A Florida appellate court recently held that when an insurer unequivocally denied a claim and the insureds submitted a request for reconsideration, the insureds’ subsequent failure to comply with policy conditions does not bar them from filing a breach of contract lawsuit. Castro v. Homeowners Choice Prop. & Cas. Co., 2017 WL 3614102 (Fla. 2d DCA Aug. 23, 2017).

Homeowners submitted a claim to their homeowners’ insurer for damage to their property allegedly caused by sinkhole activity. The insurer denied coverage for the claim based on the policy’s earth movement exclusion after determining there was no evidence of sinkhole activity. Four years later, the insureds provided an engineering report that concluded their property was damaged by sinkhole activity and requested reconsideration of the denial. The insurer re-opened the claim and requested that the insureds submit to an examination under oath, provide a sworn proof of loss and provide all documentation from their engineer. The insureds instead sued for breach of contract without complying with the insurer’s requests. The insurer moved for summary judgment, arguing that the insureds’ refusal to comply with the policy’s conditions precedent to filing suit was a breach of the contract that precluded recovery under the policy. The insureds argued the insurer waived compliance with the conditions precedent to filing suit when it unequivocally denied coverage. The trial court entered summary judgment in favor of the insurer. The insureds appealed.

The appellate court reversed, finding that when the insurer denied the claim, it foreclosed its right to later assert the insureds’ failure to comply with the policy’s conditions precedent. It held that when an insurer investigates a claim of loss and denies coverage because it concludes a covered loss has not occurred, the insurer cannot assert the insured’s failure thereafter to comply with the policy’s conditions precedent to filing suit.