

The dispute began in 2017, when Mariana Gracia filed a claim for losses due to roof damage after a spring storm. Ormond Beach-based Security First investigated and agreed to pay $11,000 for restoration work. Gracia demanded more, the insurer denied the larger amount, and Gracia filed suit for breach of contract.

The key moment came during a deposition, when Gracia revealed that a home inspection had been done on the property in 2015. When asked about the results, she said that “everything was good,” and “the roof was in good condition.”

Security First obtained the inspection report, which included photographs showing ceiling damage, roof issues and leaks consistent with the damage Gracia had cited in her claim. The insurer then amended its defense of the claim, citing the policy’s concealment and fraud provision that triggered forfeiture of coverage.

Gracia’s attorney argued to the trial court that, despite the inspection report, the damage the homeowner was claiming happened in the 2017 storm, and that the report did not automatically establish that she had intentionally misrepresented the facts.

The trial court sided with Security First on its motion for a summary judgment, declaring that the policy was voided and finding that the homeowner’s explanation was not credible.

The judge relied on Florida’s recently adopted Rules of Civil Procedure, handed down by the state Supreme Court in 2021. The rules appear to allow judges to decide credibility issues when it is obvious that a jury would agree. But the appeal court’s opinion said the trial judge, Kevin Weiss, overstepped and that the credibility decision in most cases should go to a jury.

“Only when the record evidence blatantly contradicts a litigant’s version of the facts will a court be allowed to weigh conflicting evidence or determine the credibility of a witness,” the DCA wrote.

The per curiam opinion also acknowledged that recent decisions by other appeals courts in Florida have questioned the conflicting wording of similar insurance policies, in which one line appears to require the insurer to show intentional misrepresentation, while another line does not.

Florida courts also have held in recent years that the question of intent turns on when the statement is made. If the insured misrepresents during the initial policy application process, “the law in Florida is clear: An insurer can later void a policy based on an insured’s false statement without a showing of intent to mislead.”


But for statements made after a loss, two appeals courts in the last two years have found that insurers must prove intentional fraud to trigger the voiding of the policy. What Security First offered in the Gracia case – Gracia’s short deposition statement about the pre-existing damage – was too vague to establish falsity, 5th DCA Judge Eric Eisnaugle wrote in a concurring opinion.

Security First officials and its attorney in the appeal, Angela Flowers, could not be reached for comment. And the court opinion did not address one practical matter: Whether a four-point inspection, now required by more and more Florida insurers when writing new policies, would have uncovered the existing damage and why Security First did not ask for one.

Packer, the insurance defense attorney who is not associated with the Gracia case, said that it may be impractical, time-consuming and expensive for insurers to require the inspections on all properties. Inspection reports also can differ greatly, depending on the inspector.

Packer said the appellate court’s opinion offers other guideposts for insurers: Future HO policies could include language to the effect that post-loss misrepresentations need not be intentional to trigger cancelation of the policy. And, he added, carriers’ attorneys should be prepared to ask more questions in deposition, especially if the insured reveals that a previous inspection had been done, in order to nail down misrepresentation and intent.

The homeowner’s appeals lawyer in the case, Melissa Giasi, could not be reached. But attorneys for policyholders have said that insurers are often too quick to argue misrepresentation or fraud by the insured and this decision could help put up some guardrails.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Insurer’s Motion for Summary Judgment on Business Interruption Claim Denied

Tred R. Eyerly | Insurance Law Hawaii

    The insurer’s motion to cap a potential business interruption claim after the insured failed to provide documentation was denied. Lake Charles Instruments Inc. v. Scottsdale Ins. Co., 2022 U.S. Dist. LEXIS 116802 (W.D. La. July 2, 2022).

    Plaintiff operated a business that was damaged during Hurricane Laura on August 27, 2020, and subsequently by Hurricane Delta on October 9, 2020. Plaintiff had a commercial property policy issued by Scottsdale that provided business income coverage of up to $500,000. 

    After Hurricane Laura, plaintiff submitted a claim. Plaintiff requested an advance. Scottsdale paid $50,000 on the business interruption (BI) claim while reserving rights to require full compliance with the policy, including submission of appropriate documentation. Scottsdale continued to request documentation, but none was received. Plaintiff also failed to provide documentation for its BI claim after Hurricane Delta. When documentation was finally provided, Scottsdale disputed that the documentation showed a BI claim that exceeded policy limits. Scottsdale determined the BI claim was below the policy limits.

    Plaintiff filed suit. Scottsdale moved for summary judgment because plaintiff had not provided any report or documentation to refute Scottsdale’s findings. Plaintiff opposed the motion, arguing that its secretary and treasurer was familiar with the company’s bookkeeping and records, and would be able to testify that the company lost more than $500,000 in business income as a result of the storms. 

