Mr. Daskalopoulos sued Citizens.

In its answer to the complaint, Citizens generally denied Mr. Daskalopoulos' allegations of causation. It later raised six affirmative defenses, including that it had not breached its policy as a matter of law; that Mr. Daskalopoulos' mortgage lender, which had initiated a foreclosure action against the property, was an indispensable party; and that any property damage had been the result of various other factors.

Citizens never asserted a defense sounding in fraud, misrepresentation, or unclean hands on the part of Mr. Daskalopoulos.

From the pleadings, the issues to be tried between the parties were whether sinkhole activity had affected Mr. Daskalopoulos' house and, if so, whether the damages Mr. Daskalopoulos claimed in his lawsuit had resulted from that activity.

During his opening statement, Citizens' counsel began by summarizing the issues for the jury's consideration. Counsel then said:

The evidence, interestingly, is also going to tell you that around the same time Mr. Daskalopoulos reported this claim to Citizens for the alleged sinkhole activity, alleged sinkhole damage, he stopped paying his mortgage on his house. . . .

These things coincide. Stopped paying the mortgage and hasn't paid the mortgage since that time back in 2012. Around the same time, he also owned another property.

Mr. Daskalopoulos objected to this line of argument as irrelevant and not within any of the defenses Citizens had pleaded. The trial court sustained Mr. Daskalopoulos' objection, but when Citizens' counsel resumed his opening remarks, he continued to press the same point, leaving it only when the trial court interrupted him:

Okay. Around the same time, Mr. Daskalopoulos stopped paying the mortgage on his house and hasn't paid the mortgage since then. That coincides with him making this claim to Citizens that there is sinkhole activity —

At the conclusion of Citizens' opening statement, Mr. Daskalopoulos moved for a mistrial, which the trial court denied.

The matter of Mr. Daskalopoulos' mortgage default and the timing of his insurance claim did not end there. Over objection, the theme emerged again during Mr. Daskalopoulos' cross-examination:

Q. Isn't it true that before you got your attorneys involved and you came out and filed a claim with Citizens, you had already stopped paying your mortgage?

A. I believe it was around the same time.

Q. Okay. You don't recall whether it was before or after?

A. It was like, right around the same time. Exactly, I'm not really positive if it was a week before or a week after.

After Mr. Daskalopoulos was confronted with his prior deposition testimony, he allowed (again over objection) that he might have stopped paying his mortgage payments prior to filing his insurance claim with Citizens but that he was not exactly sure of the sequence of those events.

When his testimony concluded, the jury posed its only question to Mr. Daskalopoulos, asking whether Mr. Daskalopoulos' policy with Citizens was "an upgrade" from the prior policy he had when he had purchased the house in 2006. The court declined to allow the question, but the question prompted Mr. Daskalopoulos' counsel to again move for a mistrial, noting: "Now the juror's asking about whether he got more insurance or whether he upgraded the coverage. . . . This is turning into a case about why he filed for foreclosure. It has nothing to do with the sinkhole case. Nothing."

The trial court again denied his motion for mistrial.

Ultimately, the jury returned a verdict in favor of Citizens, finding that there had been no damage of any kind to the house during the applicable policy period. The jury never reached the only question presented on Citizens' affirmative defenses, which was whether the house's damage was a result of sinkhole activity or some excluded peril under the policy.

Mr. Daskalopoulos moved for new trial, again arguing that the insertion of Mr. Daskalopoulos' mortgage foreclosure as an issue before the jury had deprived him of a fair trial. The trial court denied Mr. Daskalopoulos' motion and entered final judgment in favor of Citizens.

Mr. Daskalopoulos appealed.

The Appellate Court's Decision

The appellate court reversed the final judgment against Mr. Daskalopoulos and remanded for a new trial.

In its decision, the appellate court explained that Mr. Daskalopoulos' nonpayment of his mortgage and his bank's foreclosure complaint "had nothing to do with any relevant issue to be adjudicated." As the appellate court explained, this was "an insurance coverage dispute that revolved around whether a sinkhole had caused cracks in a house." The appellate court pointed out that the verdict form in this case – which comprised two questions – reflected the "narrow field of issues the parties had framed for determination, and neither of those questions remotely pertained to Mr. Daskalopoulos' nonpayment of a debt."

Therefore, the appellate court stated, the fact that Mr. Daskalopoulos may have been in arrears on his house's mortgage "was no more relevant to this sinkhole dispute than the house's paint color."

The appellate court rejected Citizens' contention that Mr. Daskalopoulos' financial position was relevant because it reflected a "motive" or "personal interest" on his part to file an insurance claim. As the appellate court pointed out, Mr. Daskalopoulos' financial interest in the outcome of his civil lawsuit against Citizens "was a point that needed no proving, and certainly not through the insertion of an unpled, irrelevant, and inadmissible issue."

Moreover, the appellate court said, to the extent an equivalency could be drawn between paying one's debts and one's personal integrity, it was "plainly an issue of Mr. Daskalopoulos' character that Citizens tried to frame before the jury," an issue that ordinarily was "inadmissible in civil cases." The appellate court said: 

If Citizens believed that its insured was pursuing a fraudulent insurance claim – and it all but told this jury it did – then it should have raised that as an affirmative defense before going to trial.

In sum, the appellate court said, "thrusting Mr. Daskalopoulos' foreclosure proceedings" into the opening statement of an insurance coverage action over a sinkhole claim "was improper." Expounding upon that unpleaded issue at length in Mr. Daskalopoulos' cross-examination "under the pretense that it was some form or impeachment or evidence of bias was equally improper." Taken together, the appellate court concluded, Mr. Daskalopoulos had been deprived of a fair trial in this case.

The case is Daskalopoulos v. Citizens Property Ins. Corp., No. 2D17-371 (Fla. Ct.App. March 9, 2018). Attorneys involved include: Michael V. Laurato of Austin & Laurato, P.A., Tampa, for Appellant. Angela C. Flowers of Kubicki Draper, Ocala, for Appellee.