In Trinidad v. Florida Peninsula Insurance Company, the Florida Supreme Court reversed the Third District Court of Appeal, and concluded that insurers must pay a contractor’s overhead and profit as part of the expense of repairing a homeowner’s property despite the fact that the repairs may not have been made. Florida Peninsula Insurance Company (“FPIC”) believed that they did not owe money for the overhead because that is not covered under replacement cost insurance. As we previously discussed, the facts of the case are fairly straight forward. Amado Trinidad filed a claim with his homeowner’s insurance company, FPIC, for fire damage that occurred to his home in 2008. FPIC admitted coverage and made a payment for completion of the repairs, even though Trinidad did not make repairs to the home or hire a general contractor. FPIC’s payment did not, however, include an amount for a general contractor’s overhead and profit, claiming that it was entitled to withhold payment of overhead and profit until Trinidad actually incurred those particular expenses. Trinidad then filed a breach of contract lawsuit against FPIC. The trial court agreed with FPIC, and Trinidad appealed to the Third District Court of Appeal. The Third District Court of Appeal also agreed with FPIC, and Trinidad appealed to the Florida Supreme Court. Citing a conflict with Goff v. State Farm, 999 So.2d 684 (Fla. 2d DCA 2008), the Florida Supreme Court agreed to render a ruling on the case. One of the issues that the Florida Supreme Court was forced to address was whether or not Fla. Stat. Sec. 627.7011 was applicable to this case. That statute, as it existed in 2008, provided that in the case of a replacement cost policy, the insurer shall pay the replacement cost without reservation or holdback of any depreciation in value, whether or not the insured replaces or repairs the damaged property, limited to the reasonable and necessary cost to repair or replace the damaged property. The Court went on to hold that if overhead and profit are “reasonable and necessary” to the repair, Fla. Stat. Â§ 627.7011 mandates their payment as replacement costs. Overhead and profit are no different than any other costs of repair that an insured is reasonably likely to incur. Therefore, the Florida Supreme Court concluded that an insurer is required to pay overhead and profit under a replacement cost policy, where the insured is likely to need a general contractor in order to make the repairs to their home. State lawmakers in 2011 sought to address cases like Trinidad’s and grant insurers more control over monies actually used to make repairs. Under current state law in the event of a loss under a replacement cost policy, the insurer must initially pay at least the actual cash value of the insured loss, less any applicable deductible. Then as repairs are performed, the insurer must pay the full replacement cost of those repairs.
Florida’s Third District Court of Appeal recently heard an appeal from an Amended Final Judgment after appraisal. The case on appeal was reversed and remanded for further proceedings after the appellate court concluded that the trial court should not have used Florida’s arbitration code to confirm a million dollar insurance claim when there were still unresolved coverage issues. The court determined that the Florida Arbitration Code is not applicable to insurance appraisal rewards when such coverage issues remain unresolved. In Citizens v. Mango Hill, the Third District Court of Appeal explained that there are well defined differences between arbitration and appraisal in the state of Florida. An agreement for appraisal is for the resolution of the specific issues of actual cash value and amount of loss. Typically, appraisal exists for a limited purpose – for instance, the determination of the “amount of the loss.” As such, there are no requirements that appraisers be sworn, as the appraisal process is very informal given that they are often narrow in scope and purpose. Appraisers are generally expected to act on their own skill and knowledge relating to the matters. They are not required to give formal notice of their activities to the parties or counsel, or to hear evidence. And often times, there are specific appraisal agreements covering the scope of the appraisal. On the other hand, an agreement to arbitrate usually involves the disposition of an entire controversy between parties. The Florida Arbitration Code, entitles each party to a full hearing in the presence of the opposing party, unless this right is waived by conduct or an agreement. Arbitrators can not conduct an independent investigation of the issue. In the instant case, Citizens asserts that Mango Hill failed to adhere to the post-loss obligations under the insurance policy thereby negating coverage. Specifically, Mango Hill allegedly failed to allow Citizens’ appraiser to complete a full inspection of the loss claimed, and they also supposedly refused to tender an amended sworn proof of loss or appear for an examination under oath after nearly doubling the claim amount during the appraisal process. Citizens’ asserts that the trial court failed to consider its coverage defenses regarding payment of the award in light of those coverage defenses. The Third District Court of Appeal concluded that the proper procedure requires that Citizens’ coverage defenses be addressed by motion for summary judgment or trial as opposed to an appraisal award confirmation under the Florida Arbitration Code. Here the Court rules that the Florida Arbitration Code will not apply to appraisal awards. For these reasons the appellate court reversed and remanded the case back to the trial court with instructions to comply with the court’s opinion. In the end, this case stands for the general proposition that appraisal is not the appropriate means to resolve and handle coverage disputes. In other words, if there are applicable coverage defenses that have not been disposed of, then the appraisal award cannot be confirmed, and enforced, in the same manner as an arbitration award. On the other hand, it is also clear that if no coverage defenses were asserted, or if the coverage defenses have already been resolved, then the trial court would be free to confirm, and enforce, an appraisal award.
