FLORIDA COURT OF APPEALS: EVIDENCE OF MILLIONS IN FEES BY AN INSURER TO AN ENGINEERING INSPECTION FIRM IS RELEVANT AND ADMISSIBLE TO SHOW BIAS
In Mejia v. Citizens Prop. Ins. Corp., 2014 Fla. App. LEXIS
19526 (Fla. Dist. Ct. App. 2d Dist. Nov. 26, 2014), the Second District
reversed a Pasco County trial court’s determination on the burden of
proof applicable to a sinkhole lawsuit. Mr. Mejia reported a claim for
suspected sinkhole damage to his insurer Citizens. In response, Citizens
retained an engineering firm to determine the cause of damage to the
home. After investigating the claim, the engineering firm determined
that the damage was not caused by sinkhole activity. Based upon this
determination, Citizens denied the claim.
Mejia then filed suit against Citizens, alleging the denial was a
breach of contract. Prior to trial, the court ruled that Mejia had the
burden to prove that the damage to the home was caused by sinkhole
activity during the policy period. The trial court also excluded
evidence that over the previous three years Citizens had paid
approximately $9.5 million to the engineering firm that performed the
investigation. The jury ultimately found that Mejia failed to meet his
burden and final judgment was entered in favor of Citizens.
On appeal, the Second District reversed, stating that “an insured
claiming under an all-risks policy has the burden of proving that the
insured property suffered a loss while the policy was in effect. The
burden then shifts to the insurer to prove that the cause of the loss
was excluded from coverage under the policy’s terms.” The Court found it
irrelevant that Mejia’s sinkhole coverage was provided by an
endorsement to the policy, holding that the endorsement did not change
the all-risk nature of the policy. According to the Second District, the
trial court’s determination improperly placed the burden of proof on
Mejia to prove that his home was damaged by a sinkhole; the proper
allocation would require Citizens to prove that the damage was caused by
an excluded peril.
The Second District also found that the trial court erred in excluding
evidence regarding payments made by Citizens to the engineering firm.
Citing the seminal case on expert financial discovery, Allstate Ins. Co. v. Boecher,
705 So. 2d 106 (Fla. 4th DCA 1998), the Court stated such information
was directly relevant to a party’s efforts to demonstrate a witness’s
bias and should have been allowed. Consequently, the case was reversed
and remanded for a new trial placing the burden of proof on Citizens and
allowing cross-examination relating to the prior payments to the
engineering firm.
"Because we are remanding for retrial, we must also address an evidentiary issue. Mejia argues
that the trial court erred by excluding
evidence that over
the previous three years Citizens
had paid approximately $9.5 million in fees to BCI, the engineering
firm that employed Citizens'
expert witnesses. Mejia argued that the evidence
was relevant to show bias, while Citizens argued that it was
not relevant. We conclude that the evidence
was relevant and admissible."
__________________________________________________________
NOT FINAL UNTIL TIME EXPIRES TO FILE
REHEARING MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT
OF APPEAL OF FLORIDA
SECOND DISTRICT
ALFREDO
MEJIA, )
)
Appellant, )
)
v. ) Case No. 2D13-2248
) CITIZENS PROPERTY
INSURANCE ) CORP., )
)
Appellee. )
)
Opinion filed November 26, 2014.
Appeal from the Circuit Court for Pasco County;
Linda Babb, Judge.
Raymond T. Elligett, Jr., of Buell & Elligett, P.A., Tampa; Michael
Laurato and Laura Datz of Austin & Laurato, P.A., Tampa; and Thomas W. Thompson, Jr., and A. Lee Smith of The Thompson Trial Group, P.A., Tampa, for Appellant.
Kara Berard Rockenbach of Methe & Rockenbach, P.A., West Palm
Beach, for Appellee.
NORTHCUTT, Judge.
Alfredo Mejia appeals a final judgment in favor of Citizens Property
Insurance Corp. following a jury trial on his insurance claim for damages to his home allegedly caused by sinkhole activity. The trial court erred in allocating the burden of
proof between the parties, and it erred
in excluding evidence that tended to impeach the credibility of an expert
witness who testified for Citizens. Accordingly, we reverse and remand for a new trial.
Mejia owned a home that was insured under a policy issued by Citizens.1 The standard policy insured against risk of direct physical loss
to the property. It excluded, among other things, coverage
for loss caused by earth movement and settlement
and loss caused by sinkholes.
Mejia, however, had paid an
additional premium
for a Sinkhole Loss Coverage endorsement.2 This endorsement added sinkhole loss as a covered peril, and it stated that the earth movement and sinkhole exclusions
did not apply.
During the policy term, Mejia reported a claim for damage to his home.
