Insurance Essentials

Insurance Essentials

By Michael J. Gelfand, Esq. / Published April 2024

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nsurer Is Liable for Repair Costs Even When a Repair Contract Can Be Canceled at Any Time

     It is not unheard of for a building in South Florida to sustain water damage from a leaking pipe in the wall. It can be quite costly to repair the damage because not only do you have to rip open the wall, but also the pipe will have to be fixed. Will your insurer pay for these costs? Maybe yes, maybe no.

     Recently a Florida appellate court ruled that an insurance company was liable for the costs of tearing out parts of a home to access the leaking pipe even though the insured’s repair contract could be canceled by the insured at any time. The facts in State Farm Florida Insurance Company v. James, 48 Fla. L. Weekly D 2268 (Fla. 5th DCA, December 1, 2023), indicate that after the insured’s home sustained water damage from a leaking pipe, the insured submitted a claim for the cost to tear out and replace those parts of the home needed to access the failed pipe.

     The insured’s insurance policy contained the following provision:

     Tear Out. If a Loss insured to Coverage A property is caused by water or steam escaping from a system or appliance, we will also pay the reasonable cost you incur to tear out and replace only that particular part of the building or condominium unit owned by you necessary to gain access to the specific point of that system or appliance from which the water or steam escaped.

     The insured and insurer both agreed that the tear out costs amounted to $38,834.28. The insured signed a contract for repairs which contained a provision allowing for cancellation of the contract if the insurer failed to pay the claim. Because of this provision, the insurer denied the claim on the grounds that the contract for repairs was “illusory.” The insurer maintained that the insured did not “incur” the tear out costs.

     The trial court granted summary judgment for the insured, rejecting the insurer’s argument that the insured did not “incur” the tear out costs where the insured entered into a repair contract that the insured could void at any time.

     The Florida appellate court agreed with the trial court’s decision in favor of the insured. “[T]he plain meaning of ‘incur’ as used in State Farm’s policy does not contain even a hint that an insured’s contract must be non-voidable before payment will be allowed,” the court stated. “State Farm’s interpretation simply adds an undisclosed requirement that the policy language does not support.” The court concluded that the insured did not have to actually expend funds on a loss to be entitled to insurance proceeds. As the court asks, why would an insured commit to a costly non-voidable contract if the insured is on the hook entirely if the insurer fails to pay for losses?

     Of course, if an association sustains damage to its property, the association not only needs a written repair contract but also should be able to cancel the contract at any time if the insurer fails to pay a claim for damages. It is important to read and understand what is in your insurance policies.

Insured Did Not Intentionally Destroy Evidence When It Repaired Buildings after Sustaining Hurricane Damage

     Not only are leaking pipes a common problem, but South Florida has seen our fair share of hurricanes in recent years. A roof needs immediate attention when damaged. Is there such a thing as repairing a roof too fast? Have you contacted your insurer so that the insurer can inspect the roof before you start the repairs? To avoid a spoliation of evidence defense, it is important to allow your insurer time to inspect the roof, as can be seen by the following decision.

     In another recent insurance case, a Florida appellate court ruled that the insurer did not intentionally destroy evidence when it had repairs done to two buildings that were damaged by Hurricane Irma. The facts in Universal Insurance Company of North America v. Sunset 102 Office Park Condominium Association, Inc., 48 Fla. L. Weekly D 2329 (Fla. 3rd DCA, December 13, 2023), reveal that after the association filed an insurance claim for hurricane damages, the insurer found that the damages did not exceed the deductible. The association then sued the insurer for breach of contract.

     Prior to trial, the insurer maintained that the association intentionally destroyed evidence by fixing two of the buildings and sought a sanction for spoliation, that is, an “adverse inference” jury instruction. The trial court denied the motion for sanctions, finding that the insurer had inspected the property four times. Following a jury verdict in favor of the association, the trial court denied the insurer’s motion for a new trial and entered final judgment in the amount of $884,371.90.

     The Florida appellate court affirmed the trial court decision. The court pointed out that the insurance policy required that the insured must allow inspection of the property “as often as may be reasonably required.” However, the insurer did not establish that the association violated its duty under the terms of the insurance policy to preserve the evidence. “[T]he evidence supports the court’s determination, because Universal was allowed to inspect the property four times and did not request to conduct further examination of the two reroofed buildings—despite notice of Sunset’s intention to replace the roofs—until after installation of the new roofs was complete.”

     Even though the association in this case was found to have not violated the insurance policy, the case highlights the importance of giving your insurer notice of a claim and having it inspect the property before undertaking any repairs.

Michael J. Gelfand, Esq.

Senior Partner, Gelfand & Arpe, P.A.

     Michael J. Gelfand, Esq., the senior partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a dual Florida Bar board-certified lawyer in condominium and planned development law and in real estate law, a certified circuit and county civil court mediator, a homeowners’ association mediator, an arbitrator, and parliamentarian. He is a past chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at or 561-655-6224.