JERMAINE NEMBHARD AND DONNETTE NEMBHARD v. UNIVERSAL PROPERTY AND CASUALTY INSURANCE COMPANY

Third District Court of Appeal
State of Florida
Opinion filed August 18, 2021.
Not final until disposition of timely filed motion for rehearing.
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No. 3D20-1383
Lower Tribunal No. 17-1852
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Jermaine Nembhard and Donnette Nembhard,
Appellants,
vs.
Universal Property and Casualty Insurance Company,
Appellee.
An Appeal from the Circuit Court for Miami-Dade County, Martin
Zilber, Judge.
Giasi Law, P.A., and Melissa A. Giasi and Erin M. Berger (Tampa),
for appellants.
Groelle & Salmon, P.A., and Andrew A. Labbe (Tampa); and Russo
Appellate Firm, P.A., and Elizabeth K. Russo, for appellee.
Before HENDON, GORDO, and BOKOR, JJ.
HENDON, J.
Jermaine and Donnette Nembhard (“Homeowners”) appeal from a
summary judgment in favor of Universal Property and Casualty Insurance
Company (“Universal” or “insurance company”). We affirm.
Relevant Facts and Procedural Background
The Homeowners applied for insurance with Universal in August
2016. The application for insurance required the homeowners to indicate if
they had filed any loss claims within the past five years. 1 The Homeowners
did not disclose on the application that they had two earlier water loss
claims with their prior insurer within the past two years and had collected
payments for those claims.
In October 2016, the Homeowners filed a claim for water and roof
damage allegedly caused by Hurricane Matthew. Universal accepted
coverage and issued payment for the claim in the amount of $1,324.60.
The Homeowners disputed the amount. In November 2016, the insurance
company cancelled the policy, stating the damage claimed by the
Homeowners was not a covered hazard, was not a result of any roof
opening caused by the windstorm (one of the policy exclusions), and cited
the deteriorated condition of the Homeowners’ roof.
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The application for insurance asks, “Indicate number of losses reported
by any prospective insured within the past five years.” The Homeowners
admit that they checked the box for “none” and did not indicate any
previous claims.
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The Homeowners subsequently sued Universal for breach of
contract. During Universal’s investigation of the claim, Universal discovered
that at the time the Homeowners applied with Universal, they had had two
prior water damage claims in 2015. The underwriting guidelines did not
allow an HO3 homeowners policy, such as the one obtained by the
Homeowners, to be issued for a property with prior water losses.
Universal then moved for summary judgment alleging there was no
policy in effect and thus no future financial recovery was possible for the
Homeowners. The Homeowners responded that issues of material fact
remained, and that summary judgment was inappropriate as Universal
waived the defense of material misrepresentation because it had not raised
it as an affirmative defense in its responsive pleading. Further, the
Homeowners pointed out that the insurance company paid the claim and
accepted further premiums despite its knowledge of the Homeowners’
failure to indicate the two prior water loss claims. At that point, they argued,
the insurance company could have elected to exercise its right to rescind
the policy pursuant to section 627.409(1), Florida Statutes, but did not. The
Homeowners argued that Universal’s post-loss behavior amounted to
waiver of its right to rescind and acted to ratify the Homeowners’ alleged
misrepresentation in the insurance application.
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At the conclusion of the summary judgment hearing, the trial court
granted Universal’s motion, stating;
Defendant has met the burden of establishing that there is no
genuine issue of material fact and that Plaintiffs Jermaine
Nembhard and Donnette Nembhard failed to disclose two prior
water losses within their application for insurance submitted to
Defendant Universal Property & Casualty Insurance Company
in connection with policy of insurance number 1501-1604-1960
(the "Policy").
Plaintiffs Jermaine Nembhard and Donnette Nembhard made
material misrepresentations, omissions, concealment of fact, or
incorrect statements on the application for insurance submitted
to Defendant when they failed or refused to disclose two prior
water losses reported to Homeowners Choice Property &
Casualty Insurance Company during 2015.
The misrepresentations, omissions, concealment of facts, or
incorrect statements on the application were material to the
Defendant Universal Property & Casualty Insurance Company's
acceptance of the risk because it would not have issued the
Policy had the true facts been known.
As such, Policy of insurance 1501-1604-1960 ("Policy") issued
to Plaintiffs Jermaine Nembhard and Donnette Nembhard is
void ab initio.
The Homeowners present three issues on appeal. First, they assert
that summary judgment was improper because the insurance company did
not plead the defense of misrepresentation, raising this for the first time in
its summary judgment motion. Next, they argue that summary judgment
was improper because genuine issues of material fact remain as to
whether Universal’s post-loss behavior waived rescission and materiality.
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Last, the Homeowners argue that the final judgment was improper because
the insurance company’s affidavit was insufficient as a matter of law and
should have been stricken.
