LEGAL
UPDATE
If you
would like to submit a legal update, share a resent case review, or any other
item, which would be important to those involved in the battle against arson,
please contact or submit your article to the legal committee chair, Theron
Guthrie with Boehm, Brown, Fischer, Harwood, Kelly & Scheihing, P. A. C/O P. O.
Box 11830 Daytona Beach, FL 32120.
Or, you can convey the information via e-mail to
tguthrie@boehmbrown.com or Vice
Chair Gina Smith with Butler Pappas at
gsmith@butlerpappas.com
EXAMINATIONS UNDER OATH
Laine v. Allstate Insurance Company, 2005 WL326882 (N.D. Fla. 2005)
In Laine, the insured’s building was damaged by fire. As a result of the fire the insured was charged criminally with arson. The insured was convicted, and went to prison. The criminal conviction was later reversed for insufficiency of the evidence. The insured also submitted a claim under its insurance policy as a result of the fire. The insurer made numerous requests for an examination under oath of the insured. The insured’s attorneys sought continuous delays of the examination while the criminal matter was pending and the insurer acquiesced in such. However, the insurer finally refused to agree to any delays and set the examination under oath. The insured failed to attend and the insurer denied the claim. Following the denial of the claim the insured filed suit against the insurer. The insurer moved for summary judgment. The Northern District of Florida granted the insurer’s motion for summary judgment. In so ruling the court followed the long history of Florida cases upholding examination under oath provisions and stated as follows:
The law is well settled that an insurance policy provision requiring an insured to submit to an examination under oath is lawful and binding. See e.g., Goldman v. State Farm Fire General Insurance Company, 660 So.2d 300 (Fla. 4th DCA) (upholding summary judgment for insurer based on insured’s failure to appear for examination under oath prior to filing suit); Stringer v. Fireman’s Fund Insurance Company, 622 So.2d 145 (Fla. 3d DCA 1993) (affirming judgment for insurer: “the failure to submit to an examination under oath is a material breach of the policy which will relieve the insurer of its liability to pay”. . .); Pervis v. State Farm Fire & Casualty Company, 901 F.2d 944 (11th Cir. 1990) (upholding judgment for insurer based on insured’s failure to appear for examination under oath in case arising under Georgia law); see also, De Ferrari v. Government Employees Insurance Company, 613 So.2d 101 (Fla. 3d DCA 1993) (affirming summary judgment for insurer based on insured’s failure to appear for medical examination as required by policy.)
Furthermore, the court reiterated that an insured’s submission to depositions is not sufficient to fulfill the examination under oath requirement of a
policy. Lastly, the court found that the production of records was not sufficient to satisfy the contractual requirement for the insured to submit to
an examination under oath.
FLORIDA VALUED POLICY LAW
Mierzwa v. Florida Windstorm Underwriting Association, 877 So.2d 774 (Fla. 4th DCA 2004)
In Mierzwa, the Florida Fourth District Court of Appeals interpreted the applicability of Florida Statute '627.701, the Valued Policy Law (VPL) in a
combined peril loss. The insured home owner had wind insurance with one carrier and flood insurance with another carrier. The home was damaged by both flood and wind. The cost of the total repair, the wind damage added to the flood damage, was greater than 50% of the value of the home. Pursuant to the local ordinances the home was a constructive loss.
The issue was whether the wind carrier was required under the value policy statute to tender its full policy limits. The Court held that A[i]f [the wind
carrier] ha[d] any liability at all, even a fractional share of the total damage, under the VPL it [was] liable for the face amount [of the policy].@
However, the Fourth District Court of Appeals declined to decide whether an attempted limitation requiring apportionment of damages among policies would be permitted under the VPL. The Court also rejected the argument that damages should be distributed pro rata between the two carriers as the wind carrier failed to establish that the condemnation resulting from the local ordinance was not attributable solely to wind damage.
APPRAISALS
Liberty American Insurance Company v. Kennedy, 2005 WL 50101 (Fla.App.2d 2005)
In Kennedy, the issue was whether the insurer’s submission to appraisal of the damage issue precluded the insurer from subsequently raising an issue as to coverage.
