2D06-3621 / Graham v. Lloyd's Underwriters at London

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State: Florida

Court: Florida Southern District Court

Docket No: 2D06-3621

Case Date: 09/19/2007

Plaintiff: 2D06-3621 / Graham

Defendant: Lloyd's Underwriters at London

Preview:NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
DELORES GRAHAM,                                                                      )
)
Appellant,                                                                           )
)
v.                                                                                   )   Case No. 2D06-3621
                                                                                     )
LLOYD’S UNDERWRITERS AT LONDON,                                                      )
                                                                                     )
Appellee.                                                                            )
)
_____________________________________ )
Opinion filed September 19, 2007.
Appeal from the Circuit Court for Collier
County; Lawrence D. Martin, Judge.
Matthew D. Pardy of Kim, Pardy &
Rodriguez, P.A., Orlando, for Appellant.
Neil Bayer of Sarnoff & Bayer, Coconut Grove,
for Appellee.
PER CURIAM.
Delores Graham appeals the trial court’s order granting final summary
judgment in favor of her insurer, Lloyd’s of London.   Lloyd’s denied coverage for
damages to Ms. Graham’s Naples home sustained during Hurricane Charley on August
13, 2004, based on its assertion that Ms. Graham had made a material
misrepresentation in her application for insurance coverage.   Because there are

