Universal Ins. Co. of North America v. Warfel

• Decision Date: 26 January 2012
• Docket Number: No. SC10–948.,SC10–948.
• Citation: 82 So.3d 47
• Parties: UNIVERSAL INSURANCE COMPANY OF NORTH AMERICA, Petitioner, v. Michael WARFEL, Respondent.
• Court: Florida Supreme Court

82 So.3d 47

UNIVERSAL INSURANCE COMPANY OF NORTH AMERICA, Petitioner,

v.Michael WARFEL, Respondent.

No. SC10–948.

Supreme Court of Florida.

Jan. 26, 2012.

Nancy W. Gregoire of Kirschbaum, Birnbaum, Lippman and Gregoire, PLLC, Fort Lauderdale, FL; David J. Salmon, Jonathan T. Hall, and Karl Forrest of Groelle and Salmon, P.A., Tampa, FL, for Petitioner.

George A. Vaka and Nancy A. Lauten of Vaka Law Group, P.L., and Joshua Evan Burnett of Marshall Thomas Burnett, Tampa, FL, for Respondent.

PER CURIAM.

This case is before the Court for review of the decision of the Second District Court of Appeal in Warfel v. Universal Insurance Co. of North America, 36 So.3d 136 (Fla. 2d DCA 2010). In its decision, the district court certified a question of great public importance to this Court. See id. at 138–39. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const.

FACTS AND PROCEDURAL HISTORY

In March 2005, Universal Insurance Company of North America (Universal) issued an all-risks homeowners insurance policy, which covered sinkhole claims, to Michael Warfel. See Warfel v. Universal Ins. Co. of N. Am., 36 So.3d 136, 136 (Fla. 2d DCA 2010). After the policy was issued, effective June 1, 2005, the Florida Legislature restructured the statutory scheme pertaining to the sinkhole claim process with regard to database information, testing standards, and reporting requirements. See id. The Legislature amended sections 627.706 and 627.707, Florida Statutes (2005), and enacted sections 627.7065, 627.7072, and 627.7073, Florida Statutes (2005). The sinkhole statutes appear in chapter 627, titled “Insurance Rates and Contracts,” specifically in Part X, titled “Property Insurance Contracts.” Section 627.707(2) requires insurance companies, upon receipt of a claim for sinkhole damage, to hire a professional engineer or a professional geologist to conduct testing to determine the cause of the loss and issue a report. Section 627.7073 governs those sinkhole reports, and subsection (1)(c) of that section provides:

The respective findings, opinions, and recommendations of the engineer and professional geologist as to the verification 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 correct.

§ 627.7073(1)(c), Fla. Stat. (2005).

In August 2005, Warfel filed a sinkhole claim with Universal, which subsequently hired a geotechnical, geological, and engineering firm, SD II Global (SD II), to investigate the claim. See Warfel, 36 So.3d at 136. SD II produced a report that expressed an opinion that the damage was caused by shrinkage, thermal stress, and differential settlement, all of which were excluded from coverage under the policy. See id. at 137. Relying on the report, Universal denied the claim. See id.

Warfel subsequently filed an action against Universal for breach of contract seeking the recovery of insurance benefits for the loss. See id. Before trial, Universal moved the trial court to apply the sinkhole statutes that became effective on June 1, 2005. See id. The trial court denied Universal's motions with regard to sections 627.706 and 627.707 because it found that those amendments were substantive and did not apply retroactively. See id. at 137 n. 2. However, the trial court granted Universal's motion to apply sections 627.7065, 627.7072, and 627.7073 retroactively, reasoning that the statutes were procedural. See id. at 137 n. 2.¹ Universal also moved to apply section 90.304, Florida Statutes (2007), and requested that the jury be instructed that the presumption of correctness as articulated in 627.7073(1)(c) was a rebuttable presumption affecting the burden of proof. See id. at 137. Again, over Warfel's objection, the trial court granted Universal's motion and request. See id.

During trial, both parties presented expert testimony with regard to the cause of damage to Warfel's home. See id. The experts for Warfel concluded that a sinkhole, at least in part, caused the damage to Warfel's home. See id. The experts for Universal, each affiliated with SD II, concluded that sinkhole activity did not damage the home. See id. Throughout the trial, Warfel repeatedly asserted that the presumption created in section 627.7073(1)(c) was a “vanishing” or “bursting bubble” presumption governed by section 90.303, Florida Statutes (2005), whereas Universal contended that the presumption in that statute should be governed by section 90.304 because it implements public policy relating to a sinkhole insurance crisis. See id. at 138.

