HAWKS NEST CONDOMINIUM, INC., etc. v. WESTCHESTER SURPLUS LINES INSURANCE COMPANY, etc. ( 2023 )

Third District Court of Appeal
State of Florida
Opinion filed March 15, 2023.
Not final until disposition of timely filed motion for rehearing.
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No. 3D22-0102
Lower Tribunal No. 18-266-M
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Hawks Nest Condominium, Inc., etc.,
Appellant,
vs.
Westchester Surplus Lines Insurance Company, etc.,
Appellee.
An Appeal from the Circuit Court for Monroe County, Mark H. Jones,
Judge.
Boyle, Leonard & Anderson P.A., and Mark A. Boyle and Molly Chafe
Brockmeyer and Alexander Brockmeyer (Fort Myers), for appellant.
Mound Cotton Wollan & Greengrass LLP, and William D. Wilson
(Florham Park, NJ) and Brooke O. Turetzky (Fort Lauderdale), for appellee.
Before LOGUE, SCALES and BOKOR, JJ.
BOKOR, J.
In this appeal of a December 17, 2021 summary final judgment that
grants the insured entitlement to fees and post-arbitration award interest, but
denies the insured prejudgment interest, the insured, Hawks Nest
Condominium, alleges that the trial court erred by failing to award
prejudgment interest for the covered loss. Hawks Nest claims that the
insurer, Westchester, wrongfully denied coverage before later admitting
coverage, entitling Hawks Nest to prejudgment interest pursuant to the
exception articulated by this court in Independent Fire Insurance Co. v.
Lugassy, 593 So. 2d 570 (Fla. 3d DCA 1992). 1 Because Westchester did
not deny coverage in the manner prescribed by the terms of the relevant
policy, we find Lugassy inapplicable and affirm the trial court’s order denying
prejudgment interest from the date of the loss.
FACTS AND PROCEDURAL HISTORY
The original claim arose out of damages sustained on or about
September 10, 2017, by Hawks Nest as a result of Hurricane Irma. On June
19, 2018, Hawks Nest submitted sworn proofs of loss to Westchester’s
1
In Lugassy, this Court recognized the longstanding rule that an insurer is
typically liable for prejudgment interest on a covered loss when the insurer
fails to pay within the timeframe contemplated by the policy, but adopted an
exception whereby the interest is calculated from the date of the loss, rather
than the payment date prescribed by the policy, if the insurer initially denied
coverage before later admitting coverage. Id. at 572.
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claims adjuster, thereby fulfilling Hawks Nest’s post-loss obligations for
coverage. Westchester acknowledged receipt of the proofs of loss that same
day, but did not take any further action on the claim. The policy’s loss
payment provision requires the insurer to pay for covered damages within
30 days if the insured has complied with all prerequisites for coverage and
the parties have either “reached agreement . . . on the amount of loss” or
“[a]n appraisal award has been made.”
Hawks Nest, claiming that Westchester violated its loss payment
obligations under the policy, filed a petition to compel appraisal after
Westchester failed to respond within 30 days of submission of the proofs of
loss. The policy allows either party to make a demand for appraisal of a
covered loss at any time “[i]f we and you disagree on the value of the property
or the amount of loss.” Westchester failed to respond to the petition to
compel arbitration, resulting in entry of a default and default final judgment
in favor of Hawks Nest ordering appraisal. Subsequently, Westchester
successfully moved to vacate the default judgment on the grounds of
excusable neglect. In addition to answering the petition, Westchester
asserted several partial affirmative defenses, including alleging that Hawks
Nest’s claims were barred as preexisting damages under the policy.
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Despite filing an answer and affirmative defenses, Westchester
voluntarily agreed to submit the claim to appraisal and tendered a partial
payment for the losses in the amount of $104,056.08. Ultimately, on April 6,
2021, an umpire accepted the appraiser’s valuation of $7,291,136.88 and
entered an appraisal award in that amount. Westchester paid the difference
between the appraisal award and the initial tender on April 21, 2021.
Hawks Nest then moved for a final summary judgment confirming the
appraisal award, including an award of attorneys’ fees and costs and
prejudgment interest dating back to the date of the loss. The trial court
granted the motion as to Hawks Nest’s entitlement to fees and costs, but
found that Hawks Nest was not entitled to prejudgment interest. This appeal
followed.
ANALYSIS
“It is axiomatic an insurance policy is an agreement and, in the
absence of an applicable statute, subject to the construction principles that
apply to any other species of contract.” Heritage Prop. & Cas. Ins. Co. v.
Condo. Ass’n of Gateway House Apartments, Inc., 344 So. 3d 52, 54 (Fla.
3d DCA 2021). Accordingly, “[i]t is the terms of a contract for insurance
which determine the date from which the coverage payment is due, as well
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as when interest is due on the amounts payable.” Citizens Prop. Ins. Corp.
v. Mallett, 7 So. 3d 552, 556 (Fla. 1st DCA 2009).
It is well-established that “a plaintiff is entitled to prejudgment interest
when it is determined that the plaintiff has suffered an actual, out-of-pocket
loss at some date prior to the entry of judgment.” Alvarado v. Rice, 614 So.
2d 498, 499 (Fla. 1993); see also Argonaut Ins. Co. v. May Plumbing Co.,
474 So. 2d 212, 215 (Fla. 1985) (“[W]hen a verdict liquidates damages on a
plaintiff’s out-of-pocket, pecuniary losses, plaintiff is entitled, as a matter of
law, to prejudgment interest at the statutory rate from the date of that loss.”).
