Category Archives: Florida Homeowners Insurance Water Damage Claims

Florida Homeowners Insurance Claim for Long Term Water Leak Not Excluded as a Matter of Law

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

In Price v. Castle Key Indemnity Company, Florida’s Second DCA recently dealt a heavy hit to homeowners insurers’ arguments using the continuous/constant or repeated seepage defense.

Drop of water

 

Facts

The facts in Price were a prime example of a long term water damage insurance claim. The homeowners insurer gathered strong evidence, and was able to show that this leak continued for weeks and weeks without any stoppage. The insurer’s evidence was startling: over a period of more than 30 days, over 195,000 gallons of water escaped from a pipe going to the homeowner’s toilet.  Faced with this evidence, the trial court granted summary judgment for the insurer.

The Second DCA disagreed with the insurer and the trial court. The Second DCA’s reason: the terms “sudden” and “seepage” were “less than clear” when applied to these facts. Accordingly, the Second DCA determined that these words created a latent ambiguity.  The Second DCA instructed the trial court to allow a jury to determine coverage in this case, instead of a judge.

Disappointing Discussion

Although this is the most heavily litigated coverage issue in Florida homeowners insurance, the Second DCA did not take much time to explain its decision.

These long term water damage opinions don’t come often. Usually, claims do not have such egregiously long leaks, or they have some type of dispute on the duration … so they should be determined by a jury. When the rare case like this pops up, you would think the Second DCA would take the chance to explain what types of long term water damage should be covered as a matter of law under these policies; and what types shouldn’t be.

Unfortunately, the Second DCA did not take that opportunity. Moving forward, this leaves many unanswered questions, and a lot of room for interpretation for trial court judges. I wouldn’t be surprised if there were tens of thousands of pending claims with this issue. The parties and lawyers handling those cases don’t seem to have much to work with from that case, unless they are to assume every insurance policy is ambiguous.

Takeaway

In trial court hearings, this Price opinion will give homeowners’ attorneys stronger arguments, but only if the homeowners insurer tries to obtain summary judgment.  Most of these cases don’t go that route.

I would not be surprised to see other DCAs take a different approach than the Second DCA did in Price.  I doubt all courts will be willing to find that every insurance policy is ambiguous as to long term water losses. A case like this is the perfect example of a case where insurers could be granted summary judgment.

We will see how this changes the strategies. Hopefully, we will get some more opinions on this issue soon.


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Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Before we go on, if you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.


Here is a full copy of the order:

Download (PDF, 51KB)

 

The Florida Policyholders Bill of Rights Working Group Issues its Final Report

Florida Homeowners Insurance Claims and Litigation Handbook


ins a

As discussed this summer, Florida’s Insurance Consumer Advocate Robin Westcott organized a Bill of Rights Working Group to create a Bill of Rights for Florida’s insureds.  They addressed the following issues in great detail:

  • education, transparency, and monitoring the insurance marketplace;
  • improvements to the claim process;
  • assignment of benefits and emergency remediation companies;
  • examinations under oath;
  • alternative dispute resolution;
  • post-claim underwriting; and
  • coverage provided by repair rather than indemnity payments.

The final report is here:

Download (PDF, 2.16MB)

The Group wants the Bill of Rights to have a lasting impact.  For the parts of the Bill that reflect existing case law, they want the Bill to codify the existing case law into statutory law.  For the parts of the Bill that are not yet law, they want the Bill to make new law. Lastly, there is an educational component.  To help insureds navigate claims, they want insurers to provide insureds with a copy of the Bill when they file a claim.

The report is a great snapshot of today’s insurance industry concerns.  I think the Group did a great job of addressing the current landscape.  My only criticism is that I would have liked the Group to disclose, in the Bill, some of the data on these claims.  To get the new recommendations turned into law, the Group should disclose the data that proves these concerns are justified.  In all fairness, the Group might not have needed the data.  The Group was comprised of several insurance professionals with decades of experience.  Thus, they likely used their private data to form their conclusions and recommendations, even if they did not disclose it.

I think the Bill of Rights will be very helpful for insureds when navigating a claim; however, the Bill’s primary impact on insurers appears to be focused on the assignment of benefit-water extraction claims.  If the legislature adopted all the recommendations, AOB contractors will have some new obstacles to deal with, including licensing requirements; limitations to the scope of their AOB contracts; and compliance with certain standards for water extraction.