Are You Financially Prepared for Hurricane Season? Here in South Florida we all know the devastation of hurricanes and the destruction they can cause. One of the most expensive things you could lose during a hurricane would be your home. For this reason it is extremely important for homeowners to be prepared financially for hurricane season. It is often the case that many Floridians are not prepared to protect their home or their finances during hurricane season.
The most important thing to do going into hurricane season is making sure that you have hurricane coverage. Check all your insurance policies and if you can not locate your policy don’t hesitate to call your insurer and ask these pressing questions regarding your home. This goes along with making sure you have all sufficient documents needed in the case of a hurricane.
However, hurricane season has already started. So now is the time to take a look at your property insurer to determine whether your insurer is in good financial health. In the event of major storm, you don’t want to be stuck with an insurance company that is going broke as it will negatively impact your claim. Worse, it could leave you in a position where you will be unable to fully recover money for repairs that you are entitled to receive despite the fact that you paid your premiums.
Next you must insure that you have adequate proof of damage. Make sure that you take pictures or videos of the damage immediately after assessing it. Also if any conditions worsen make sure to document them so that your insured will cover all your damages.
So remember heading into hurricane season you must double check your policies to make sure you are fully covered for hurricanes. Once you have done that make sure you have all proper documentation needed to make a claim. And lastly in the event of a hurricane make sure to document all of your damage. These tips should help you to protect your home and your money in the case of a disaster.
Overhead and Profit – Is it Included in the Replacement Cost Portion of the Insurance Policy?
In Trinidad v. Florida Peninsula Insurance Company, the Florida Third District Court of Appeal, held that a homeowner was not entitled to overhead and profit as damages from a fire in his home.
In this case, a fire damaged the insured’s home. The insured then submitted a claim for payment to his insurance company. The insurance company admitted coverage and made a payment towards repairs. The insured, however, believed that he was not paid in full for his claim as he was not paid overhead and profit. As a result, he filed a lawsuit against his insurance company.
The issue in the litigation focused on overhead and profit. Overhead and profit are elements of the costs paid to a contractor for repairs, and are included in repair contracts and estimates. Overhead includes fixed costs to run the contractor’s business, such as salaries, rent, utilities, and licenses. Profit is the amount the contractor expects to earn for his services.
Although the insured had not hired a general contractor, or submitted a contract by a contractor estimating the repairs, the insured claimed that he was nonetheless entitled to overhead and profit. The insured claimed that he was entitled to overhead and profit even though he did not hire a contractor because they are a “replacement cost” and it is his choice as to whether to make the repairs with a contractor or not.
The insured initially based his argument on his contention that the loss settlement provision of his policy provided for an “actual cash value” payment for his loss, and “actual cash value” includes overhead and profit. Actual cash value is the actual cost of repair, less depreciation. The parties later agreed, however, that the policy is a replacement cost policy. But the insured claimed that his insurance company still was required to pay him for overhead and profit even if he never hired a contractor and does not repair the damage. The insured also relied on Fla. Stat. Sec. 627.7011(3) to support his position.
