27 Fla. L. Weekly Supp. 525a

Online Reference: FLWSUPP 2706NUNEInsurance — Homeowners — Post-loss obligations — Examination under oath — Insurer’s unpled defense that insured breached policy by failing to attend EUO was tried by consent and established by evidence — Insurer entitled to directed verdict on this discrete issue — Because considerable precedent at time of trial supported position that a carrier could not avoid payment unless failure to attend EUO caused prejudice, new trial granted at which jury will be instructed that insured materially breached contract by failing to appear for EUO and insured will be provided opportunity to show that breach of this post-loss obligation did not prejudice insurer

CELERINA NUNEZ, Plaintiff, v. UNIVERSAL PROPERTY & CASUALTY INSURANCE COMPANY, Defendant. Circuit Court, 11th Judicial Circuit in and for Miami-Dade County, Circuit Civil Division. Case Nos. 16-1284 CA (34), 16-1435 CA (01). July 17, 2019. Michael A. Hanzman, Judge. Counsel: David A. Herrera and Orlando Romero, for Plaintiff. Alison J. Trejo, Jeffrey M. Wank, and Kara Berard Rockenbach, for Defendant.

ORDER

I. INTRODUCTION

This run of the mill first party insurance dispute was tried to jury on March 25th and 26th, 2019 before the Honorable Rodney Smith.¹ The jury awarded Plaintiff the sum of Fifteen Thousand Dollars ($15,000.00) for losses caused by a kitchen leak, and Twenty Thousand Dollars ($20,000.00) for losses caused by a bathroom leak. Defendant now asks the Court to enter a directed verdict in its favor or, in the alternative, order a new trial, insisting that: (a) it was entitled to summary judgment (and a directed verdict) based upon Plaintiff’s undeniable failure to comply with the examination under oath (EUO) requirement of the policy; and (b) Judge Smith erred by: (i) permitting Plaintiff to argue that she should be relieved of any breach of the EUO provision because she attended her scheduled depositions, and (ii) placing upon Defendant the burden of proving that Plaintiff “unreasonably” failed to attend her EUO — a burden it was not required to bear.²

The Court heard argument on Defendant’s motion on June 27, 2019, and thereafter reviewed the trial transcript. The matter is now ripe for disposition.

II. FACTS

Plaintiff, Celerina Nunez (“Plaintiff” or “Nunez”), purchased a homeowner’s policy from Defendant Universal Property and Casualty Insurance Company (“Defendant” or “Universal”). Nunez alleged that her home suffered a water loss on April 7, 2015 caused by a broken kitchen pipe, and that five days later (April 12, 2015) her property sustained another water loss due to a bathroom leak. Both of these losses were reported to Universal on April 15, 2015.

On May 7, 2015 Universal sent a field adjuster to inspect the property and investigate the claimed losses. On August 10, 2015 the carrier first requested that Plaintiff’s counsel coordinate a date for an EUO. When no response was forthcoming, Universal sent a second letter on August 17, 2015 again requesting that counsel coordinate a date for the EUO. When Plaintiff’s counsel again failed to respond, Universal — by letter dated September 10, 2015 — unilaterally set the EUO for October 1, 2015. Plaintiff failed to appear. On October 9th, 2015 Universal denied both of Plaintiff’s claims based upon her failure to attend the scheduled EUO and comply with other post-loss obligations. Plaintiff then filed her breach of contract action on January 20th, 2016. Universal filed its answer on December 9, 2016, raising eleven (11) affirmative defenses, none of which was based on Plaintiff’s failure to attend an EUO.

Although it had never been pled, both before and during trial Universal’s primary defense was in fact Plaintiff’s failure to attend her EUO — a condition of the policy. In Universal’s view this material breach relieved it of any obligation to perform (i.e., pay the claim). Plaintiff did not deny failing to appear as required by her contract. But she insisted that Universal waited too long (110 days) to request the examination, and argued that she provided Universal with an opportunity to question her by “sitting for two depositions.” Trial Transcript, Volume I (“TR I”) at 233. Universal’s retort was that Nunez did not provide “information and documents until Day 75,” TR I at 222, and that its EUO request was timely, mandated by the policy, and not satisfied by Plaintiff’s appearance at post-litigation depositions.

