Consequential Damages can be Recovered Against Insurer in Breach of Contract

In a favorable case for insureds, the Fifth District Court of Appeal maintained that “when an insurer breaches an insurance contract, the insured is entitled to recover more than the 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 [insurance] contract.” Manor House, LLC v. Citizens Property Insurance Corp., 44 Fla. L. Weekly D1403b (Fla. 5thDCA 2019) (internal citations and quotation omitted). Thus, consequential damages can be recovered against an insurer in a breach of contract action (e.g., breach of the insurance policy) if the damages can be proven and were in contemplation of the parties at the inception of the insurance contract.

In Manor House, the trial court entered summary judgment against the insured holding the insured could not seek lost rental income in its breach of contract action against Citizens Property Insurance because the property insurance policy did not provide coverage for lost rent. However, the Fifth District reversed this ruling because the trial court denied the insured the opportunity to prove whether the parties contemplated that the insured, an apartment complex owner, would suffer lost rental income (consequential damages) if the insurer breached its contractual duties.

This ruling is valuable to insureds because Citizens Property Insurance, a creature of statute, cannot be sued for first-party bad faith. However, the Fifth District found that the consequential damages in the form of lost rental income did not require the insured to prove the insurer acted in bad faith, but merely, breached the terms of the policy. This holding can be extended to other breach of contract actions against an insurer when the insured suffered and can prove consequential-type damages caused by the breach.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

DID THE INSURED FORFEIT PROPERTY INSURANCE COVERAGE BY FAILING TO COMPLY WITH POST-LOSS POLICY OBLIGATIONS?

Have you complied with your property insurance policy’s post-loss policy obligations?   Has your property insurer argued that your failure to comply with post-loss policy obligations has resulted in you forfeiting insurance coverage?  Have you filed a lawsuit against your property insurer for coverage and the property insurer has asserted affirmative defenses based on your material breach of the policy by failing to comply with post-loss policy obligations?  

 

These are common questions when an insured submits a claim under a property insurance policy.   Knowing how to address these questions (and a property insurer’s coverage defenses relating to these questions) is important when pursuing a property insurance claim.

 

 

The Third District Court of Appeal in American Integrity Insurance Company v. Estrada, 44 Fla. L. Weekly D1639a (Fla. 3d DCA 2019), does a good job addressing these questions in a property insurance coverage dispute involving vandalism.   The property insurer in this case raised various forfeiture of coverage affirmative defenses relating to its insured’s failure to comply with post-loss policy conditions, e.g., (i) failure to appear for an examination under oath, (ii) failure to promptly notify the insurer of the vandalism (the loss), (iii) failure to submit a sworn proof of loos, (iv) failure to provide all requested records, and (v) failure to protect the property from further damage by making repairs.   These are fairly routine affirmative defenses raised by a property insurer.  The procedural argument in this case is not relevant; what is relevant is the Court’s discussion of an insurer’s affirmative defenses based on its insured’s failure to comply with post-loss policy obligations.  

 

As shown below, an insured’s breach of a post-loss policy obligation MUST be material and MUST prejudice the insurer.    An insured’s material breach of a post-loss obligation will result in a presumption of prejudice to the insurer, however, an insured can REBUT the presumption by showing the insurer was not prejudiced, which is a question of fact for the trier of fact.

 

1.    Breach of Post-Loss Obligations Must be “Material” 

 

The Third District explained:

 

Florida law “abhors” forfeiture of insurance coverageSee Axis Surplus Ins. Co. v. Caribbean Beach Club Ass’n, Inc., 164 So. 3d 684, 687 (Fla. 2d DCA 2014). “Moreover, ‘[p]olicy provisions that tend to limit or avoid liability are interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy . . . .’ ” Bethel v. Sec. Nat’l Ins. Co., 949 So. 2d 219, 223 (Fla. 3d DCA 2006) (quoting Flores v. Allstate Ins. Co., 819 So. 2d 740, 744 (Fla. 2002)).

