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Analysis of New Case Law re: Intent as an Element when Voiding Coverage based on False Statements or Material Misrepresentations 2019

Posted by Michael A. Cassel | Apr 24, 2019 | 0 Comments

Analysis and Interpretation by  Michael A. Cassel

On April 17, 2019, the Third District Court of Appeals released their decision in Jose Alvarez and Hilda Alvarez v. State Farm Florida Insurance Company (hereinafter " Alvarez").  The Alvarez opinion discusses whether a verdict in favor the insureds should be invalidated based on the jury's finding that the insureds intentionally and materially misrepresented the extent of the loss.  

Background and Facts

In 2009, the insureds sustained damages as a result of a kitchen drain leak which was repaired by their plumber.  In 2010, the insureds filed their claim with State Farm.  During the adjustment of the claim, the insureds advised State Farm's adjuster, in pertinent part, that there was no water damage to the interior of the property.  In November 2010 and April 2011, State Farm sent correspondences denying the claim based, in part, that no accidental direct physical ensuing loss occurred and, therefore, no coverage was available under the policy. 

In March 2012, the insureds' public adjuster provided an executed Sworn Proof of Loss (hereinafter "SPOL") alleging that a water loss did, in fact, occur, and caused damages in the amount of $82,967.92.  In 2013, State Farm re-inspected and, as with their initial adjustment, found no evidence of water damage at the insureds' property.  State Farm maintained its denial and the insureds filed a lawsuit alleging breach of contract.  State Farm asserted a defense that the insureds asserted material misrepresentations in pursuing their claim related to the scope and amount of loss.  In support of its defense, State Farm proffered a subsequent insurance application to Citizens Property Insurance Corporation certifying that there was no existing damage at the property in direct contradiction with the SPOL.

At trial, the jury was instructed, in pertinent part, that “[o]verestimating the value, a mistake, or inadvertence is not sufficient to void the policy.  The jury must decide whether plaintiffs made material misrepresentations of fact sufficient to void the policy. If not, then the jury is to determine the amount that the defendant must pay.”  The jury was then asked two (2) questions: first, the jury was asked the following: “Did the Defendant prove, by the greater weight of the evidence, that Plaintiffs intentionally and materially misrepresented the extent of the loss such that no other conclusion can be drawn than that a purposeful misrepresentation was intended?”  The jury answered this question “Yes.”  Then the jury was asked the following: “What amount of money do you find, by the greater weight of the evidence, will compensate Plaintiff for damages arising from their claim?”  The jury answered “$6,000.00.” 

State Farm filed a Motion for Final Judgment asserting that the insureds were not entitled to damages.  The insureds filed their own motion to set aside the verdict and grant entitlement to damages and, more likely than not, attorney's fees and costs.  The trial court granted State Farm's motion.  This appeal followed.

3d DCA Opinion

The 3d DCA found that “[a]s a matter of law, the finding of material misrepresentation voids coverage for the claim.” [1]  Additionally, the appeals court found that, because the insureds agreed to the verdict form and did not raise any objection regarding an inconsistency in the verdict, they were essentially estopped from raising an objection regarding a “compromise” error in the appeal. [2]

Analysis, Impact, and Effect

Typically, in residential property insurance policies, there is no coverage for the system from which water escapes.  There is, however, coverage for any ensuing damage which also encompasses the cost to access the failed system.  If there is no ensuing damage, there is typically no coverage. [3]  It stands to reason that, consistent with the jury's finding, the insureds in Alvarez, who admitted that no ensuing damages occurred as a result of their plumbing leak, later alleged ensuing water damage with the intent to obtain a positive coverage determination.   

In Florida, there are four elements that must be satisfied in order to establish intentional misrepresentation: “(1) a false statement concerning a material fact; (2) the representer's [ sic] knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation.” [4]  It must be noted, however, that the fourth element regarding consequent injury does not need not be met with respect to an insurance claim in support of the voiding of a policy. [5]  Furthermore, Florida courts have consistently dismissed actions (or upheld the dismissal of such) where it is found that a party has provided false testimony or intentionally misrepresents facts. [6]  Of course, as in Alvarez, intent is usually a question for the jury. [7]

With that said, as included in the jury instructions, “[o]verestimating the value, a mistake, or inadvertence is not sufficient to void the policy.” [8]  This means the presentation of an estimate which may include higher prices than a practical bid or include undamaged areas subject to the “Matching Statute” [9] is not sufficient to allege an intentional misrepresentation; instead, it is misrepresentations with the intent to obtain coverage under false pretenses that will serve to void the policy and any potential coverage for the claim.

