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A Florida appellate court affirmed a decision canceling a jury award where the jury found homeowners made material misrepresentations about a claim to their insurer, which voided their policy.
The Case
In 2009, Jose and Hilda Alvarez experienced kitchen drain problems. A plumber replaced and rerouted the kitchen drain line, but the Alvarezes continued to experience bathroom backups and attempted to correct the drainage problems.
With the assistance of a public adjuster, the Alvarezes filed a claim with their insurer, State Farm Florida Insurance Co., under their all-risk policy in 2010.
State Farm’s claim representative investigated and denied coverage in part based on the Alvarezes’ statement that the toilets had not overflowed, they had the kitchen drain lines repaired and there was no interior water damage.
State Farm reported finding no accidental direct physical loss and, therefore, no covered claim, and sent two letters in November 2010 and April 2011 confirming denial of coverage to the Alvarezes. The letters noted the Alvarezes were not claiming any direct water damage loss inside the house.
The Alvarezes did not appeal the decision or contradict the letters of denial.
In March 2012, the Alvarezes’ public adjuster sent State Farm a sworn proof of loss signed by the Alvarezes asserting a water damage loss in 2009 and attesting to a $82,968 loss.
State Farm’s claim reviewer noted the 2009-10 inspector’s report indicated no interior water damage, just slow toilets and a repaired kitchen J-pipe and drainage.
In 2013, State Farm conducted an extensive re-inspection of the Alvarezes’ home and found nothing to indicate water damage, except a small warping of one lower cabinet toe-kick, attributed not to water damage but to improper installation.
The Alvarezes sued State Farm for breach of contract.
State Farm answered, citing policy exclusions and the defense that the Alvarezes made material misrepresentations in pursuing their claim on the scope and amount of their claimed loss.
In response to the Alvarezes’ motion for summary judgment on coverage, the trial court entered an order granting the Alvarezes’ motion for partial summary judgment (identifying the issue as one of liability rather than coverage) and reserved the question of damages for the jury.
The trial court denied the Alvarezes’ motion for summary judgment on State Farm’s misrepresentation defense, allowing that issue to proceed to trial, too.
Discovery included reports from the original 2010 insurance inspection as well as proof that when the Alvarezes had applied to another insurer for homeowners insurance, they certified their home had no existing damage, in direct contradiction to their sworn proof of loss to State Farm.
Trial proceeded on the issues of damages and material misrepresentation. The verdict form asked the jury to determine whether the Alvarezes had made a material misrepresentation to State Farm “by exaggerating the extent of the loss” and how much damages should be awarded.
During deliberations, the jury asked the trial court, “If we decide the plaintiff made a material misrepresentation, can we still give plaintiff compensation?” The court advised the jury, “In answer to your question, be advised that I have given you all the law that applies to this case.”
The jury ultimately found the Alvarezes materially misrepresented the facts but awarded them $6,000 in damages, the amount State Farm’s plumber testified the kitchen drain repairs would cost.
The trial court granted State Farm’s motion for final judgment in its favor with no damages payable to the Alvarezes, and the dispute reached the Third District Court of Appeal.
The Appellate Court’s Decision
The appellate court affirmed.
Judge Eric Hendon, writing for a unanimous panel, explained the State Farm policy contained a “valid provision voiding the policy upon material misrepresentation of fact” by the Alvarezes. The appellate court added the jury found the Alvarezes violated that provision by making material misrepresentations of fact in their claim to State Farm.
As a matter of law, the appellate court said the jury’s finding of material misrepresentation voided coverage for the Alvarezes’ claim. Therefore, the appellate court concluded the trial court properly determined as a matter of law that the verdict finding material misrepresentation voided the Alvarezes’ coverage for their claimed loss and the trial court “correctly rendered judgment in favor of State Farm with no entitlement to damages.”
The case is Alvarez v. State Farm Florida Insurance, No. 3D17-2261 (Fla. Ct. App. April 17, 2019). Attorneys involved include: Alvarez, Feltman & DaSilva and Brian C. Costa and Paul B. Feltman, for appellants/cross-appellees. Law Office of Ubaldo J. Perez Jr.; Russo Appellate Firm, and Elizabeth K. Russo, for appellee/cross-appellant.
This story is reprinted with permission from the Insurance Coverage Law Center, the industry’s only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. Contact him at smeyerowitz@meyerowitzcommunications.com.