In Mora v. Tower Hill Prime Ins. Co., 2015 Fla. App. LEXIS 812
(Fla. Dist. Ct. App. 2d Dist. Jan. 23, 2015), the Second District
reversed a Hillsborough County trial court’s grant of summary judgment
in favor of the insurer. The summary judgment was predicated upon an
alleged misrepresentation in the insurance application with regard to
the condition of the Moras’ home. In 2010, nearly five years after
purchasing the home, the Moras filed a sinkhole claim with their
insurer, Tower Hill. After investigating the claim, which confirmed
sinkhole activity, Tower Hill extended coverage. A disagreement arose
with regard to the extent of the damage, and the Moras filed suit in
2011.
During discovery, Tower Hill obtained a real estate inspection form and
a homeowner orientation report that were prepared when the Moras
purchased the home. These documents contained notations that cracking
existed throughout the home and handwritten notes regarding repair of
the cracks.
However, the documents were not addressed during the Moras’
depositions.
Tower Hill moved for summary judgment arguing that the reference to
cracks on the documents showed that the Moras made a misrepresentation
on their insurance application when they answered that they were not
aware of any “prior repairs made to the structure on the insured
location for cracking damage.” In support of its motion, Tower Hill
filed an affidavit from an employee of the builder that authenticated
the real estate inspection form and the homeowner orientation report. It
also submitted an affidavit from an assistant vice president of
underwriting stating “[h]ad Tower Hill known of the existing cracking
damage to the property . . . it would not have issued the [policy].”
The Second District analyzed the issue within the framework of Florida
Statute Section 627.409, which allows a policy to be forfeited in at
least two circumstances: when an insured makes a misrepresentation that
amounts to actual fraud or a misrepresentation that is material to the
acceptance of the risk. When an insurer seeks to rescind a policy based
on a misrepresentation that falls short of fraud, as Tower Hill did, the
insurer must prove that the insured’s statement is a misrepresentation,
that it is material, and that the insurer detrimentally relied on it.
The Second District found Tower Hill fell short of this burden in two
respects. First, Tower Hill equated “cracking damage” in its application
with “cracks” and “repairs” on the inspection documents. The Court
concluded that an insured might consider repair of common drywall or
stucco cracks as normal maintenance and that the word “damage” was added
to the application question to limit the inquiry to more significant
events than common “cracking.” If Tower Hill intended “cracking damage”
to include all “cracking,” the Court reasoned, the question could be
ambiguous. An insurer may not deny coverage under the statute if the
misrepresentation was in response to an ambiguous question.
Second, the Second District took issue with Tower Hill’s position that
it would not have issued the policy had it known of the drywall and
stucco cracks. The Court stated that the record showed nothing more than
the fact that the house had drywall, stucco, and other cracks, and
“[i]t is a simple fact of life that most new Florida homes develop
nonstructural cracks in drywall, stucco, and other areas.”
The Court
also noted that the affidavit of the underwriter did not explain why the
“true facts” in the inspection documents would have caused Tower Hill
not to issue the policy because “Tower Hill cannot seriously contend
that it refuses to insure all homes in Florida that have a history of
minor maintenance to drywall and stucco at the time of application.”
Based on these deficiencies, the Court reversed summary judgment and
remanded for further proceedings.