    Scottsdale argued the declaration from the secretary/treasurer was unsupported and the lay testimony would be insufficient to create a fact issue. The court disagreed. Based on the secretary/treasurer’s knowledge and experience of the business operations after the storm, she could  testify and rebut the opinions offered by Scottsdale’s experts. Therefore, Scottsdale’s motion was denied.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

In Review: the Essentials of Insurance and Reinsurance Law in USA

Bill O’Neill, Jenna Tyrpak, Michael T. Carolan, Thomas J. Kinney | Troutman Pepper

All questions

Insurance and reinsurance law

i Sources of law

Each state has both statutory and common law applicable to insurance issues. State common law is a significant source of law for the purpose of resolving disputes. In broad terms, it applies to issues such as legal duties, the interpretation of contracts, procedure and damages. Individual state statutes applicable to insurance, though they vary in breadth and focus, generally regulate insurance companies operating within the state. Common state statutes include provisions requiring companies to be licensed or barring insurers from acting or marketing their products in a deceptive manner.

Under the US Constitution, federal statutes may pre-empt state statutes and laws where they overlap. Thus, a federal statute may pre-empt inconsistent state laws. Federal common law, while fairly narrow in scope, impacts insurance and reinsurance companies indirectly. One example is federal common law relating to the application of the Federal Arbitration Act, which guides decisions on whether policyholders or cedents are bound to arbitrate a dispute with insurers or reinsurers.

ii Making the contract

The requirements for the creation of an enforceable insurance or reinsurance contract mirror those of most written contracts – offer, acceptance, consideration, legal capacity and legal purpose. In practical terms, an application or submission and the tender of the initial premium represent the offer to contract. Acceptance is generally demonstrated through execution of the policy or agreement. Without an offer and acceptance, there is no meeting of the minds and no contract.

Insurance and reinsurance contracts are negotiated and placed both directly and through intermediaries. In either case, prospective policyholders or cedents provide the information requested by the insurance carrier or reinsurer for the placement. If necessary, the insurance carrier or reinsurer’s underwriter can (but is not necessarily required to) seek more information. At all times, the prospective policyholder or reinsured generally is under an obligation to disclose all material information relating to the risk being covered.

Following the agreement on terms, the insurance or reinsurance contract is documented. In most individual consumer insurance markets, the insurance policy is initially crafted by the insurance company. In other instances, a manuscript policy may be negotiated.

iii Interpreting the contract

Because of variations among state laws, there are no overarching rules of insurance contract interpretation. In general, the rules of interpretation applicable to commercial contracts apply to insurance policies. State or federal courts that interpret contract provisions typically try to determine the objective intent of the parties. Unambiguous insurance policy provisions are generally enforceable. While these principles apply to reinsurance agreements as well, reinsurance disputes are typically viewed through the prism of industry custom and practice. Indeed, in reinsurance arbitrations the arbitrators’ charge is often to view the parties’ agreement as an ‘honourable engagement’, meaning arbitrators are directed to interpret the contract without a need to follow strict rules of law and with a view to effecting the purpose of the contract in reaching their decision.

iv Intermediaries and the role of the broker

Insurance intermediaries, including agents and brokers, play a key role in the US insurance and reinsurance markets. Currently, there are more than 2 million individuals and more than 236,000 businesses licensed to provide insurance services in the US.33

There are various types of agents and brokers. Broadly speaking, a general insurance agent contractually represents the insurance company and is authorised to accept risks and issue policies, a soliciting agent has authority to seek insurance applicants but has no authority to bind an insurance company, and a broker is a licensed, independent contractor who represents insurance applicants and ceding insurers in the negotiation and purchase of insurance or reinsurance.34

The conduct of insurance intermediaries is regulated through state statutes and laws. Typically, an agent or broker has a duty to faithfully carry out the instructions of its client. Depending upon the circumstances, a heightened ‘fiduciary duty’ may also apply.

v Claims

The laws regarding insurance and reinsurance claims issues vary from state to state. Key issues include notice, good faith, and dispute resolution.

With respect to notice, both insurance and reinsurance claims generally require that a policyholder or cedent provide reasonably timely notice of claims or other information. For insurance claims, timely notice is considered a condition precedent to coverage in many states, meaning a claim may not be covered if there is not reasonably timely notice. For reinsurance claims, if timely notice is not a stated condition precedent in the reinsurance contract, some jurisdictions require a reinsurer to prove that it was economically prejudiced if it seeks to avoid a claim on account of late notice.

