A Property Insurance Case Is Causing Waves

By Edgar A. Kelly / Published November 2019

A 2004 property insurance case against Citizens Property Insurance Corporation has caused waves this summer. The case, stemming from damage to several apartment buildings as a result of Hurricane Frances, was overturned at the appellate level and remanded back to the trial court. Specifically, Florida’s Fifth District Court of Appeal reversed the trial court’s ruling on Citizens’ motion for partial summary judgment as to whether the plaintiff was entitled to extra-contractual, consequential damages. These consequential damages were alleged as lost rental income to the apartment complex as a result of Citizens’ delays and denials of coverage.

     The dispute began when nine apartment buildings, owned by Manor House, LLC, were damaged by Hurricane Frances in September 2004. Citizens adjusted the claim and made payments totaling $1,927,747. Sub-sequently, in April 2006, Manor House’s public adjuster requested that the claim be re-opened and presented a claim in the amount of $10,027,087. Following this action, Citizens made a supplemental payment in the amount of $345,192. Contrary to the supplemental payment, Citizens’ independent adjuster had given the loss a replacement cost value of $6,410,456.

     In August 2007, Manor House formally filed suit against Citizens demanding that payment be made in the amount of $6.4 million—the replacement cost value provided by Citizens’ independent adjuster. Further, Manor House requested that the court compel Citizens to move forward with appraisal. In June 2009, the trial court ordered the parties to move forward with appraisal, as provided within the subject policy of insurance. Thereafter, in November 2009, an appraisal award was entered for the replacement cost value of $8,649,816. This led Citizens to make an additional payment in the amount of $5,502,022.

     Nonetheless, Manor House later filed suit against Citizens alleging breach of contract and fraud. With regard to its breach of contract allegations, Manor House alleged that Citizens failed to properly adjust the loss, pay the undisputed amount after estimates, honor Manor House’s demand for appraisal, provide Manor House with documents Citizens needed to adjust the loss, and pay the appraisal award in a timely manner. Further, Manor House sought to recover extra-contractual damages related to loss of rental income due to delays in repairing the damaged apartments as a result of Citizens dragging its feet in adjusting and paying the claims.

     In response, Citizens filed several motions, namely, Citizens’ motion for partial summary judgment to prevent Manor House from pursuing a claim for extra-contractual, consequential damage, Citizens’ motion for partial summary judgment regarding appraiser and umpire fees, and Citizens’ motion for judgment on the pleadings regarding Manor House’s claim for fraud. The trial court ruled in favor of Citizens on all three motions. Upon appeal, the Fifth District Court of Appeal, for different reasons, affirmed the trial court’s decisions on Citizens’ motion for partial summary judgment regarding appraiser and umpire fees and on Citizens’ motion for judgment on the pleadings regarding Manor House’s claim for fraud.

     The surprise came in the appellate court’s decision with regard to Citizens’ motion for partial summary judgment to prevent Manor House from pursuing a claim for extra-contractual, consequential damage. With regard to the ruling on the aforementioned motion, the appellate court determined that the trial court denied Manor House the opportunity to prove at trial whether the parties contemplated that Manor House would suffer consequential damages in the form of lost rental income if Citizens breached its contractual obligations to  adjust in a timely fashion the claim and pay for covered damages. In its opinion, the appellate court cited Florida case law which states, in part, that when an insurer breaches an insurance contract, the insured “is entitled to recover more than pecuniary loss involved in the balance of the payments due under the policy” in consequential damages, provided the damages “were in contemplation of the parties at the inception of the contract.” More specifically, in this case, damages allegedly resulted from a significant delay to Manor House being able to complete repairs so that the damaged apartments could be rented. The appellate court also made sure to note that it is undisputed that Citizens is immune from bad faith claims; however, the consequential damages alleged are strictly based on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.

     It should not be a surprise to note that the question raised by this ruling will most likely be making its way to the Florida Supreme Court. Though this is not the end of the road for this 2004 case, it will absolutely be one of the most tracked cases in the insurance field.

Edgar A. Kelly

Attorney, The Morgan Law Group

Edgar A. Kelly is an attorney at The Morgan Law Group focusing on property insurance litigation. Mr. Kelly’s experience in insurance litigation includes direct involvement in pre-suit coverage decisions, issues concerning bad faith, significant motion practice, taking and defending depositions, successful mediations, and trial preparation. Mr. Kelly was born and raised in Miami, Florida, and earned a bachelor of science from Florida International University and earned his juris doctor from Barry University School of Law. While in law school, he was elected and served as a Senator for the Student Bar Association and was involved with Habitat for Humanity. For more information on The Morgan Law Group, visit www.policyadvocate.com.