In Sanchez v. Security First Ins. Co., 2024 WL 949223 (Fla. 3d DCA 2024), Judge Scales of the Third District Court of Appeals recently wrote an important special concurring opinion in a case in which a Third District panel felt bound by an earlier panel’s decision to follow the Fourth District’s view that the (obviously substantive) property insurance NOI statute can be applied retroactively to violate the constitutional right against impairment of contracts.

On that issue, the Sixth District got it right. The issue has been certified as a conflict and we await the Florida Supreme Court’s resolution of the issue. See Cantens v. Certain Underwriters at Lloyd’s London, 2024 WL591695, *3 (Fla. 3d DCA February 14, 2024) (“[B]ecause the presuit notice requirement of section 627.70152(3), taken in context, is procedural in nature, and applies to all policies, regardless of date of inception, the trial court correctly dismissed the action without prejudice pursuant to section 627.70152(5).”); Cole v. Universal Prop. & Cas. Ins. Co., 363 So. 3d 1089, 1095 (Fla. 4th DCA 2023)(“[B]ecause the presuit notice requirement of section 627.70152 applies retroactively as a procedural provision, it applies to existing policies in effect at the time of enactment.”); but see Hughes v. Universal Prop. & Cas. Ins. Co., 374 So. 3d 900, 910 (Fla. 6th DCA 2023) (“[W]e find that section 627.70152 is substantive and cannot be applied retroactively to insurance policies issued before the statute’s effective date.”).

Judge Scales wrote:

Because this panel is bound by the recent holding of another panel of this Court in Cantens v. Certain Underwriters at Llyod’s London, 49Fla. L. Weekly D360, ––– So.3d ––––, 2024 WL 591695 (Fla. 3d DCA Feb. 14, 2024), we are compelled to affirm the trial court’s June 9, 2022 order dismissing Sanchez’s complaint “without prejudice and without leave to amend.” I, therefore, concur in the result reached in this case, but I write to express my disagreement with Cantens, which followed the Fourth District’s decision in Cole v. Universal Property & Casualty Insurance Co., 363 So. 3d 1089 (Fla. 4th DCA 2023).

The issue in the case, noted Judge Scales, as it was in Cantens and Cole, was whether the Legislature’s new statutory condition precedent to an insured’s right to sue the property insurer for an alleged breach of the insurance contract may apply to an existing insurance policy without running afoul of Florida’s prohibition on impairment with contracts.  As I have noted in previous articles, for about three years, the vast majority of lawyers and trial judges who have examined this issue have concluded that the Menendez case is pretty-much on point. That case–in the PIP insurance context–held that if a presuit notice requirement makes a substantive change in the law, it cannot be applied retroactively to impair insurance contracts that were formed prior to the new statute taking effect.

In 2021, the Legislature enacted the new condition precedent at issue, section 627.70152 of the Florida Statutes, which, among other things, required that, at least ten days prior to filing suit against the insurer, an insured must provide notice to the Florida Department of Financial Services of the insured’s intent to initiate litigation against the insurer. The insured’s notice must state, with specificity, all of the following information:

1. That the notice is provided pursuant to section 627.70152.

2. The alleged acts or omissions of the insurer giving rise to the suit, which may include a denial of coverage.

3. If provided by an attorney or other representative, that a copy of the notice was provided to the claimant.

4. If the notice is provided following a denial of coverage, an estimate of damages, if known.

5. If the notice is provided following acts or omissions by the insurer other than denial of coverage, both of the following:

a. The presuit settlement demand, which must itemize the damages, attorney fees, and costs.

b. The disputed amount.

§ 627.70152(3)(a), Fla. Stat. (2021).

Under the new legislation, a trial court is required to dismiss any first-party lawsuit filed by an insured who has not complied with the notice requirement, which means that a plaintiff’s noncompliance cannot be cured by compliance, followed by amending the plaintiff’s lawsuit. § 627.70152(5), Fla. Stat. (2021).

