Trinidad v. Florida Peninsula Insurance Co.
2013 WL 3333823, 38 Fla. L. Weekly Supp. 507, 121 So. 3d 433 (2013)
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Rule of Law:
Under a replacement cost insurance policy, an insurer must include payment for a general contractor's overhead and profit in its initial payment for a covered loss if the insured is reasonably likely to need a general contractor for the repairs. An insurer cannot withhold these costs pending the insured's actual expenditure on repairs, as this is inconsistent with Florida statutes governing replacement cost payments.
Facts:
- Amado Trinidad held a replacement cost homeowner's insurance policy with Florida Peninsula Insurance Company.
- On February 11, 2008, Trinidad's home sustained fire damage.
- Trinidad filed a claim with Florida Peninsula, which admitted the loss was covered under the policy.
- Florida Peninsula issued a payment for repair costs but excluded any amount for a general contractor's overhead and profit.
- Trinidad did not repair his home or hire a general contractor to perform repairs after the loss.
- Florida Peninsula contended it was not obligated to pay for overhead and profit until Trinidad actually incurred those specific expenses.
Procedural Posture:
- Amado Trinidad filed a breach of contract lawsuit against Florida Peninsula Insurance Company in a Florida trial court.
- The trial court granted summary judgment in favor of Florida Peninsula.
- Trinidad, as appellant, appealed the decision to the Third District Court of Appeal.
- The Third District Court of Appeal affirmed the trial court's summary judgment in favor of Florida Peninsula, the appellee.
- The Florida Supreme Court then accepted jurisdiction to review the Third District's decision due to an express and direct conflict with a decision from the Second District Court of Appeal.
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Issue:
Does a replacement cost homeowner's insurance policy, governed by section 627.7011, Florida Statutes (2008), require an insurer to pay for a general contractor's overhead and profit before the insured actually incurs those costs, where a general contractor is reasonably likely to be needed for the repairs?
Opinions:
Majority - Pariente, J.
Yes. Under a replacement cost policy, an insurer must pay for a general contractor's overhead and profit if a general contractor is reasonably likely to be needed for the repairs, regardless of whether the insured has actually incurred those costs. The court reasoned that 'replacement cost' is measured by what it would cost to repair or replace the damaged property. If the repairs are complex enough to reasonably require a general contractor, then that contractor's overhead and profit are a necessary component of the total repair cost. The controlling statute, section 627.7011(3), Fla. Stat. (2008), mandated that insurers pay replacement costs 'whether or not the insured replaces or repairs the dwelling,' which prevents insurers from conditioning payment on the costs being 'actually incurred.' The court also found it would be anomalous for a replacement cost policy to provide less coverage than an actual cash value policy, which case law (Goff) established does include overhead and profit.
Dissenting - Polston, C.J.
The dissent would not answer this question, concluding that the court lacks jurisdiction to hear the case. The dissent argued that there was no 'express and direct conflict' between the Third District's decision in this case and the Second District's decision in Goff v. State Farm, as required for the Florida Supreme Court to exercise jurisdiction. It reasoned that Goff involved an 'actual cash value' policy and the depreciability of overhead and profit, while Trinidad involves a 'replacement cost' policy and whether costs must be incurred before payment. Because the cases presented different facts and different legal questions, the dissent would have discharged the case.
Analysis:
This decision significantly clarifies the scope of 'replacement cost' coverage under Florida law, preventing insurers from itemizing repair costs and withholding payment for certain components, like contractor fees, until they are actually incurred. It strengthens the position of insureds by providing them with the full estimated funds needed to undertake repairs, rather than forcing them to finance contractor costs out-of-pocket. The ruling establishes that 'replacement cost' is determined by the likely cost of repair, not the actual amount spent, thereby harmonizing the treatment of overhead and profit with other estimated costs like labor and materials.
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