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Florida Sinkhole Homeowners Insurance Update Regarding the Second DCA on Sinkhole Burden of Proof

Florida Homeowners Insurance Claims and Litigation Handbook

Brief Summary

In Mejia v. Citizens, Florida’s Second DCA held that Citizens had the burden of proof to show that sinkhole activity was not the cause of the plaintiff’s property damage. Once Mejia proved the property suffered a loss during the policy period, Citizens was required to show that the loss was excluded under this policy. In addition, the Court ruled that the amount of money Citizens paid to its engineer during the previous three years ($9.5M) was admissible.

For a copy of the Mejia opinion, scroll to the bottom of this article.

This is one of several key sinkhole homeowners insurance opinions in the last couple of months. If you missed the last few, you can read them here:

Omega v. Johnson

Contract for Repairs Argument Upheld

2011 Statutory Structural Damage Definition Applies to Policies Issued After Senate Bill 408’s Effective Date

Homeowner Not Required to Produce Sinkhole Report Before Lawsuit


How does CaseGlide Solve This Problem?

To learn more about how our proprietary claims litigation software CaseGlide solves this problem, check out our First Party Property Insurance Blog article on CaseGlide here.


The Mejia Opinion

Download (PDF, 59KB)


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Florida Sinkhole Homeowners Insurance Update Regarding Homeowner Not Required to Produce Competing Sinkhole Report Obtained After Denial

Florida Homeowners Insurance Claims and Litigation Handbook

 Overview:

Florida’s Second DCA recently answered an important question in Florida sinkhole homeowners insurance litigation: if (1) a homeowner has a competing engineering report it obtains after an insurer denies a sinkhole claim and (2) the insurer does not request the report, the homeowner is not required to produce the report before filing a lawsuit.

In a concise opinion embedded at the end of this post, Florida’s Second DCA in Herrera v. Tower Hill determined that the insureds were not required to produce their competing engineering report prior to filing their lawsuit against Tower Hill.  In summary, Tower Hill argued that the insureds’ failure to produce the report constituted a breach of the “concealment or fraud” and the “duties after loss” provisions.

Tower Hill argued that the insureds, before filing the lawsuit, should be required to to produce the report to Tower Hill. If the insureds would have produced the report, Tower Hill could have evaluated the report and the parties could have avoided the litigation altogether. The trial court granted Tower Hill’s motion for summary judgment on these arguments.

The Second DCA reversed the trial court’s finding in favor of Tower Hill. The Second DCA explained that “[t]hese conditions apply where the insurer admits liability but disputes the recovery amount. See Tower Hill Select Ins. Co. v. McKee, 39 Fla. L. Weekly D1756, at *1. The policy did not require the Herreras to give the Geohazards report to Tower Hill unless they had the report at the time of the claim, but before Tower Hill denied it. See Surrett v. First Liberty Ins. Co., No. 8:11-cv-60-T-23MAP, 2011 WL 3879515, at *2 (M.D. Fla. Sept. 2, 2011).”

Takeaway:

This is a very popular argument for insurers; however, the Second DCA did not agree that it applied to this specific set of facts. Interestingly, the Second DCA may have “left the door open” to this argument: if Tower Hill would have requested the report at some point after it was created, the policy may have required the insureds to produce the report before the lawsuit. That’s not exactly what the opinion states; however, you have to assume the Second DCA mentioned that fact for a reason.

In addition, Tower Hill’s arguement may still provide it with a defense to the insureds’ attorney’s fees as discussed here in our analysis of Omega v. Johnson.

This is one of several key sinkhole homeowners insurance opinions in the last couple of months. If you missed the last three, you can read them here:

Omega v. Johnson

Contract for Repairs Argument Upheld

2011 Statutory Structural Damage Definition Applies to Policies Issued After Senate Bill 408’s Effective Date


As a reminder, we have the complete Herrera v. Tower Hill order embedded at the end of this post.

Let me know your thoughts on this opinion and feel free to send me a message.


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The Complete Order in Herrera v. Tower Hill

Download (PDF, 57KB)

Florida’s Fifth DCA Rules that Homeowners Insurer Does Not Have to Pay Attorneys’ Fees When it Flips Sinkhole Coverage Decision After Lawsuit

Florida Homeowners Insurance Claims and Litigation Handbook

 Overview:

According to Florida’s Fifth DCA, a homeowners insurer can reverse its position in a sinkhole case and still not be required to pay attorneys’ fees.  Read more about Omega Insurance Company v. Johnson to find out how Omega perfectly handled a disputed sinkhole claim.


