Florida Courts Diverge on Presumption of Prejudice and Late Notice

On January 3, 2024, the Third DCA issued an opinion in Mario Arce et.al. vs. Citizens Property Insurance Corporation, 3D22-0722 (Fla. 3d DCA 2024), expressly disagreeing with the Fourth DCA on whether late notice provided by an insured leads to a rebuttable presumption of prejudice favoring the insurer. Most property insurance policies contain a provision regarding notice. These provisions are usually found in the “Duties After Loss” section of the policy, and include language that says something like “in case of a loss to covered property, we have no duty to provide coverage under this Policy if the failure to comply with the following duties is prejudicial to us…Give prompt notice to us or your insurance agent.” Despite this common language, Florida case law provides a presumption of prejudice in favor of the insurer if the insured provides late notice of an insurance claim.¹

In Perez v. Citizens Property Insurance Corporation, 345 So. 3d 893 (Fla. 4th DCA 2022), the Fourth DCA issued an opinion that changed this presumption of prejudice, holding that the presumption of prejudice was essentially eliminated by the specific language of the policy.  While there was “no genuine dispute as to any material fact” that the insurer was prejudiced by the provision of late notice, the court did not apply the presumption because “the policy language places the burden on the insurer to prove prejudice.”

The facts of Perez were as follows.  The insureds alleged that their property was damaged by Hurricane Irma on September 10, 2017.  The insureds submitted a claim on November 27, 2018, over a year after the storm.  Citizens sent an adjuster to inspect and denied the claim based on the late reporting.  The insureds filed suit and Citizens moved for summary judgment.  Citizens filed an affidavit to prove that the notice was late, and then argued it was entitled to a presumption of prejudice.  The insureds provided an affidavit from an expert to rebut the prejudice.  The trial court granted the summary judgment finding that the notice was late, Citizens was presumed prejudiced, and the insureds did not rebut the presumption of prejudice.  However, the Fourth DCA overturned the trial court’s decision stating “Citizens alleged the notice was untimely, under the policy it was required to show prejudice…Citizens presented no evidence that it was prejudiced by the untimely notice.” Perez at 896.

Perez turned the presumption of prejudice issue on its head. Based on Perez, if the insurance policy contains language regarding prejudice in the “Duties After Loss” section, then the insurer has the burden of proof to demonstrate prejudice in order to assert a late notice defense. Furthermore, if there is no presumption of prejudice, then the insured no longer has a duty to rebut the presumption. The burden of proof as it relates to late notice rests exclusively on the insurer.

Over the last year, Perez has had a significant impact throughout the state because most courts follow a district court opinion from outside their district when there is no controlling decision in their district. As such, the Perez decision was essentially controlling law as it related to presumption of prejudice and late notice.

Arce, however, has now created a definitive conflict between the courts and called into question Perez’s control in Florida. The facts of Arce are similar to the facts in Perez.  On September 10, 2017, the roof of insureds’ home was allegedly damaged by Hurricane Irma. The insureds reported the loss to Citizens nearly three years later, on August 26, 2020. After investigating the claim, on October 1, 2020, Citizens sent the insureds a denial letter stating that “Citizens is respectfully denying this claim since our ability to evaluate this claim has been prejudiced due to failure to report this loss in a timely manner.” The insureds filed suit and Citizens filed for summary judgment. Citizens asserted that summary judgment was appropriate because, among other arguments, it was entitled to a rebuttable presumption of prejudice due to the insureds’ untimely notice, and also claimed there was no record evidence to rebut the presumption. The trial court granted summary judgment and the insured appealed.

On appeal, the insureds urged the court to follow Perez. The court sternly rejected the insureds argument and with it, Perez’s holding, expressly declining to adopt  “Perez’s ‘policy language exception’ to the presumption of prejudice that arises when an insured fails to promptly notify the insurer of a claim.” Arce at 14. The court upheld the trial court’s decision to apply a presumption of prejudice when the insured fails to provide timely notice and reasoned that Perez’s holding frustrates the purpose of a prompt notice provision – to “afford[s]the insurer an adequate opportunity to investigate, to prevent fraud and imposition upon it, and to form an intelligent estimate of its rights and liabilities before it is obliged to pay.” Arce at 15. Because the policy at issue was silent as to the parties’ burdens, the court declined “to read into the provision the burden-shifting that the Perez holding infuses into the policy language.” Id.

By rendering its decision in the Arce case, the Third DCA provided guidance to the trial courts within its district, which can rely on established case law regarding presumption of prejudice and late notice. Similarly, in Perez the Fourth DCA provided guidance regarding how trial courts within that district should view presumption of prejudice and late notice. The question that remains is how trial courts in the remaining districts will deal with the presumption of prejudice and late notice issue. Since there is a conflict between the Third and Fourth DCAs, the trial courts in the other districts can potentially choose to apply either the standard set forth in Arce or the standard set forth in Perez. As such, an insurer raising a defense based upon late notice and presumption of prejudice in other Florida districts would be well served to put forth the Arce court’s reasoning.