 

With these basic principles in mind, it is, unsurprisingly, well settled that, for there to be a total forfeiture of coverage under a homeowner’s insurance policy for failure to comply with post-loss obligations (i.e., conditions precedent to suit), the insured’s breach must be material. See Drummond, 970 So. 2d at 460 (concluding that the insured’s failure to comply with a post-loss obligation “was a material breach of a condition precedent to [the insurer’s] duty to provide coverage under the policy”) (emphasis added); Starling, 956 So. 2d at 513 (“[A] material breach of an insured’s duty to comply with a policy’s condition precedent relieves the insurer of its obligations under the contract.”) (emphasis added); Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300, 303 (Fla. 4th DCA 1995) (“An insured’s refusal to comply with a demand for an examination under oath is a willful and material breach of an insurance contract which precludes the insured from recovery under the policy.”) (emphasis added); Stringer v. Fireman’s Fund Ins. Co., 622 So. 2d 145, 146 (Fla. 3d DCA 1993) (“[T]he failure to submit to an examination under oath is a material breach of the policy which will relieve the insurer of its liability to pay.” (quoting 13A Couch on Insurance 2d (Rev. 3d) § 49A:361 at 760 (1982) (footnote omitted) (emphasis added))).

 

Further, while the interpretation of the terms of an insurance contract normally presents an issue of law, the question of whether certain actions constitute compliance with the contract often presents an issue of factSee State Farm Fla. Ins. Co. v. Figueroa, 218 So. 3d 886, 888 (Fla. 4th DCA 2017) (“Whether an insured substantially complied with policy obligations is a question of fact.”) (emphasis added); Solano v. State Farm Fla. Ins. Co., 155 So. 3d 367, 371 (Fla. 4th DCA 2014) (“A question of fact remains as to whether there was sufficient compliance with the cooperation provisions of the policy to provide State Farm with adequate information to settle the loss claims or go to an appraisal, thus precluding a forfeiture of benefits owed to the insureds.”) (emphasis added).

Estrada, supra

 

2.   If the Breach was Material, was the Property Insurer “Prejudiced”

 

Although there is a split between Florida’s Fourth and Fifth District Courts of Appeal on this prejudicial element (the Fourth District has taken a more pro-insurer friendly approach), the Third District agreed with the Fifth District’s more insured-friendly approach that “the insurer must be prejudiced by the insured’s non-compliance with a post-loss obligation in order for the insured to forfeit coverage.”   

 

3.  Party Bearing Burden to Establish Property Insurer was “Prejudiced”

 

The Third District held that while prejudice to an insurer will be presumed when an insured materially fails to comply with a post-loss policy obligation, the insured can rebut this presumption by showing the insurer was not prejudiced:

 

[W]hen an insurer has alleged, as an affirmative defense to coverage, and thereafter has subsequently established, that an insured has failed to substantially comply with a contractually mandated post-loss obligation, prejudice to the insurer from the insured’s material breach is presumed, and the burden then shifts to the insured to show that any breach of post-loss obligations did not prejudice the insurer.

Estrada, supra.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

CONSEQUENTIAL DAMAGES CAN BE RECOVERED AGAINST INSURER IN BREACH OF CONTRACT

In a favorable case for insureds, the Fifth District Court of Appeal maintained that “when an insurer breaches an insurance contract, the insured is entitled to recover more than the 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 [insurance] contract.”  Manor House, LLC v. Citizens Property Insurance Corp., 44 Fla. L. Weekly D1403b (Fla. 5thDCA 2019) (internal citations and quotation omitted).   Thus, consequential damages can be recovered against an insurer in a breach of contract action (e.g., breach of the insurance policy) if the damages can be proven and were in contemplation of the parties at the inception of the insurance contract.