 

In Johnson v. Omega Insurance Company, Florida’s Fifth DCA held that it is possible for a homeowners insurer to make a mistake in a sinkhole case and still not have to pay hundreds of thousands of dollars in attorneys’ fees.  I include a full copy of the opinion at the end of this post.

Facts

Omega, a Tower Hill company, followed the statutes from the beginning to end. Relying on a report from a professional engineering and geology firm, Omega initially denied the sinkhole claim. The homeowner hired an attorney, and that attorney hired an engineer to contradict Omega’s decision. According to the homeowner’s engineer, Omega’s engineer may have been wrong – there may have been sinkhole activity causing damage.

Instead of providing this report to Omega and allowing Omega to make a decision based on the new information, the homeowner’s attorney sued Omega, and then provided the report to Omega in discovery. As discussed below, Omega was entitled to rely on its engineering and geology firm’s report.

In response to the homeowner’s lawsuit, Omega submitted the case to neutral evaluation (which we know is mandatory), and the neutral evaluator sided with the homeowner – sinkhole activity may be the cause of the damage. In response to the neutral evaluator’s opinion, Omega agreed to comply with the neutral evaluator, accepted coverage, and tendered the policy benefits to the homeowner.

Now that there was no dispute, the homeowner made her next move: a motion for confession of judgment and attorneys’ fees.

Holding

The Fifth DCA determined Omega did everything right. By complying with every Florida statute for sinkhole claims, Omega did not do anything that wrongfully led the homeowner to resort to litigation. Accordingly, Omega did not have to pay the homeowner’s attorneys’ fees.

Takeaway

As you know, the homeowners insurers that are still litigating sinkhole cases rely very heavily on these arguments. In short, the argument is that the insurer is entitled to rely on its expert absent any competing reports.  When you combine that presumption with the confession of judgment doctrine, insurers believe that they should never have to pay attorneys’ fees when a homeowner’s attorney hides a report that could have led to no lawsuit in the first place.

You can bet these insurers are relieved that their hard work paid off in this case. With hundreds of thousands of dollars per case looming over every adjuster’s head on every case, a decision the other way would have been tough for these insurers to endure.

Of course, this outcome could have been different for a number of reasons- what if the homeowner did not have the report before filing the lawsuit?  Most homeowners’ attorneys would not make this same mistake today.

The Second DCA in Colella v. State Farm has a similar holding for insurers to rely on.  In Johnson, the Fifth DCA called Colella and Johnson “strikingly similar.”

For those remaining sinkhole cases (many have settled), homeowners insurers’ attorneys will have another tool in their arsenal.

The Big Takeaways

With sinkhole claims dwindling, the big takeaway here is that this logic can be applied to other types of insurance claims.  Johnson stands for the longstanding Florida proposition that homeowners need to give insurers a chance to fully evaluate the claim instead of “hiding the ball.” The sinkhole statutes may provide an added level of protection – the presumption of correctness – but the arguments in this case are undoubtedly applicable to any other case where the homeowner withholds information in her possession before she files the lawsuit.

Additionally, if you have been following along, you may have noticed that this is the third big sinkhole case in favor of homeowners insurers in the last two weeks. If you missed the first two, you better read them here:

Contract for Repairs Argument Upheld

2011 Statutory Structural Damage Definition Applies to Policies Issued After Senate Bill 408’s Effective Date


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And here is the complete copy of the order:

Download (PDF, 78KB)

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)

 

Florida Sinkhole Homeowners Insurance Update re Eleventh Circuit Rules that 2011 Structural Damage Statutory Definition Applies to Policies Issued After Senate Bill 408’s Effective Date

Florida Homeowners Insurance Claims and Litigation Handbook

Overview

Another hundred million dollar sinkhole insurance question has finally been answered: to deny a sinkhole claim, homeowners insurers can apply the 2011 statutory definition of “structural damage” to a policy issued after May 17, 2011 even if the insurance policy did not include the statutory definition.


(For a full copy of the order, scroll to the end of this post.)

