Insurance coverage litigation is a lot like improv. You often deal with uncertain underlying facts, and you need to adapt quickly on the fly. One of the more difficult coverage claims to litigate is the “mysterious disappearance” claim. It seems there are a lot of claims out there where nobody knows exactly when something went missing, or was damaged, or perhaps the sequence of when damage occurred (see the Hurricane Katrina “wind v. water” debate, soon to be the Superstorm Sandy “wind v. water” debate).
Recently, I represented a sporting goods company that paid millions of dollars to purchase wholesale inventories of high-end firearms that never made their way from Wales to Palm Beach. It was a particularly difficult claim that involved the U.S. Bureau of Alcohol, Tobacco and Firearms, the U.K. Serious Fraud Office, conspiracy theories, and international intrigue. The case was settled short of trial, in part because nobody seem to know what some of the key witnesses were going to say if they testified at trial. Lawyers hate that.
It is typically the policyholder, as the plaintiff (or at least the claimant in the situation where the insurer files a declaratory judgment action), who wants to get its case in front of a jury. A big reason is that juries do not like insurance companies. Another reason is that juries are sympathetic to a policyholder that has suffered a great loss, or faces liability that threatens to force it into bankruptcy.
Insurance companies want coverage cases decided by judges. A motion for summary judgment is the insurer’s big weapon. It is usually the insurer’s last and best chance of keeping the case from going to a jury. One of the reasons why insurers will almost always remove a coverage case from state to federal court if diversity jurisdiction exists is that federal judges are more likely to grant summary judgment than state court judges.
This all brings me to burdens of proof, and the Fourth District Court of Appeals’ recent decision in Voort v. Universal Prop. & Cas. Ins. Co., No. 4D11-3361 (Fla. 4th DCA Oct. 31, 2012). It is black letter insurance law that policyholders have the burden of proving that a claim triggers the insurance policy – i.e., the claim falls within one of the coverage parts of the policy, and the claim occurred within the relevant policy period. The burden then shifts to the insurer to prove that that the claim is not covered.
In “mysterious disappearance” claims, the burden of proof is critical, since typically the “real truth” is unknown, and the parties must rely on circumstantial evidence to prove their case. If both the policyholder and insurer can present sufficient circumstantial (or sometimes expert) evidence to support their side of the case, then the dispute should be put to a jury to weigh credibility and determine whose story is more plausible.
The Voort case involved a homeowners’ insurance claim in which the Voorts reported missing and damaged several pieces of furniture that were moved into their new home. They purchased insurance on their new home from Universal beginning on March 15, 2010. Their furniture was moved into their new home on April 10, 2010. The problem was that the movers had picked up the furniture and stored it for almost a year, well before the Universal coverage incepted. So Universal claimed that the furniture must have been damaged and/or lost prior to coverage inception.
The evidence developed in the case was inconclusive. The movers stated that, to the best of their knowledge, the furniture was all accounted for and undamaged up to the day of the move. But nobody seemed to know exactly when the furniture was damaged or went missing.
Universal moved for summary judgment, arguing that the policyholder had the initial burden of proving that the claim arose within the policy period. Since the policyholder could not conclusively prove when the loss occurred, Universal argued that judgment should be entered in its favor. Judge John J. Murphy, III of the Seventeenth Judicial Circuit (Broward County) agreed with Universal, and granted summary judgment in the insurer’s favor.
On appeal, the Fourth DCA reversed. The decision, authored by Judge Martha C. Warner, correctly noted that, although at trial the Voorts had the burden of proving that the loss occurred within the policy period, on summary judgment the insurer had the “burden to conclusively prove that the loss did not occur during the policy period.” Since the Voorts had presented circumstantial evidence supporting their position, the court was required to make all reasonable inferences in the policyholder’s favor, and Universal failed to carry its burden to prove that no reasonable jury could side with the Voorts. In reversing summary judgment, the Fourth DCA reaffirmed that the policyholder gets to present its case to a jury on a “mysterious disappearance” claim even when doubts exist as to when the loss occurred.
The result is that this case will now proceed to trial, where the Voorts will have the burden of proving that the loss occurred within the policy period. In my opinion, the odds are high that the jury will side with the Voorts, and award the Voorts the full value of their claim. If that happens, Universal will also be ordered to pay the Voorts’ attorneys fees under Fla. Stat. § 627.428, which fees must be substantial given that the case went to the 4th DCA and back again.
This leads me to another truism of insurance coverage litigation: when the insurer loses on summary judgment, it almost always settles the case rather than face a jury. I expect the Voorts soon will be able to replace their furniture with much nicer accoutrements, with a new flat screen TV on which they can enjoy the genius of Drew Carey syndicated in high definition.