The Second District Court of Appeals looked at the Eleventh Circuit’s decision in Three Palms Pointe, Inc. v. State Farm Fire & Casualty Company. 362, F.3d 1317 (11th Cir. 2004). In Three Palms Pointe, “the Eleventh Circuit interpreted the Florida Supreme Court’s opinion in State Farm Fire & Casualty v. Licea, to hold that once the matter has been submitted to appraisal, the insurer can only dispute coverage for the claim as a whole and not anything less.” The court found that the Eleventh Circuit misinterpreted the holding in Licea. Moreover, the Second District Court of Appeals noted that it was “not bound by the Eleventh Circuit’s decisions on questions of Florida law.”
Thus, the Second District Court of Appeals held as follows:
the submission of the claim to appraisal does not foreclose [the insurer] from challenging an element of the loss as not being
covered by the policy. Only if a court determines that coverage exists for that element of the loss will the amount of appraisal
for that element of the loss be binding on the [insurer].
Cotton States Mutual Insurance v. D=Alto, 879 So.2d 67 (Fla. 1st DCA 2004)
In this case, the First District Court of Appeals found that a nonfinal order compelling appraisal under a homeowner=s insurance policy is not appealable.
The issue before the appellate Court was whether an order to compel appraisal was the same as an order determining the entitlement to a party thus allowing Cotton States to appeal a nonfinal order pursuant to Florida Rules of Appellate Procedure 9.130(a)(3)(C)(iv). Florida Courts had previously held that an agreement requiring the parties to submit to an appraisal is appealable under subdivision (a)(3)(C)(iv), on the theory that it was the same as an order determining entitlement to arbitration. In Allstate Insurance Company v. Suarez, the Florida Supreme Court described the appraisal process as an Ainformal proceeding@ and explained that it was not the same as an arbitration proceeding. 833 So.2d 762 (Fla. 2002). Consequently, based on the rationale of the Suarez decision, the First District Court of Appeals held that an order compelling appraisal was not appealable under rule 9.130(a)(3)(C)(iv) as such proceeding was not the same as arbitration.
PREJUDGMENT INTEREST
Owners Insurance Company v. Hartford Fire Insurance Company, 29 Fla.L.Weekly D1719 (Fla. 2nd DCA 2004).
In Owners, the issue before the court was the date from which prejudgment interest was due to the prevailing party. The Second District Court of
Appeals stated that Awhere a claim for property damage is made by an insured on an insurance policy =prejudgment interest [is due] from the date proceeds would have been due under the policy=.@ Hence, the Court did not calculate the prejudgment interest from the date of loss but rather the prejudgment interest was due from the date provided for in the Owners contract provisions.
CIVIL ARSON CASES
Lowe v. Golden Eagle Insurance Company, 2003 WL 150111 (Cal.Appl W. Dist. January 22, 2003).
Insurer denied insured’s claim on the basis that the insured intentionally set the fire which formed the basis for his claim. The Court concluded insured could not establish “bad faith” and that insurance company properly rejected claim where neither the insured nor his expert ever proposed a logical non- arson explanation or an accidental cause for the fire.
INNOCENT CO-NSURED CASES
Valenti v. Allstate Insurance Company, 243 F.Supp. 2d 221 (M.D. Pa. January 27, 2003).
Insurer denied claim as to both named insured and named insured’s spouse. The basis for the denial was that the named insured was responsible for intentionally setting the fire and lied about material matters during the course of the investigation. The issue was whether the named insured's spouse was an innocent co-insured entitled to recover under the policy of insurance based on the following provision:
This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstances concerning this insurance or the subject thereof, or the interest of the insured therein, or in the case of any fraud or false swearing by the insured relating thereto.
The Court held that the use of the language “the insured” was not ambiguous as the policy defined “insured person” by using the words ”you” and “your” referring to the definition section which unequivocally refers to the policyholders named on the declarations page and the policy holders resident spouse. Hence, the policy provided for joint coverage and the “innocent co-insured” spouse could not recover.
EXAMINATIONS UNDER OATH AND COOPERATION CASES
M.C.W. Inc. d/b/a Todd’s Restaurant v. Hamilton Mutual Insurance Company d/b/a EMC Insurance Company, et al., 2003 WL 193567 (Mich. App. January 28, 2003).