On cross examination Nunez acknowledged being “aware that Universal asked to take [her] examination under oath” so it could “sit down” with her and “talk . . . about your losses,” and further acknowledged that the policy obligated her to do so. TR I at 247. She could not, however, “recall” receiving either of Universal’s letters to her counsel (August 10th or 17th) demanding the EUO. TR I at 249, 250, even though she was “aware that Universal was requesting [her] examination under oath.” TR I at 253. Plaintiff also denied ever seeing Universal’s September 10th, 2015 letter setting the EUO for October 1, 2015. TR I at 255. Plaintiff then confirmed that she never appeared for the EUO “before [she] filed the lawsuit.” TR I at 257, 258.

The next witness who provided testimony relevant to Universal’s post-trial motion was Christine Gomez, Defendant’s corporate representative. She confirmed Universal’s repeated requests for the EUO and testified that the carrier did not want to “jump the gun” by demanding the examination prior to receipt of Plaintiff’s sworn proof of loss and damage estimate, both of which were not submitted until “Day 75.” Trial Transcript, Volume II (“TR II”) at 45-49. Plaintiff’s counsel — presumably to show an absence of any prejudice caused by his client’s failure to comply with the policy — then asked Ms. Gomez whether “anything” in Universal’s records “would show” that its adjuster was “inhibited in any way throughout his inspection,” TR II at 47, and inquired as to “[w]hat more information” Universal needed “to get from an examination under oath.” TR II at 49. In response, Ms. Gomez testified that there was no record reflecting that its adjuster’s inspection “was inhibited,” TR II at 47, and that the EUO was needed because it “requests documents that she [the insured] needed to bring with her so that we can further ask her questions; because that sworn statement of her damages being claimed wasn’t matching with the observations of our field adjuster. There was just no damage.” TR II at 49.

After calling Ms. Gomez as an adverse witness Plaintiff rested. Universal then moved for directed verdict, arguing that the evidence established that Plaintiff had “failed to submit to an examination under oath,” and that Universal’s decision to request it “110 days after the investigation began” is not a basis to avoid this contractual obligation. TR II at 51. After being advised that this issue was raised and rejected on summary judgment, the court denied the motion for directed verdict without entertaining any substantive argument. TR II at 52.

Universal then re-called Ms. Gomez, who again confirmed that the carrier did not receive Plaintiff’s proof of loss until seventy-five (75) days after the claim was reported. TR II at 98. Ms. Gomez also testified that Universal received no response to its two letters (August 10 and 17) requesting that an EUO be coordinated, and no response to its September 10th letter setting the EUO. TR II at 99-104. She then confirmed Plaintiff’s failure to attend the EUO, and Universal’s subsequent denial of the claim. TR II at 104-105.

On cross-examination Plaintiff’s counsel again attempted to demonstrate an absence of prejudice by asking what documents Universal requested be brought to the EUO “that they didn’t have.” TR II at 106. Counsel also brought out the fact that Universal had an opportunity to talk with Ms. Nunez when she gave a “recorded statement” — a statement Ms. Gomez pointed out was given “before we even knew the amount of damages she was claiming.” TR II at 107. Finally, counsel attempted to establish that the failure of his client to attend the EUO did not in any way restrict Universal’s adjuster’s “investigation.” TR II at 107.