In the case at bar, observed Judge Scales:

Ms. Sanchez and Security First did not include in their bargained-for insurance contract the detailed notice now mandated by the statute, nor did they contract for the statute’s mandatory dismissal penalty associated with the statute’s new requirements. Hence, consistent with the constitutional prohibition on contract impairment, we may apply the statute’s new condition precedent to the parties’ existing insurance contract only if we determine that the statute’s new requirements do not affect the parties’ substantive rights. Menendez, 35 So. 3d at 875.

In determining that the new notice requirement can be constitutionally grafted into existing insurance contracts, Cole merely concludes that the insured’s “rights and obligations are unchanged by the addition of [the statute’s] presuit notice provision….” Cole, 363 So. 3d at 1093. Cantens concludes that the new statute “does not impose any new punishments or penalties that substantively impact an insured’s ability to recover[.]” Cantens, 49 Fla. L. Weekly at D362, ––– So.3d at ––––, 2024 WL 591695, at *3. Judge Scales “strongly disagree[d] with these conclusions,” because:

A provision affects a parties’ substantive rights, and cannot be retroactively applied, if it either creates significant new obligations or imposes new penalties. Menendez, 35 So. 3d at 877. This new statute does both.

The judge reasoned:

The new notice requirements mandated by the statute plainly create new substantive obligations on a policyholder. The statute significantly burdens an insured with a new pre-suit obligation that effectively requires the insured to adjust his own claim. Before an insured can bring an action against an insurer alleging that the insurer has breached the insurance contract by underpaying a claim, the insured must specifically itemize the insured’s damages and attorneys’ fees and costs, and calculate, presumably with specificity, the disputed amount. Because insurers no doubt will vigorously cross-examine insureds regarding discrepancies between amounts demanded at trial and amounts contained in the pre-suit notice, these calculations cannot be approximations. Presumably, if at any time during the proceedings, discrepancies arise between an insured’s actual damages and those contained in the pre-suit notice, insurers will seek dismissal of the insured’s lawsuit for failure to comply with the new statute’s itemization requirement. From a practical perspective, compliance with the statute’s pre-suit itemization requirement adds a significant, substantive, and expensive pre-suit burden on an insured trying to enforce contractual rights.

Further:

The new statute also imposes a new penalty – dismissal of the insured’s lawsuit – for noncompliance with the statute’s notice requirement. As mentioned earlier, section 627.70152(5)’s mandatory dismissal penalty requires the trial court to dismiss the lawsuit without prejudice; the statute does not allow a trial court the discretion to dismiss a complaint, with leave to amend following compliance with the new statute. Hence, in order to sue his insurer, a policyholder whose lawsuit has been dismissed under section 627.70152(5), must comply with the statute’s notice requirements and then re-file his lawsuit (paying the associated filing fees) and again serve process on the insurer (paying those associated costs). Cantens characterizes this penalty as not “substantively impact[ing] an insured’s ability to recover, as the action may be refiled[.]” Cantens, 49 Fla. L. Weekly at D362, ––– So.3d at ––––, 2024 WL 591695, at *3. But Cantens’s conclusory holding in this regard provides little solace to a low-income policyholder forced to again incur filing and service of process fees, or worse, to a policyholder whose lawsuit has suffered section 627.70152(5)’s mandatory suit dismissal after the expiration of the statute of limitations, and therefore, cannot re-file. It would seem that the remedies available to such a policyholder are nonexistent.

Judge Scales also observed:

It bears noting that virtually every pre-Cole federal case and, most recently, our sister court’s Hughes case, hold that section 627.70152’s new notice requirement cannot, consistent with Florida’s prohibition on contract impairment, be applied to existing insurance contracts. While the statute’s new requirements may very well be good public policy, I agree with the reasoning uniformly expressed in those pre-Cole opinions and by the Hughes Court: section 627.70152’s notice requirements impose new substantive burdens on policyholders, and therefore, cannot be constitutionally applied to existing insurance policies.