Citizens Property Insurance Corporation v. Amat

District Court of Appeal of Florida
2016 Fla. App. LEXIS 2412, 2016 WL 670189, 198 So. 3d 730 (2016)

ELI5:

Rule of Law:

An insurer's breach of contract by improperly denying a claim does not waive a policy provision that conditions payment for subsurface repairs on the insured first entering into a contract for those repairs.

Facts:

Ariety Amat and Briceida Leon (the Homeowners) held a homeowners insurance policy with Citizens Property Insurance Corporation (Citizens).
In June 2011, the Homeowners reported damage to their home from suspected sinkhole activity.
Citizens hired an engineering firm, which concluded the damage was not caused by sinkhole activity.
In January 2012, based on its expert's report, Citizens denied the Homeowners' claim.
The Homeowners then retained their own expert, who concluded that sinkhole activity was the cause of the damage.
The insurance policy contained a loss settlement provision stating that Citizens would pay for above-ground cosmetic damage but would not pay for subsurface repairs, such as grouting or underpinning, until the insured entered into a contract for those specific repairs.

Procedural Posture:

The Homeowners filed suit against Citizens in a Florida trial court after Citizens denied their insurance claim.
The case was tried before a jury, which returned a verdict in favor of the Homeowners, finding the loss was covered under the policy.
The jury awarded the Homeowners a general verdict of $169,665.77 for the total cost of stabilization and repairs.
The trial court entered a final judgment for money damages in favor of the Homeowners.
Citizens filed a post-trial motion requesting, among other things, that the court apply the policy's requirement that the Homeowners enter a contract for subsurface repairs before payment is due.
The trial court denied Citizens' motion regarding the subsurface repair payments and entered an amended final judgment awarding a lump-sum money judgment.
Citizens, as the appellant, appealed the amended final judgment to the Florida Second District Court of Appeal; the Homeowners are the appellees.

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Issue:

Does an insurer's breach of contract by denying a valid sinkhole claim waive a policy provision requiring the insured to enter into a contract for subsurface repairs before the insurer is obligated to make payment for those repairs?

Opinions:

Majority - Wallace, Judge

No. An insurer's breach of contract by denying a claim does not waive its right to enforce policy provisions that control the method and timing of payment for a covered loss. The court reasoned that Citizens was not attempting to use the provision to avoid liability altogether, but merely to enforce the agreed-upon contractual procedure for payment of subsurface repairs. The court distinguished this from cases where an insurer's breach waives a condition that would cause a complete forfeiture of coverage. Furthermore, because the Homeowners sued to enforce the contract, they are bound by all of its terms, including the loss settlement provisions. The court held that denying a claim does not rewrite the policy or expand the scope of coverage; it is simply a dispute over liability. Citing its own precedent in Tower Hill Select Ins. Co. v. McKee, the court concluded that the trial court was obligated to enforce the policy as written, which required the Homeowners to enter into a repair contract before Citizens was required to pay for the subsurface work.

Analysis:

This decision clarifies that an insurer's wrongful denial of a claim is not a total breach that voids all policy conditions. It establishes a key distinction between conditions that are precedent to recovery (which may be waived by a breach) and conditions that govern the procedure for payment after liability is established (which are not waived). This protects insurers from having to pay out large sums for specialty repairs, like sinkhole stabilization, before the insured has committed to undertaking the work. The ruling ensures that insurance proceeds for such repairs are used for their intended purpose, preventing a potential windfall for insureds who might otherwise take a cash payment without performing the necessary stabilization, leaving the property at risk.

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