On the other hand, the insurance company argued that replacement cost is the cost to replace the damaged property, which does not include depreciation or overhead and profit until the insured either incurs those costs or he signs a contract for repairs and submits the contract to the insurance company.
The Trial Court and the Third District Court of Appeal sided with the insurance company and concluded that the insurance company was only required to make payments for overhead and profit under a replacement cost policy when the homeowner actually incurred those costs or became contractually obligated to do so with a contractor. Since the insured did not hire a contractor and did not spend any money on overhead or profit he was not entitled to payment for overhead and profit under the replacement cost insurance policy.
In sum, the Third District Court of Appeal concluded that an insurance policy that promises to pay replacement cost value requires the insured to actually replace the damaged property. The case is currently pending before the Florida Supreme Court, and one of the issues to be decided is whether this ruling conflicts with Fla. Stat. 627.7011(3) which requires replacement cost payments to be made “whether or not the insured replaces or repairs the dwelling or property.” A ruling is expected soon from the Florida Supreme Court.
Chipped tile claims are under assault by Florida insurance companies. Indeed, South Florida insurance companies have seen a steady rise over the years in the increased number of chipped tile claims. As a result, insurance companies are fighting back. Insurance companies are denying more and more of these claims every day. When they are not denying these claims, they are often quicker to exercise their right to repair, which triggers different contractual obligations between the parties. Citizens was even able to modify its policies to have a $10,000 cap for cosmetic or aesthetic damage to flooring, including, but not limited to, chips, scratches, dents, marring or any other damage that covers less than 5% of the total floor surface area of the building and does not prevent typical use of the floor.
But a recent ruling by the Fourth District Court of Appeal in Benjamin Ergas’s legal saga against his insurance company, Universal, an insurance company that was fined millions of dollars for poor claims handling, is potentially catastrophic for property owners seeking insurance coverage for damage to their floor from a sudden and accidental loss.
As with most cases, Benjamin Ergas’s legal odyssey started inconspicuously. Benjamin Ergas, the insured, dropped a hammer on his tile floor, causing it to chip. The chip was about the size of the hammer head. He filed a claim for the damage with Universal, his homeowner’s insurance company. Universal denied the claim. They denied the claim on grounds that the policy excluded coverage as follows:
“We insure against risk of direct loss to property… We do not insure, however, for loss: . . . 2. Caused by: . . . (e) Any of the following: (1) Wear and tear, marring, deterioration . . . .”
The insured then filed a lawsuit against his insurance company, Universal, seeking coverage for his damaged floor. The trial court, however, entered summary judgment in the insurance company’s favor. In so doing, the trial court agreed with the insurance company that the damage was excluded under the insurance policy because “marring” was not covered. The insured then challenged that ruling by filing an appeal with the Fourth District Court of Appeal.
On appeal, the insured argued that the term “marring” was ambiguous because the policy did not define the term. Long standing Florida law states that any ambiguity in an insurance policy should be interpreted in the insured’s favor, and coverage afforded. The insured also argued that under the doctrine of ejusdem generis, the term “marring” should be read in context. Since “marring” was found in the policy between the terms “wear and tear” and “deterioration” it suggests that marring was intended to refer to damage which was caused over time. Since the damage from the dropped hammer was sudden, the insured argued it was covered under the insurance policy, and not excluded by the “marring” exclusion.
However, the Fourth District Court of Appeal was not persuaded by those arguments. As a result, the appellate court concluded that the “the damage caused by the hammer dropping constituted marring and thus was excluded from policy coverage.” In sum, they affirmed the trial court’s conclusion to deny coverage.