unresolved genuine issues of material fact in this case, we reverse the summary
judgment entered in favor of Lloyd’s and remand for further proceedings.
In June 2004, Ms. Graham applied for homeowner’s insurance through the
John Lee Insurance Agency, an independent agent in Naples, Florida.   The application
contains an entry indicating that the home is three miles from the “gulf.”   Mr. Lee
submitted the application to The Levings Group (Levings), the surplus lines agent for
Lloyd’s Underwriters at London (Lloyd’s).   On June 10, 2004, Levings issued a binder
for coverage of Ms. Graham’s home, with coverage effective as of June 9, 2004.   A
policy was subsequently issued which included windstorm coverage.   Shortly after
issuing the policy, Levings had the home inspected by an independent inspector.   That
inspector reported that the home was one and one-quarter miles from the gulf.
Lloyd’s alleges that on July 12, 2004, it sent a letter to John Lee Insurance
stating that based on the inspection report, “please send endorsement request to
increase coverage to $150,000 and X-wind1 or send proof of replacement cost and
distance to coast.”   This document contains the word “FAX” at the top and is dated July
12, 2004, but contains no facsimile time or date markings or a fax confirmation report.
Lloyd’s also alleges that on August 11, 2004, it sent another letter to Mr.
Lee discussing the “X-wind” problem.   However, the typed portion of this letter
discusses only the increased replacement cost and does not mention the “X-wind”
problem at all.   At the bottom of the letter is a handwritten notation stating, “[h]ome
needs to be X-wind.   Inspection report states home is 1¼ miles to the gulf.”   No
evidence was presented as to whether the handwritten entry was added to the letter
1                                                                                          “X-wind” appears to mean “delete wind damage coverage.”
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prior to the time it was allegedly sent or who wrote it.   More importantly, the record does
not establish whether either of the above-mentioned documents were ever actually
faxed or mailed to John Lee Insurance.   Mr. Lee was never deposed nor was the
individual who allegedly sent the letters.   Ms. Graham contends that she had never
seen either of these letters and was never informed of their existence by Mr. Lee,
assuming that he did get them.
On August 13, 2004, Hurricane Charley struck the gulf coast of Florida
causing damage to Ms. Graham’s home.   Three days after the hurricane, on August 16,
2004, Levings sent Mr. Lee a change endorsement deleting wind damage coverage
from Ms. Graham’s policy.   Meanwhile, having suffered wind damage from Hurricane
Charley, and purportedly without notice that her policy would not cover damage caused
by the hurricane, Ms. Graham submitted a claim.   Lloyd’s denied the claim on the basis
that wind damage was excluded.   Ms. Graham filed suit.   The trial court ordered the
parties to nonbinding arbitration.   The arbitrator found that (1) there was a material
ambiguity in the homeowner’s policy application with respect to the definition of “gulf
and/or distance to gulf,” (2) Lloyd’s waived its coverage defenses by failing to notify its
insured after having actual or constructive knowledge of the (alleged) actual distance to
the gulf for more than thirty days2 prior to the date of the loss, and (3) Ms. Graham’s
2    We can find no statutory or other legal basis establishing thirty days as a
waiver of a coverage defense in a first party claim such as this one.   Section
627.426 (2)                                                                                    (a), Florida Statutes (2004), provides that a liability insurer may not deny
coverage based on a particular coverage defense unless, within thirty days after the
liability insurer knew or should have known of the defense, written notice of reservation
of rights to assert the defense is given.   There is no corresponding statute applicable to
first party property damage claims.   Since the period of time in question in this case was
over thirty days, we assume this was simply the period of time the arbitrator felt was
sufficient to establish waiver under the facts of this case.
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losses were covered losses under the policy of insurance.   After the arbitrator issued his
decision in favor of Ms. Graham, Lloyd’s filed a motion for trial de novo, which the trial
court granted.   Lloyd’s then filed a motion for summary judgment based on its assertion
that Ms. Graham had made a material misrepresentation in her application with regard
to the distance to the gulf.   After a hearing, the trial court granted the motion.
We review a trial court’s grant of a party’s motion for summary judgment
de novo.   Volusia County v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126, 130
(Fla. 2000).   Summary judgment may only be granted “if the pleadings, depositions,
answers to interrogatories, and admissions on file together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.”   Fla. R. Civ. P. 1.510(c).   The burden is on
the moving party to show conclusively that the nonmoving party cannot prevail.   Gomes
v. Stevens, 548 So. 2d 1163, 1164 (Fla. 2d DCA 1989).   “If the record reflects the
existence of any genuine issue of material fact, or the possibility of any issue, or if the
record raises even the slightest doubt that an issue might exist, summary judgment is
improper.”   Id.                                                                                  “The presumption of correctness generally applicable to all orders
subject to appellate review is relatively weak in review of a summary judgment because
the appellate court is in no less of a position than the trial court in reviewing
documentary evidence.”   Poe v. IMC Phosphates MP, Inc., 885 So. 2d 397, 400-01 (Fla.
2d DCA 2004).
The basis of Lloyd’s motion for summary judgment was its assertion that
Ms. Graham indicated in her insurance application that her home was three miles from
the gulf, when in fact it was less than two miles from the gulf.   Lloyd’s asserts that this is
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a misrepresentation material to the risk and that it would not have issued the policy with
wind damage coverage had the true facts been known.3   Ms. Graham disputes the
calculation of the actual distance, asserts that the application language is ambiguous,
and alleges that Lloyd’s waived any defenses to coverage by sitting on its knowledge of
the claimed defense for over a month and failing to notify her of the coverage question
and/or failing to issue a change endorsement until after the hurricane had passed.
