Homeowners Have Post-Loss Duties Too, Florida Appeals Court Says in HCI Win
Florida insurers, often on the receiving end of insureds’ complaints – in the courts and in the news media – may take heart from a new ruling by a Florida appeals court, which draws a bold line under insureds’ responsibilities after a loss.
The 1st District Court of Appeals on Wednesday overturned a $541,257 jury award against Homeowners Choice Property and Casualty Insurance Co., noting that the Perdido Key homeowners did not give proper notice on part of the claim in 2020. Thomas and Rebecca Clark also offered no proof of the loss of rental value, did little to protect the home from further damage after the storm, and did not show how the insurer failed to pay actual cash value on the claim, the court said.
“We reverse because the Clarks failed to present sufficient evidence that the insurance company did not adjust the actual cash value of the insured loss or the replacement cost of the damaged property,” Judge Thomas Winokur wrote in the March 19 opinion.
Lawyers for Tampa-based Homeowners Choice could not be reached for comment Wednesday. But another Florida insurance defense attorney said the ruling underscores the fact that an insurance policy is indeed a contract, and insureds are often obligated to comply if they want payment on a claim.
“The focus of the court’s decision is really on whether the insured’s breaches of the post-loss conditions were material, which the court obviously did find the breaches to be material,” Fort Lauderdale attorney Michael Packer, of the Marshall Dennehey law firm, said in an email.
The case began in 2020, after Hurricane Sally, a Category 2 storm, blew through northwest Florida. The Clarks quickly notified Homeowners Choice of the Coverage A damage to the vacation house, including a roof that was torn off, missing siding, and water damage inside.
Homeowners Choice, part of the HCI Group and sister company to TypTap Insurance, Tailrow, CORE, and other companies, responded within two days, reminding the Clarks that they must make reasonable repairs to protect the property from further damage and must list personal items that were compromised, the court explained. Within a month, the insurer sent an adjuster, who estimated the loss at $76,634. That was considered actual cash value (replacement value minus depreciation). HCI sent a check for $59,656 (the incurred loss minus the depreciation and the deductible).
The Clarks cashed the check, used the money to pay for roof and siding repairs – but never provided receipts or invoices as required by the policy, the court noted.
The residents then decided to hire a public adjuster, who claimed a $440,000 loss for the dwelling. The estimate, which came 10 months after the storm, gave the same figure for ACV and RCV, with no depreciation amount. The public adjuster also estimated a nearly $58,000 loss on contents and, again, did not distinguish between ACV and RCV. He then claimed a $43,000 loss for the period when the property was unavailable to rent out.
Perhaps to be sure, HCI hired a well-known engineering firm to re-inspect everything. Still, the parties never reached an agreement on the total loss, an appraisal panel was not summoned, and the Clarks filed suit for breach of contract. HCI asked the trial court for a directed verdict on the grounds that the family had failed to provide evidence that the loss was greater than what the insurer had provided. The trial judge declined, and after a trial, the jury granted the half-million-dollar award based largely on the public adjuster’s estimates.
On appeal, the appellate judges reversed and sided with the insurer’s lawyers on almost all points. The court pointed out that the Clarks tarped the roof after the storm but waited six months to hire a contractor to make the roof and siding repairs, a delay that worsened mold problems inside the home. The public adjuster’s reports came 10 months after the storm, which was not a very prompt notice, the court suggested.
The Clarks provided no evidence to show that a delay in prompt notice did not prejudice the insurance company. On the claimed loss of personal belongings, the homeowners claimed a heavy amount but produced no receipts to back up the claim. The claim included more than $9,700 for bed linens. The public adjuster also claimed the loss of the couple’s washing machine but later admitted that it was fully functional, the court explained.
A claim for the loss of the rental income was based on a gross revenue estimate, not the fair rental value that was required by the policy, the judges noted. In addition, the trial court had impermissibly allowed the jury to consider evidence of estimated but not-yet-incurred repair costs, the appeal court judges wrote.
The judges also delved into the ACV versus RCV question. In short, the court found that HCI did not breach the contract. The insurer paid the ACV for the roof and siding repair. But the policyholders did not perform other work, which could have allowed for further reimbursement from the carrier under the policy.
“Accordingly, there was insufficient evidence presented at trial for a reasonable jury to conclude that Homeowners Choice breached a term of the policy when the Clarks could not—and did not—show that Homeowners Choice was liable for the RCV of the damage caused by the hurricane, thus directed verdict should have been granted,” the appeals court concluded. It remanded the case to the trial court for further proceedings.
The outcome provides some lessons for policyholders and their attorneys.
“I suspect that had the public adjuster’s estimate included an ACV amount that was in excess of the carrier’s ACV estimate and payment, there may have been a different outcome,” Packer said.
But, as the court explained, the insureds never contended that the ACV payment was incorrect. “Had they disputed the ACV payment with a competing ACV damage estimate – more than the Homeowners Choice estimate – the jury then could have been in a position to determine whether the carrier breached the policy,” he said.
The lawyer for the Clarks could not be reached for comment. The appeals court opinion can be seen here.
Top photo: The famous sign at Souvenir City, not far from the Clarks’ home, damaged by Hurricane Sally in 2020. (Sophia Germer/The Advocate via AP)