Universal then rested and once again moved for directed verdict based upon Plaintiff’s failure to “attend an EUO.” TR II at 112. The motion was again denied. TR II at 113. The parties and the Court then proceeded to a charge conference. The first issues discussed were whether a showing of prejudice to the insurer is required in order to avoid liability based upon a failure to attend an EUO, and whether the jury should be instructed that Plaintiff’s failure to attend her EUO had to be “unreasonable” in order to relieve Universal of its obligations under the policy. TR II at 113-116. On the first point, the court — without hearing any argument — concluded that “there is no prejudice that’s required.” As for the second point, Plaintiff’s counsel persuaded the court that Universal bore the burden of proving “that the plaintiff unreasonably failed to attend” her EUO. TR II at 115-117. As for Universal’s claim that a failure to attend an EUO is “deemed a material breach,” TR II at 118, and there is no basis for any “reasonableness” inquiry, the court described that position as “inaccurate,” and as an example posited:

If the person is in the hospital, you send an EUO, and they say, Well, they didn’t show so therefore it’s unreasonable. Is it unreasonable? The jury is entitled to consider the reasons why.

Just because he dodged an EUO, now they don’t have to accept that. They’ll say, you know what, what she did it was — yeah, it was unreasonable for her not to appear.

But just because you mail out an EUO — let’s say the person is in another area, all right, let’s say out of the state or sick or the person lives in New York and you want to send it somewhere, in a county that it’s 300 miles away; those are reasons that a jury can consider. Now, it’s not an automatic strict liability, so to speak, all-or-nothing.

Well, We mailed a letter, you didn’t show; well the question stands: okay, what is this insured’s reason for not showing? If you prove it’s unreasonable, that’s what I have seen the case law as produced here.

TR II at 119-120. When defense counsel responded by pointing out that Plaintiff had provided no reason for her failure to attend, the court nevertheless ruled that “they can argue that,” and ordered that the jury would be asked: “[d]id Universal prove by the greater weight of the evidence that the Plaintiff unreasonably failed to attend the EUO on October 1, 2015?” TR II at 120.³

Consistent with the court’s ruling, Plaintiff’s counsel argued that his client’s failure to attend her EUO was not “unreasonable,” as: (a) it was requested 110 days after the loss was reported; (b) “she gave a recorded statement”; and (c) “she allowed her home to be inspected.” TR II at 147. He emphasized that:

No, that it was not unreasonable for my client after 110 days and after giving a recorded statement, after opening up her home for Universal to come in and inspect, and then after 110 days — which my math isn’t great, but that’s four months almost.

Now you want an examination under oath? That’s not reasonable, folks, and that is what the insurance company is trying to portray this case as and it’s not that.

My client’s home was damaged and my client’s home deserves to be restored to its pre-loss condition and at this point only you seven can do that.

Thank you.

TR II at 149. In response, Universal’s counsel battled on the same ground, arguing:

Boy, isn’t that reasonable to say, Hey, Mrs. Nunez, we got to get in a room and talk about what is really going on here, we need to find out what happened at your property and go through these damage estimates and, maybe, talk about the prior water loss claim that wasn’t with our company to see if anything overlaps?

That sounds reasonable to me. So on August 10th, let’s get a certified letter, not only out to Mrs. Nunez, but to her attorneys, saying: We’d like to sit down with you and talk about this; this is a condition of your contract; this is a requirement that you must comply with and, then, we’ll take the next step.

But no, no response from either Mrs. Nunez or her attorneys.

August 17th, second letter; silence. September 10th, Universal makes a decision. We’ve been ignored now for one month and ten days from our initial request. You want to talk about 110 days? Let’s talk about it.

Seventy-five days to get their damage estimate and proof of loss and we’re going to be on the hook for 110 days?

. . .

Mr. Wank: We’re going to be on the hook for being ignored?

So we set the EUO. Guess what? No response. September 10th; no response; silence. We show up at the EUO, October 1st.

Yeah, you got it; she didn’t show up; and that’s what the evidence shows, undisputed. She said: Well, I got it, but I thought it was in Fort Lauderdale.

Clearly they knew about it. They were talking about it . She doesn’t show. Universal has no choice, now that two-and-a-half months have gone by from the initial time they asked for it, say: Mrs. Nunez, here is — you’re going to read that denial letter, here is everything we’ve tried to do, you’ve left us no choice, there’s no coverage for this claim, you have not complied with your condition, which Florida law and the policy requires.

