Florida welcome sign Hurricane Frances hit Florida in 2004, but claims linger 15 years later. (Photo: Shutterstock)

The snail-paced resolution of insurance claims for property damage caused by a hurricane that hit Florida in 2004 will continue following an appellate court’s decision in a case brought against Citizens Property Insurance Corporation.

The case

Nine apartment buildings in Florida owned by Manor House, LLC, Ocean View, LLC, and Merritt, LLC (collectively, “Manor House”) were damaged in September 2004 when Hurricane Frances struck.

Manor House presented its claims to its insurer, Citizens Property Insurance Corporation, and, after an inspection, Citizens issued payments totaling $1,927,747.

In April 2006, Manor House’s public adjuster, Dietz International, asked Citizens to reopen the claim. In June 2006, Manor House presented another claim to Citizens, this time for $10 million.

After reopening the claim and assigning a new adjuster, Citizens made additional payments in September 2006 totaling $345,192. Then, in December 2006, Citizens’ field adjuster informally estimated the “actual cash value” of the Manor House loss at $5,489,062 and the “replacement cost value” of the loss at $6,410,456.

Meanwhile, Manor House’s public adjuster estimated the replacement cost value at $10,027,087.

In March 2007, Jeffrey Wells, the apartment complex’s new owner and Manor House’s litigation agent, sent Citizens a letter requesting payment of the “undisputed” amount of $6.4 million, that is, the field adjuster’s informal estimate of replacement costs, and demanding an appraisal. Citizens responded by challenging Wells’ authority to act on behalf of Manor House and asked for documentary proof of his authority. Citizens also asked Wells to supply documentation it said was necessary to consider the requests for appraisal and payment, including articles of incorporation, certified ownership records, invoices for actual costs of replacement, and contracts for the work in progress.

Wells responded with a letter denying that the invoices and other documents requested by Citizens were necessary to trigger an appraisal; however, he provided the insurer with a copy of his appointment as Manor House’s agent.

In August 2007, Manor House sued Citizens, demanding prompt payment of the allegedly “undisputed” amount of $6.4 million and asking the court to compel Citizens to engage in the policy-provided appraisal procedures.

The trial court granted serial motions to abate the action based on the failure of Manor House to provide all necessary documents to Citizens. In June 2009, the trial court ordered the action stayed and directed the parties to go forward with the appraisal process. In November 2009, the appraisal panel awarded Manor House $8,649,816 in replacement cost value and $8,388,752 in actual cash value. In January 2010, Citizens paid an additional $5,502,022 to Manor House.

Manor House subsequently filed suit against Citizens alleging, among other things, breach of contract and fraud. On the breach claim, 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 it needed to adjust the loss, and timely pay the appraisal award.

Manor House sought to recover extra-contractual damages related to rental income that it allegedly lost due to the delay in repairing the apartment complex based on Citizens’ alleged procrastination in adjusting and paying the Manor House claims.

On the fraud claim, Manor House alleged that Citizens’ representations of the nature and extent of its coverage obligations were intentionally false and misleading and that it engaged in misleading claims handling practices by aggregating various general construction costs to a single building so as to exceed the policy limits applicable to that building, demanding immaterial documents regarding Manor House’s insurable interest and corporate ownership, and attempting to mislead the appraisal panel by concealing information related to the estimate of damages announced by Citizens’ field adjuster.

The trial court granted Citizens’ motion for partial summary judgment regarding appraiser and umpire fees; motion for partial summary judgment to prevent Manor House from pursuing a claim for extra-contractual, consequential damages; and motion for judgment on the pleadings on Manor House’s claim for fraud.

Manor House appealed.

The appellate court’s decision

The appellate court first agreed with the trial court’s decision granting Citizens’ motion for partial summary judgment regarding Manor House’s claim that it should not have to pay its own appraiser’s fees and half the cost of the umpire’s fees, reasoning that the Citizens insurance policy specifically called for each party to pay its own appraiser and to share the umpire’s fees.

The appellate court then addressed the trial court’s decision granting Citizens’ motion for partial summary judgment on the breach of contract claim regarding lost rental income based on the fact that the insurance policy essentially provided for property damage coverage but did not provide coverage for lost rent.

The appellate court said that was “an accurate reading of the insurance policy,” but found that the trial court’s ruling ignored the “more general proposition” that the injured party in a breach of contract action was entitled to recover monetary damages that would put it in the same position it would have been in had the other party not breached the contract. Accordingly, the appellate court said, when an insurer breached an insurance contract, the insured was “entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy” as consequential damages, provided the damages “were in contemplation of the parties at the inception of the contract.”

The appellate court decided that, in granting summary judgment, the trial court denied Manor House the opportunity to prove whether the parties contemplated that Manor House, an apartment complex, would suffer consequential damages in the form of lost rental income if Citizens breached its contractual duties to timely adjust and pay covered damages, which in this case allegedly resulted in a significant delay in completing repairs so that units could once again be rented.

The appellate court added that although Citizens, a creature of statute, was statutorily immune from bad faith claims, it was not statutorily immune from this aspect of Manor House’s claim because the consequential damages Manor House claimed were “based squarely on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.”

The appellate court then reversed the trial court’s decision granting partial summary judgment on this claim so that the parties could litigate all issues related to Manor House’s claim of lost rent.

Finally, the appellate court upheld the trial court’s decision granting Citizens’ motion for judgment on the pleadings regarding Manor House’s fraud claim, reasoning that certain allegations in the fraud count essentially alleged a fraudulent breach of contract, which did not amount to an independent tort, and that additional allegations that attempted to assert bad faith liability, including unfair claims handling practices, had to be dismissed because Citizens was immune from an action for first-party bad faith.

The case is Manor House, LLC v. Citizens Property Ins. Corp., No. 5D17-2841 (Fla. Ct. App. May 31, 2019). Attorneys involved include: Mark Boyle, Alexander Brockmeyer, and Molly Chafe Brockmeyer, of Boyle & Leonard, P.A., Ft. Myers, and Christopher N. Mammel of Merlin Law Group, P.A. West Palm, for Appellants. Kara Berard Rockenbach, and Rachel Jenny Glasser, of Link & Rockenbach, P.A., West Palm Beach, and J. Pablo Caceres, of Butler, Weihmuller, Katz and Craig, LLP, Tampa, for Appellee.

Related:

Forecasting the 2019 hurricane season: A look back and ahead

Top 10 costliest hurricanes in the U.S.

Flood Insurance 101: What agents need to know

Steven A. Meyerowitz, Esq., (smeyerowitz@meyerowitzcommunications.com) is the director of the Insurance Coverage Law Center, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from the Insurance Coverage Law Center, the industry’s only comprehensive digital resource designed for insurance coverage law professionals.