Citizens retained BCI, an engineering
firm, to evaluate the property for sinkhole activity. BCI investigated and
concluded that the damage was not caused by sinkhole activity, and Citizens denied Mejia's claim. At trial on Mejia's breach-of-contract claim, Citizens relied on testimony from experts, including an engineer from BCI,
to argue that there was no sinkhole activity and no structural
damage to the property. Mejia presented his own expert evidence that his
home had suffered structural damage due to sinkhole activity.
Prior to trial, the court ruled that Mejia had the burden of
showing that the
damage was caused by sinkhole
activity
during the policy period. This was contrary to
the jury instructions
requested by Mejia, which
required him to
show only that his home was
damaged while the insurance policy was in force and then shifted to
Citizens the
1The form
of insurance was CIT HO-3 07 08.
2Form CIT
23 94 07 08.
burden to show
that the cause of the damage was not covered by the policy. Instructed otherwise pursuant to the pretrial
ruling, the jury found that Mejia
had not established by the
greater weight of the evidence that his home had suffered physical damage caused by a sinkhole. Final judgment was thereafter entered in favor of Citizens, and this appeal
followed.
Mejia argues on appeal, and we
agree, that the trial court erred in allocating
the burden of proof. In
litigation involving an insurance claim, the burden of proof is assigned according to the nature of the policy. Without dispute, the insurance policy
at issue here is an "all risks"
policy. An all-risks policy provides coverage for "all losses not resulting from misconduct or fraud unless the policy contains a specific provision expressly excluding the loss from coverage." Hudson v.
Prudential Prop. &
Cas.
Ins. Co., 450 So. 2d 565, 568 (Fla. 2d DCA 1984) (contrasting an all-risks policy
from a
specific peril policy which insures only against named risks). Consistent
with the jury instruction requested by Mejia in this case,
an insured claiming under an all-risks
policy has the burden of proving that
the insured property suffered a loss while the policy was in effect. The burden then shifts to the insurer to
prove that the cause of the loss
was excluded from coverage under the
policy's terms. Id.
As
we held in Hudson, it makes no
difference that the sinkhole coverage
at issue was provided in an endorsement to the underlying policy. In Hudson,
as here,
the homeowner had an all-risks policy with
a sinkhole endorsement. This court held that the "endorsement
did not change the 'all risks' nature of the underlying policy; it merely narrowed the earth sinking exclusion." Id. at 568. And in
that case, as here, the
jury instructions "had the effect of improperly placing the burden on
the Hudsons to
prove that their home was
damaged by a sinkhole." Id. Based on that error, we
reversed and remanded for a new
trial.
Neither does it matter that
the sinkhole endorsement in Hudson was
obtained under an earlier version of the applicable insurance statute. In Hudson,
the
statute provided
that every property insurer in Florida
"shall make available
coverage for insurable sinkhole losses on any
structure." § 627.706(1), Fla. Stat. (1981). The
version of the statute applicable to
Mejia's policy was substantially identical
save for specifying that every
property insurer in Florida "shall
make available, for an appropriate
additional
premium, coverage for sinkhole
losses." § 627.706(1), Fla. Stat. (2009)
(emphasis added). Significantly, in
both versions of the statute the insurer was required to make available coverage for sinkhole losses "to the extent
provided" in the form to which the sinkhole coverage attaches. Compare
§ 627.706(1), Fla. Stat. (1981), with
§ 627.706(1),
Fla. Stat. (2009). In
both cases, the form to which the
endorsement was attached was an all-risks insurance policy.
The trial court erred in allocating the burden of
proof between Mejia and Citizens. We reverse
and remand for a new trial in which the jury must be properly instructed
on the burden of proof consistent with the
foregoing.
Because
we are remanding for retrial, we must also
address an
evidentiary
issue. Mejia argues that the trial court erred by excluding evidence that over the
previous three years Citizens had
paid approximately $9.5 million in
fees to BCI, the engineering firm that employed Citizens' expert witnesses. Mejia
argued that the evidence was relevant to show bias, while
Citizens argued that it was not relevant. We conclude that the evidence was relevant
and admissible.
In Allstate
Insurance Co. v. Boecher, 733 So. 2d 993, 997 (Fla. 1999), the
supreme court held that a plaintiff was allowed to discover the amount of fees paid, over the
preceding three years, by his uninsured motorist
carrier to its expert in accident reconstruction and injury causation. The court stated
that "[t]he more extensive the
financial relationship between a party and a witness, the more it is likely that the witness has a vested interest in that financially beneficial relationship continuing." Id.
Citizens maintains that Boecher addressed only the discovery of such
information and
not its admission at trial and that the opinion is mere dicta outside
the context of discovery. Although
it is true that Boecher involved a discovery dispute, this
argument
misses the mark. Even though Boecher
addressed discovery rather than
admissibility at trial, we have previously
observed that "dictum of the highest court of this State, in the absence of a contrary decision by that court, should be given persuasive weight
in this court." Milligan v. State, 177 So. 2d 75, 76 (Fla. 2d DCA
1965).