In Shelton v. Liberty Mutual, the Eleventh Circuit issued a ruling that is extremely important for sinkhole claims reported for insurance policies that were issued after May 17, 2011, the effective date of Senate Bill 408.  Although Liberty Mutual’s policy did not have the statutory definition for “structural damage” written in the policy, the Eleventh Circuit held that Liberty Mutual properly denied a sinkhole claim by relying on the “structural damage” definition in the statute – Fla. Stat. 627.706(2)(k).

Liberty Mutual’s Arguments

Liberty Mutual argued that the statutory definition controlled, even though it was not in their policy.  Liberty Mutual argued that the statutory definition is incorporated into the insurance policy, regardless of whether it is an extreme departure from the simple definition in its policy.  As you know, this is the 2011 statutory definition of “structural damage;”

(k) “Structural damage” means a covered building, regardless of the date of its construction, has experienced the following:

1. Interior floor displacement or deflection in excess of acceptable variances as defined in ACI 117-90 or the Florida Building Code, which results in settlement-related damage to the interior such that the interior building structure or members become unfit for service or represents a safety hazard as defined within the Florida Building Code;

2. Foundation displacement or deflection in excess of acceptable variances as defined in ACI 318-95 or the Florida Building Code, which results in settlement-related damage to the primary structural members or primary structural systems that prevents those members or systems from supporting the loads and forces they were designed to support to the extent that stresses in those primary structural members or primary structural systems exceeds one and one-third the nominal strength allowed under the Florida Building Code for new buildings of similar structure, purpose, or location;

3. Damage that results in listing, leaning, or buckling of the exterior load-bearing walls or other vertical primary structural members to such an extent that a plumb line passing through the center of gravity does not fall inside the middle one-third of the base as defined within the Florida Building Code;

4. Damage that results in the building, or any portion of the building containing primary structural members or primary structural systems, being significantly likely to imminently collapse because of the movement or instability of the ground within the influence zone of the supporting ground within the sheer plane necessary for the purpose of supporting such building as defined within the Florida Building Code; or

5. Damage occurring on or after October 15, 2005, that qualifies as “substantial structural damage” as defined in the Florida Building Code.

The Homeowner’s Counterarguments

The homeowner made at least two arguments:

  • because Liberty Mutual’s policy did not include the statutory definition, Liberty Mutual could not rely on the statutory definition and, therefore, had to cover sinkhole claims if there was any damage to the structure.
  • this change in the “structural definition” was a change that required heightened notice to the policyholder.

The Eleventh Circuit’s Opinion

The Eleventh Circuit rejected both arguments.

The Definition is Incorporated

The court held that the statute is a part of the insurance policy and Liberty Mutual’s policy and should be read as if it were part of it. Unfortunately for the homeowner, the court does not go into great detail regarding why this can’t be considered a situation where the insurer offers more coverage than the statute allows. This argument – that the statute provides a baseline for the coverage required but not necessarily all of it – is usually homeowners’ attorneys’ favorite argument in situations like these. Interestingly, although the Court rejected the argument, the court did not go into great detail regarding why this did not apply here.

This Change in Policy Terms Did Not Require Heightened Notice

Second, there is an entire body of case law that can make insurers’ new policy provisions invalid if they failed to provide proper notice of material changes to the policy.  In other words, if an insurer drastically changes an insurance policy, it can’t call it a renewal because the homeowner might not ever notice the change.  Usually, if that happens, the insurer will be forced to apply the old parts of the policy if it failed to provide notice of the new terms.

  • Here, in Shelton, we had what most could consider to be a material change – a change in coverage from all sinkhole damage to only the worst forms of sinkhole damage.
  • However, the court used Fla. Stat. 627.43121 to state that this was a change in policy terms that was mandated by the legislature; therefore, it was not a “change in policy terms” as defined by the law, and it did not require heightened notice procedures.

Conclusion

So … all of those sinkhole claims may not be covered … and we are just finding this out now?

Of course, the Eleventh Circuit does not bind Florida state courts, and Florida’s appellate courts could take a completely different position. However, like yesterday’s post about the contract for repairs ruling, we are finding out this information a little late.

Unlike with the contract for repairs decision we discussed yesterday, this delay was outside of everyone’s control.  The statutory definition came into effect in 2011, yet the contract for repairs requirement arose years and years before that. For homeowners insurers to get a ruling on the statutory definition issue, they had to wait this long for it to go up the ladder to the Eleventh Circuit.