During the examination under oath, the insureds failed to answer questions regarding their own origin and cause investigator and failed to produce audio tapes and fire scene photographs which were requested by the insurer.
The Court found that it could not be said “as a matter of law” that insureds willfully and deliberately withheld information at the examination under oath, failed to comply with the conditions precedent under the policy or failed to cooperate during the course of the investigation of the claim.
Wright v. Farmers Mutual of Nebraska, 266 Neb. 802, 669 N.W. 2d 462 (Neb. October 3, 2003).
Court found failure to answer questions about insured’s finances, debts, other properties and other insurance during examination under oath were material to investigation. Thus, failure to provide such information was a material breach of the insurance contract.
Snyder v. Chester County Mutual Insurance Company, 264 F.Sup.2d 332 (D. Maryland May 22, 2003).
Insurer had good faith belief that theft claim might be fraudulent so as to support claim for financial documents pursuant to cooperation clause where claim increased over $80,000, claim was close to policy limits, insureds had mentioned possible bankruptcy, insured gambled and much of claim supported only by photocopies of catalog pages. The Court found that the insured’s failure to comply with the insurer’s request for such financial documentation was a failure to comply under the cooperation clause of the policy.
Taricani v. Nationwide Mutual Insurance Company, 77 Conn.App. 139, 822 A 2d 341 (Conn.App. March 25, 2003).
Constitutional privilege against self-incrimination did not excuse insured’s failure to cooperate with insurer’s investigation of a fire loss.
Lorenzo-Martinez v. Safety Insurance Company, 58 Mass.App.Ct. 359, 790 N.E.2d 692 (Mass. App. June 19, 2003).
Court held that the willful, unexcused refusal to submit to an examination under oath, without proof of prejudice to insurer’s interests resulting from refusal, constitutes a material breach of the insurance contract discharging the insurer’s liability under the contract.
EXTRA-CONTRACTUAL DAMAGES
Carrol v. Allstate Insurance Company, 262 Conn. 433, 815 A.2d 119 (Conn. February 25, 2003).
Court reversed award of punitive damages and damages for intentional infliction of emotional distress where evidence was that the insurer’s fire investigation and SIU investigation were flawed in that they were incomplete. As well, the evidence showed that the SIU representative made comments which could lead the jury to believe investigation was pre-determined. However, the Court allowed the compensatory damages for negligent infliction of emotional distress to stand.
INS Investigations Bureau, Inc. v. Lee, 748 N.E. 2d 566 (Ind.App. June 25, 2003).
Suit was brought against fire cause and origin expert alleging that the cause and origin’s investigation caused the insurer to erroneously deny coverage. The jury awarded compensatory damages for both negligence and breach of contract on the same facts and the same damages.
On appeal, the Court held that a party may not recover twice for the same wrong. Thus, the award of compensatory damages was vacated. However, the Court found that the issue of whether the cause and origins investigation was the cause of the insurer’s denial was a jury question. Lastly, the Appellate Court concluded that an imperfect investigation punctuated by misstatements, mistakes and missteps which resulted from mere negligence did not necessarily establish the fraud, malice, gross negligence or oppressiveness required to award punitive damages.
Sexon v. State Farm Fire and Casualty Company, Fed. App. X. 267 2003 WL 1466620 (Cir. Ind. February 24, 2003).
Insurer denied fire claim on the basis that insured was responsible for arson. The Court found that insurer disputed the claim in good faith where the evidence showed the following: 1) firefighters found newspaper and melted plastic on top of the stove, 2) test of debris revealed the presence of gasoline on the rear burner, 3) the right two burners were in the high position and the left two burners were turned off, 4) the electricity had been reconnected at the instruction of the insured on the day of the fire, 5) the property was for sale at the time of the fire, 6) the prior renters had vacated the premises as they could no longer afford the rent, and 7) the insured was the only person with a key at the time of the loss and was the last to leave and lock up.
Plante v. USF&G Specialty Insurance Company, 2004 U.S. Dist. Lexis 4875; 17 Fla.L. Weekly Fed. D 350 (SD Fla. March 2, 2004).