Both insurance and reinsurance claims may involve issues of good faith and fair dealing. Insurance companies, for their part, must respond to the claims of their policyholders consistent with contractual good faith and fair dealing requirements. In reinsurance, the duty of utmost good faith applies to both cedents and reinsurers. Thus, while cedents must fully disclose all material information about the ceded risk, for most lines of business reinsurers have a concomitant duty to ‘follow the fortunes’ of their cedents, which requires indemnifying cedents for all business-like, good faith, reasonable claim payments.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Implementing “Highly Protected Risk” Programs Will Lower Property Insurance Costs

John Canepa, Sr. | Woodruff Sawyer

Highly protected risk” (HPR) is an insurance industry term referring to a risk that has been controlled and managed through various measures.

The International Risk Management Institute describes a as one that is subject to a much lower than normal probability of loss. This could be by virtue of being a low-hazard occupancy or property type and having superior construction, special fire protection equipment and procedures, and management commitment to loss prevention.

FM Global, a property insurance company, describes an HPR location as one in which all reasonable physical and human element loss-prevention measures have been implemented to protect buildings, equipment, and contents from all losses, including those caused by natural hazards.

Insurance carrier underwriters work to ensure their clients’ HPR account risk profile remains stable, year to year. The carriers look for the policyholder’s risk management team to adhere to HPR guidelines and allow the carrier’s engineering consultants to actively monitor and contribute toward the client’s loss-reduction efforts.

Although it can be a costly and time-consuming process, properties that achieve HPR status tend to have fewer losses and hence, can expect lower premiums on their commercial property insurance. This reduction is cumulative over the life of the property.

The Human Element: A Key Contributor to HPR Classification

Human element risk-reduction efforts involve a performance-based approach to maintaining and updating a structure, its operations, and the fire protection systems. Human element programs are designed to control ignition sources, minimize flame spread, manage the presence of combustibles, and ensure that fire protection systems function as designed.

The National Fire Protection Association (NFPA) reports that human element factors play a significant role in most fires and explosions. Statistical studies of loss incidents in a variety of industries have indicated the following general breakdown:

Factors Affecting Loss Incidents

  • factors (70-80%) (e.g., management program deficiencies, human operator errors)
  • Equipment failures (10-20%) (e.g., design or maintenance deficiencies)
  • External factors (10-20%) (e.g., earthquakes, floods)

A small sample of the human element programs that apply to a wide variety of industry segments includes:

  • Fire protection systems inspection, testing, and maintenance
  • Fire protection systems impairment
  • Electrical systems testing and maintenance
  • Hot work permit systems
  • Equipment predictive maintenance
  • Housekeeping and storage
  • Industrial control systems
  • Physical security controls
  • Business continuity planning

The National Commission on Fire Prevention and Control’s “America Burning” report finds that well over half of the major fires within all industry segments are due to some form of human oversight. These human-driven losses have resulted in an average of 3,900 civilian deaths annually over the past three years and up to $10 billion in direct property damage on an annual basis.

Engineering Controls: First Line of Defense in Protecting Properties

Property Insurance carriers employ a non-traditional business model whereby risk and premiums are determined by engineering analysis—as opposed to historically based actuarial calculations. These carriers operate from the philosophy that most losses can be prevented. They provide insurance products and property loss prevention engineering services to protect their clients.

Fire protection engineering guidelines developed from scientific studies take both a prescriptive and performance-based approach toward the implementation of controls to better protect properties, minimize machinery failures, and better safeguard processes. These fire protection engineering controls are implemented to prevent the development of ignition sources, identify the correct fire-protective systems based on the level of exposure, minimize flame spread, and isolate smoke and fire to minimize potential damage.

Fire protection engineering research focuses on the analysis and control of special hazards, which in many cases represent the proximate cause of all large property losses in the United States. Fuses physics-based models of fire scenarios and their effects on structural and non-structural building elements to predict risks and identify loss-mitigation efforts.

Fire protection engineering controls include, but are not limited to, the following:

  • Substantial construction
  • Well-protected special hazards
  • Adequate sprinklers, water supply, detection/alarm systems, special protection systems
  • Adequate human element programs in place and maintained
  • Minimal exposure from natural hazards or adequate mitigation
  • Minimal risk from external exposures based on construction and/or separation

Engineering controls should be the first line of defense in protecting properties and minimizing potential loss.

What’s the ROI on Costly HPR Controls?

Achieving the HPR level of protection often requires analysis or a return on investment study since engineering-type controls, which go beyond municipal code requirements, can be very costly to implement. Management must consider the physical property loss cost-benefit and the business continuity cost benefit.

Compliance with human element programs and guidelines typically does not require a significant expenditure to complete. These loss-prevention measures are often considered low-hanging fruit, since the implementation and ongoing management of such programs require only a time commitment from the in-house facilities/engineering staff and in some cases, a minor expense due to third-party resource involvement.