Aside from the AOB-related recommendations, the rest of the Bill codifies/creates obligations and limitations for insurers, including more standards for communicating during the claim and examination under oath process; prohibitions on post-claim underwriting; and expectations for insurers when they elect to repair.  Ultimately, some of these obligations are already existing law, and I bet most insurers already comply with the majority of the recommendations.

Only time will tell the impact of the Group and its recommendations. There is no doubt that they discussed a lot of major concerns.  We will wait and see what the legislature does with these recommendations. When that time arises, I will keep you posted.

Takeaway:

The assignment of benefits issue is not going way, and its up to insurers to not let this be the next attorney-driven trend.

How can insurers deal with the assignment of benefits issue?  First, get the best management and attorneys together and decide exactly what to do on these cases. Second, pay for routine documents and evaluations only once, then automate any documents or processes that will occur in all of these cases.  Third, enter all of the case information into software (instead of Word documents and emails) so that you can use data to help guide you towards settlement.  Fourth, as failures and successes arise, continue to optimize your system to ensure you achieve the best possible outcomes while spending the least.

If you have any questions or would like to see checklists or guides for handling assignment of benefits cases, please message me.


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Assignment of Benefit Homeowner Insurance Claims and Bill of Rights Working Group (Video)

Florida AOB & Industry Litigation Trend Report Image

First Party Property Insurance Blog is Proud to Announce our New E-Book: the Florida Homeowners Insurance Claims and Litigation Handbook.

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

We’re so confident in this E-Book that we offer you a money-back guarantee if it does not have the information you and your insurance claims business needed to improve. Click the link below to buy copies for you, your colleagues, and your partners.


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At the Bill of Rights Working Group recent meeting, Mr. Dry Out‘s Matthew Jerabek explained his concerns with the AOB contractors in the water damage claim industry.  Below is the video of his statements to the Working Group.  To be safe, I cannot promise that his statements are true because I have zero personal knowledge regarding the allegations; however, I think anyone who handles these claims would want to have the opportunity to hear his statements.

The Video

Embedly Powered

Although this may lead some carriers to take approaches based on emotion, assignment of benefits cases are the perfect type of case for statistical data evaluations to drive decision making.  They are also the perfect type of case to use document automation and litigation project management to achieve better outcomes at a fraction of the costs.

Don’t hire attorneys to have junior associates get you nowhere on these files for thousands of dollars.  If you want checklists, guides, or legal document templates for handling claims like this one, please message me.


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AOB Claims and the Bill of Rights Working Group

Florida AOB & Industry Litigation Trend Report Image

Overview:

After a water leak, homeowners often hire a contractor to make emergency repairs.  Contractors and homeowners and insurers often disagree about the cost to repair.  Read this article to learn how insurers, contractors, and the legislature are trying to resolve this dispute.


First Party Property Insurance Blog is Proud to Announce our New E-Book: the Florida Homeowners Insurance Claims and Litigation Handbook.

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

We’re so confident in this E-Book that we offer you a money-back guarantee if it does not have the information you and your insurance claims business needed to improve. Click the link below to buy copies for you, your colleagues, and your partners.


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Johnson Strategies authored a fantastic post today about the impact of assignment of benefit claims on insurers and how the Homeowners’ Policy and Claims Bill of Rights Working Group is trying to address this problem.

How much are insurers losing as a result of the AOB claims?  Here is a quote from the post:

Addressing fraud this systemic starts with understanding that water damage claims are number one across all insurers–approaching 50% of  the total annual claim payout, with an average claim often in excess of $10,000. Using Citizens as a gauge, the 2012 total forecasted payout just for bursting pipes (not weather related roof leaks, or back up of sewers, etc) was in excess of $142,000,000. 

Using a hypothetical carrier with 180,000 policies I showed how just the deductible and plumbers’ referral fee resulted in fraudulent claim inflation of $3,375,000 every year.  

For all Florida property carriers including Citizens that’s roughly $150 million annually.

Then…when you add in the cost of unnecessary repairs, unnecessary drying services or water detection and the rank-and-file up-charging that everyone knows (and ICA workshop testimony confirms) is rampant, well…you get the ugly picture.

See the full post here (parentheticals omitted)(emphasis added).

Johnson Strategies suggests the legislature address the following concerns:

  • the substantial financial incentive for plumbers to refer AOB contractors;
  • AOB contractors perform all of the water damage mitigation services;
  • loose licensing requirements;
  • no required permits;
  • no required inspections; and
  • no requirement for pre-work estimates.