For this reason, when an insurer wrongfully denies coverage for a loss, “[a]n
insurer is liable for prejudgment interest on the amount payable for an
insured . . . loss on the theory that failure to pay within the time frame
contemplated by the agreement constitutes a breach of a contract to pay
money.” Lugassy, 593 So. 2d at 571–72.
“Generally, interest on a loss payable under an insurance policy is
recoverable from the time payment is due under the terms of the policy.” Id.
at 572. However, we have also held that “if the insurer denies liability,
interest begins to run from the date of the loss, even where the policy
provides for payment at a later date.” Id.; see also N. Pointe Ins. Co. v.
Tomas, 16 So. 3d 977, 978–79 (Fla. 3d DCA 2009) (“Once the insurer denies
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coverage, it is deemed to have waived the policy provision for deferred
payment and, should it pay, becomes responsible for prejudgment interest
from the date of loss.”).
Here, Hawks Nest argues that Westchester both breached its loss
payment obligations and effectively denied coverage by failing to respond to
the proofs of loss within 30 days. However, per the terms of the policy,
submission of proof of loss would only trigger Westchester’s loss payment
obligation if the parties agreed about the amount of the loss or an appraisal
award had been made. The appraisal process, although triggered after the
filing of a petition to compel appraisal, is part of the contemplated process.
Westchester’s timely payment after entry of an appraisal award is not the
functional equivalent of a denial of coverage. Because Westchester timely
paid the outstanding coverage balance within 30 days of the appraisal
award, Westchester complied with its obligations under the policy, such that
Hawks Nest did not suffer an out-of-pocket pecuniary loss prior to entry of
the judgment, as contemplated by Lugassy. See Liberty Mut. Ins. Co. v.
Alvarez, 785 So. 2d 700, 701 (Fla. 3d DCA 2001) (reversing prejudgment
interest award where “[t]he record shows that, in accordance with the
insurance contract, the carrier paid the award three weeks after its filing”);
Allstate Ins. Co. v. Blanco, 791 So. 2d 515, 517 (Fla. 3d DCA 2001) (finding
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that insured was not entitled to prejudgment interest where “the insurance
policy provisions allowed Allstate sixty days within which to pay the appraisal
award and Allstate made payment within the allotted time”); cf. Lugassy, 593
So. 2d at 571 (affirming award of prejudgment interest under functionally
identical policy where “[i]t is undisputed that the parties never reached an
agreement or filed an appraisal award” and the insurer “denied the Lugassys’
claim forcing the Lugassys to litigate the claim for benefits under the policy”).
We also reject Hawks Nest’s contention that Westchester’s initial
default and partial affirmative defenses were tantamount to a denial of
coverage or a waiver of its deferred payment rights under the policy. While
Westchester’s lack of communication likely triggered the necessity to file the
petition to compel appraisal, it issued a partial payment and ultimately paid
the appraisal award in a timely manner. See, e.g., Sunshine State Ins. Co.
v. Davide, 15 So. 3d 749, 750 (Fla. 3d DCA 2009) (rejecting argument that
“withholding a portion of the arbitration award constituted a denial of
coverage,” as “Sunshine has never denied coverage of Davide’s claim, but
rather only disputed the amount to be paid under the policy to satisfy this
claim”); Jugo v. Am. Sec. Ins. Co., 56 So. 3d 94, 95–96 (Fla. 3d DCA 2011)
(affirming denial of prejudgment interest and finding that insured had not
denied coverage where “[t]he dispute turned on quantifying the covered loss,
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not the existence of coverage”); see also Citizens Prop. Ins. Corp. v. Mich.
Condo. Ass’n, 46 So. 3d 177, 178 (Fla. 4th DCA 2010) (rejecting argument
that insurer had waived its right to deny coverage by not responding to claim
prior to insured filing suit, as “[w]aiver is the intentional or voluntary
relinquishment of a known right or conduct which warrants an inference of
the relinquishment of a known right” and the insurer was still investigating
the claim at the time of the lawsuit and had never affirmatively denied
coverage (quotations omitted)).
Westchester timely paid the appraisal award, and its actions were not
tantamount to a denial of coverage. 2 The trial court correctly denied Hawks
Nest’s request for prejudgment interest.
2
As explained, Lugassy stands for a simple principle—denial of a claim that
is eventually found to be covered is tantamount to breach of the contractual
obligation to cover a loss and therefore triggers payment of prejudgment
interest from the time of loss. 593 So. 2d at 571–72. Lugassy shows a logic
or symmetry of cause and effect—breach of the obligation to recognize a
covered loss results in prejudgment interest from the time of loss. That
symmetry doesn’t exist here. The breach here results from the insurer’s
failure to timely communicate with an insured. It is not a denial of coverage.
The insurer issued payment timely after the arbitral award. Therefore, no
actionable delay in “the time payment is due under the policy” exists, either.
Id. at 572; see, e.g., Allstate Ins. Co. v. Martinez, 790 So. 2d 1151, 1152 n.3
(Fla. 3d DCA 2001) (declining to award prejudgment interest from the date
of loss after determining that the record in that case did not bear out the
insured’s assertion that insurer had deployed delay tactics). On this record,
therefore, we agree with the trial court that the insured did not meet its
burden to establish that the insurer denied coverage or caused actionable
delay.
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Affirmed.
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