SUMMERWIND WEST CONDOMINIUM OWNERS ASSOCIATION INC v. MT HAWLEY INSURANCE…

Background

Hurricane Sally damaged a condominium building in Florida owned and operated by Summerwind West Condominium Owners Association Inc. Summerwind submitted an insurance claim under a wind policy issued by Mt. Hawley Insurance Company and Syndicate 1458 at Lloyd’s of London. The insurers denied the claim, stating that their engineer found no storm-related damage that created openings in the roof, exterior cladding, doors, or windows and that the water intrusion resulted from wind-driven rain.

Summerwind brought a breach-of-contract action. Mt. Hawley moved for summary judgment, which asks the court to rule without a trial when there is no genuine dispute about a fact that could affect the result. Mt. Hawley argued that the policy was void under its clause concerning concealment, misrepresentation, or fraud; that Summerwind could not recover replacement costs or increased construction costs because it had not replaced certain property; and that Summerwind could not recover attorneys’ fees. Mt. Hawley also sought dismissal as a sanction for alleged fraud on the court.

Insurance Fraud Defense

The policy stated that it was void in cases of fraud or when an insured intentionally concealed or misrepresented a material fact concerning the policy, property, or claim. Applying New York law, the court explained that an insurer seeking summary judgment on this basis must prove fraud by clear and convincing evidence, including an intent to defraud.

Mt. Hawley relied primarily on an email in which Summerwind’s property manager asked an elevator company to change the date of an earlier elevator bid so Summerwind could “push it under” the hurricane claim. Mt. Hawley also relied on differences between the manager’s earlier description of the elevators and her deposition testimony, Summerwind’s failure to produce the original bid, and the late disclosure of an earlier email.

The court held that the evidence did not establish fraudulent intent as a matter of law. The record could support Summerwind’s explanation that the original bid was prepared before the hurricane for future budgeting and that the hurricane later damaged the elevators and accelerated the need for replacement. The conflicting evidence about the elevators’ pre-storm condition, the missing original bid, and the late-produced email could be interpreted in more than one way. Because a reasonable factfinder could conclude that Summerwind did not intend to defraud Mt. Hawley, the court denied Mt. Hawley’s motion for summary judgment on the policy’s fraud provision.

Replacement and Code-Compliance Costs

The policy generally required the damaged property to be repaired or replaced before Summerwind could receive replacement-cost coverage. It required repairs or replacement within 180 days for replacement-cost valuation and, for increased construction costs required by laws or ordinances, as soon as reasonably possible and no later than two years unless extended in writing.

Summerwind did not dispute that it had not replaced the building’s stucco cladding, windows, or sliding glass doors. It argued that Mt. Hawley’s refusal to pay prevented it from financing those repairs. The court found a factual dispute about whether Mt. Hawley’s refusal to pay any policy proceeds prevented Summerwind from completing the repairs. The court therefore denied Mt. Hawley’s motion for summary judgment on replacement and code-compliance costs.

Attorneys’ Fees

Summerwind sought attorneys’ fees under several Florida statutes. It did not respond to Mt. Hawley’s argument that the policy’s New York choice-of-law provision covered the fee request and that the Florida statutes did not support recovery under New York law.

The court held that the attorneys’ fees request failed as pleaded regardless of whether Summerwind had forfeited it by not responding. The policy required matters arising under it to be governed by New York law, and Summerwind identified no New York provision supporting attorneys’ fees. The court granted Mt. Hawley’s summary-judgment motion with respect to Summerwind’s claim for attorneys’ fees and dismissed that claim.

Alleged Fraud on the Court and Disposition

Mt. Hawley also asked the court to dismiss the case as a sanction for fraud on the court, relying on substantially the same evidence it cited for the policy-fraud defense. The court held that Mt. Hawley had not shown fraud on the court by clear and convincing evidence and denied the motion for sanctions. The court added that Mt. Hawley’s failure to follow the court’s procedure for seeking permission to file a sanctions motion provided an additional, independently sufficient basis to deny that portion of the motion.

Judge John P. Cronan concluded that Mt. Hawley’s motion for summary judgment was granted with respect to Summerwind’s claim for attorneys’ fees and denied in all other respects. The court also denied Mt. Hawley’s motion for sanctions.