Guess what? You got it; silence after that. You know what happened next? Here we are. Universal defending itself when all they wanted to do is find out from Mrs. Nunez some more information and then make its decision.

TR II at 156-158.

The jury ultimately returned a verdict finding that: (a) Plaintiff had proven by the greater weight of the evidence that she sustained direct physical damage to her property both on April 7th and 15th, 2015; and (b) that Universal had failed to prove by the greater weight of the evidence “that Plaintiff had unreasonably failed to attend her examination under oath on October 1st, 2015.” TR II at 179-180. Universal then moved for judgment notwithstanding the verdict, arguing that “[e]verything presented to the jury supported” the undisputed fact “that Mrs. Nunez failed to attend her examination under oath despite repeated requests from Universal.” TR II at 184. That motion also was denied. TR II at 187.

III. ANALYSIS

An insurance policy is a contract — nothing more or less. And as this Court has written many times, “contracts are voluntary undertakings, and contracting parties are free to bargain for — and specify — the terms and conditions of their agreement.” Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So.3d 989, 993 (Fla. 4th DCA 2014) [39 Fla. L. Weekly D1871a]; City of Pompano Beach v. Beatty, 222 So. 3d 598, 600 (Fla. 4th DCA 2017) [42 Fla. L. Weekly D1556a]; Sky Bell Asset Mgmt., LLC And Sky Bell Select, L.P., v. National Union Fire Ins. Co. of Pittsburgh, P.A., 23 Fla. L. Weekly Supp. 535a (11th Jud. Cir., Dec. 17, 2015); DePrince v. Starboard, 23 Fla. L. Weekly Supp. 1022a (11th Jud. Cir., April 7, 2016; JDJ of Miami, Inc., v. Valdes, et. al., 23 Fla. L. Weekly Supp. 1026a (11th Jud. Cir., March 23, 2016); Regalia Beach Developers, LLC, v. MVW Mgmt. LLC, 24 Fla. L. Weekly Supp. 286a (11th Jud. Cir., June 30, 2016). Put another way, “[c]ontracting parties are at liberty to address any issue they see fit . . .,” Perera v. Diolife LLC, 44 Fla. L. Weekly D1067a (Fla. 4th DCA Apr. 24, 2019), and when they do so the Court’s task is “to enforce the contract as plainly written.” Okeechobee Resorts, L.L.C., supra at 993; Gulliver Sch., Inc. v. Snay, 137 So. 3d 1045, 1047 (Fla. 3d DCA 2014) [39 Fla. L. Weekly D457a].

The insurance policy entered into here required the insured to attend an EUO if requested. It did not mandate an EUO only if “reasonable” or “convenient.” The uncontroverted evidence established that Universal twice requested an EUO and Plaintiff ignored both requests. When Universal then scheduled the EUO Plaintiff failed to appear. No reason for this failure was articulated at trial. As a result, Plaintiff breached the contract, and the court erred when it placed upon Universal a burden of establishing that this breach was “unreasonable.” It also erred in permitting Plaintiff to argue that this breach was somehow cured by Plaintiff’s attendance at her depositions. Given the facts of this case, where there was abject non-compliance (not substantial compliance — or even attempted compliance), Universal was entitled to a directed verdict on the issue of Plaintiff’s breach because — quite simply — there was no issue of fact presented. Plaintiff undeniably breached the contract by failing to appear for her EUO.⁴