 

In Manor House, the trial court entered summary judgment against the insured holding the insured could not seek lost rental income in its breach of contract action against Citizens Property Insurance because the property insurance policy did not provide coverage for lost rent.  However, the Fifth District reversed this ruling because the trial court denied the insured the opportunity to prove whether the parties contemplated that the insured, an apartment complex owner, would suffer lost rental income (consequential damages) if the insurer breached its contractual duties.

 

This ruling is valuable to insureds because Citizens Property Insurance, a creature of statute, cannot be sued for first-party bad faith.  However, the Fifth District found that the consequential damages in the form of lost rental income did not require the insured to prove the insurer acted in bad faith, but merely, breached the terms of the policy.   This holding can be extended to other breach of contract actions against an insurer when the insured suffered and can prove consequential-type damages caused by the breach. 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

INSURER’S CONFESSION OF JUDGMENT THROUGH POST-LAWSUIT PAYMENT

The recent opinion in the property insurance coverage dispute, Bryant v. Geovera Specialty Ins. Co., 44 Fla.L.Weekly D1232a (Fla. 4thDCA 2019), discusses the doctrine known as an insurer’s “confession of judgment.”   In this case, an insured suffered water damage from a pipe leak.  The insurer paid the insured $6,000 because of sublimits in the property insurance policy.   There was a $5,000 sublimit for mold and a $1,000 sublimit for water leakage that occurs over a period of 14 days or more.  The insured sued the insurer for covered water damage arguing that the sublimits did not apply.

 

After the lawsuit was filed, an agreed order was entered that stayed the case pending an appraisal.  The appraisal award did not apply the $1,000 sublimit to the water damage from the pipe leak and segregated out damage for mold.  (The insurer already paid the mold sublimit).  The insurer ended up paying the appraisal award for the water damage caused by the pipe leak after deducting its pre-lawsuit sublimit payment.  The insurer paid the award and did NOT challenge the application of the $1,000 sublimit in court, although it could have since coverage issues are decided by courts.

 

An issue became whether the insurer’s post-lawsuit payment of the appraisal award above the $1,000 sublimit constituted an insurer’s confession of judgment.

 

[I]t is well settled that the payment of a previously denied claim following the initiation of an action for recovery, but prior to the issuance of a final judgment, constitutes the functional equivalent of a confession of judgment.” Johnson v. Omega Ins. Co., 200 So. 3d 1207, 1215 (Fla. 2016). The confession-of-judgment doctrine “applies where the insurer has denied benefits the insured was entitled to, forcing the insured to file suit, resulting in the insurer’s change of heart and payment before judgment.” State Farm Fla. Ins. Co. v. Lorenzo, 969 So. 2d 393, 397 (Fla. 5th DCA 2007).

 

The confession-of-judgment doctrine is limited to situations where the filing of the lawsuit “acted as a necessary catalyst to resolve the dispute and force the insurer to satisfy its obligations under the insurance contract.” See, e.g.State Farm Fla. Ins. Co. v. Lime Bay Condo., Inc., 187 So. 3d 932, 935 (Fla. 4th DCA 2016). However, “[i]t is the incorrect denial of benefits, not the presence of some sinister concept of ‘wrongfulness,’ that generates the basic entitlement to the fees if such denial is incorrect.” Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). Thus, “an incorrect denial of benefits, followed by a judgment or its equivalent of payment in favor of the insured, is sufficient” to constitute a confession of judgment and to allow the insured to recover attorney’s fees.

 

An attorney’s fees award is also appropriate “where, following some dispute as to the amount owed by the insurer, the insured files suit and, thereafter, the insurer invokes its right to an appraisal and, as a consequence of the appraisal, the insured recovers substantial additional sums.” Lewis v. Universal Prop. & Cas. Ins. Co., 13 So. 3d 1079, 1081 (Fla. 4th DCA 2009).

 

Even after Johnson, not all post-suit payments by an insurer will constitute a confession of judgment. We recently held that where an insurer valued a loss, issued payment, and was unaware of the insured’s disagreement with the damage valuation until the filing of the complaint, the insurer’s timely payment of an appraisal award during the litigation did not constitute a confession that the insurer breached the insurance policy. See Goldman v. United Servs. Auto. Ass’n, 244 So. 3d 310, 311-12 (Fla. 4th DCA 2018).

