[ author: Jonathan Small ]

The Eleventh Circuit Court of Appeals recently explained that under Florida law a policyholder who fails to provide prompt notice of a claim faces an uphill battle defeating the resulting rebuttable presumption of prejudice to the insurer. The court also affirmed an award of attorneys’ fees to the insurer under Florida’s offer of judgment statute.

In Yacht Club on the Intracoastal Condo. Ass’n, Inc. v. Lexington Ins. Co., No. 13-12486, 2015 U.S. App. LEXIS 293, 2015 WL 106862, at *2 (11th Cir. Jan. 8, 2015), the plaintiff condominium association filed suit against its insurer seeking $6,208,910 for damage caused by Hurricane Wilma in October 2005. The association chose not to submit a claim to its insurer immediately after the hurricane, because it mistakenly believed the damage to its property did not exceed the amount of its $100,000 deductible. Upon the association’s alleged discovery of more extensive damage, it sent formal notice of the loss to its insurer on July 27, 2010, four years and seven months after the hurricane. The insurer denied the claim on the grounds that the association failed to provide “prompt notice of the loss or damage” as required by the policy.

The Court of Appeals affirmed the district court’s determination on summary judgment that the association was not entitled to coverage due to its failure to provide prompt notice. Although there is no “bright-line” rule under Florida law setting forth a particular period of time beyond which notice cannot be considered “prompt,” the fact that the association was aware of damage to the property immediately after Hurricane Wilma and, in fact, imposed a special assessment to pay for repairs in connection with the damage, was sufficient to show that it breached its duty of notice. The court rejected the association’s claim that its mistaken belief that the damages did not exceed the deductible excused its failure to provide prompt notice.

The association attempted to overcome the resulting rebuttable presumption of prejudice through evidence that the insurer’s expert was able to form an opinion on causation. However, the court held that “[t]he ability to offer testimony as to causation alone does not satisfy the purpose of prompt notice,” especially since the association’s own expert acknowledged that the structure sustained additional damage because repairs were not made immediately after Hurricane Wilma and the association undertook repairs before filing a claim with its insurer. Thus, the association failed to carry its burden to rebut the presumption of prejudice to the insurer.

Following the court’s decision in Yacht Club, it is clear that an insurer’s decision to deny coverage for claims that are not promptly made will be upheld unless there is strong, affirmative evidence that the delay resulted in no prejudice.

The 11th Circuit also upheld the district court’s award of attorneys’ fees under Florida’s offer of settlement statute, Florida statute § 768.79. The court has previously held that the offer of judgment statute is substantive and therefore is applied in diversity cases. See Horowitch v. Diamond Aircraft Indus., Inc., 645 F.3d 1254, 1258 (11th Cir. 2011). Pursuant to Section 768.79, “if a defendant files an offer of judgment which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable costs and attorney’s fees incurred. . . from the date of filing of the offer if the judgment is one of no liability . . . and the court shall set off such costs and attorney’s fees against the award.”

Prior to the entry of summary judgment, the insurer filed an offer of judgment in the amount of $150,000, which the association refused. The court rejected the association’s argument that attorneys’ fees under Section 768.79 are not available in any case in which a declaratory judgment accompanies a claim for damages. The court noted that if the association were to succeed on its declaratory judgment action, it would result in an award of damages, just as in its breach of contract claim. The offer of judgment statute, therefore, applied.

The court’s decision to impose attorneys’ fees serves as a helpful reminder of the utility of offer of judgment statutes.