Prior to issuance of the Third District’s opinion in American Integrity Insurance Company v. Maria Estrada, No. 3D16-0966 (Fla. 3d DCA, June 26, 2019) [44 Fla. L. Weekly D1639a], that would have been the end of the case — at least if it had been tried before this Court. As the Third District pointed out in American Integrity, our appellate court — as well as others — had squarely held that “[t]he 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.” Stringer v. Fireman’s Fund Ins. Co., 622 So. 2d 145, 146 (Fla. 3d DCA 1993). See also Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300 (Fla. 4th DCA 1995) [20 Fla. L. Weekly D1844a] ([a]n insured’s refusal to comply with a demand for an examination under oath is a willful and material breach of an insurance contract which precludes the insured from recovery under the policy”). This is no more than a specific application of the well settled general contract principle that “a material breach by one party excuses the performance by the other.” Hamilton v. Suntrust Mortg. Inc., 6 F. Supp. 3d 1300, 1309 (S.D. Fla. 2014); City of Miami Beach v. Carner, 579 So. 2d 248, 251 (Fla. 3d DCA 1991) (“[t]he rule is quite clear that a contracting party, faced with a material breach by the other party, may treat the contract as totally breached and stop performance”); Focus Mgmt. Group USA, Inc. v. King, 171 F. Supp. 3d 1291 (M.D. Fla. 2016) (“[t]he general rule is that a material breach of the Agreement allows the non-breaching party to treat the breach as a discharge of his contractual liability”); Toyota Tsusho Am., Inc. v. Crittenden, 732 So. 2d 472 (Fla. 5th DCA 1999) [24 Fla. L. Weekly D1238a] (“[w]hen a nonbreaching party to a contract is confronted with a breach by the other party, the nonbreaching party may stop performance, treating the breach as a discharge of its contractual liability”).

Based upon this precedent, this Court has routinely found that an insured who fails to show up for a requested EUO — without either substantial compliance or reasonable justification — materially breaches the policy, and that this material breach relieves the insurer of any liability. So if it had presided over this trial, the Court would have directed a verdict (or likely entered summary judgment) in Universal’s favor.

On the other hand, at the time of this trial (and currently) other appellate courts had concluded that when an insured breaches a post-loss obligation provision — like an EUO demand — an insurer is not relieved of its obligation to provide coverage absent a showing of prejudice. See, e.g., Allstate Floridian Ins. Co. v. Farmer, 104 So. 3d 1242 (Fla. 5th DCA 2012) [38 Fla. L. Weekly D75a]; Whistler’s Park, Inc. v. Florida Ins. Guar. Ass’n, 90 So. 3d 841 (Fla. 5th DCA 2012) [37 Fla. L. Weekly D1188a]; Hamilton v. State Farm Florida Ins. Co., 151 So. 3d 1 (Fla. 5th DCA 2014) [39 Fla. L. Weekly D559b]. In American Integrity our appellate court found this line of authority persuasive and, as a result, held that: (a) to be relieved of its obligation to pay an otherwise valid claim an insurer must be “prejudiced by the insured’s non-compliance with a post-loss obligation. . .;” and (b) “when an insurer has alleged, as an affirmative defense to coverage, and thereafter has subsequently established, that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.” Id. While the Court certified conflict, and this question will presumably be addressed by our Supreme Court, the rules in this district have now been settled.⁵

Turning back to this case, Plaintiff filed her complaint for breach of contract on January 20, 2016. Universal filed its answer and affirmative defenses on December 9, 2017 (misstated 2016). Universal again raised eleven (11) affirmative defenses but did not base any of them upon Plaintiff’s failure to attend an EUO. And because Plaintiff’s failure to attend the EUO was not asserted as an affirmative defense, Plaintiff obviously did not plead an avoidance based upon the absence of prejudice. But despite Universal’s failure to plead this defense, Plaintiff’s failure to attend an EUO was the primary (if not sole) defense actually litigated both pre-trial and during trial. Universal moved for summary judgment (twice) based upon this unpled defense, and this case was clearly tried by consent on the question (albeit an irrelevant one) of whether Plaintiff’s admitted failure to attend the EUO was “reasonable” and therefore not a breach. Plaintiff’s counsel also questioned witnesses, without objection, in an attempt to establish that her admitted failure to attend the EUO caused no prejudice, but never directly asked the trial court to instruct the jury on the issue of prejudice, or request that it be placed on the verdict form.