The Working Group made suggestions to address all of these concerns. Now, we must wait to see whether identifying these issues will be followed with a genuine solution from the legislature.

 Takeaway:

Although this may lead some carriers to take approaches based on emotion, assignment of benefits cases are the perfect type of case for statistical data evaluations to drive decision making.  They are also the perfect type of case to use document automation and litigation project management to achieve better outcomes at a fraction of the costs.

Don’t hire attorneys to have junior associates get you nowhere on these files for millions of dollars.  If you want checklists, guides, or legal document templates for handling claims like this one, please message me.


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Florida Homeowners Insurance Claims for Water Leaks and Damage, and the Constant or Repeated Seepage Exclusion

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

What happens when a homeowners insurance company denies a claim for constant or repeated seepage or leakage?

Generally, homeowners insurers’ personnel will look at the damage and, based on (1) experience or (2) an expert opinion, the insurer will determine that it is long term damage that is not covered.

If a person has a roof leak, pipe break, supply line burst, or something else that she thought happened quickly, then she might think the constant or repeated seepage exclusion is unfair.  Depending on (1) the way that the exclusion is written in the policy and (2) the investigation the homeowners insurer conducted, the homeowner might be right.

In this article, you will see what homeowners insurers need to prove that a water leak and its damage are excluded using the constant or repeated seepage exclusion for long term water damage.

So don’t forget to read all the way to the end, contact me, and subscribe.


Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook

Florida Homeowners Insurance Claims and Litigation Handbook and Litigation Data Reports:

Before we go on, if you are in the Florida homeowners insurance claims industry and are looking for a guide with the key cases, strategies, laws, attorneys, and adjusters, or if you’re looking for Florida litigation data reports, please visit this page to learn more about our Florida Homeowners Insurance Claims and Litigation Handbook.


Do you think you need to understand this subject? I’d say you should be an expert on it.  

The most common dispute in the Florida homeowners insurance industry is whether water damage is covered or excluded by homeowners insurance.  Florida is a rainy and humid place, so there is plenty of water damage.  The question is whether the damage is sudden or long-term.  You better know the difference.

How do you find out the difference? Read this article to find out how homeowners insurers must prove that damage was excluded by the constant or repeated seepage exclusion.

The Policy

The exclusion has many variations; however, in general, it excludes long term water damage. With respect to the variations, some of these exclusions expressly provide that the seepage must come from within a plumbing, heating, or air system. Others contain language that excludes the leakage “whether hidden or not.” In addition, some describe the exclude time period as “weeks” or “months” whereas others specifically exclude damage that occurs over a period of more than 14 days.

Hoey v. State Farm

The main case on the issue is the Fourth DCA’s 2008 decision in Hoey v. State Farm, 988 So. 2d 99 (Fla. 4th DCA 2008). In Hoey, the Fourth DCA determined that the evidence in the record was enough to show that the insurer was entitled to a judgment that the damage was long term and, therefore, excluded from insurance coverage. By analyzing the steady increase in the water bills for roughly three months, the insurer was able to show that there was a failure in the nylon of the toilet supply line. Contrary to many of the litigated cases on this provision, this case had enough evidence in the insurer’s favor to allow the trial court to determine the insurance company clearly did not cover the damage.

Key Evidence

In cases where summary judgment is not appropriate, juries must decide whether the evidence shows that the leakage occurred for an excluded time period. Naturally, insureds’ and insurers’ attorneys should pay attention to the following factors to assess what the jury will think of the damage:

1. The Photographs

The photographs tell the story and are typically the most important evidence. Do they show staining and warping? For an insurer, it is going to be hard to convince a jury that the water loss was long term if there is no staining or warping of particle board cabinets. For an insured, if the particle board has rings and rings of deep brown stains and appears to be falling apart, then how can he or she convince a jury that the damage happened from a single leak?

The most important photographs will come from the field adjuster and, if the insurer promptly hired an engineer who quickly visited the property, then the engineer should have good photographs. Because these losses often occur in obscure areas of the property (kitchen cabinets, wall space), an insured generally does not have prior photographs of the damaged areas. Ultimately, the photographs will be the most critical evidence in the case.