The vast majority of these claims – hundreds of millions of dollars worth of claims – are resolved. Thus, the impact is very limited.

Nevertheless, thousands of claims and lawsuits remain pending, and this case should give homeowners insurers and their attorneys a big boost in their arguments to resolve these cases.

Takeaway

Like the opinion in yesterday’s post, homeowners insurers would have been much better served if they had this opinion a couple of years ago. Unfortunately, homeowners insurers and attorneys had no choice but to let this issue linger in the federal system until now.

It will be interesting to see if Florida courts side with the Eleventh Circuit, or if they focus more on the argument that insurers are free to provide more coverage than the statutes.  For the good of the industry, hopefully that Florida appellate opinion comes out soon.


For More Information on Sinkhole Claims Updates …

For more information on some of the extremely important sinkhole claim updates, please read these articles:


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And here is the complete copy of the order:

Download (PDF, 56KB)

Florida Sinkhole Homeowners Insurance Update Regarding the Contract for Repairs Argument Being Upheld

Florida Homeowners Insurance Claims and Litigation Handbook

Overview

One of the hundred million dollar sinkhole insurance questions has finally been answered by Florida’s Second DCA: even if the insurer denies a claim, homeowners are not entitled to coverage for the cost of subsurface stabilization repairs until they enter into a contract for those repairs.


McKee v. Tower Hill: the Rulings

In Andrew McKee v. Tower Hill, Florida’s Second DCA determined the following:

(For a full copy of the order, scroll to the end of this post.)

Subsurface Stabilization Repairs

  • The homeowner was not entitled to the cost of subsurface stabilization repairs because he failed to enter into a contract for those repairs.
    • Note #1: the Second DCA did not specify whether the homeowner could have entered into a contract during litigation or before the judgment.
    • Note #2: this is an important victory for Tower Hill because the homeowner likely argued that Tower Hill’s denial prevented it from entering into a contract for repairs.
      • The homeowner probably argued that it did not want to enter into a very large contract without assurances from Tower Hill that it would cover the cost. The homeowner probably also argued that Tower Hill’s denial was a breach that made the contract for repairs provision unenforceable.
      • Importantly, Tower Hill avoided these prior breach arguments and remained entitled to rely on the contract for repairs requirement.

Breach of Contract

  • Despite Tower Hill’s argument that the homeowner prematurely filed suit without complying with policy conditions, the Second DCA appeared to uphold a finding that Tower Hill breached the contract.  This is not 100% clear from the order.
    • Note #1: the Second DCA held that the sinkhole loss settlement provision and post loss conditions were conditions to the amount of coverage provided, not coverage itself.
    • Note #2: I have not had the opportunity to review the briefs, but based on the opinion, this leads me to believe that the homeowner may still be entitled to his attorney’s fees.
      • Why? Because he may have prevailed on the underlying breach of contract action, and he likely will be able to obtain a judgment for the coverage to repair the above ground, cosmetic damages.
      • If Tower Hill filed a valid Proposal for Settlement, though, then it may not be required to pay the homeowner’s attorney’s fees.
      • If the Court finds Tower Hill breached the contract, the attorneys fees at this stage could exceed $200,000.00.

Prejudgment Interest

  • Lastly, the Second DCA determined Tower Hill was not required to pay prejudgment interest for the subsurface repairs because, as noted above, the homeowner is not entitled to the cost of those repairs, and this was outside of Tower Hill’s control.

Conclusions

The Good News

This case clarifies the issues on a common set of circumstances in Florida sinkhole claims.

The Bad News

  • Too little, too late?: This ruling comes a bit late – tens of thousands of sinkhole claims have been resolved without any insurer taking this common, specific issue through the appellate process.
  • Expensive Unanswered Questions: The Second DCA is required to focus on the specific issue it is asked, and it will not give advisory opinions. This leaves a few important questions unanswered:
    • This ruling does not answer the question of whether a homeowner can enter into a contract during litigation.
  • Attorney’s Fees: Depending on some other issues outside of this ruling, Tower Hill may have “won the battle but lost the war” because they may be required to pay the homeowner hundreds of thousands of dollars in attorney’s fees … despite this favorable ruling.

