HOA’s Insurance Claim for Hurricane Damage Is Denied Due to Late Notification to Carrier

Eleventh Circuit (Florida) US District Appellate Court Decision (January 8, 2015).

An HOA in Florida with 380 residential units sustained property damage from a hurricane that struck the Florida coast on October 24, 2005.  At the time of the hurricane the HOA carried $5,00,000 in insurance. Shortly after the hurricane, the HOA’s board of directors was aware of the fact that some damage had been sustained, but apparently based on their own determination that the cost to repair the damaged that had been observed would not exceed the $100,000 deductible for the policy, no claim was made. Interestingly, in March of 2006, the HOA’s board imposed a special assessment in the amount of $150,000 on the homeowners in order to pay for the repair of damage caused by the hurricane.

In the years following the hurricane, various areas of the HOA property such as roofs and windows and doors began developing problems that necessitated continual repairs. In late 2006, the association hired a consultant to assess the condition of its property for the evaluation of a potential construction defect lawsuit against the developer. The consultant’s report included a finding of roof damage that was attributed to the hurricane in October of 2005. The HOA still didn’t take any action relative to an insurance claim based on the hurricane damage, but it did file a construction defect lawsuit in 2008. The developer then proceeded to file a bankruptcy so the association  was forced to incur the expense of significant repairs.

In 2009, the HOA’s board retained an insurance adjuster to assess the damage and was informed that there had been considerable damage attributable to the hurricane in 2005 for which a claim should have been made. Several months later, in July of 2010 (nearly 5 years after the hurricane), the HOA had legal counsel submit a formal notice of claim for the 2005 hurricane damage to the insurance company and thereafter in in October of 2010, the HOA filed a lawsuit against the insurance company. The court granted summary judgment in favor of the insurance company on the basis that the HOA had failed to provide the insurance company with “prompt” notice of the claim as required under the terms of the policy and further, that the HOA had not met its burden of proving that the insurance company was not prejudiced by the late notification as is presumed under the law. The court also awarded the insurance company $150,000 in attorney fees as the prevailing party. The HOA then filed an appeal.

The appellate court ruled that the notice of claim that was provided to the insurance company was untimely “as a matter of law.”  The court indicated that the fact that the board had levied a $150,000 special assessment to address hurricane damage was sufficient to “lead a reasonable and prudent man to believe that a claim for damages would arise.” Additionally, the court ruled that the requirement for prompt notice was not excused by uncertainty as to the extent of the damage and the HOA did not present sufficient evidence to rebut the presumption of prejudice to the insurance company from the late notification of the claim. To the contrary, the facts indicated that the insurance company was prejudiced by the tardiness of the claim.  Lastly, the appellate court affirmed the award of $150,000 in attorney fees to the insurance company.

See case decision:Yacht_Club_On_the_Intracoast