Should you have any questions about how this analysis may relate to your own claim,  please do not hesitate to contact us for a free consultation.

[1] Alvarez v. State Farm Florida Ins. Co., 3D17-2261, 2019 WL 1646121, at *2 (Fla. 3d DCA Apr. 17, 2019) citing to Schneer v. Allstate Indem. Co., 767 So.2d 485, 489 (Fla. 3d DCA 2000) (holding that an insureds' fraudulent misrepresentations as to their contents claim voided their homeowner's policy in its entirety and thus voided the dwelling coverage); Valdez v. Consolidated Prop. & Cas., 762 So.2d 1034 (Fla. 3d DCA 2000) (affirming final judgment voiding insured's insurance policy where insurance policy contained a valid provision voiding the policy upon intentional concealment or misrepresentation by the insured); Am. Reliance Ins. Co. v. Kiet Invs., Inc., 703 So.2d 1190 (Fla. 3d DCA 1997) (holding that clauses voiding coverage for intentional misrepresentations and fraud in claims process are valid and enforceable); Wong Ken v. State Farm Fire & Cas. Co., 685 So.2d 1002, 1003 (Fla. 3d DCA 1997) (“[T]he clause which voids coverage if the insured makes an intentional misrepresentation ‘after a loss'-that is, as here, in making a claim-is valid and enforceable.”) (citation omitted)

[2] Id.

[3] Homeowners Choice Property & Casualty, etc., v. Miguel Maspons, et al., 2017 Fla. App. LEXIS 451 (3rd DCA 2017). 

[4] Specialty Marine & Indus. Supplies v. Venus, 66 So. 3d 306, 310 (Fla. 1st DCA 2011).  See also Lance v. Wade, 457 So.2d 1008, 1011 (Fla. 1984). 

[5] See Chaachou v. American Cent. Ins. Co., 241 F.2d 889 (5th Cir. 1957) applying Florida law.  It must be noted that, on October 1, 1981, the Fifth Circuit Court of Appeals split and formed the 11th Circuit Court of Appeals and, as such, all Fifth Circuit decisions before this date are binding precedent in the 11th Circuit.  Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir. 1981).

[6] See Cox v. Burke, 706 So.2d 43, 47 (Fla.5th DCA 1998)(“[W]here a party lies about matters pertinent to his own claim... and perpetrates a fraud that permeates the entire proceeding, dismissal of the whole case is proper.”); Mendez v. Blanco, 665 So.2d 1149 (Fla.3d DCA 1996)(Affirming the dismissal of the claim where plaintiff repeatedly lied under oath at a deposition); O'Vahey v. Miller, 644 So.2d 550 (Fla.3d DCA 1994)(Affirming the dismissal of the claim based upon the established perjury of plaintiff that represented serious misconduct and “an obvious affront to the administration of justice”), review denied, 654 So.2d 919 (Fla. 1995); Kornblum v. Schneider, 609 So.2d 138 (Fla.4th DCA 1992)(The trial court has the inherent authority to dismiss the entire action for a fraud which permeates the proceedings); Horjales v. Loeb, 291 So.2d 92, 93 (Fla.3d DCA 1974)(“One who engages in a fraudulent scheme forfeits all right to the prosecution of a lawsuit.”).

[7] See, generally, Alvarez at 1.

[8] Alvarez at fn. 1.

[9] Fla. Stat. § 626.9744.

About the Author

Michael A. Cassel

Michael A. Cassel, LL.M., is the managing partner and co-founder of Cassel & Cassel, P.A., where he represents policyholders throughout the state of Florida in first party property insurance claims.  Michael is licensed by the Florida Bar as well as in the Southern, Middle, and Northern Federal Districts of Florida, the U.S. Court of Appeals for the 11th Circuit, and has argued before the Judicial Panel for Multidistrict Litigation.  He has earned an AV Preeminent rating from Martindale Hubbell.  He has also been named a Florida Super Lawyer for the last two years by Florida Super Lawyers Magazine and a Rising Star for the prior six consecutive years, was named as one of South Florida Business Journal's 40 Under 40 for 2020, and one of the Cystic Fibrosis Foundation 40 Under 40 Outstanding Young Professionals of South Florida for 2022.  Michael regularly publishes blogs on newly released case law pertaining to first party property insurance claims and has become a regular on the lecture circuit presenting on topics such as building code compliance, ordinance and law coverage, bad faith litigation, technology in claims adjustment, and providing updates on case law and legislative changes.  He obtained his Masters of Insurance Law from the University of Connecticut in 2023.


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