Our standard of review of an order granting summary judgment is de
novo. See Major League Baseball v. Morsani, 790 So. 2d 1071 (Fla. 2001);
Volusia Cnty. v. Aberdeen at Ormond Beach, L.P., 760 So. 2d 126 (Fla.
2000).
On December 31, 2020, the Florida Supreme Court amended Florida
Rule of Civil Procedure 1.510, aligning Florida’s summary judgment
standard with that of the federal courts pursuant to Rule 56 of the Federal
Rules of Civil Procedure. In re Amendments to Florida Rule of Civil
Procedure 1.510, 309 So. 3d 192 (Fla. 2020). Under this new summary
judgment standard, effective May 1, 2021, “the mere existence of some
alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242 (1986). The hearing on Universal’s motion for
summary judgment was held was held in August 2020 and predated both
the amendment and effective date of the new summary judgment rule. We
therefore review the order on appeal applying the summary judgment
standard that existed at the time of the hearing.
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Discussion
We first address the Homeowners’ argument that it was error to grant
summary judgment based on Universal’s affirmative defense of
misrepresentation raised for the first time in a motion for summary
judgment rather than in a responsive pleading, relying on Bank of N.Y.
Mellon v. Bloedel, 236 So. 3d 1164, 1166-1167 (Fla. 2d DCA 2018), among
others, which holds that issues not raised within the pleadings of a civil
controversy are ordinarily deemed waived.
We acknowledge the rule that affirmative defenses must be pleaded
either in the answer or as separate affirmative defenses and, if not
pleaded, the issue is deemed waived. See Fla. R. Civ. P. 1.140(h)(1).
There is, however, an exception to that rule, which is that an affirmative
defense can be tried by consent. When an issue is tried by express or
implied consent, that issue can be treated in all respects as if it had been
raised in the pleadings. Di Teodoro v. Lazy Dolphin Dev. Co., 418 So. 2d
428, 429 (Fla. 3d DCA 1982). More specifically:
When issues not raised by the pleadings are tried by express or
implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause
them to conform to the evidence and to raise these issues may
be made upon motion of any party at any time, even after
judgment, but failure so to amend shall not affect the result of
the trial of these issues. If the evidence is objected to at the trial
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on the ground that it is not within the issues made by the
pleadings, the court may allow the pleadings to be amended to
conform with the evidence and shall do so freely when the
merits of the cause are more effectually presented thereby and
the objecting party fails to satisfy the court that the admission of
such evidence will prejudice the objecting party in maintaining
an action or defense upon the merits.
Fla. R. Civ. P. 1.190(b); Twenty-Four Collection, Inc. v. M. Weinbaum
Const., Inc., 427 So. 2d 1110, 1112–13 (Fla. 3d DCA 1983) (stating any
issue, whether denominated an affirmative defense or a counterclaim, may
be tried by implied consent); Massey-Ferguson, Inc. v. Santa Rosa Tractor
Co., 366 So. 2d 90 (Fla. 1st DCA 1979) (same); Paul Gottlieb & Co. v. Alps
S. Corp., 985 So. 2d 1, 5 (Fla. 2d DCA 2007) (same).
With that in mind, the record shows that Universal filed its motion for
summary judgment on June 12, 2019, in which it asserted the defense of
false statement in the insurance application. The summary judgment
hearing was held fourteen months later, in August 2020. During that
interim, both parties engaged in substantial discovery including the very
issue of the Homeowners’ omissions in the insurance application, to which
fact the Homeowners admitted in their depositions. Once discovery was
complete, and two days before the August 20, 2020 summary judgment
hearing, the Homeowners filed their full substantive response on the merits
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and at that time objected to the affirmative defense having been asserted in
the summary judgment motion rather than the answer to the complaint.
After fourteen months of discovery that specifically included the issue
of the Homeowners’ insurance application omission, no one could claim
they were surprised. The Homeowners’ omission of the prior loss claims
had been a theme of discovery for months and was argued at the summary
judgment hearing. When an issue is so tried, it is treated in all respects as
if raised by the pleadings without the necessity of a motion to amend the
pleadings to conform to the evidence. Di Teodoro, 418 So. 2d 428 (Fla. 3d
DCA 1982). The trial court determined the issue was before it and ruled on
its merits. The Homeowners’ procedural objection to the introduction of this
issue as being beyond the scope of the original pleadings is form over
substance, as there is no dispute regarding the fact that the Homeowners
omitted prior loss claim information.
The Homeowners’ assert that there is a genuine factual dispute
whether their omission on the application was material. We disagree. An
insurance company has the right to rely on an applicant's representations
in an application for insurance and is under no duty to inquire further, New
York Life Insurance Company v. Nespereira, 366 So. 2d 859 (Fla. 3d DCA
1979), unless it has actual or constructive knowledge that such
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representations are incorrect or untrue. N. Miami Gen. Hosp. v. Cent. Nat'l
Life Ins. Co., 419 So. 2d 800, 802 (Fla. 3d DCA 1982) (citing Hardy v. Am.