Plante purchased a homeowner’s insurance policy from USF&G in January 2000. Plante submitted a claim for vandalism and a water leak. USF&G issued five payments to Plante throughout the course of the claim. In July, 2003, Plante filed a Civil Remedy Notice. USF&G did not pay the amounts claimed in such notice within the sixty day period.
Accordingly, on November 26, 2003, Plante filed a two count complaint alleging claims for statutory bad faith as per Florida Statute §624.155(1) (b) and fraud in the inducement. USF&G filed a Motion to Dismiss as to both counts. USF&G’s motion to dismiss count I, statutory bad faith pursuant to Blanchard v. State Farm Mutual Auto Insurance, as there had been no determination of liability as to the breach of contract issue. 575 So.2d 1289(Fla. 1991) (A claim for bad faith pursuant to Florida Statute §624.155 does not accrue until there has been a determination of liability in the breach of contract action).
The Court addressed the issue of whether an award less than the policy limits satisfied the prerequisite to a bad faith claim. The Court concluded that the Florida Supreme Court would find that an award need not meet the policy limit to permit a plaintiff to proceed with a bad faith claim. Additionally, the Court found that once a insurer has made a payment on the plaintiff’s claims, it has waived its coverage defenses that would otherwise exist regardless whether it pays the policy limits or an amount less than that. Accordingly, USF&G would not be allowed to assert any coverage defenses as it made a partial payment on the plaintiff’s claim.
Thus, the Court denied USF&G’s motion to dismiss the count of statutory bad faith and found an insurer’s partial payment on a insured’s claim constituted a final determination of liability for purposes of the bad faith statute.
CONCEALMENT AND FRAUD
American Pepper Supply Company v. Federal Insurance Company, 72 P.3d 1284 (Ariz. App. July 24, 2003).
Arizona Appellate Court found that the level of proof for concealment or fraud under the applicable insurance policy was by “clear and convincing evidence.”
RESTITUTION
State of Washington v. Bradshaw, 2003 WL 22329284, 118 Wash.App. 1067 (Wash.App.Div.1, October 13, 2003).
Insurer issued mobile home policy based on insured’s representations in the application. However, a subsequent inspection revealed that mobile home did not meet eligibility requirements. Insured was notified that policy would be canceled May 23, 1997. On May 22, 1997, a fire was intentional set to the mobile home. Insured was charged and entered a plea to second-degree arson. As part of the plea agreement insured agreed to pay restitution but reserved the right to contest the amount of such. At the conclusion of the restitution hearings the court awarded restitution including investigative costs and attorney’s fees.
The Appellate Court concluded that attorney’s fees stemmed from the crime and as such these fees were causally related to the crime. Furthermore, the Court found the insurer was a victim of the crime and that it had incurred expenses and fees in having to handle the claim.
NFPA 921
McCoy v. Whirlpool Corp., 2003 WL 1923016 (D.Kan. April 21, 2003).
Plaintiff’s cause and origin expert planned to testify that he had eliminated external sources of combustion and concluded that the heat source which created the fire had to be internal from the dishwasher. Defendant’s moved to strike such testimony as expert had no expertise in dishwashers. Court declined to strike experts testimony where such testimony was generally consistent with the methodology established in NFPA 921, which recognizes a proper role for deductive reasoning in its methodology. The Court also noted that the expert’s testimony would be helpful to the jury which could easily sort out any perceived inadequacies at the time of trial.
Commonwealth of Pennsylvania v. Efaw, 565 Pa. 445, 774 A. 2d 735 (Penn. 2001) -
State Farm insured a home owned by Ms. Efaw (Appellant) and her husband. At the time of the fire, the daughter of Ms. Efaw was renting the home. State Farm also
carried the renter’s insurance for the daughter. A fire occurred on December 23, 1995, which was believed to be incendiery. After State Farm and the Fire Marshall completed
their investigations, the cause of the fire was determined to be the ignition of combustible materials placed on the electric burner of the kitchen stove. State Farm denied claims to
both Appellant and her daughter under the respective insurance policies. The Fire Marshall requested information gathered by State Farm during its arson
investigation pursuant to the Arson Reporting Immunity Act, as codified in the Pennsylvania Statutes. In response, State Farm supplied the Commonwealth of Pennsylvania with
photographs, statements and other information it had compiled during its arson investigation. After a Grand Jury subpoenaed State Farm to produce all documents
relating to the arson investigation, State Farm complied. The Grand Jury thereafter charged Appellant with arson, recklessly endangering another person and insurance fraud.