Property carriers and property brokers typically have in-house property engineers who audit a client’s approach toward HPR status and assist the client in complying with carrier recommendations. Third-party resources are also used to assess HPR compliance.

The carrier and/or third-party resources conduct site surveys to determine whether a client’s risk exposures and property management controls are in line with HPR property and regulatory agency guidelines. If they encounter deficiencies, carriers will provide risk-reduction recommendations in hopes of bringing the risk to an acceptable HPR level. Underwriters will often accept alternative and less-costly solutions to the recommended engineering controls if human element controls are in place.

What about your return on investment (ROI)? Loss prevention will grant the property holder access to lower rates for property risk insurance. As a risk’s “protection” increases, underwriters can commit to greater capacity, often at a better price with broader contract terms.

The benefits of achieving HPR status go beyond lower insurance costs. The Oxford Metrica Group released a study finding that companies that implement physical risk management practices (enterprise risk management & HPR loss-prevention programs) experience fewer losses, incur lower total incurred loss dollars, and offer a stable, more consistent value to shareholders. Woodruff-Sawyer-Property-Fire-Loss-2022Reducing your exposure to loss does more than build resilience. It empowers a company to command the best insurance coverage at the best terms. The HPR level of property protection can provide peace of mind in that your facility meets the highest industry standards for property protection.

Have the Right Resources Ready

If you’re thinking about loss prevention or are interested in taking steps to control your property risk, knowing where there are resources to help you is essential.

FM Global develops Property Loss Prevention Data Sheets that are based on scientific studies conducted at its laboratories, through analysis of third-party property loss prevention study findings, and through the adoption of various nationally recognized NFPA codes. These Data Sheets identify engineering and human element loss-mitigation measures for commercial and industrial property environments, which when achieved, qualify a risk as meeting HPR status.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.

Lead Paint Litigation Raises Coverage Questions for Policyholders

Robert Tugander | Rivkin Radler

State and local governments have been pursuing “public nuisance” claims against companies responsible in some way for societal problems. We’ve seen cases against manufacturers and distributors of guns, lead paint and opioids. And this theory is being tested in climate change cases against energy companies.

As new legal theories and trends emerge, so do insurance cases addressing coverage for those liabilities. A recent California decision tackles one issue: Is a public nuisance claim based on the willful acts of the insured’s predecessor barred from coverage?

The case—Certain Underwriters at Lloyd’s London v. ConAgra Grocery Products Co.—addresses California Insurance Code Section 533. That law says an insurer is not liable for a loss caused by the policyholder’s willful act. The ruling derives from a California statute, but the court’s reasoning can be applied to similar disputes elsewhere involving “expected or intended” policy language.

ConAgra was one of several paint manufacturers accused of creating a public health crisis by promoting the use of lead paint for interior use despite knowing that lead was hazardous to humans. After a trial, ConAgra was ordered to pay into a lead paint abatement fund.

ConAgra itself did not promote lead paint for interior use. But its predecessor, W.P. Fuller & Co., did. And evidence showed the Fuller knew that using lead paint indoors would likely harm children.

The coverage dispute centered on whether Fuller’s knowledge could be imputed to ConAgra and whether the findings in the underlying case were sufficient to meet the willfulness standard under Section 533.

ConAgra argued that Section 533’s deterrence policy didn’t apply to it, an innocent insured on the hook for a predecessor’s conduct over which it had no control. It analogized to vicarious liability cases that allowed innocent insureds to be indemnified for the wrongful acts of others. But the court disagreed that the successor’s knowledge mattered. ConAgra became liable for the public nuisance that Fuller caused, and thus stood in Fuller’s shoes for purposes of Section 533.

With Fuller’s knowledge imputed to it, ConAgra proffered two reasons why Section 533’s willful standard wasn’t met. The court rejected both.

The first rested on causation. ConAgra contended that Section 533 required a direct causal relationship and a close temporal connection between the willful act and the loss. As Fuller’s conduct happened decades ago, the loss was too attenuated from Fuller’s lead paint promotions. The court disagreed, finding that Section 533 applies whenever the loss is caused by a willful act. Fuller’s willful conduct was adjudged to be a substantial factor in creating a public nuisance; there’s no reason why Section 533 should not apply.

ConAgra next argued that Section 533 applies only if it was shown that Fuller’s high-level managers knew of the hazards. Again, the court was unpersuaded. It was established that Fuller, the corporate entity, knew that lead paint was highly likely to cause harm when it promoted it for residential use. This was enough to trigger Section 533’s prohibition against insurance coverage.

The point here is straightforward. Policyholders in the cross hairs of public nuisance litigation should not expect to be bailed out by their insurers. This is so, even where an insured’s liability arises solely from the deliberate acts of its corporate predecessor.

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.