The appellate court’s ruling, however, completely dismisses the sudden and accidental concept of damage. Indeed, and in dismissing that notion, the ruling does go to great lengths, in a footnote, to mention that the insured’s attorney did not argue that the insurance company’s interpretation of marring could potentially cover almost all damage to the insured’s property, whether slight or substantial. In other words, while the court noted that the term was not ambiguous, it suggested that term could very well be overbroad. And that could potentially be problematic since the overbroad use of the term of “marring” could pertain to most of what an insured would expect the policy to cover. Simply put, a definition of “mar” or “marring” which included serious injury would essentially gut coverage under the insurance policy. And the court noted that a term used within the insurance policy should not be construed to reach such an absurd result as potentially gutting all available insurance coverage under the policy. Gen Star Indem. Co. v. W. Fla. Village, Inc., 874 So.2d 26 (Fla. 2d DCA 2004).
On the other hand, since the insured’s attorney did not argue that the definition of marring is ambiguous because that term, as used by the insurance company in this case, is potentially overreaching, overbroad, and ambiguously over-inclusive of damage, the appellate court did not address that concern that they themselves noted could be very problematic for insurance companies.
Therefore, it is possible that if the appellate court is confronted with an argument that the term “marring” is ambiguous because of its potentially over-inclusive interpretation gutting just about all other available coverage that the appellate court may reach a different conclusion than the one reached in Ergas.
But until then, insurance companies will no doubt rely on Ergas to deny many “chipped tile” claims that were the direct result of a “sudden” and “accidental” event that was once covered and paid by the insurance companies.
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Before opening our law firm in 2006, our attorneys worked for some of the state’s, and nation’s, largest law firms, and worked representing the insurance companies for years. Our attorneys are now uniquely positioned to use that experience to assist individuals and businesses alike throughout Florida with their insurance claims. As a result, our attorneys are well versed in the impact insurance has on businesses, condominiums, and individuals alike. Our insurance litigation practice group is prepared to tackle your insurance claim.
Given our extensive experience litigating for, and against, insurance companies, our insurance litigation practice group is prepared to provide aggressive, efficient and effective representation on a broad spectrum of insurance claims in Florida for local, national, and international clients. We are prepared to advocate insurance claims at the pre-suit stage, trial, appellate and arbitration levels.
Call us today toll free at 1-866-518-2913 or at 305-263-7700.
It is vital for every business owner or professional to have a disaster plan in place that includes knowing how to assess damage, understanding how to properly file an insurance claim, and make the required repairs to get back to work as quickly as possible. Taking the wrong approach, or simply mishandling your potential insurance claim, could cost you a lot of money with respect to any claim that may ultimately be submitted to your insurance company.
In an effort to aid your hurricane season preparation, here are some suggestions that could assist you during this upcoming hurricane season’s adequately prepare.
â€¢ Make sure to copy and safely store your pertinent documents. For instance, make sure you have a copy of your property and casualty, as well as a copy of your business interruption insurance policy, and a copy of your lease agreement. You should maintain hard copies of these important documents in the event of a long-term power outage, but you should also store these documents digitally and off-site in a secure electronic environment. You should also safely store these documents in a manner that will allow you to gain very quick access to them in the event of a catastrophe.
â€¢ You should also safely make the appropriate arrangements to have copies of your last four years of income tax returns, and the last six months of your profit and loss statements safely secured. You’ll need the financial data in the event that you have to make a business interruption claim, and you will need physical copies of these documents should you not be able to gain access to them electronically.
â€¢ Keep an updated account of your inventory, and print that out as well. Be sure to inventory all of your office supplies such as computers, desk, chairs and paper since you can recover those losses. You should photograph all of these items as well.
â€¢ If you rent space, then it is imperative that you keep a copy of your lease agreement in a safe place along with all of the aforementioned other documents.
â€¢ Make sure to take photographs and/or video of your entire workspace, including your inventory and office supplies.
â€¢ Make sure to collect emergency contact information for all of your employees, suppliers, and vendors.