Appellant moved to suppress the documents submitted by State Farm, and the trial court denied the motion. The Commonwealth made an oral motion
in limine to admit all of theevidence gathered by State Farm during its arson investigation and the trial court denied on the grounds that Appellant possessed a constitutional reasonable expectation of privacy
in the information conveyed to her insurance company. The Commonwealth appealed to the Superior Court, which reversed the trial court, since the ARIA does not require an
insurance company to notify its insured prior to releasing information relating to an arson investigation or to require a waiver of confidentiality when neither of these requirements
appear with the express terms of the statute. The Supreme Court of Pennsylvania affirmed the Superior Court’s decision because
there was no remedy for failure to notify the insured, as required in Pennsylvania’s statute, and the sections addressing notifications to the insured specifically exempt violators from
criminal liability. The Supreme Court held that an insured has no reasonable expectation of privacy for statements made to her insurance company pursuant to an arson
investigation.
New Rule Regarding Fire Investigations by State
Submitted by; Guy E. Burnette, Jr.
October 10, 2003
Re: Division of State Fire Marshal, Administrative Rule 4A-61.001
In the handling of fire loss claims, particularly where there may be indications of an incendiary cause for the fire, an investigation by the State Fire Marshal often takes place. The results of that investigation can have a significant impact upon a pending claims investigation.
Like many other agencies of state government, the State Fire Marshal has experienced increasing pressures on its limited resources for conducting investigations of fire incidents throughout the State of Florida. In many cases, the State Fire Marshal simply cannot commit the resources necessary to properly investigate a fire incident, especially where significant follow-up investigation is required into the circumstances surrounding the loss and the subjects of the investigation.
In an attempt to address this concern, the State Fire Marshal has promulgated Rule 4A-61.001 with an effective date of August 13, 2003.
This is a new Rule adopted under the Florida Administrative Code concerning the responsibilities of the State Fire Marshal and local fire officials/law enforcement officers in the investigation of fire incidents. This Rule was enacted to attempt to reduce the number of responses by the State Fire Marshal to fires which are accidental or have no clear indications of any criminal cause. It sets forth the conditions and circumstances under which the State Fire Marshal will respond to a fire incident. It requires the local fire department/law enforcement agency to conduct a preliminary fire cause investigation prior to contacting the State Fire Marshal to request their assistance in the investigation.
Under Section (1)(a) PURPOSE it states that "the purpose of this Rule is to assist local fire officials and law enforcement officers in determining the established
responsibilities with respect to the initial or preliminary assessment of fire scenes, and the determination of whether probable cause exists to refer such scenes to the Division for an investigation pursuant to Section 633.03, Florida Statutes." It goes on to state "This Rule imposes no additional or new obligations on local fire officials or law enforcement, but serves solely to clarify the conditions that necessitate the engagement and assistance of State Fire Marshal, Bureau of Fire and Arson Investigations’ resources upon the occurrence of a fire or explosion."
Section (1)(b) SCOPE notes that " . . . the State Fire Marshal is required to investigate any fire in which property has been damaged or destroyed and where there is probable cause to believe that the fire was the result of carelessness or design." It goes on to state "The purpose of the Bureau of Fire and Arson Investigations is to investigate crimes or criminal activity related to fires."
The substantive portions of this new Rule begin with Section (3) CONDUCT OF INITIAL INVESTIGATION. Under Sub-section (3)(a) any fire department or fire official intending to request the State Fire Marshal to investigate a fire must first make an initial investigation into the circumstances surrounding the fire and its origin and cause. Law enforcement officials are permitted, but not required to do so.
Under Section (3)(b) when a fire occurs in an area with no organized fire department or designated arson investigation unit, the local law enforcement agencies may directly request the Bureau of Fire and Arson Investigation to conduct the initial investigation.