DISTANCE TO THE GULF
Lloyd’s relied on the report of an independent inspector who indicated that
he measured the distance on a map and came up with one and one-quarter miles.
During his deposition, the inspector stated that he also drove to the beach from Ms.
Graham’s home and found the distance to be about one and one-quarter miles.
However, Ms. Graham points out that the inspector, by his own admission, had stopped
at Clam Beach Park, which is as far as one can go by car on that route.   According to
the testimony and affidavit of another witness, the distance to the actual shoreline from
where the Lloyd’s inspector stopped is another three-quarters of a mile.   Thus, argues
Ms. Graham, even by Lloyd’s agent’s attempt to drive to the beach, the distance is at
least two miles.   She contends that because Lloyd’s would have issued the policy as
long as the distance was over two miles, any misrepresentation which might be
attributed to Ms. Graham’s claim that her home was three miles from the gulf instead of
two would not be material to the risk.
Following arguments of counsel, the trial court announced it was granting
the motion for summary judgment but the court did not explain its decision.   The written
3    Lloyd’s underwriting guidelines prohibit underwriting wind damage coverage
for homes within two miles of the shoreline.
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order contains no findings of fact or conclusions of law.   No evidence as to the actual
distance was presented during the hearing on the motion for summary judgment, and
the depositions and affidavits attached to the pleadings contain contrary claims.
Whether Ms. Graham’s answers to questions on the application for
insurance constituted misrepresentations is normally a question for the finder of fact.
“[T]he insured’s representations normally constitute a disputed issue of fact for the trier
of fact’s resolution regardless of how obviously false or material the representations
may be.”   Anderson v. Armor Ins. Co., 674 So. 2d 174, 175 (Fla. 2d DCA 1996) (citing
Beneby v. Midland Nat’l Life Ins. Co., 402 So. 2d 1193 (Fla. 3d DCA 1981)).   When the
evidence is not conclusive, the accuracy of the answers given by the insured and the
insured’s misrepresentations are matters of fact for the jury’s determination.   Id. (citing
Patterson v. Cincinnati Ins. Co., 564 So. 2d 1149, 1151 (Fla. 1st DCA 1990)).   Although
Lloyd’s asserted that Ms. Graham’s home was less than two miles from the gulf,
because the actual distance to the shoreline from Ms. Graham’s home is still in dispute,
this question remains a disputed issue of material fact.
AMBIGUITY
Ms. Graham also contends that the application is ambiguous.   The
application asks only, “distance to gulf.”   It does not explain the meaning or purpose of
this question or spell out the means by which the applicant is to determine or estimate
the distance.   Ms. Graham testified that she did not know any other way to calculate that
distance other than according to her own experience driving (and on one occasion
walking) there.   Lloyd’s counters that there is only one logical interpretation of this
question on the application, which is that it seeks the “as the crow flies” distance to the
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shoreline for purposes of determining eligibility for wind damage coverage.   Ms. Graham
responds that she is not sophisticated in insurance matters and had no way of knowing
the importance of this question or its meaning.
We agree that the question as presented on the application is ambiguous
and susceptible to differing interpretations.   It is undisputed that there is no direct route
of travel from Ms. Graham’s home to the shoreline.   We question whether the average
person in Ms. Graham’s position should know that she must measure the distance to
the shoreline “as the crow flies” or even know how to accomplish such a measurement,
as opposed to simply relying on her experience traveling the shortest route thereto or
estimating that distance.
After all, the man on the street purchases his insurance
policy in very much the same way that he purchases his
automobile or his reaper or other chattels.   He knows no
more about the making of a contract of insurance than he
does about the making of an automobile, and he naturally
relies upon the skill and good faith of those who hold
themselves out to be experts in such matters, by advertising
their wares for sale.   It would seem to be the clear duty of
the insurer, professing to draw an instrument protecting the
applicant's property against certain defined perils, to
exercise due diligence to supply a policy which will effect the
purpose intended.   Any damage caused to the applicant
through the agent's mistakes or negligence in making
inquiries that he should know to be pertinent should rest on
the insurer.
Am. S. Life Ins. Co. v. Hardy, 202 So. 2d 98, 102 (Fla. 4th DCA 1967) (Cross, J.,
dissenting) (quoting Vance on Insurance, § 89 (3d ed. 1951)), quashed, 211 So.2d 559,
561 (Fla. 1968).4
4    Hardy involved an alleged misrepresentation on an application for insurance
as to the health of the insured.   When the insured died the insurer denied coverage.
The trial court directed a verdict in favor of Hardy.   American Southern appealed.   The
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Ambiguities in an application for insurance are construed liberally in favor
of the insured and strictly against the insurer who prepared the policy.   See Prudential
Prop. & Cas. Ins. Co. v. Swindal, 622 So. 2d 467, 470 (Fla. 1993).   Where the terms of
a contract are disputed and reasonably susceptible to more than one construction, an
issue of fact is presented which cannot properly be resolved by summary judgment.
Chhabra v. Morales, 906 So. 2d 1261, 1264 (Fla. 4th DCA 2005); Strama v. Union Fid.
Life Ins. Co., 793 So. 2d 1129, 1132 (Fla. 1st DCA 2001).
We conclude that because reasonable persons could disagree as to the
meaning of the distance question as stated on the application or on how to measure
that distance, summary judgment was inappropriate.
NOTICE & WAIVER
Ms. Graham contends she never received notice of Lloyd’s intention to
cancel the wind damage coverage in her policy.   Lloyd’s contends that it notified Mr. Lee
of the problem and that Mr. Lee was Ms. Graham’s agent; therefore, notice to Mr. Lee
was effective as notice to Ms. Graham.   Ms. Graham denies that Mr. Lee was her agent
and further argues that, if anything, Mr. Lee was Lloyd’s agent.
We first note that once Lloyd’s had knowledge of a possible defense to the
wind damage coverage provision of the policy, it had a duty to notify Ms. Graham of its