Given that: (a) Universal’s unpled EUO defense was obviously tried by consent, and (b) considerable precedent at the time of trial supported the position that a carrier could not avoid payment unless an insured’s failure to attend an EUO caused prejudice, Plaintiff had an obligation to request a jury instruction on this issue, as well as an obligation to request that the jury be asked the question of whether Universal in fact was prejudiced by its failure to secure an EUO. Because it did neither, this avoidance was arguably waived, thereby entitling Universal to a directed verdict. See, e.g., Powell v. Goldner, 483 So. 2d 468 (Fla. 3d DCA 1986). On the other hand, the trial court — without hearing any substantive argument — did state on the record that “there is no prejudice required,” TR II at 115, arguably making any attempt to request a jury instruction/interrogatory futile. On top of that, the EUO defense was never pled in the first place and — as a result — never had to be avoided in a formal pleading. Finally, neither party had the benefit of the Third District’s American Integrity decision which exhaustively surveyed the law on this point and definitively settled it in this district.

In light of these unusual circumstances, the Court believes that it would be inequitable to enter a case dispositive directed verdict on this unpled EUO defense, and concludes that the more appropriate remedy is to grant a new trial and direct a verdict in Universal’s favor on the discrete issue of whether Plaintiff breached the contract by failing to attend an EUO. She clearly did, and that breach is not excused based upon her belief that Universal’s request was “unreasonable,” or her claim that it obtained the functional equivalent through deposition. On retrial the jury will be instructed that Plaintiff materially breached the contract by failing to appear for her EUO, and Plaintiff will then be provided an opportunity “to show that [her] breach of [this] post-loss obligation did not prejudice the insurer.” American Integrity, supra.

IV. CONCLUSION

For the foregoing reasons it is hereby ORDERED:

1. Defendant’s Renewed Motion for Directed Verdict is GRANTED in part. The Court directs a verdict in Defendant’s favor on the issue of whether Plaintiff breached the policy by failing to attend an EUO.

2. Defendant’s Motion for New Trial is GRANTED.

__________________

¹Judge Smith has since been appointed to the United States District Court for the Southern District of Florida.

²Defendant also claims that Judge Smith erred in allowing Plaintiff to testify as to her confusion regarding the location of her scheduled deposition (not EUO), and by permitting Juan Herrera to testify as an expert. Because the Court agrees with Defendant’s primary arguments it need not address these additional claims.

³The court, however, refused to instruct the jury that Plaintiff’s failure to attend the EUO had to be “unreasonable,” despite its ruling that Universal “still [had] to prove that it was unreasonable.” TR II at 132.

⁴The Court rejects Plaintiff’s claim that Universal’s EUO request was untimely because Fla. Stat. § 627.70131(5)(a) mandates that an insurer pay or deny a claim within “90 days” of notice “unless the failure to pay is caused by factors beyond the control of the insurer which reasonably prevent such payment.” Id. First, this statute does not address EUO’s at all, or obligate a carrier to set them within any particular time. Second, the statute does not provide — and in fact disclaims — any private right of action (“. . . failure to comply with this subsection does not form the sole basis for a private cause of action”). Third, even if the statute is, as a matter of law, incorporated into all policies issued in Florida, see, e.g., Citizens Prop. Ins. Corp. v. River Manor Condo. Ass’n, Inc., 125 So. 3d 846, n.1 (Fla. 4th DCA 2013) [38 Fla. L. Weekly D820a], it does not mandate payment or denial “within 90 days” when an insured — like in this case — first submits a sworn proof of loss and estimate on day 75.

⁵The rule adopted in American Integrity may — for all practical purposes — make EUO clauses anemic, as the insured will, as it did here, inevitably ask the carrier what it would/could have “discovered” during the EUO which it was unable to discover on its own (or later discover), and how the insured’s failure to attend at an EUO impacted its ability to investigate the claim. In many (perhaps most) cases a carrier will unable to point to a specific piece of information it did not already have (or later receive), or be able to persuasively articulate how an insured’s failure to appear at a EUO meaningfully hampered its investigation. Thus, the rule adopted in American Integrity may render this post-loss contractual obligation a paper tiger.