DECEMBER 2015

Florida Insurance Matters is a monthly update on Florida insurance-related legal developments by the Colodny Fass Insurance Litigation Practice, recognized as the 2014 Insurance Litigation Department of the Year in South Florida by the Daily Business Review.

About the Author

Matthew C. Scarfone, a senior attorney in the Colodny Fass Insurance Litigation Division, represents clients on a variety of insurance matters including property and casualty coverage disputes, fraud prevention, bad faith, and best practices.

Contact Mr. Scarfone at (954) 492-4010 or mscarfone@colodnyfass.com.

For more information about Mr. Scarfone, click here.

What Happens When an Insured Refuses to Allow Insurer to Perform Repairs?

An insured suffered a covered loss and the carrier exercised its option to repair damaged property. The insured disagreed with the carrier’s scope and method of proposed repairs and refused to allow the repairs. The carrier then denied coverage based on the insured’s failure to permit repairs. The insured performed his own repairs and filed suit against the carrier for breach of contract and declaratory relief. The trial court abated the action based on the carrier’s argument that an insured must allow repairs before he can challenge the sufficiently of the repairs. The Fourth DCA reversed explaining that abatement of the case “under the circumstances of this case” was not appropriate. Since the insured had already performed repairs at his own expense, he could not “comply” with the option to repair.

Robinson v. Florida Peninsula Ins. Co. (November 12, 2015).

Click here to read the case.

• The option to repair does not immunize a carrier from a lawsuit regarding the scope or method of repairs.
• “Compliance” with a carrier’s right to make repairs is not necessarily a precondition to suit.
• The court left for another day the issue of what the appropriate resolution is when an insured refuses to allow repairs because of disputes over the scope or method of repairs.

Liability for Sinkhole Claims Not Limited to Damage at “Time of Loss”

The Fifth DCA held that a jury instruction in a sinkhole case–which limited the insurer’s potential liability to the damage that existed “at the time of the sinkhole loss”–was erroneous and required a new trial. This case involved a covered sinkhole loss, in which the carrier argued that its initial payment represented full compliance with its contractual duties. After suit was filed, however, the carrier made supplemental payments, which the trial court ruled were inadmissible “offers to compromise.” The Fifth DCA reversed, and explained that the harm caused by the erroneous jury instruction was compounded by the fact that the jury was prevented from hearing evidence of the carrier’s supplemental payments.

Sanchez v. Tower Hill Signature Ins. (December 11, 2015).

Click here to read the case.

• Clearly identify any settlement offers as “privileged and confidential.”
• Always be mindful that post-suit payments may be considered a “confession of judgment.”

Voluntary Dismissal of Declaratory Action May Expose Carriers to Claims for Attorney’s Fees

The Fifth DCA held that an automobile insurance carrier’s voluntary dismissal of its declaratory action entitled the insured to recover attorney’s fees and costs under section 627.428, Florida Statutes. The carrier provided a defense to a negligence action brought against its insured, and simultaneously sought a declaration that it had no duty to defend the insured. After the underlying dispute was resolved, the carrier dismissed the declaratory action, but the insured sought an award of fees and costs. The court held that by dismissing the declaratory action and providing a defense, the carrier “confessed judgment” and triggered the insured’s right to recover attorney’s fees and costs.

Explorer Ins. Co. v. Cajusma, Quilner Pade, et al (November 6, 2015).

Click here to read the case.

• Consider the potential consequences before filing (and later dismissing) a declaratory action against your insured.
• Involve both liability counsel and coverage counsel when negotiating a settlement of a doubtful liability claim and consider release language or stipulated dismissals where each party bears its own fees and costs.

Consumers Face Potential Pitfalls When Signing AOBs

While some consumers might believe assigning benefits is a fast, easy way to have repairs performed, signing these contracts can lead to unforeseen major problems, Matthew Scarfone explained to Local10 News. “[Consumers] lose the right to payment for those services and don’t have the same incentive as other homeowners to negotiate the price and to make sure the services being rendered are necessary,” he said. Mr. Scarfone also explained that AOB contracts commonly provide for contractors to recover from individual homeowners in the event the insurance carrier only partially covers a repair, or not at all.

Click here to view the news story with Mr. Scarfone’s commentary.