â€¢ Work with your senior staff to prepare a plan for a storm, fire, flood or other emergency. What are the contingencies that will allow you to get back to work quickly, and what are the variables that will prompt a long term shut down. Who will be in charge of getting your network back up? Who will be in charge of contacting your major clients? Who will be in charge of handling your insurance claim? Assigning these responsibilities in a calm environment prior to a storm striking will only aid the smooth transition to get back to work after a storm strikes South Florida.
â€¢ If you own the property, hire a licensed inspector or contractor to examine the roof, interior and other structural components in advance to the store. You do not want the insurance company to deny your claim by saying that your property had pre-existing damage. The best way to combat that argument is to conduct the appropriate inspection today.
â€¢ Prepare a list of preferred contractors that you can call on for all necessary repairs. Don’t wait for the insurance company to find someone. If the storm was a catastrophe, then that aid will be difficult to come by. Indeed, it will be incumbent upon you to repair your damages, and the best way to do that is to contact a contractor today and make arrangements to insure prompt repairs after a storm strikes out Florida.
â€¢ Communication is vital to any recovery. Make sure you have a plan for proper communication and one should anticipate disruptions in communications services, possibly for extended periods of time.
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Considering the increased odds of South Florida getting hit by a storm you should take the necessary steps to safeguard your property and business. That is particularly true since history suggests that South Florida is due for a hurricane strike. Therefore, this is certainly not the season to take lightly. We’ve been spared the last few years, but this could be the year where we are hit by another hurricane. Hurricanes are a fact of life living in South Florida. Although inevitable, they are not surprises like earthquakes or tsunamis. You can prepare and be ready for a hurricane. Call us today to discuss your hurricane preparation in greater detail.
Citizens Property Insurance is aggressively downsizing, which has caused many smaller insurers to take on their policies. They have been downsizing because Gov. Scott believes they need to lower risks. To the average person this seems like a good thing as smaller companies will continue to grow. However, the smaller insurers’ success when taking over the insurance policies from Citizens has proved otherwise. The companies who receive these policies from Citizens are considered to be “Takeout” firms.
Takeout firms receive policies from Citizens usually in agreement to receive money along with the policies. Once the policies are removed from citizens then the policy holder’s agent is notified of an offer to accept the takeout deal. If the agent denies the offer then the same offer will be made to the policy holder, who may refuse to allow the policy to be removed from Citizens.
What does all of this mean? Basically Citizens is paying lots of money to relatively new and small insurers who are not always equipped enough to handle this quantity of policies. This is why it is incumbent upon all Florida policy holders to check the financial strength of their insurance company.
For instance, Citizens agreed to pay Heritage Property and Casual Insurance, a nine month old company, $52 million to take over 60,000 policies. As a result of this homeowners will receive letters from Heritage and have 30 days to opt out before they are automatically removed from Citizens.
Many believe that companies such as Heritage are not capable of taking on such policies, especially in the event of a hurricane. There is evidence to back this belief as many companies who have taken over policies from Citizens have become insolvent.
The negative effective of these companies becoming insolvent is tax payers coming out of pocket for more then $400 million. This is not a good sign as Citizens is starting to intensify its effort to turn over policies to smaller insurers.
It seems as though Citizens intended purpose of lowering risk by removing these policies is actually causing more risk as smaller firms are becoming insolvent and tax payers are taking on the cost.
A Significant Victory for Homeowners filing a Homeowners Insurance Claim – Florida Appellate Court Concludes that a Water Loss from a Deteriorated Pipe is a Covered Claim
Did you know that water damage is one of the most commonly cited reasons in claims on home insurance? This should not come as a total surprise considering the many possible causes of water damage – heavy rain, bursting of pipes, and the bathtub accidentally overflowing. However, insurance companies as of late have been increasing their denials on water damage claims.
Coming home to find a busted pipe has flooded your home is one of the biggest disasters a homeowner can face. Being mistreated by your insurance company can add insult to injury and can cost a South Florida homeowner tens of thousands of dollars. Especially if that insurance company improperly denies that water damage claim.