intention to cancel that coverage in her policy.   Cat ‘N Fiddle, Inc., v. Century Ins. Co.,
213 So. 2d 701, 704 (Fla. 1968); Best Meridian Ins. Co. v. Tuaty, 752 So. 2d 733, 735
Fourth District held that “[t]he insured was not in good health and in the absence of a
showing of waiver or estoppel on the part of the company, the policy never became
effective,” 202 So. 2d at 100, and reversed the trial court, directing judgment in favor of
the insurer.   Judge Cross dissented.   The supreme court, in quashing the Fourth
District’s decision, specifically agreed with Judge Cross’s dissenting opinion.
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(Fla. 3d DCA 2000).   Whether notice to Mr. Lee constituted effective notice to Ms.
Graham depends on whether Mr. Lee was Ms. Graham’s agent.   Although a broker is
usually considered the agent of the insured during the process of procuring insurance,
Amstar Ins. Co. v. Cadet, 862 So. 2d 736, 740 (Fla. 5th DCA 2004), once the policy has
been issued, the relationship between the insured and the broker is severed.   See Cat
‘N Fiddle, 213 So. 2d at 704-05.
[W]hen an insurer has failed to give personal notice to the
insured, but seeks nevertheless to establish cancellation on
the theory that it effected notice to the insured's agent, it is
incumbent on the insurer to demonstrate that the scope of
the agent's authority encompassed the authority to perform
the act sought to be charged to the agent's principal.
Id.   In order to establish the existence of an agency relationship, three elements are
necessary:   (1) acknowledgement by the principal that the agent will act on his or her
behalf, (2) acceptance by the agent, and (3) control by the principal over the agent’s
actions.   Amstar, 862 So. 2d at 741.   Alternatively, “such authority may be presumed
from a long course of dealing between the parties.”   Cat ‘N Fiddle, 213 So. 2d at 704.   In
this case, the record contains no evidence confirming an ongoing agency relationship
between Ms. Graham and Mr. Lee.   Ms. Graham testified in deposition that she did not
know Mr. Lee at all and only chose his insurance agency to obtain the insurance
because of its proximity to her home.
It is a well-settled rule that a broker or agent employed by an
owner to procure a policy of insurance on property is not
authorized to accept notice of the cancellation of such policy.
His employment is at an end when he procures the
insurance, and the subsequent notice to him by the
insurance company of the cancellation of its policy is no
notice to the insured.
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Cat ‘N Fiddle, 213 So. 2d at 704 (quoting Stuyvesant Ins. Co. v. Barkett, 11 S.W.2d 87,
89 (Ky. 1928)).
Finally, the fact that Levings was apparently relying on Mr. Lee to submit
the requested change endorsements arguably reflects that it considered Mr. Lee its
agent, not Ms. Graham’s.   Indeed, it is unclear why Levings requested that Mr. Lee
prepare a change endorsement to the policy when it appears that Levings, as Lloyd’s
agent, had full authority to issue the necessary changes unilaterally without consulting
Mr. Lee.   In fact, Levings finally did issue the change endorsement on August 16, 2004,
three days after Hurricane Charley had done its damage.
We conclude that Lloyd’s has failed to prove that Mr. Lee was Ms.
Graham’s agent for the purpose of Lloyd’s notice of its intent to cancel the wind damage
coverage of her homeowner’s policy.   In addition, as noted above, the record does not
conclusively establish that Lloyd’s actually notified Mr. Lee of the problem.
WAIVER
Ms. Graham contends that by failing to give notice for over sixty days and
waiting until after the hurricane had passed to issue the policy change endorsement,
Lloyd’s waived its defense to the wind damage coverage.
[A]n insurance company should not be permitted to lull the
assured into a false sense of security by accepting
premiums after knowledge, either actual or constructive, of
facts sufficient to avoid the policy, and then when the risk
eventuates assert as a basis for escape from liability the
existence of facts or conditions of which they were, or should
have been, previously aware.
Hardy, 211 So. 2d at 561 (citing Johnson v. Life Ins. Co. of Georgia, 52 So. 2d 813, 816
(Fla. 1951)).                                                                              “[I]t is equally well settled in insurance law that, when an insurer has
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knowledge of the existence of facts justifying a forfeiture of the policy, any unequivocal
act which recognizes the continued existence of the policy or which is wholly
inconsistent with a forfeiture, will constitute a waiver thereof.”   Johnson, 52 So. 2d at
815.
Ms. Graham has raised a legitimate question of waiver and estoppel.   The
policy was issued with an effective date of coverage of June 9, 2004.   The inspection
report noting the distance discrepancy was prepared June 27, 2004.5   According to the
record, Lloyd’s first alleged attempt to notify Mr. Lee of the problem was July 12, 2004.
Its second alleged attempt to communicate with Mr. Lee was August 11, 2004.   It was
not until August 16, 2004, over two months since the issuance of the policy and three
days after Hurricane Charley hit that Lloyd’s issued the coverage change endorsement.
As noted above, neither our statutes nor our case law define what would constitute
waiver under the facts of this case.   Ms. Graham also asserts that had she been given
timely notice of the wind damage coverage issue, she may have been able to secure
other coverage before the hurricane hit.   Therefore, whether Lloyd’s actually waived its
coverage defense in this case is a question for the finder of fact which cannot be
resolved in a summary judgment proceeding.   Mut. of Omaha Ins. Co. v. Eakins, 337
So. 2d 418, 410-20 (Fla. 2d DCA 1976); Woodruff v. Gov't Employees Ins. Co., 669 So.
2d 1114, 1115 (Fla. 1st DCA 1996).
Based on the above, we conclude that there are unresolved issues of
material fact in this case with regard to actual distance, ambiguity of the “distance”
5    The actual date the report was forwarded to the Levings Group is not clear
from this record, although the president of the Levings Group testified it must have been
received before July 12, 2004.
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provision in the application, notice, and waiver; all of which should have precluded
summary judgment.   We therefore reverse the trial court’s grant of summary judgment
in favor of Lloyd’s and remand for further proceedings consistent with this opinion.
Reversed.
STRINGER and SILBERMAN, JJ., and GROSS, RAYMOND O., ASSOCIATE JUDGE,
Concur.
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