Bryant, supra

 

Here, the appellate court held the insurer’s payment of the post-lawsuit appraisal award constituted a confession of judgment that it incorrectly denied benefits by invoking the $1,000 leakage sublimit.    Once the insurer invoked the sublimits, it raised a coverage issue that only a court could decide and [t]his coverage issue went beyond a mere dispute about the valuation of the loss, so the insureds could not have simply invoked the policy’s appraisal provision before filing suit.”  Bryant, supra.  (“Under Johnson, “[o]nce an insurer has incorrectly denied benefits and the policyholder files an action in dispute of that denial, the insurer cannot then abandon its position without repercussion.” Here, the insurer’s payment of the appraisal award…demonstrated that GeoVera [insurer] had abandoned its pre-suit coverage position that the claim was subject to the $1,000 sublimit for long-term water leakage.”) (internal citation omitted)

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

INSURED UNDER PROPERTY INSURANCE POLICY SHOULD COMPLY WITH POST-LOSS POLICY CONDITIONS

Your property insurance policy will contain post-loss policy conditions.  Examples include submitting a sworn statement in proof of loss, providing documentation to your insurer, and sitting for an examination under oath.  Insurers will require you, as the insured, to comply with post-loss policy conditions unless they elect to promptly deny coverage.  If you do not comply with such post-loss policy conditions you can forfeit coverage under the policy and/or give the insurer the argument that any lawsuit you filed against the property insurer is premature.  Thus, there really is no upside in refusing to comply with the post-loss policy conditions, which should be done in consult with an attorney or, as the case may be, a public adjuster.   

 

For instance, in Safepoint Ins. Co. v. Sousa, 44 Fla. L. Weekly D994a (Fla. 3d DCA 2019), an insured submitted a property insurance claim for hurricane damage.  The insurer requested the insured submit a sworn statement in proof of loss and provide documentation.  The insured never did although she did submit for an examination under oath.  The insurer ended up tendering insurance proceeds based on its adjustment of the claim.  Thereafter, the insured sued its insurer and moved to compel an appraisal per the terms of the property insurance policy.  In doing so, the insured provided an adjustment / estimate from her public adjuster that was approximately $100,000 more than the proceeds the insured received (which had never been provided to the insurer).  The insurer opposed the motion based on the insured’s failure to comply with post-loss policy conditions (i.e., submitting the sworn statement in proof of loss and documentation).   The appellate court agreed that the insured’s failure to comply with these post-loss policy conditions clearly spelled out in the property insurance policy rendered it PREMATURE for the insured to compel an appraisal.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

 

PROPERTY INSURER INVOKING APPRAISAL UNDER PROPERTY INSURANCE POLICY

shutterstock_398442106Property insurance policies routinely contain an appraisal provision.   The provision may read something to the effect:

 

 

 

If you and we fail to agree on the amount of loss, either may request an appraisal of the loss. However, both parties must agree to the appraisal. In this event, each party will choose a competent and impartial appraiser within 20 days after receiving a written request from the other. . . . If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of the loss.

 

Safepoint Insur. Co. v. Gomez, 44 Fla.L.Weekly D239b (Fla. 3d DCA 2019).

 

In Safepoint, the Third District Court of Appeal maintained if the property insurer invokes appraisal, it waives the right to subsequently demand compliance with post-loss conditions in the policy as a condition precedent to that appraisal.  (“‘Appraisal exists for a limited purpose – the determination of the amount of loss.’” By invoking appraisal pursuant to the terms of the insurance policy, Safepoint [insurer] waived the requirement of compliance with post-loss obligations as a condition precedent to that appraisal.”)  Safepoint, supra (internal citation omitted). 

