On April 13, 2022, the Fourth District Court of Appeals released their decision in Sharon Godfrey v. People's Trust Insurance Company, [1] (hereinafter "Godfrey").  The Godfrey opinion discusses a shift in the burden to prove prejudice as it pertains to the failure to comply with conditions precedent to coverage in a homeowners insurance policy.

Background and Facts

In July 2017, the insured sustained a water loss to her property which was reported to her insurance carrier in May 2018.  In turn, the carrier requested a sworn proof of loss.  After the carrier sent numerous follow-up correspondences and received no response, the insured filed suit in October 2018.

In litigation, the carrier moved for summary judgment asserting that the insured materially breached the terms of the policy by failing to 1) provide prompt notice, and 2) provide a sworn proof of loss.  The trial court granted the carrier's motion over the assertion of the insured that the insurer must show that it was prejudiced.  The appeal followed.

4th DCA Opinion

The 4th DCA ultimately held that, while the insured clearly breached the terms and conditions of the governing policy, the question of whether the insurer was prejudiced remained a question of fact.  This was in no small part due to the lead in clause of the insured's policy which states, in pertinent part, that there was “no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to [the insurer].” [2]  The 4th DCA took this to mean that the People's Trust policy expressly requires that the insurer affirmatively show that they were prejudiced.

Analysis, Impact, and Effect

We have previously provided a complete analysis on policy conditions precedent so we will refrain from repeating ourselves here in full; however, there are some aspects worth reiterating in line with the Godfrey opinion. 

Normally, “[a] material breach of an insured's duty to comply with a policy's condition precedent relieves the insurer of its obligations under the contract.” [3]  A total failure to comply with a policy provision, generally related to the requests for a proof of loss or examination under oath, amounts to a breach of the policy precluding recovery without the need to show prejudice. [4]  “If, however, the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.” [5] Additionally, "[t]he question of whether an insured's untimely reporting of loss is sufficient to result in the denial of recovery under the policy implicates a two-step analysis. . . . The first step in the analysis is to determine whether or not the notice was timely given. . . . If the notice was untimely, then prejudice to the insurer is presumed. . . . However, the presumption of prejudice to the insurer 'may be rebutted by a showing that the insurer has not been prejudiced by the lack of notice.'" [6]  With all of this said, such analyses were subject to the lead-in provision of the operative conditions which stated as follows: “After a loss to which this insurance may apply, you shall see that the following duties are performed” [7] or “In case of a loss to covered property, you must see that the following are done.” [8]

In newer insurance policies, the lead-in provision to the duties after loss section shifts the burden of proving prejudice where the policy states as follows: “Your Duties After Loss. In case of a loss to covered property, we have no duty to provide coverage under this policy if the failure to comply with the following duties is prejudicial to us.” [9]  As noted in Godfrey, by mandating that the failure to comply be prejudicial to the insurer, the policy effectively requires the insurer to show how they were prejudiced instead of the other way around. 

In a legal sense, the term prejudice is defined as “injury or damage resulting from some judgment or action of another in disregard of one's rights.” [10]  In the context of post loss conditions, prejudice occurs “where the insurer has been deprived of the opportunity to investigate the facts.” [11] Therein lies the application of the definition of prejudice in first party insurance matters – whether there was injury or damage to the insurer such that they were deprived of the opportunity to investigate the facts of the claim.  Based on the newer language addressed in Godfrey, this prejudice must be plead and proven by the insurer.  Of course, “a party cannot create its own prejudice and thereby benefit from it.” [12]  As such, insurers should do everything within their power to alleviate any potential prejudice before denying a claim for failure to comply with policy conditions, especially in light of the more stringent standard imposed by the policy terms discussed in Godfrey.

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]   Godfrey v. People's Tr. Ins. Co. , 4D21-901, 2022 WL 1100490 (Fla. 4th DCA 2022).

[2]   Godfrey ,  supra , at 1.

[3]   Starling v. Allstate Floridian Ins. Co. , 956 So. 2d 511, 513 (Fla. 5th DCA 2007)

[4]   Haiman v. Federal Insurance Co. , 798 So.2d 811 (Fla. 4th DCA 2001); s ee also Starling v. Allstate, supra.  

[5]   Haiman  at 812 (quoting  Diamonds & Denims, Inc. v. First of Georgia Ins. Co. , 417 S.E.2d 440, 441–42 (Ga.Ct.App.1992)).

[6]   LoBello v. State Farm Florida Ins. Co. , 152 So. 3d 595, 599 (Fla. 2d DCA 2014)  quoting   Bankers Ins. Co. v. Macias , 475 So. 2d 1216, 1218 (Fla. 1985) (additional citations omitted).

[7]   Id . at 596.

[8]   Am. Integrity Ins. Co. v. Estrada , 276 So. 3d 905, 907 (Fla. 3d DCA 2019)

[9]   Arguello v. People's Tr. Ins. Co. , 315 So. 3d 35, 36 (Fla. 4th DCA 2021).

[10]  Merriam-Webster Online, “ Prejudice .”

[11]   Gemini II Ltd. v. Mesa Underwriters Specialty Ins. Co. , 592 F. App'x 803, 807 (11th Cir. 2014)  citing Macias , 475 So.2d at 1218.

[12]   Mid-Continent Cas. Co. v. Basdeo , 742 F. Supp. 2d 1293, 1338 (S.D. Fla. 2010).   See also   Corrigan v. Vargas , 277 So. 3d 642, 645 (Fla. 5th DCA 2019), reh'g denied (Aug. 30, 2019) (“The doctrine of unclean hands is designed to prevent courts from granting a party relief from a result the party brought about through its own voluntary acts.”);  McCollem v. Chidnese , 832 So. 2d 194, 196 (Fla. 4th DCA 2002) (“[T]he conduct constituting the unclean hands… must generally be connected with the matter in litigation and must affect the adverse party.”).