S. Life Ins. Co., 211 So. 2d 559 (Fla.1968); Joe's Creek Indus. Park, Inc. v.
Loyal Am. Life Ins. Co., 251 So. 2d 348 (Fla. 2d DCA 1971)); see also
Indep. Fire Ins. Co. v. Arvidson, 604 So. 2d 854, 856 (Fla. 4th DCA 1992)
(same). The record shows that at the time the Homeowners made their
application with Universal, the insurance company did not have actual or
constructive knowledge that the Homeowners did not disclose prior water
loss claims.
The Florida Supreme Court has held that when an insurer would
have altered the policy's terms had it known the true facts, or if the
misstatement materially affects risk, a non-intentional misstatement in an
application will prevent recovery under an insurance policy. See Cont’l
Assurance Co. v. Carroll, 485 So. 2d 406, 409 (Fla. 1986), citing Life Ins.
Co. v. Shifflet, 201 So. 2d 715, 719 (Fla. 1967); see also Mut. Fire Ins. Co.
v. Kramer, 725 So. 2d 1141, 1142 (Fla. 2d DCA 1998) (holding that in order
for an insurer to rescind an insurance policy based on a misrepresentation,
the misrepresentation must be material; however, the insurer does not
need to establish that it was intentional).
Further, Section 627.409(1), (2020), Florida Statutes, provides:
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1) Any statement or description made by or on behalf of an
insured or annuitant in an application for an insurance policy or
annuity contract, or in negotiations for a policy or contract, is a
representation and not a warranty. Except as provided in
subsection (3), a misrepresentation, omission, concealment of
fact, or incorrect statement may prevent recovery under the
contract or policy only if any of the following apply:
(a) The misrepresentation, omission, concealment, or
statement is fraudulent or is material to the acceptance of the
risk or to the hazard assumed by the insurer.
(b) If the true facts had been known to the insurer pursuant to a
policy requirement or other requirement, the insurer in good
faith would not have issued the policy or contract, would not
have issued it at the same premium rate, would not have issued
a policy or contract in as large an amount, or would not have
provided coverage with respect to the hazard resulting in the
loss.
Universal indicates in the record that its policy was not to issue that
particular (HO3) policy if there were prior claims. On this basis the trial
court properly found that the Homeowners’ failure to disclose was material.
Id.; Continental, 485 So. 2d at 409.
The Homeowners next assert that genuine issues of material fact
remain as to whether the insurance company waived its right to rescind the
policy by its post-loss actions. They argue that by accepting the claim and
issuing payment, and by “accepting premiums despite having actual or
constructive knowledge at the time of adjustment of the prior loss claims,”
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Universal ratified the policy and waived its rescission rights. Neither the
record nor Florida law supports this conclusion.
The record indicates that it was Universal’s claims department that
obtained the underwriting report that revealed the Homeowners’ prior
losses, and underwriting was not made aware of the prior losses until after
the policy had been cancelled. The notice of cancellation was sent to the
Homeowners, to the agent, and to the mortgage company. Because the
mortgage company had paid the premium for the policy, as a matter of
standard procedure the unearned premium was returned to the mortgage
company. These facts do not amount to Universal’s post-loss “ratification”
of the policy or a waiver of its rescission rights.
Under Florida law, Universal could cancel the policy after discovering
the Homeowner’s omission of prior loss claims. An insurer has the right to
unilaterally rescind an insurance policy on the basis of misrepresentation in
the application for insurance. Certain Underwriters at Lloyd's London v.
Jimenez, 197 So. 3d 597, 601 (Fla. 3d DCA 2016) (citing Fabric v.
Provident Life & Acc. Ins. Co., 115 F. 3d 908, 912 (11th Cir.1997). The
misrepresentation need not be fraudulently or knowingly made but need
only affect the insurer's risk or be a fact which, if known, would have
caused the insurer not to issue the policy or not to issue it in so large an
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amount. Id. (citing First Nat'l Bank Holding Co. v. Fid. & Deposit Co. of
Maryland, 885 F. Supp. 1533, 1535 (N.D. Fla. 1995)); see also, Mora v.
Tower Hill Prime Ins. Co., 155 So. 3d 1224, 1227–28 (Fla. 2d DCA 2015)
(holding the insurer must show that the insured's statement is a
misrepresentation, that it is material, and that the insurer detrimentally
relied on it).
Finally, we find no merit to the Homeowners assertion that the
insurance company’s affidavit should have been stricken as insufficient as
a matter of law. Even if the insurance company’s representative, Mr.
Villasenor, did not have personal knowledge of the information or
documents to which he attested regarding the Homeowners’ omissions on
the application for insurance, striking his deposition would have been futile
because the Homeowners themselves confirmed and admitted to the
omission in their depositions.
For the reasons discussed above, we conclude that summary
judgment was proper, and affirm.
Affirmed.
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