American Integrity Insurance Company v. Estrada

Summary of Case by Allison Van Fleet, Associate Attorney

American Integrity Insurance Company v. Estrada, not final until disposition of timely filed motion for rehearing (Fla. 3d DCA June 26, 2019)

Issue:

• Whether the trial court’s striking of American Integrity’s affirmative defense alleging the insured concealed or misrepresented material facts or circumstances, engaged in fraudulent conduct, or made false statements before or after the claimed loss, committing insurance fraud without leave to amend was proper?
• Is an insurer required to plead and prove prejudice in order to successfully establish a coverage defense based upon an insured’s failure to satisfy all post-loss obligations?

Result:

• The Second District Court of Appeal reversed the final judgment and remanded for a new trial allowing American Integrity leave to file an amended pleading asserting insurance fraud as an affirmative defense.
• The Second District Court of Appeal held that in order for an insurer to establish a defense for an insured’s failure to comply with post-loss obligations the insurer must only plead and prove that the insured materially breached a post-loss obligation. Once this has been established, the burden then shifts to the insured to prove that any breach did not cause prejudice to the insurer.

Facts:

In 2011 Estrada brought suit against American Integrity Insurance Company for breach of contract based upon the homeowner’s insurance contract issued by American Integrity for a burglary loss. During a pre-trial hearing, the trial court granted the Estrada’s ore tenus motion to strike American Integrity’s affirmative defense which alleged that the instant action was barred because the insured concealed or misrepresented material facts or circumstances, engaged in fraudulent conduct, or made false statements before or after the claimed loss and refused to allow American Integrity to amend the affirmative defense to include the requisite factual specificity. At trial, at the close of evidence Estrada’s counsel moved for directed verdict to strike all the affirmative defenses which pertain to Estrada’s alleged failure to comply with post-loss obligations and alleged that American Integrity had not proven that it had been prejudiced by any alleged failure to comply. The trial court granted this motion for directed verdict and the only question that remained for the jury to consider was the amount of damages to award Estrada. After the jury returned an award for damages the trial court summarily denied American Integrity’s motion for a new trial.

Reasoning:

• The Second District Court of Appeal first determined that the motion to strike American Integrity’s affirmative defense was not properly noticed as it was an ore tenus motion at a pre-trial hearing. The Court further found that the trial court should have allowed American Integrity leave to amend the defense as amendments to pleadings ought to be freely given unless there is potential for prejudice, dispute, or futility. The Court found that Estrada would suffer no prejudice by allowing American Integrity to amend the affirmative defense to include the sufficient factual requirements as the fraud allegations had been thoroughly discussed in discovery. Thus, American Integrity should have been granted leave to amend their affirmative defense alleging insurance fraud.
• The Second District Court of Appeals reasoned that although the trial court was persuaded by the Florida Supreme Court’s decision in State Farm Mut. Auto Ins. Co. v. Curran, 135 So. 3d 1071 (Fla. 2014), the same does not apply in homeowner’s insurance policy cases. Curran, an UM claim where the insured failed to comply with a post-loss compulsory medical examination, the Florida  Supreme Court discussed post-loss obligations as conditions subsequent to suit and the Second District Court of Appeal importantly differentiated the present action because in homeowner’s insurance policy cases post-loss obligations are conditions precedent to suit. Not stopping there, the Second District Court of Appeal further opined that while the breach must be material and the insurer must be prejudiced by the breach, the insurer must only establish that the insured has failed to comply with the post-loss obligations to receive a presumption of prejudice. Once the failure to comply with the post-loss obligations has been established, the burden then shifts to the insured to show that the insurer has not been prejudiced by the failure to satisfy the post-loss obligations.