A Florida appellate court held that the trial court properly held that an insurer did not waive a claim of misrepresentation by not raising it as an affirmative defense. Nembhard v. Universal Prop. & Cas. Ins. Co., No. 3020-1383, 2021 WL 3640525, 46 Fla. L. Weekly D1869b (Fla. 3d DCA, Aug. 18, 2021).
The application for insurance required the applicant to “[i]ndicate number of losses reported by any prospective insured within the past five years.” The insureds selected the option of “none,” despite the fact that they had two previous claims for water damage to their property, and were issued a policy. However, the insurer's underwriting guidelines did not permit issuance of a policy to a prospective insured with multiple prior water losses. A claim was presented and paid, but after the insureds filed a breach of contract action against the insurer to dispute the amount of payment, the prior claims were discovered. The trial court granted summary judgment for the insurer on the basis that the policy was void ab initio due to the concealment of the prior losses.
The core issues at the summary judgment stage and in the appeal were whether the insurer had waived its misrepresentation defense by not raising it as an affirmative defense in the pleadings and whether the insurer, through its post-loss actions, had ratified the policy. On the first issue, the appellate court found that the misrepresentation defense was tried by consent, noting that the insureds had admitted to their omissions throughout the substantial discovery that occurred between the filing of the summary judgment motion and the hearing on the motion. As such, the misrepresentation was treated as if raised by the pleadings. On the second issue, the court held that the insurer could not ratify an insurance contract, and thereby waive its right to rescind the agreement, by accepting premiums or issuing payment for a claim even if it has constructive knowledge of misrepresentations, and that an insurance company maintains its right to rely on a prospective insured's statements within an application and does not waive this right through its actions.
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