 

In Safepoint, the insured (policyholder) submitted a property insurance claim.  The insurer sent payment for the covered loss, but the amount of payment was disputed.  As a result, the insurer invoked the appraisal process in the property insurance policy, and the insured agreed.  As the appraisal process was underway and an umpire selected, the insurer sent a letter to the insured demanding a sworn statement in proof of loss, examinations under oath, and additional documentation—post-loss requirements of the insured in the insurance policy.  The insured did not comply and the insurer used this non-compliance as an excuse to deny the claim.  This prompted the insured to file a breach of contract lawsuit against the insurer and move to compel the insurer to complete the appraisal process that it invoked. The trial court agreed, as affirmed by the Third District.  The insurer could not refuse to complete the appraisal process that it invoked by thereafter requiring the insured to comply with post-loss conditions in the policy.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

ASSIGNMENT OF BENEFITS PROVISION IN HOMEOWNER’S POLICY IS ENFORCEABLE

shutterstock_1005703702When it comes to property insurance claims, particularly those under a homeowner’s insurance policy, an insured will oftentimes assign its benefits under the policy to a restoration contractor.  The request for the assignment may likely be prompted by the contractor that does not want to perform the work without the assignment of benefits.  The assignment of benefits (also known by the acronym “AOB”) allows the third-party contractor (as the assignee of the insured) to sue the insurer directly for benefits under the policy associated with the restoration work.  

 

Recently, the Fourth District Court of Appeal found enforceable a provision in a homeowner’s insurance policy that stated, “[n]o assignment of claim benefits, regardless of whether made before a loss or after a loss, shall be valid without the written consent of all ‘insureds,’ all additional insureds, and all mortgagee(s) named in this policy.”   Restoration 1 of Port St. Lucie v. Ark Royal Ins. Co., 43 Fla.L.Weekly D2056a (Fla. 4th DCA 2018).  This meant that for the assignment of benefits to be valid, all insureds and the insured’s mortgagee had to sign off on the assignment.

 

In this case, the restoration contractor got the assignment of benefits signed by the wife-insured, but the assignment was not signed by the husband-insured or the mortgagee.  Based on this, the insurer denied payment to the restoration contractor.  The restoration contractor sued the insured based on the assignment and the Fourth District affirmed the trial court in dismissing the complaint holding that the language of the assignment of benefits provision in the policy is enforceable (meaning the contractor needed the written consent of all insureds and the mortgagee in order to effectuate a valid assignment). 

 

Regardless of your feelings about assignment of benefits, the language in the homeowner’s policy must be reviewed to ensure compliance with any assignment of benefits language in the policy. 

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

THE CONTINGENCY FEE MULTIPLIER (FOR INSURANCE COVERAGE DISPUTES)

shutterstock_531182533The contingency fee multiplier: a potential incentive for taking a case on contingency, such as an insurance coverage dispute, where the insured sues his/her/its insurer on a contingency fee basis.

 

In a recent property insurance coverage dispute, Citizens Property Ins. Corp. v. Agosta, 43 Fla.L.Weekly, D1934b (Fla. 3d DCA 2018), the trial court awarded the insured’s counsel a contingency fee multiplier of two times the amount of reasonable attorney’s fees.  The insurer appealed. The Third District affirmed the contingency fee multiplier.

 

Of interest, on appeal—which is reviewed under an abuse of discretion standard of appellate review–the Third District analyzed the state of Florida law on contingency fee multipliers.

 

To begin with, Florida has adopted the lodestar approach for determining reasonable attorney’s fees based on the following factors to consider (known the Rowe factors based on the Florida Supreme Court case):

 

(1) The time and labor required, the novelty and difficulty of the question involved, and the skill requisite to perform the legal service properly.

(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.

(3) The fee customarily charged in the locality for similar legal services.

(4) The amount involved and the results obtained.

(5) The time limitations imposed by the client or by the circumstances.

(6) The nature and length of the professional relationship with the client.

(7) The experience, reputation, and ability of the lawyer or lawyers performing the services.

