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When insured lies | Zalma on insurance



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Cancellation requires return of the premium

Cesar Benitez appealed the trial court’s entry of final summary judgment in favor of Universal Property and Casualty Insurance Company (“the insurer”) in a first-party property insurance dispute regarding a water damage claim.

IN Cesar Benitez v. Universal Property and Casualty Insurance Companyno. 4D21-3281, Florida Court of Appeals, Fourth District (Oct. 12, 2022), the appellate court was asked to interpret a statute and policy formulation.

FACTS

In his application for insurance with the insurer, Benitez reported no previous losses on his property. But after Benitez submitted a claim for new damage, the insurer’s inspector found evidence of pre-existing damage and repairs. The insurer denied Benitez’s claims but continued to collect premiums from him for years. Benitez then sued for breach of contract, and the insurer asserted an affirmative defense based on section 627.409, Florida Statutes (2019). The law provides:

(1) Any statement or description made by or on behalf of an insured or annuitant in an application for an insurance or annuity, or in negotiations for an insurance or contract, is a representation and not a warranty. Except as provided in subsection (3), a misrepresentation, omission, concealment of fact or misrepresentation 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 material to the acceptance of the risk or to the risk assumed by the insurer. § 627.409(1)(a), Florida Stat. (2019) (my emphasis).

Additionally, the insurer’s policy allowed denial of coverage if Benitez “[i]willfully concealed or misrepresented any material fact or relationship; (2) [e]engaged in fraudulent conduct; or (3) [m]made materially false statements; relating to this insurance.”

The insurer also moved for dismissal for fraud on the court or, in the alternative, for a judgment under section 627.409 for material error.

At a hearing on that motion, Benitez did not dispute his failure to disclose the prior claim in both his policy application and discovery responses to interrogatories and sworn statements in his deposition. Benitez instead argued that the insurer could not claim rescission as an affirmative defense because the insurer had continued to collect premiums from him for approximately two years after learning of the previously secret claim. The insurer argued that it was only seeking to deny coverage under section 627.409 and not to rescind the policy.

The trial court held that there was no genuine issue of material fact as to whether Benitez’s failure to disclose the prior claim on his insurance application or in discovery constituted material misrepresentations such that the claim could be denied under the policy provisions and section 627.409.

ANALYSIS

While section 627.409 provides that an insurer may request cancellation of a policy, the plain language of the statute allows alternatively for an insurer to deny coverage of an individual claim. When statutes are clear and unambiguous, courts will not look behind the plain language of the statute for legislative purposes or resort to rules of statutory construction to determine intent.

The insurer’s affirmative defense was based on the statute, and the insurer made clear at the sentencing hearing that it was not seeking rescission of the policy under the statute, but was instead seeking the alternative remedy of denying the claim.

The trial court properly granted summary judgment on the insurer’s denial of coverage of Benitez’s claim based on material misrepresentations.

An appellate court can affirm a district court’s decision as long as there is some basis to support the judgment in the record. As a result, the Court of Appeal did not have to decide whether there were grounds to dismiss the claim based on fraud on the court.

Cancellation is an equitable remedy where both parties to the insurance contract are returned to the situation they were in before the insurance came into effect and treat the insurance as if it never existed. An insurer that cancels must repay the premium. But under the terms of the policy and Florida statute, if the insured lies about material facts, the insurer can simply deny the claim and leave the policy in effect. As my mother, rest her soul, often told me: “Liars never succeed.” This case proved her right.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com. Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

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Now available Barry Zalma’s newest book, Bad faith damagesand How to Acquire, Understand and Make a Successful Commercial Property Insurance Claim: Information Needed by Individuals and Insurance Professionals to Manage Commercial Property Insurance” the new books are now available as a Kindle book here, pocket here and as one bound here available at amazon.com.

Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published on https://zalma.substack.com. Go to the Zalma On Insurance podcast at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to Insurance Claims Library – https://zalma.com/blog/insurance-claims-library

About Barry Zalma

An insurance coverage and claims management author, consultant and expert witness with more than 48 years of practical and courtroom experience.




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