In
Boecher, the supreme court observed
that the information sought from
Allstate "does not just
lead to the discovery of admissible
information. The information
requested
is directly relevant to a party's efforts to demonstrate to
the jury the witness's
bias." 733 So. 2d at 997 (emphasis added).
A
jury is entitled to know the extent of
the financial connection between the party and
the witness, and the cumulative
amount a party has paid an expert during
their relationship. A party is
entitled to argue to the jury
that a witness might be more likely to testify favorably on behalf of the party because of the witness's financial
incentive to continue the financially advantageous relationship.
Id. at
997-98 (emphasis added). The supreme court echoed the Fourth
District's
assessment that the "information would be 'indisputably relevant
and meaningful.' " Id.
at 998 (quoting Allstate Ins. Co.
v. Boecher, 705 So. 2d 106, 107 (Fla. 4th DCA 1998),
approved,
733 So. 2d 993).
We
have previously cited Boecher to support our conclusion that evidence
of a
doctor's financial interest in a case, by way of a letter of protection,
was properly admitted to attack the doctor's credibility as a witness. Carnival Corp. v. Jimenez, 112
So. 3d 513, 520 (Fla. 2d DCA 2013)
(analyzing admissibility of evidence to
determine propriety of closing
argument). We reject Citizens' attempt
to limit Carnival Corp. to an
inquiry
into the witness's financial interest only in the present case. See Flores v.
Miami-Dade
Cnty., 787 So. 2d 955, 959 (Fla. 3d DCA 2001) ("The
inquiry extends not
just to the
compensation arrangements for the current case but also allows inquiry into the expert's work in other cases." (citations
omitted)).
Similarly, the Fourth District relied on Boecher
when affirming an order
permitting the
plaintiff to ask defense experts
about sums paid to them in the previous three years by the defendants' insurer, the twist in that case being that the insurance company was not identified as such. Herrera v. Moustafa,
96 So. 3d 1020, 1021 (Fla.
4th DCA
2012). Here,
we conclude that the trial court abused
its discretion by precluding Mejia from cross-examining Citizens' expert witnesses
about the $9.5 million their company had been paid by Citizens over the previous three years.
Reversed
and remanded for a new trial.
SLEET, J., Concurs.
ALTENBERND, J., Concurs with
opinion.
ALTENBERND, Judge, Concurring.
I concur in this opinion, but I would do so even if the policy were not treated
as an "all risks" policy.
It is likely that the HO-3 insurance
policy issued by Prudential Property
and Casualty Insurance Company to the
Hudsons insuring their home
in 1981 was significantly different from the policy issued by Citizens in 2011
to Mr. Mejia. See Hudson
v. Prudential Prop. & Cas. Ins. Co., 450 So. 2d 565 (Fla. 2d DCA
1984). When
that standard policy was introduced
by the Insurance Services Office in the early 1970s, it was a relatively simple policy that insured the dwelling on an all-risks basis and personal property on a named
peril basis.
Over time, for reasons that are
not important to this case, the
policy evolved into a
"special form" policy. At
least to this judge, the policy is oddly
structured because the "Section I—Perils Insured
Against" begins with an all-risks type insuring agreement for the dwelling. That all-risks
language is immediately followed by a statement
that "we do not insure, however, for loss: . . ." This
"however" clause is followed by a long list of excluded
risks. Several pages later, the policy in more traditional fashion provides
"Exclusions" to the Section
I coverage. In other
words, the policy essentially adds exclusions in
both the insuring agreement and in the standard section for exclusions.
The HO-policy may never have been an "all risks"
policy if one defines "all risks" literally. But with the addition of the named excluded
perils within the insuring agreement, it has become an amalgam
that is neither an all risks nor a named peril form.
In
the case of sinkhole risks in
Florida, the statutorily authorized
sinkhole endorsement is intended
to eliminate the sinkhole exclusion from
the policy. It is written,
however, in language that appears to be coverage for an added named peril and not merely an elimination of the
authorized exclusion. But when litigated, the homeowner maintains that
damage has occurred to the home that falls within the sinkhole
coverage. The insurance company maintains that the damage is not caused by a sinkhole and is actually damage that is excluded under the main policy's exclusion for earth
movement and settlement.
There is no controversy that an insurance company has the burden of proof
as to an exclusion like the earth
movement and settlement exclusion.
Given the overall complexity of these claims, where
sinkhole damage is excluded in the
main policy, revived in the
endorsement, and then litigated as a
matter that is either covered sinkhole
damage or excluded earth movement damage, it seems to me that the only practical solution as to the
specific issues raised in sinkhole litigation
is to place the burden of proof on the insurance company once the insured has established the requisite physical damage
to the insured dwelling during
the term of the policy.