Section (4) FINDING OF PROBABLE CAUSE imposes a requirement of "probable cause" to believe that the fire was the result of carelessness (at the level of gross negligence or culpable negligence) or design (i.e., arson) in order to make a request for an investigation under Section 633.03 by the State Fire Marshal/Bureau of Fire and Arson Investigations. The facts and circumstances of the fire constituting probable cause must be submitted to the Bureau of Fire and Arson Investigation for their determination of whether probable cause exists and an investigator should be sent to the scene.
Section (4)(b) mandates certain information to be contained in the report submitted to the Bureau of Fire and Arson Investigations. The report must contain the following:
1. The date and time of the fire.
2. The address of the damaged property.
3. A description of the type structure involved in the fire (residential, commercial, etc.) and the extent of damage to the property.
4. The name(s) of the owner of the property which was damaged.
5. The name(s) and number of any persons injured or killed in the fire and the extent of any injuries.
6. The facts and circumstances constituting probable cause to believe that the fire was a result of carelessness or design.
Section (4)( c) requires that the report be given verbally and may be followed-up in writing if the reporting person chooses to do so. The verbal report must be given to the Bureau of Fire and Arson Investigations through their toll-free number (800-638-3473) and must be done prior to releasing the scene, if that is practical or reasonable.
Section (5) FINDING OF NO PROBABLE CAUSE states that when local fire officials or law enforcement officers determine there is no probable cause to believe the fire was the result of carelessness or design, did not involve injury or death of a firefighter and is otherwise not appropriate for investigation under the provisions of Section (10), there is no obligation to refer the matter to the Bureau and an investigation will never be opened by the Bureau.
Section (6) CONSULTATIONS WITH THE BUREAU provides for verbal consultation with Bureau Investigators whenever a local fire official or law enforcement officer wishes to confer or consult about the fire to determine whether probable cause exists. It is specifically provided that this verbal consultation shall not remove the responsibility to conduct an initial investigation as set forth under Section (3).
Section (7) RESPONSIBILITIES OF THE BUREAU details the process for reviewing the probable cause report from local fire officials or law enforcement officials. Section (7)(a) provides that where the Bureau agrees there is probable cause, or the fire is otherwise required to be investigated under the criteria of Sections (9) or (10), the Bureau must immediately initiate a complete investigation of the fire. If the investigation is not immediately begun, the Bureau must take appropriate action to preserve the scene and all evidence. Under Section (7)(b) the Bureau may reject the finding of probable cause by the local fire officials or law enforcement officials after reviewing their reports. Where there is no probable cause determined by the Bureau and the fire is not otherwise required to be investigated under Sections (9) or (10), the Bureau will not initiate an investigation. The requesting official must be notified verbally of this decision, and written notification of the decision with an explanation of the reason or reasons for determining probable cause does not exist, must be sent to the requesting official at the time the decision is made.
Section (8) STANDARD PROCEDURES FOR INITIAL INVESTIGATIONS outlines the responsibilities of the Bureau for conducting an investigation. Section (8)(a) states that the Bureau will not perform the initial investigation to determine probable cause in any area where an organized fire department or law enforcement agency is available to conduct that investigation. Section (8)(b) states that the Bureau will conduct a probable cause investigation where there is no organized fire department or law enforcement agency available, but only after a request has been made verbally or in writing by the municipality, county or special district where the fire is located.
Section (9) DEATH OR INJURY OF A FIREFIGHTER provides that any time a firefighter is injured and requires hospitalization or treatment by a physician at a medical facility (presumably, something more than treatment at the fire scene by an EMT) or whenever a firefighter is killed in the line of duty, the fire must immediately be reported to the Bureau and an investigation will be conducted.
Section (10) PRESUMPTIONS FOR PURPOSES OF BUREAU INVESTIGATIONS sets forth certain circumstances under which an investigation will always be conducted by the Bureau regardless of other factors. Those include fires where:
1. The projected direct dollar loss exceeds one million dollars, or
2. There has been a civilian death or an injury likely to result in death, or
3. The cause of the fire is not readily determined by the initial investigation conducted by local officials, or
4. The fire involves the suspected failure of a fire suppression or fire detection system.
Whenever any of these four factors are present, the Bureau will investigate the fire incident regardless of any other factors.