Foran Glennon Palandech Ponzi & Rudloff

August 2014

Eleventh Circuit Upholds Insurer Denial of Property Claim Based on Six-Month Delay in Notice

Morgan Smith

The Eleventh Circuit Court recently addressed whether a sixth-month delay in notifying an insurer of property damage was “prompt notice.”  The Court determined that it was not.  The holding is significant because it emphasizes the importance of identifying and reporting loss or damage to an insurer as soon as possible so that the claim may be investigated effectively.

Factual Background.  In the instant case, the insured, PDQ Coolidge Formad, LLC (‘PDQ’), brought suit alleging that a commercial insurer, Landmark American Insurance Company (“Landmark’),  breached an insurance contract between the parties when the insurer denied the insured’s claim for property damage. PDQ is the owner of Washington Shores apartment complex located in Orlando, Florida.  In August 2008 Washington Shores sustained severe roof damage following Tropical Storm Fay.  The Washington Shores policy provided that in the event of loss or damage, PDQ was required to give Landmark “prompt notice of the loss or damage.”

Following the storm, PDQ notified Landmark of damages sustained to other properties it owned, but did not report its claim for damages to the Washington Shores property until February 2009, approximately sixth months after the loss. After Landmark was notified of the claim, an engineer sent by Landmark to inspect the property determined that it was impossible to ascertain whether or not the roof damage was attributable to wind from Tropical Storm Fay.  Consequently, Landmark denied PDQ’s claim for damages to Washington Shores for the reason that PDQ failed to provide Landmark with “timely” notice of the damage.  PDQ sued Landmark for breach of contract and Landmark successfully moved for summary judgment.  PDQ subsequently appealed on the basis that the term “prompt notice” contained in the policy was ambiguous and that Landmark was not prejudiced by the delay in reporting.

Discussion.  On appeal PDQ first argued that the phrase “prompt notice” contained in the policy was ambiguous. The Eleventh Circuit disagreed with this contention, holding that the term “prompt notice” in the Policy was not ambiguous, and should be construed to mean that notice must be given with “reasonable dispatch and within a reasonable time in view of all facts and circumstances of a particular case.” The fact that PDQ timely notified Landmark of the storm damage to its other properties provided sufficient evidence that PDQ was aware of the alleged damage to Washington Shores, and the Court affirmed the trial court’s conclusion that the six-month delay in reporting was not “prompt.”

Moreover, PDQ argued that there was a dispute of fact regarding any prejudice suffered by Landmark from PDQ’s six-month delay in notice.  Under Florida law, a six-month delay by an insured in reporting property damage creates a rebuttable presumption of prejudice to the insurer. Bankers Ins. Co. v. Macias, 475 So.2d 1216, 1217-18 (Fla.1985).  The burden is on the insured to show lack of prejudice where the insurer has been deprived the opportunity to investigate the facts. Stark v. State Farm Fla. Ins. Co., 95 So.3d 285, 288 (Fla.4th DCA 2012). The Court in the instant matter determined that PDQ did not meet its burden to rebut the presumption of prejudice. While Landmark’s engineer concluded in its post notification inspection that the roof damage on Washington Shores was not the result of Tropical Storm Fay, PDQ offered no evidence showing an earlier inspection would not have impacted the investigation.  For instance, PDQ did not address whether better conclusions would have been drawn without the delay, whether those conclusions could have been drawn more easily, and whether repairs to affected areas that took place in the interim would hinder the evaluation of extent of damages or effort to mitigate damages. Based on the fact that PDQ did not rebut the presumption of prejudice, the Court affirmed the trial court decision that Landmark was prejudiced by PDQ’s failure to provide timely notice.

Conclusion.  As a result of PDQ Coolidge Formad LLC v. Landmark American Insurance Co., the Eleventh Circuit has emphasized that it is in an insured’s best interest to timely notify its insurance company of any claims for damage. Not only may this be necessary for compliance with policy language concerning “prompt notice”, but also in order to ensure that the claim will be handled effectively and to avoid prejudice to the insurer.

The case is: PDQ Coolidge Formad LLC v. Landmark American Insurance Company, 13-12079, 2014 WL 2016553 (11th Cir. May 19, 2014).