(8) Whether the fee is fixed or contingent.

 Agosta citing Florida Patient’s Compensation Fund v. Rowe, 473 So.2d 1145 (Fla. 1985).   

 

Based on the consideration of these factors, the trial court determines through an evidentiary hearing a reasonable hourly rate to multiply by a number of reasonable hours expended in the litigation.  This is referred to as the lodestar amount or lodestar figure.  However, the court may add to this lodestar amount by tacking on a contingency fee multiplier.  For example, assume the trial court found 100 reasonable hours were incurred at the reasonable hourly rate of $300.  This would result in an attorney’s fees award of $30,000.  But, with the contingency fee multiplier, the trial court can add to this.  A multiplier of 2 would result in an attorney’s fees award of $60,000, hence the incentive for moving for the multiplier. 

 

In determining whether to add a contingency fee multiplier, the trial court must consider competent, substantial evidence in the record (offered at the evidentiary hearing) of these three factors:

 

(1) whether the relevant market requires a contingency fee multiplier to obtain competent counsel;

(2) whether the attorney was able to mitigate the risk of nonpayment in any way; and

(3) whether any of the factors set forth in Rowe are applicable [the factors mentioned above], especially, the amount involved, the results obtained, and the type of fee arrangement between the attorney and his client.

 

Agosta citing Standard Guarantee Ins. Co. v. Quanstrom, 555 So.2d 828 (Fla. 1990)

 

 

There has been a debate as to whether the contingency fee multiplier only applies in rare and exceptional circumstances.  The Florida Supreme Court (hopefully) put this issue to bed rejecting the argument that the contingency fee multiplier only applies in rare and exceptional circumstances.  Agosta citing Joyce v. Federated National Ins. Co., 228 So.3d 1122 (Fla. 2017). 

 

Just as important, and perhaps the most important to me, the Florida Supreme Court held that a “fee multiplier ‘is properly analyzed through the same lens as the attorney when making the decision to take the case,’ as it ‘is intended to incentivize the attorney to take a potentially difficult or complex case.’”  Id. quoting Joyce, 228 So.3d at 1133. This is important because the complexity of a case is not determined at looking at a case in hindsight based on the actual outcome of the case, but looking at a case through the same lens as the attorney at the time the decision is made to handle the caseId. citing Joyce

 

The Florida Supreme Court also stated that the first contingency fee multiplier factor—the relevant market factor—is based on whether there are attorneys in the relevant market who have the skills to effectively handle the case and would have taken the case absent the availability of a contingency fee multiplier.  Id. citing Joyce.

 

Finally, the Florida Supreme Court stated that the third contingency fee multiplier factor that considers the results obtained is not based on the amount of recovery, even a recovery not exceptionally large—“the Florida Supreme Court held that the trial court correctly analyze the ‘outcome’ of that case when it found that ‘[a]lthough the amount involved [$23,500] was ‘not exceptionally large,’ it was material to the Joyces [plaintiffs].”  Id. quoting Joyce, 228 So.3d at 1125.

 

The contingency fee multiplier adds incentive to handle certain insurance coverage disputes on contingency.  If a multiplier is obtained, it definitely rewards the risk of taking a case on contingency (and certainly one of the reasons I explore such contingency fee options!). 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

PROPERTY INSURANCE EXCLUSION: LEAKAGE OF WATER OVER 14 DAYS OR MORE

shutterstock_196921499The recent opinion of Whitley v. American Integrity Ins. Co. of Florida, 43 Fla.L.Weekly D1503a (Fla. 5th DCA 2018), as a follow-up to this article on the property insurance exclusion regarding the “constant or repeated seepage or leakage of water…over a period of 14 or more days,” is a beneficial opinion to insureds. 

