Fourth District Court of Appeal Judge Alan Forst wrote the ruling. Courtesy photo.
A South Florida homeowner who sued to compel an insurer to pay more money for hurricane damage lost out at the Fourth District Court of Appeal, which dismissed her complaint with prejudice.
The opinion found even though the policy involved the appellant's own home, she wasn't technically involved in the dispute.
It's a ruling that presents a new pitfall for homeowners, as it said in order to be a third-party beneficiary, a borrower has to show that an insurance policy was meant to directly benefit them.
The appeal revolved around homeowner Ethel Reconco, who sued Integon National Insurance Co. after Hurricane Irma damaged her Fort Pierce home in 2017.
The bank that mortgaged the home had bought a force-placed insurance policy at her expense when she'd fallen behind on payments, according to Wednesday's ruling, which said the bank was the named insured while the borrower was the father of Reconco's children.
Crucially, the policy said, "There is no contract of insurance between the BORROWER and [the Insurer]," according to the ruling.
But when the insurer paid the bank for the damage, the father assigned his policy rights to Reconco, who repeatedly sought an appraisal and claimed the bank was missing $60,000 in coverage, according to the opinion.
Since the policy involved her house, the homeowner argued she had standing as a third-party beneficiary and reasoned the claim owed was less than her unpaid mortgage balance of $105,000. She pointed to Florida Statutes Section 627.428, which says only those with an insurable interest in property can sue the property's insurer.
Reconco also leaned on Florida case law, including South Florida opinions in Schlehuber v. Norfolk & Dedham Mutual Fire Insurance Co. and Ran Investments Inc. v. Indiana Insurance Co., which found building owners can sue the insurer to enforce a policy even if they're not named in it.
But Integron countered that Reconco wasn't a third-party beneficiary because she couldn't prove the bank and the insurer had a clear and manifest intent to directly benefit her through the contract. Lucie Circuit Judge Barbara W. Bronis agreed, finding the Ran Investments case didn't apply.
That was the right move, according to the Fourth DCA, which said although it has sided with homeowners in similar cases, that doesn't mean Floridians with an insurable interest naturally have standing to enforce a property insurance policy.
Instead, the appellate panel found it depends on the circumstances, as Florida law holds a contract must clearly articulate "an intent to primarily and directly benefit the third party or a class of persons to which that party claims to belong."
"Rather than automatically being vested with standing due to an 'insurable interest' in the property, a court 'must determine whether, pursuant to the terms of the policy, [a plaintiff] has standing to bring her claims as an intended third-party beneficiary under Florida law,' " the opinion said. "While in both of the earlier cases there may have been some question as to whether the insurance policy was intended to primarily and directly benefit the third-party beneficiary, the Policy in the instant case expresses a clear or manifest intent not to benefit Appellant
The appeals court also found Reconco wasn't a loss payee under the policy because she'd acknowledged that the claim wasn't greater than her outstanding mortgage payment, as the policy had required.
It was a blow for Reconco's attorney William Terry in Vero Beach. He said the opinion " slams the door" on a homeowner's ability to bring a lawsuit to compel an insurer's promise of coverage — something he said was already hard to do, as it meant paying for a lawyer or finding pro bono representation.
"These policies, for a while now, have been written with an attempt to exclude the homeowner from participating in any claim. And the courts focused on that, saying that because of this language that attempts to exclude the homeowner from participation in the claim, then the homeowner really isn't an intended beneficiary," Terry said. "The policies have been worded that way for a few decades now, and yet the homeowners were still able to wind their way through this little maze, and now there's no way of getting through it with this opinion."
Now that the Fourth DCA has sided with insurers on this issue, Terry said the ruling provides all the more reason to avoid ending up with a force-placed policy.
"Now, there's not a whole lot to keep them [insurers] from doing whatever the heck they want to do because there's not going to be any legal recourse against them, so long as the mortgage is being paid," Terry said.
Joseph W. Gelli and George M. Duncan of Garrison, Yount, Forte & Mulcahy in Tampa represented Integron but not immediately respond to a request for comment.
Terry said he plans to move for a rehearing and for certification.
Raychel Lean
Raychel Lean is ALM's Florida bureau chief, overseeing the Daily Business Review. Email her at [email protected] or follow her on Twitter via @raychellean.