2. The Water Bills

The water bills also can help guide the parties’ understanding of what happened. If there was a sudden and extreme toilet leak or pipe burst, then, depending on where the burst was, there may be a huge surge in the water bills. If the bills constantly crept up for a few months, however, that might suggest there was a pinhole leak that allowed water to seep out over a long period of time. According to the Fourth DCA, the water bills in Hoey were sufficient to allow the trial court’s finding that the damage was excluded.

3. The Experts

The experts in this field are very skilled and can provide the parties with highly detailed evaluations of an infinite amount of different types of water losses. Many of the experts I deal with rely on the studies done by Dr. Ralph Moon from HSA Engineers.I have worked with Dr. Moon a great deal. He has published volumes of studies showing what each housing material looks like after it has been exposed to water for days or months. The studies are very intricate and detailed, and, in some cases, can even tell you what temperature the water was in your case. There are several other outstanding experts that rely on Mr. Moon’s studies. I find that a lot of these experts are very good at explaining why a particular type of damage had to have been caused by long term seepage.

Despite having handled well over 100 of these types of cases, I have not had the chance to meet any experts in this area that are hired by insureds and their attorneys. I would like to hear their counterarguments to the very well reasoned theories laid out in the water duration studies I mentioned above.

If you would like a copy of any of Dr. Moon’s articles or the names of any of the other highly qualified experts, please feel free to email me. If you handle these types of cases, I highly recommend reading Dr. Moon’s articles and sharing them with your team as soon as possible. As you know, the experts will be responsible for explaining the issue to the jury.

4. The Nature of the Source

To determine whether the damage was long term, the parties have to understand the nature of the event. Was the leak coming from the roof? If so (and so long as there was not a wind event), the only seepage that could have entered must have been rain and other moisture over a period of time. If a slight “leak” caused a substantial amount of damage, that is a strong example of a long term water loss. Was the leak coming from a deficiency in the shower stall or tub surround? One might logically expect that the damage occurred each time the person showered or took a bath. Understanding the exact source of each portion of the loss is crucial to determining whether the source, by its nature, is something that would happen over time or all at once.

5. The Policy

To evaluate the claim, insurers and insureds must also go to the heart of the issue – the insurance policy. Interestingly, and as mentioned above, these policies have many variations. Not only are the excluded durations different, but the sources of the loss can often be different. For example, some policies’ constant or repeated seepage exclusions may exclude long term seepage coming only from within a plumbing, heating, or air conditioning system. If the loss was long term but not from one of those systems (for example, through the roof), then insureds and insurers might need to reevaluate whether the loss was “sudden” or not, which is also required by virtually every homeowners insurance policy. As also noted above, some policies contain language that excludes the damage “whether hidden or not.” This is arguably the first place to look when evaluating one of these claims.

If you are an insured, a claims handler, or an attorney in this field, then you certainly need to understand the significance of these issues. This exclusion is as litigated as any other exclusion in any type of insurance policy. Although this was not meant to be an exhaustive review of the issues, I hope that it helped you in some way. As noted above, if you want any of the materials from Dr. Moon or you want to discuss any of the other experts in the field, please email me.

Takeaway:

At least 60% of your claims and lawsuits are probably water damage claims. It’s time to approach these on a more global level.

  • What if I told you that you could use a system to search your old claims and cases to determine how much the next case will settle for?
  • What if I told you that you could pay for the legal documents for these claims only once?

Well, its no longer 2001, and these systems are freely available.  If you want to know more about the systems we use, or you want free checklists and guides for handling water damage claims, please message me.


Questions?

If you have any questions about this article or anything else Florida homeowners insurance-related, please contact us.

Another New Florida Homeowners Insurance Late Notice Case: Hope and Cunningham v. Citizens Property Insurance Corporation


First Party Property Insurance Blog is Proud to Announce our New E-Book: the Florida Homeowners Insurance Claims and Litigation Handbook.

You know I am always here to provide tons of value to businesses in the insurance claims industry. We spent years collecting and analyzing leading industry data, strategies, action steps, and cases to know for our clients. We decided to make this available exclusively to the First Party Property Insurance Blog Community.