In a recent case, the Cheethams filed a claim with their insurer Southern Oak after their property sustained water damage when a pipe buried under the home deteriorated and caused waste water and material to back up into the home.
Southern Oak denied the claim and the Cheethams filed suit in Miami-Dade County Circuit Court. The judge assigned to handle the case for trial court agreed with the insurer that the damage was excluded from coverage under the Cheetham’s policy.
The homeowner then filed an appeal to the Third District Court of Appeal challenging the trial court’s ruling.
The Third District Court of Appeal was asked to make two important determinations:
(1) whether the policy was ambiguous; and
(2) whether the exclusion applied to the Cheetham’s situation.
Southern Oak argued that the policy excluded coverage for deterioration, as well as water damage. The Appellate Court, however, reasoned that while the damage would have been excluded under the policy because of the deterioration of the pipe, the coverage was extended under the exception when damages “result from discharge or overflow of water or steam from a plumbing system on the residence premises”.
The Appellate Court determined that, even though the policy didn’t define “plumbing system” that the pipe in the Cheetham’s case was a part of the plumbing system based on its designed function and dictionary definition.
Additionally the court reasoned that the pipe was on the residence premises and part of the system despite being buried under the home and the water exclusion the defendant pointed to only excludes water damage originating from outside the resident premises, not from within.
What does this mean for homeowners? The pertinent part was where the damage originated, had the broken pipe been off of the Cheetham’s property and caused water and debris to back up into their home, the Court would have excluded those damages from coverage. But because the pipe was a part of the Cheetham’s plumbing system and the problem causing the back up originated on their property the damage was covered under the insurance policy.
The first signs of water damage might seem trivial. But warnings like water stains on the ceilings or a leak under the kitchen sink can lead to real problems, like a weakened roof or rotten floorboards. A burst pipe can even damage your furniture and other personal possessions.
Please do not hesitate to contact our office to discuss your insurance claim needs.
But once the holiday weekend is over, we must start preparing for the 2013 hurricane season, which officially starts on June 1st.
Many native South Floridians have been dealing with hurricanes since they were young children and simply brush off hurricane season without preparation. However, must we remind you of the damage caused by Hurricane Andrew or even the more recent Hurricane Wilma, the second worst hurricane in Florida history?
Advanced preparation is vital because right before a storm hits, supermarkets and home improvement stores are jam-packed with last minute shoppers. Waiting until the last minute on important supplies is especially dangerous because items fly off the shelves and you risk being left without necessary supplies. It also important to stock enough supplies to last you through a storm and beyond.
The National Hurricane Center recommends including these items in your hurricane survival kit:
The Condominium Act in Florida states that insurers must cover damage to the exterior common elements. However, the 4th District Court of Appeal recently held that associations cannot rely on that provision to cover damages to those areas.
In a recent dispute between Citizens and River Manor Condo Association, Inc. (“Ass’n”) in Wilton Manors, the Court reversed $1.24M of a $6M damages awarded to the Ass’n for damages caused by Hurricane Wilma in 2005.
Citizens argued that structures and landscaping separate from the buildings was excluded from coverage. In response the Ass’n cited the section in the Condominium Act that requires coverage for those damages. The Circuit Court Judge found conflict between the policy exclusions and the Act and found for the Ass’n.
The 4th District panel looked at the legislative intent and insisted that the Act was created to regulate associations not insurance companies because a subsection in the Act requires associations to use their “best efforts” to obtain such coverage and if the Act regulated insurers the subsection would be meaningless. However, the panel agreed that the “best efforts” language is ambiguous, and could lead to negative consequences in future application.
The Court interpreted the statute to mean that an association should use its best efforts to obtain insurance that covers the exterior elements of common areas but implicitly recognizes that due to market constraints this may be impossible. This means that insurance policy exclusions strictly construe the coverage of the association’s property and the association may not rely on the section of the Condo Act to “extend” coverage to those areas.