Florida Homeowners Insurance Sinkhole Claims Analysis: Sinkholes and MSJs on the Stabilization Repairs (Pre-408 Policies)

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*April 30, 2014: as a result in the decline in sinkhole claims, there have not been many developments on the contract for repair requirement since I first won this issue over a year ago.  

Insurance Policy

Insurance Policy

In a sinkhole case, can an insurer win a summary judgment that the insured is not entitled to coverage for subsurface repairs, even though that insured has entered into a contract for stabilization repairs in accordance with recommendations of the engineer the insured retained? Yes, even if the policy did not incorporate the statutory amendments from Senate Bill 408.

I previously obtained a summary judgment (and at least one other Judge in Hillsborough county has adopted the same position) in a Hillsborough county case where the Court ruled that:

if the insured wanted coverage for the cost of stabilization repairs, the policy and applicable statutes required the insured to enter into a contract for stabilization repairs that was in accordance with the recommendations of the engineer selected or approved by the engineer retained by the insurer.

The Court determined that, although the insured had entered into a contract for repair in accordance with her engineer’s recommendations, she still was not entitled to any coverage for stabilization repairs.

The Court cited five reasons:

1. Fla. Stat. 627.707 (5) (a) (2005) requires the coverage to be the cost of repairs recommended by the insurer’s engineer:

“if a sinkhole loss is verified, the insurer shall pay to stabilize the land and building and repair the foundation in accordance with the recommendations of the professional engineer as provided under s. 627.7073, and in consultation with the policyholder, subject to the coverage and terms of the policy.”

The engineer provided under Fla. Stat. 627.7073 is (usually) the engineer retained by the insurer; therefore, Fla. Stat. 627.707 (5) (a) requires the insurer to provide coverage in accordance with its engineer’s specifications.

2. Fla. Stat 627.7073 (1) (c) (2006) provides a presumption of correctness for purposes of relying on the insurer’s retained engineer’s recommendations:

“The respective findings, opinions, and recommendations of the professional engineer or professional geologist as to the cause of distress to the property and the findings, opinions, and recommendations of the professional engineer as to land and building stabilization and foundation repair shall be presumed correct.”

The Court understood that this was not a presumption in evidence terms; however, it was a presumption that made sense in combination with Fla. Stat. 627.707 (5) (2005) and the policy form.

3. The first half of Fla. Stat. 627.707 (5) (b) (2005) limits coverage for stabilization repairs until the insured enters into the contract for stabilization repairs covered by the insurer:

“The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. … “

4. The second half of Fla. Stat. 627.707 (5) (b) (2005) provides insureds with recourse in the event the stabilization repairs recommended by the insurer’s engineer are not sufficient:

“If repair covered by a personal lines residential property insurance policy has begun and the professional engineer selected or approved by the insurer determines that the repair cannot be completed within the policy limits, the insurer must either complete the professional engineer’s recommended repair or tender the policy limits to the policyholder without a reduction for the repair expenses incurred.”

5. The policy properly incorporated these provisions.

Other Notes

The Court had actually ruled against this same argument weeks before this hearing; however, when presented with a complete understanding of the statutory framework, the Court agreed that the statutes and policy require an insured to enter into a contract in accordance with the insurer’s retained engineer’s stabilization repair plan if he or she wants that coverage.

We also argue that the following two cases suggest that an insurer should be entitled to summary judgment on the cosmetic repairs when an insured has not entered into a compliant contract for stabilization repairs:

Ceballo v. Citizens, 967 So. 2d 811 (Fla. 2007) and

Slayton v. Universal Property and Casualty Ins. Co., 103 So. 3d 934 (Fla. 5th DCA 2013).

We read these cases as supporting the proposition that, without the subsurface repairs, any dispute on the estimated cosmetic damages is simply premature. The insured should be giving the insurer the opportunity to coordinate performance of the stabilization repairs, then inspect the property after those repairs are complete, and then issue any supplemental payment for additional damages that might be necessary. Although the provisions at issue in Slayton and Ceballo are not identical to the sinkhole loss provisions, the sinkhole loss settlement provisions also indicate that additional damages may occur after the repairs and there may be more coverage available.

I’d be happy to provide you with copies of the orders or anything else you might need in regards to these issues.

Sinkhole Formation

Sinkhole Formation

 

Takeaway:

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