Earlier this week, the Florida District Court of Appeal once again concluded that, where an insurance policy does not impose a stricter standard for voiding insurance policies based on misrepresentations than section 627.409 of the Florida Statutes (“Section 627.409”), Section 627.409 permits an insurer to do so based on even innocent misrepresentations if the insurer demonstrates that it would not have issued the policy had it known the truth.
In Universal Property & Casualty Insurance Co. v. Johnson, No. 1D12-0891, 2013 WL 1809639 (Fla. Dist. Ct. App. 1st Dist. Apr. 30, 2013), a fire destroyed the Johnsons’ home. Universal insured the home, and its policy contained a condition (the “Voidance Condition”) providing that the entire policy would be void if, before or after a “loss,” the insured: (1) “intentionally concealed or misrepresented any material fact or circumstance”; (2) engaged in fraudulent conduct; or (3) “made false statements.” Universal investigated the claim and denied coverage based on a misrepresentation in the Johnsons’ policy application. Specifically, the Johnsons answered “no” when asked if either of them had been convicted of a felony in the last 10 years, but Mrs. Johnson had actually been convicted of five felonies in July 1998. It was later determined that this misrepresentation was innocent in that it was based on a misunderstanding as to the actual date when Mrs. Johnson had been convicted, and that Universal would not have issued the policy had it known the truth about Mrs. Johnson’s criminal history.
The Johnsons sued Universal for coverage and Universal counterclaimed, arguing that it was entitled to void the policy pursuant to Section 627.409. The Johnsons claimed that Universal could not rely on Section 627.409 to void the policy because the Voidance Condition imposed a more stringent standard than Section 627.409 – i.e., it required that the misstatements be intentional in order to void the policy. The trial court agreed, and Universal appealed.
The appellate court reversed. Although it acknowledged that parties to insurance policies are free to contract out of the requirements of state or federal law (provided they don’t violate public policy in the process), the appellate court concluded that the Universal policy did not impose a stricter standard for voiding its policy than Section 627.409. The court first noted that the Johnsons’ interpretation of the Voidance Condition’s third prong rendered it superfluous of the condition’s other two prongs, in violation of Florida law. The court also rejected the Johnsons’ argument that the third prong required intent based on the Voidance Condition’s title, “Concealment or Fraud,” even though concealment and fraud require intent. Specifically, the court reiterated its prior holding that, “headings or subheadings of a document do not dictate the meaning of the entire agreement, especially where the literal language of the heading is contrary to the agreement’s overall scheme.”