As we approach the one-year anniversary of Hurricane Irma making landfall on Cudjoe Key on September 10, 2017, it is important to review the law that impacts when an insurance claim (or supplemental claim) must be made for damage caused by Hurricane Irma, and what is the statute of limitations for a lawsuit to be filed for a claim that is either denied or not yet fully paid (even if not formally denied).
There is a lot of misinformation being provided to Florida policyholders regarding the statute of limitations for Hurricane Irma claims. I have been shocked at how many times I have heard lawyers, insurance agents, and public adjusters tell policyholders they have three years to file a lawsuit over a denied hurricane insurance claim. That is incorrect. I have also heard policyholders told they have five years to file a lawsuit from the date the insurer denied the claim. That is also incorrect.
In 2011, the Florida Legislature made two important changes impacting the timing of hurricane insurance claims and insurance coverage lawsuits concerning hurricane-related damage. First, the Florida Legislature passed Fla. Stat. § 627.70132, which provides that a claim must be made with the insurance company within three years after the loss occurs. Second, the Legislature amended the statute of limitations statute, Fla. Stat. § 95.11(2)(e), to provide that a lawsuit on a hurricane insurance claim must be filed within five years of the date of loss.
Note that these statutes deal with two distinct deadlines. First is the deadline for the policyholder to notify the insurance company regarding the damage. Fla. Stat. § 627.70132 provides an absolute deadline of three years from the date of loss. However, most insurance policies provide that notice of loss must be provided “as soon as practicable” after the policyholder becomes aware of a loss. A policyholder that is aware of damage soon after a hurricane hits should not wait three years to provide notice to its insurance company because such a notice will be considered late as a matter of law. This is grounds for an insurer to deny coverage, if the insurer was prejudiced by the delay. Under Florida law, if the notice is late, prejudice to the insurer is presumed, and the burden is on the policyholder to prove that the insurer was not prejudiced. See Bankers Ins. Co. v. Macias, 475 So.2d 1216 (Fla. 1985). So do not think you can wait three years to notify your insurer of the loss. The right time to notify the insurer is as soon as you can get access to the property and assess the damage. A supplemental claim can be filed later if additional damage is discovered, and should be done immediately upon discovering additional damage.
If the insurer denies the claim, or does not deny the claim but merely drags the claim adjustment process out, the policyholder has five years from the date of loss to file a lawsuit or the claim is lost. Before 2011, policyholders had five years from the date the insurer denied the claim to file a lawsuit. I have seen many situations with complicated commercial property claims, especially claims involving contentious business interruption claims, that are dragged out for years. Even if the insurer never denies the claim, a lawsuit must be filed within five years of the date of loss. If the claim is dragging on and the deadline is approaching, ask the insurer for a tolling agreement to extend the five-year period. If the insurer refuses then you need to get a lawsuit on file to preserve the claim.
Now, here is the part that can trip up even the most experienced lawyer or insurance professional: some property policies require a policyholder to file a lawsuit within one year of the date of loss. That potentially means some Florida policyholders have to file their Hurricane Irma insurance lawsuits next week. What about the long five-year statute of limitations? It can be shortened to as little as one year if two things occur. First, if the policy’s “Suit Limitation” clause or “Suit Against Us” clause provides for a one-year statute of limitations. Non-admitted policies, also known as surplus lines policies, are lightly regulated by the Florida Office of Insurance Regulation. Surplus lines forms are not approved by state regulators and can contain provisions inconsistent with Florida law.
An insurance policy that is subject to Florida law cannot reduce the statute of limitations to file an insurance coverage lawsuit to less than five years, per Fla. Stat. § 95.03. So just because a policy, even a surplus lines policy, has a one-year statute of limitations, does not mean this shortened limitations period is enforceable. However, there is a second factor at play that could make this type of provision enforceable. If the insurance policy is subject to another jurisdiction’s law, then Fla. Stat. § 95.03 does not apply, and the statute of limitations can be shortened to as little as one year.
How can a property policy be subject to some law other than Florida law? One way is for the policy to have a choice-of-law provision that provides for the application of another state’s law. Another way is if the policy is “made” in another state, even if the insured is in Florida. This latter issue is the one I see missed most often. Lawyers and insurance professionals assume a policy is subject to Florida law because the damaged property is in Florida. This can be a fatal mistake, particularly if you think you have five years to file a lawsuit but instead only have one.
This issue is complicated by the fact that Florida applies an antiquated choice-of-law rule called lex loci contractus. The modern choice-of-law rule, typically referred to as the Restatement rule, applies the law of the state with the most significant relationship to the dispute. For an insurance claim involving damage to a property, that almost always means applying the law of the state where the damaged property is located. That is the law in most states. That is not the law in Florida.
The Florida lex loci contractus rule applies the law of the state where the contract is deemed “made”. Where is the contract “made”? There is some disputed caselaw on that question, but the answer typically is where the policy was delivered. If the insurance broker is in another state, that state’s law could apply. Some courts have looked to the place from which the policy is issued. So the law of the state where the insurer resides could apply. This is a factual question that could take extensive discovery in coverage litigation to resolve. The important point is that, if the policy provides for the application of another state’s law, or if the policy was issued or delivered outside of Florida, Florida law may not apply to the claim, and the five-year statute of limitations may be shortened to as little as one year.
Judges in the Southern District of Florida have questioned whether the lex loci contractus rule should really apply for Florida property insurance cases involving a damaged property in Florida. See Club Caribe Condo. Ass’n Inc., v. Travelers Excess and Surplus Lines Co., No. 11-62673, 2012 WL 529972 at * 3 (S.D. Fla. Feb. 17, 2012) and Liberty Mut. Ins. Co. v. Festival Fun Parks LLC, No, 12-62212, 2013 WL 4496511 at * 3-4 (S.D. Fla. Aug. 22, 2013). This is a controversial issue, and the Florida Supreme Court has never weighed in. However, since the Florida Supreme Court has applied the lex loci contractus rule in other contexts, most Florida judges have continued to apply this antiquated rule. Application of this rule often results in the application of law other than Florida law, which puts a policyholder at risk for a shortened statute of limitations.
So do not assume you have until September 10, 2022 to file your Hurricane Irma insurance lawsuit. Check your policy language. If necessary, find out where your policy was issued from and where it was issued to. For the vast majority of Hurricane Irma insurance claims in Florida, the statute of limitations to file suit will be September 10, 2022. For a select few policies — particularly surplus lines policies and commercial property policies (especially policies covering properties in multiple states) — the statute of limitations may be far shorter. Some policies may require suit to be filed as early as next week. Are you prepared for that deadline?