Insurance Fraud by Agent Is Fraud by Insured

Facts of the Case

The homeowner owned a home insured by SafePoint. On February 25, 2016, she submitted a notice of claim with SafePoint alleging that the residence sustained damage caused by a water leak in the second-floor bathroom. The notice identified Contender Claims Consultants as the homeowner's loss consultant.

SafePoint had the home inspected by an independent adjuster and a building scientist. According to SafePoint's building scientist, a loss consultant from Contender was present during the inspection and directed SafePoint's agents to parts of the home claimed to have sustained damage from the leak, including the kitchen located directly below the second-floor bathroom.

After concluding its investigation, SafePoint determined the alleged damages were consistent with chronic moisture exposure occurring over a minimum period of 6 weeks in duration prior to the reported date of loss and inconsistent with the damage being caused by a one-time leak. SafePoint accordingly denied the claim pursuant to Section I of the policy, which excluded coverage for damages caused by "[c]onstant or repeated seepage or leakage of water or steam … which occurs over a period of time."

In response, the homeowner sued SafePoint. In her complaint, she asserted that she provided SafePoint "with a damage estimate for a covered loss in the amount of $43,181.01" and that she "sustained unpaid damages in the amount of $43,181.01." She later filed the detailed, itemized estimate—prepared by Contender—with the court. The estimate sought damages for nearly every room of the house. Notably, the estimate included line items for the replacement of the kitchen cabinets.

In her sworn interrogatory responses, the homeowner responded to the question of damage as follows: "$43,181.01, as per the written estimate prepared by [Contender] submitted with Plaintiff's Responsive Documents to Defendant's Request for Production."

At the deposition of the homeowner, she confirmed that, consistent with the estimate, she was claiming $43,181.01 in damages. When questioned about the line items in the estimate, however, the homeowner all but conceded that the estimate contained false statements. For example, when asked if the reported leak caused damage to the kitchen cabinets, she disclosed that the cabinets had actually been damaged by a prior leak in the kitchen—a leak the homeowner made a claim for with a different insurer—and that the leak at issue did not cause any damage to the kitchen cabinets.

Based on the homeowner's sworn interrogatory answers and deposition testimony, SafePoint amended its answer to include an affirmative defense based on the policy's "concealment or fraud" provision. That provision stated that SafePoint would not provide coverage for an otherwise covered loss if, whether before or after the loss, one or more "insureds" have done the following.

• Intentionally concealed or misrepresented any material fact or circumstance
• Engaged in fraudulent conduct
• Made material false statements relating to this insurance

SafePoint moved for summary judgment pursuant to that provision.

Analysis of the Case

At no point prior to the hearing did the homeowner seek to revise the estimate or otherwise submit a new estimate. At the hearing, the homeowner's attorney made the following concessions.

• The homeowner "has never said that she does not agree with [the] sworn proof of loss."
• The homeowner adopted the estimate.
• The estimate should not have included $11,000 for damages to the kitchen and that it would, therefore, be appropriate for the trial court to grant partial summary judgment or, alternatively, strike $11,000 from the total damages claimed by the homeowner.

At the conclusion of the hearing, the trial court found that the uncontroverted summary judgment evidence established the estimate contained material false statements. The court also concluded that the false statements were attributable to the homeowner because she adopted the estimate as her own in both her sworn interrogatory answers and deposition testimony and because Contender was acting as her agent.

It is well established that a party is bound by his or her admissions under oath, be it by deposition or interrogatories. The homeowner, in this case, adopted the estimate as her own statement. As the estimate undisputedly included at least $11,000 in repairs unrelated to the leak, the homeowner made material false statements relating to the claim.

Even after the homeowner acknowledged during her deposition testimony that the kitchen cabinets were not damaged by the leak, she still made no attempt to revise the estimate prior to the summary judgment hearing. Even if the homeowner did not intend to rely on the false statements contained in the estimate, a showing of intent is not required under the policy's concealment or fraud provision.

In Universal Prop. & Cas. Ins. Co. v. Johnson, 114 So. 3d 1031 (Fla. Dist. Ct. App. 2013), the court analyzed the same "concealment or fraud" clause, albeit in the context of a false statement made on an insurance application and held that the material false statement need not be intentional. In so holding, the Johnson court explained that, "given the language of subsection [(1)], subsection [(3)] would be superfluous if a 'false statement' under [(3)] included only intentionally false statements."

Simply put, an insured cannot blindly rely on and adopt an estimate prepared by his or her loss consultant without consequence. This is not to say that an insured will always be bound by the representations made in an estimate prepared by his or her loss consultant.

When an insured relies on or adopts an estimate containing material false statements to support his or her claim, the insured is bound by the estimate and cannot avoid application of the concealment or fraud provision simply because he or she did not prepare the estimate.

Conclusion

A "loss consultant" or "public insurance adjuster" usually takes an assignment of the funds the insured collects from the insurer due to the claim presentation. Regardless, the claim is presented by the insured and the loss consultant—as Contender did in this case—and the insured knew that the presentation by Contender was false and so testified at deposition. In so doing, she admitted that she adopted the fraudulent claim prepared by Contender and attempted to defraud her insurer. Although she may have had a legitimate claim (which is doubtful), the fraud defeated her attempt to obtain money from her insurer.

© 2021 Barry Zalma, Esq., CFE