An AOB Doesn’t Let You Get Away with Fraud, Florida’s 6th DCA Holds

Most property insurance policies contain “Concealment or Fraud” provisions. As the name suggests, these provisions penalize claimants for material misrepresentations or concealment by releasing insurers from payment obligations, regardless of whether relevant claims would otherwise be covered. Claimants with fully compensable claims, therefore, could lose benefits to which they are entitled because of a consequential lie.

In a recent appeal to Florida’s Sixth DCA,¹ SFR Services, LLC, as a post-loss assignee to a homeowner’s insurance benefits, argued that the Concealment or Fraud provision in the policy at issue only applied to policyholders, not to assignees. The argument was an attempt to challenge an unfavorable jury verdict where the jury had found that while the property loss alleged in SFR’s complaint was covered, coverage was nonetheless voided because SFR had made “material misrepresentations . . . in violation of the policy’s Concealment or Fraud provision.”

SFR relied on the language of the applicable policy’s Concealment or Fraud provision; the provision addressed only “insureds,” not “assignees” and the policy’s definition of “insured” did not include an assignee. SFR argued that as an assignee, based on the policy’s language, it was not subject to the conditions set forth in the Concealment or Fraud provision. It also relied on Shaw v. State Farm Fire & Casualty Co., 37 So. 3d 329 (Fla. 5th DCA 2010), disapproved of on other grounds by Nunez v. Geico Gen. Ins. Co., 117 So. 3d 388 (Fla. 2013), which recognized that the assignment of a right to payment did not include the transfer of contractual duties to the assignee. SFR’s reliance on Shaw was misplaced because, as the Sixth DCA held, the Concealment or Fraud provision was a condition of the policy, not a contractual duty. As a condition, it was equally applicable to assignees and policyholders. The court found the Second DCA’s treatment of an appraisal provision under similar circumstances to be instructive. Specifically, in Webb Roofing & Construction, LLC v. FedNat Insurance Co., 320 So. 3d 803 (Fla. 2d DCA 2021), the Second DCA held that an assignment “did not eliminate the duty of compliance with the conditions imposed by the insurance contract, including appraisal” and that such provisions were distinguishable from policy duties.

Concluding its opinion, the Sixth DCA stated that “[t]he Concealment or Fraud provision . . . provide[d] a remedy for the insurer in the event of fraudulent conduct” and that this “provision ‘would be of no value if a party could escape the effect of such a clause by assigning a claim . . . to a third party.’”²

The recently created Sixth appellate district is composed of Florida’s Ninth, Tenth, and Twentieth judicial circuits.