At the conclusion of the presentation of evidence, the trial court instructed the jury as follows:

You must presume that the opinions, findings, and conclusion in the SD II report as to the cause of damage and whether or not a sinkhole loss has occurred are correct. This presumption is rebuttable. The Plaintiff has the burden of proving by a preponderance of the evidence that the findings, opinions, and conclusions of the report are not correct.

Id. However, during closing arguments, Universal told the jury that the jury

must presume that the opinions, findings, and conclusions in the SD II report as to the cause of damage and whether or not a sinkhole loss has occurred are correct. You must presume that report is correct. That report is the only report in evidence. You can take it back in the room. Read it. You will presume —the Judge will instruct you you [sic] must presume that's correct.

Id. The jury returned a verdict in favor of Universal, and after denying Warfel's motion for a new trial, the trial court entered a final judgment in favor of Universal.

On appeal, the Second District Court of Appeal reversed. The appellate court held that there was no legislative expression that public policy compels a homeowner to shoulder the burden to disprove the report and opinions of the insurer's engineers and geologists. Id. at 138. Further, the Second District noted that it was “also mindful that, historically, an all-risks policy encumbers the insurer with the burden to prove that a claimed loss is not covered.” Id. (citing Wallach v. Rosenberg, 527 So.2d 1386, 1388–89 (Fla. 3d DCA 1988)). Finally, the court noted that the Legislature “knows how to create burden-shifting presumptions under section 90.304,” but did not do so in section 627.7073(1)(c). See id. at 138–39. The Second District ultimately held that “[b]ecause the trial court misapplied the presumption at work in this case and gave the jury an instruction improperly shifting the burden of proof, a new trial is required.” Id. at 140. Further, the court certified the following question to this Court as one of great public importance:

DOES THE LANGUAGE OF SECTION 627.7073(1)(C) CREATE A PRESUMPTION AFFECTING THE BURDEN OF PROOF UNDER SECTION 90.304 OR DOES THE LANGUAGE CREATE A PRESUMPTION AFFECTING THE BURDEN OF PRODUCING EVIDENCE UNDER SECTION 90.303?

Id.

This review followed.

BACKGROUND

The central question here is whether the burden shifting presumption articulated in section 90.304 of the Florida Evidence Code applies to the presumption provided in section 627.7073(1)(c). The answer to this question requires an understanding of both the presumption and sinkhole statutory schemes in Florida.

Presumptions Background

Thayer–Wigmore v. Morgan–McCormick

Prior to the adoption of the Federal Evidence Code, there were two major schools of thought with regard to the procedural effect of a presumption in the face of rebutting evidence: the “Thayer–Wigmore” view and the “Morgan–McCormick” view. See 21B Charles Alan Wright & Kenneth W. Graham, Jr., Federal Practice and Procedure § 5126 (2005); see also In re Yoder Co., 758 F.2d 1114, 1119 (6th Cir.1985). Professors Thayer and Wigmore viewed presumptions as “devices of procedural convenience” that were efficient mechanisms for addressing inferences that arise from a basic fact in the absence of any evidence of the presumed fact. Wright & Graham § 5122.1, at 428. Under the Thayer–Wigmore approach, “once the opponent introduced evidence showing the non-existence of the presumed fact, the presumption dropped out of the case.” Id. (emphasis supplied). An unrebutted presumption, however, entitled its proponent to a directed verdict on the presumed fact under this approach. See id. Presumptions that follow this school of thought have come to be known as “bursting bubble” presumptions. See id.

Professors Morgan and McCormick posited that presumptions should be given greater effect than they were afforded under the Thayer–Wigmore approach. See id. at 430. Under this theory, “contrary evidence on the presumed [fact] does not dissipate the presumption; it simply satisfies the opponent's burden of production and sends the case to the jury with an instruction that the burden of persuasion is on the opponent.” Id. at 431. Presumptions under this theory shift the burden of persuasion and afford courts the ability to tweak the weight of the burden shifted to fit more closely with the underlying social policy advanced by the presumption. See id. Both the Thayer–Wigmore approach and the Morgan–McCormick view provide for a directed verdict on a presumed fact if such fact goes unrebutted. The fundamental difference between the two views stems from the impact of rebutting evidence upon a presumption in the face of rebutting evidence: the former requires the presumption to vanish, whereas the latter still presents the presumption to the trier of fact to decide if the contradicting evidence overcomes the presumption.

Many states viewed the Thayer–Wigmore presumption as “too weak” and the Morgan–McCormick presumption as “too strong.” See id. at 432. Professor Francis H. Bohlen suggested a third approach which provided that rather than a single effect for all presumptions, “presumptions should be grouped into several different classes according to the policies they served and each class assigned an effect...