 

In this case, the insured had a vacation home.  A plumbing leak occurred that caused water damage to the home.  The plumbing leak occurred during a period of time that lasted approximately 30 days.  For this reason, the property insurer denied the claim per the exclusion that the policy does not cover loss caused by repeated leakage of water over a period of 14 or more days from a plumbing system.  Summary judgment was granted by the trial court in favor of the insurer based on this exclusion. 

 

The insured countered that the policy did not address whether it covered a loss occurring within the first 14 days.  The insured argued, and the appellate court agreed, that the insurer therefore failed to establish that the water loss did not occur within the first 14 days.  “The undisputed fact that the property was exposed to water for more than fourteen days did not establish that the loss occurred on the fourteenth or later day of exposure pursuant to the exclusionary provision.”   Whitley, supra.

 

This is a beneficial case to an insured because if loss occurred due to the continued seepage or leakage of water over a period of 14 days or more (e.g., continuous plumbing leak), the insured can establish it is still entitled to coverage for loss that occurs during the first 14 days.  This puts the onus on the insurer to argue the loss occurred after the 14th day.  However, the insured will counter that the loss occurred during the first 14 days.  In other words, the insured can make this a question of fact for the jury.  

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

COMPETING EXPERT WITNESSES IN AN INSURANCE COVERAGE DISPUTE

shutterstock_363608708Oftentimes, insurance coverage disputes involve competing expert witnesses.  The experts render different expert opinions regarding a topic that goes to coverage and/or damages.  An example of competing expert witnesses can be found in the recent property insurance coverage dispute, Garcia v. First Community Ins. Co., 43 Fla.L.Weekly D671a (Fla. 3d DCA 2018). 

 

In this case, an insured submitted a claim under her homeowner’s policy for water damage due to a roof leak.  She claimed her damage was approximately $23,000.  The insurer denied coverage and an insurance coverage dispute ensued.

 

The insured’s policy, akin to many homeowner’s policies, contained exclusions for loss caused by:

 

h. Rain, snow, sleet, sand or dust to the interior of a building unless a covered peril first damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening.

 ***

i. (1) Wear and tear, marring, deterioration;

 

The insurer sent an engineer to inspect the insured’s property and the engineer (expert) opined that the water intrusion was not covered under the policy based on the aforementioned exclusions.  Her opinion was that the water intrusion through the roof was the result of deterioration from age, tree branch abrasions, and construction defects based on how nails were installed into the shingles.  Based on this opinion, the insurer was denying coverage based on the (i) wear and tear, marring and deterioration exclusion and (ii) rain intruded through the roof based on a peril (construction defect) that was not covered under the policy.

 

The insured, as expected, had a competing expert that opined that a hail impact or high wind uplift (covered peril) in the days leading up to the rain event caused water to intrude through the roof and cause interior damage.   Under this opinion, the insured was presenting an expert opinion for coverage and why the insurer’s exclusions were inapplicable.

 

In this case, surprisingly, the trial court granted summary judgment in favor of the insurer.  However, this was reversed on appeal because the competing opinions as to coverage and the cause of the insured’s loss created a genuine issue of material fact.  Summary judgment cannot be granted if there are genuine issues of material fact.  See Garcia, supra, (“Given this conflict in the material evidence as to the cause of the loss, the trial court erred in entering final judgment in favor of First Community [insurer].”).

 

Another argument the insurer raised was that its engineer inspected the property within months after the date of loss whereas the insured’s expert is basing an opinion on an inspection that occurred three years after the fact.   This fact, albeit true, does not create a genuine issue of material fact.  Rather, it goes to the credibility of the experts at trial.  Which expert is more credible regarding the cause of the loss:  the insurer’s expert that inspected the property a few months after the loss or the insured’s expert that inspected the property years after the loss.  Well, the issue of credibility and how a jury / trier of fact weighs this in consideration of other evidence is not appropriate in determining a motion for summary judgment. See Garcia, supra.

 

Experts are an important part of construction disputes including insurance coverage disputes and it is not uncommon for there to be competing expert opinions as to the cause of a loss, a defect, and, of course, damages.   

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.