Friday, February 11, 2011

Sinkhole presumption: FSC Arguments in Warfel

The Florida Supreme Court today heard argument in Universal Insurance Co. v. Warfel, which involves the significant issue of whether the findings and conclusions of the insurance company's experts are presumed correct when litigating a sinkhole claim.  This case is particularly unusual because the jury actually found that damage to the insured's home was not caused by a sinkhole, in part due to presumption language added by 2005 legislative reforms.

The decision is likely to turn on whether the Florida Supreme Court finds any implicit legislative intent to create a litigation presumption based on public or social policy (as Universal argued), or whether the presumption is limited to the claims investigation process (as Warfel argued).  Constitutional retroactivity also could come into play.

Below, after a summary of the case, there are some unofficial excerpts from the argument.

The Presumption Issue.

The case, Universal Insurance Co. v. Warfel ( SC10-948), involves application of a 2005 legislative change to Section 627.7073(1)(c), Florida Statutes.  As amended, that section provides:  "The respective findings, opinions, and recommendations of the engineer and professional geologist as to the verifications or elimination of a sinkhole loss and the findings, opinions, and recommendations of the engineer as to land and building stabilization and foundation repair shall be presumed to be correct."  The presumption favors the engineer and geologists selected by the insurer.

Based on the 2005 law change, the trial court’s instruction to the jury in Warfel was that the homeowner "has the burden of proving by a preponderance of the evidence that the findings, opinions, and conclusions of the report are not correct.”  The jury concluded that the damage was not caused by a sinkhole.

On appeal, the Second District Court of Appeal reversed, awarding the insured a new trial because the judge had incorrectly instructed the jury.  The District Court concluded that “the section 627.7073(1)(c) presumption was a ‘vanishing’ or ‘bursting bubble’ presumption, a presumption affecting the burden of producing evidence but not one shifting the burden of proof to him,” because “the statutory scheme reflected no legislative intent to apply a public or social policy presumption so as to shift the burden of proof to the homeowner.”

Constitutional Retroactivity Issue

There was very limited discussion at the argument of a constitutional issue, considered below but not certified to the Supreme Court.  That issue is whether the presumption language was a procedural change that can be applied retroactively to claims made under existing insurance policies -- or is it a substantive claim that cannot be applied retroactively without impairing vested contract rights.   The Second District agreed with the trial court that the presumption was procedural and did not involve an issue of substantive retroactivity.

The Argument 

The most active Justice in the argument was Justice Barbara J. Pariente, followed by the Chief Justice, Charles T. Canady.  Here are some unofficial excerpts of the proceedings:

Regarding the Legislature's ability to express its intent:  J. Pariente:  "If the Legislature was really intending this as a shifting burden . . . they’d say there is a presumption . . . and it’s shifted to the insured. . . .  They know how to place evidentiary presumptions into the law."

Regarding whether the presumption applies to the investigation or to the litigation, and noting that the 2005 amendments applied to "Standards for investigation of sinkhole claims by insurers" (F.S. 627.707), " Testing standards for sinkholes" (F.S. 627.7072), and " Sinkhole reports" (627.7073):  J. Pariente [to Warfel’s counsel]:  “You don’t even think this presumption had anything to do with litigation?"  Warfel’s counsel:  “Absolutely not."  J. Pariente:  "I’m agreeing . . . that this is a pre-suit investigation [presumption]."

C.J. Canady [to Universal's counsel]:  "What in the structure of this 2005 statute . . . shows that this applies in litigation . . . ?"  Universal's counsel:  "I have to admit that there is absolutely nothing in the statute."  Universal's counsel [to J. Pariente]:  "Where else could it apply? . . .  This has to be a litigation presumption.  Otherwise it's just going to fall apart."

Regarding the bursting bubble theory:  J. Pariente [to Warfel's counsel]:  “It doesn’t even make sense that this was a bursting bubble theory. . . I think the Legislature knows how to write when they want a presumption that changes the burden or proof. . . .”  C.J. Canady [to Warfel’s counsel]:  “Can you give some examples of statutorily created presumptions that are bursting bubble presumptions? . . . [I] didn’t remember seeing any statutorily created . . .  It looked like there were a lot of judicially created bursting bubble presumptions.”

Regarding whether the law is "one sided" in that only the insurer selects the expert:  Justice Jorge Labarga: “Who chooses the geologist, the expert that ultimately writes the report that is presumed to be correct? . .  . Does the insured have any input at all under the statute?  Is there an objection that an insured can raise?  . . . Are there any other instances . . . where the insurer gets to pick the actual expert and that expert's report is to be deemed correct?”  Universal’s counsel:  “Not that I’m aware of. . . . This is a pretty unique statute.” 

Justice Peggy Quince:  “So even if the plaintiff comes in, has another expert who says . . . this damage is a sinkhole, you still have a presumption that [the insurer’s expert’s] report . .  . . is correct?  C.J.  Canady:  “It’s clearly a rebuttable presumption so in this case the jury could have believed the competing expert, and the jury could have decided the case in favor the insured . . . I understand . . . it’s probable [that the report will favor the insurer] based on who chooses the experts. . . [But the experts] are licensed professionals and they’re putting their signature on something that is going into the public records. .  . . So the notion that this is strictly one-sided . . . doesn’t exactly fit the scheme.”

Additional information

A video of the argument is available at this link: 

This report was prepared by Perry Cone and posted on

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