In this 99 page book, we provide our readers with:

  • the 16 Strategies You Need to Know to Master Florida Homeowners Insurance Claims, including pages of Action Steps and Cases to Know for evaluating each strategy
  • the 6 Key Statutes You Need to Know to Master Florida Homeowners Insurance Claims, including Practice Tips and Cases to Know for handling each statute
  • The 3 Tools You Need in Your Florida Homeowners Insurance Claims Toolbox, including our Resources, Legal Document Library, and Affirmative Defenses analysis, and
  • our CaseGlide Florida Homeowners Insurance Databases with insurer data, attorneys, and public adjusters

We’ve been conducting Webinars and Training Sessions on this material for years, and they have always helped our clients’ businesses. The Florida Homeowners Insurance Claims and Litigation Handbook has everything you need to help your colleagues, staff, and partners master our claims industry. Our clients have used the material in this E-Book to revolutionize how they handle claims and litigation.

We’re so confident in this E-Book that we offer you a money-back guarantee if it does not have the information you and your insurance claims business needed to improve. Click the image of the E-Book now to buy it for your friends and clients today.


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*April 30, 2014: There are some other late notice cases that can help you prepare your case.  Check this link to make sure you review all of the late notice cases that have recently came out.*

LATE NOTICE CASE: HOPE & CUNNINGHAM V. CITIZENS

The Third DCA just issued the latest opinion on the late notice defense:

http://www.3dca.flcourts.org/opinions/3D11-3147.pdf

As discussed in Florida Courts on the Prompt Notice Provision and New Late Notice Case, the Florida DCAs have been giving insureds and insurers a lot to work with in terms of evaluating the strengths and weaknesses of a late notice defense.

The Third DCA’s opinion in Hope & Cunningham v. Citizens changes nothing in the current late notice law, but helps to maintain the status quo. The case involved a October, 2005 Hurricane Wilma claim reported to Citizens in 2009.

The Third DCA used the “tipsy coachmen doctrine,”which allows an appellate court to affirm a trial court’s order even if the trial court made the decision for the wrong reason. The trial court granted summary judgment pursuant to the Fourth DCA’s finding in Kroener v. FIGA that the passage of two years alone was sufficient for summary judgment on the defense, without consideration of the facts that might have overcome the presumption of prejudice.

The Third DCA said the trial court should have reviewed the plaintiff’s affidavit, the public adjuster’s report, and the roofer’s estimate to assess whether those could be sufficient to create a question of fact as to whether the plaintiffs could overcome the presumption of prejudice. The Third DCA took up that task and said that, because the evidence was merely conclusory, it did nothing to create a question of fact as to the prejudice. Accordingly, the Third DCA found that the trial court was right for the wrong reasons and Citizens was entitled to summary judgment.

This fits right in the prior analysis. Insureds must produce sufficient evidence to overcome the presumption of prejudice and the people presenting that evidence must stick to their stories. If an insured does not present evidence with specific (not conclusory), unwavering reasons as to why the insurer was not prejudiced, then summary judgment is proper.


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New Late Notice Case

Getting Started

New to the First Party Property Insurance Blog? Take five minutes to find the answers to your insurance questions by clicking here.

*April 30, 2014 Update: Click here to see all of the late notice cases that came out since this post.*

In Yacht Club on the Intracoastal Condominium Association, Inc. v. Lexington Ins. Co., the Southern District of Florida looked at a few important late notice issues and determined that the insured breached the prompt notice provision as a matter of law.

The insured filed the claim for Hurricane Wilma damages arising on October 24, 2005. The insured argued that it waited to report the claim because it did not understand the extent of the damages until they later manifested. The insured reported the claim on May 21, 2010.

As indicated above, the insured argued that it did not realize the extent of the damages until they later manifested. Consistent with several cases rejecting that argument, the Court did not allow this argument to preclude a summary judgment finding that the insured’s notice was not prompt.

Then came the real issue that has been going different directions in the local Florida DCAs: whether the insured could present a fact issue as to whether it could overcome the presumption of prejudice. The insured presented evidence that its expert could determine that the hurricane caused the damage. Furthermore, the insured presented evidence that even the insurer’s experts issued some conclusions about the damage. Putting them together, the insured argued that the jury should decide whether this evidence is enough to overcome the presumption of prejudice.

The Southern District granted summary judgment for the insurer as a matter of law. The Court acknowledged that some experts reached some conclusions; however, the Court granted summary judgment because the experts undoubtedly would have been able to reach more accurate conclusions if the insured would have promptly reported the damage.

The rationale is powerful and correctly explains why these issues should be for the Court rather than the jury. Simply presenting expert opinions that some conclusions can be drawn should not destroy an insurance company’s right to have a claim reported quicker than 4 and a half years after the hurricane.

Did this Article Answer Your Homeowners Insurance Question?

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