Takeaway

You have to applaud Tower Hill and the homeowner’s attorneys for finally taking this issue this far up the judicial chain, and finally giving the the Florida homeowners insurance industry some guidance on this set of facts.  This ruling, however, would have had 100x the impact if it was issued 5 years ago, and comes with several limitations that make it hard to determine its overall impact on the remaining cases.


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And here is the complete copy of the order:

Download (PDF, 48KB)

Citizens Offers to Settle Another 600 Sinkhole Cases with Marshall Thomas Burnett

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

Citizens made an offer to 600 of Marshall Thomas Burnett’s clients to resolve pending sinkhole lawsuits.  This follows the 300 offers to Thompson Trial Group’s clients, and the 300 with Boyette, Cummins & Nailos.



In the press release included below, you can see the process of how the proposed settlement will play out for the homeowners; however, the terms of the proposed settlement for attorney’s fees were not included in the release:

Download (PDF, 79KB)

In this article regarding the first of these group settlements, I outlined my analysis on why these settlements make perfect sense for everyone, especially Citizens.  By taking a top-down approach to these claims, Citizens was able to substantially reduce exposure while still giving the homeowners everything they needed.

The only question is “how to we get to these results one month after the lawsuit is filed, instead of after years of litigation?” As you know, my opinion is that software could have yielded the same results at a fraction of the costs.

In the press release, Citizens also stated it has approximately 2,000 sinkhole cases remaining.  As always, we will keep you updated.

Takeaway:

The billion dollar sinkhole claim industry keeps inching towards extinction.


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Florida Homeowners Insurance Analysis: Problems and Solutions for Assignments of Benefits and Water Remediation Companies

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

As we have said several times in the past here at First Party Property Insurance Blog, water damage claims are the most common type of Florida homeowners insurance claim.


Johnson Strategies once again delivered a fantastic post on the Florida Homeowners Insurance Industry.  This one is titled “Water Extraction: Florida’s Biggest Cost Driver?”

To summarize, Johnson delivers some terrific insight on how seemingly slight “tweaks” to an average water damage insurance claim payout can lead to hundreds of millions of additional homeowners insurer liability. In this article, Johnson also focused on how prevalent these “tweaks” are when the water damage claim involves a restoration contractor with an assignment of benefits.

As you know, in this article on Water Damage Claims, First Party Property Insurance Blog discussed various coverage issues with water damage claims. We also looked into Hail Claims, which make up a small but increasing share of water damage claims (not all hail claims involve ensuing water damage).  These two First Party Property Insurance Blog articles focused on coverage for these types of claims; however, Johnson’s article urges us to focus on the actual claim payouts when the claims are covered.

A Typical AOB Claim

As Johnson discussed, the Florida water remediation/restoration/extraction/assignment of benefits industry (yes, people use any and all of these terms to describe this industry) involves thousands, and probably tens of thousands, of fact patterns similar to this:

  • Plumber Repair: a homeowner calls a plumber to repair a water leak;
  • Referral: the plumber repairs the leak and recommends the homeowner contact a restoration company to make the repairs;
  • Assignment of Benefits (AOB): in exchange for doing the repairs at little or no cost to the homeowner, the restoration company requests the homeowner to assign the company the right to pursue the insurance claim against the insurance company (as assignment of benefits);
  • Damages Dispute: the restoration company and the insurance company disagree regarding the cost to repair the homeowner’s property, and the difference can be as little as $500 or as much as $50,000.00;
  • Lawsuit: the restoration company files a lawsuit against the insurance company and demands “proper” payment (as the restoration company sees it), and thousands of dollars in attorney’s fees and costs at the outset.

Although it may sound like a reasonable process, no one can deny that over the past few years these claims have skyrocketed without any objective justification.

If you are not familiar with how big of a role these claims play in Florida homeowners insurance, don’t worry, we got you.  Here is one of the most detailed reports on water damage claims from Citizens in 2012.  This will help you understand the sheer number of water damage claims Florida’s homeowners insurers face.

Download (PDF, 757KB)

The AOB Problem

A Few Hundred Dollars Here and There Adds Up

So why is this such an important problem?

Johnson Strategies estimates that this industry’s excessive charges for bursting pipe cases alone could cost insurers $150M per year. That does not include the actual extra repair payouts, public adjuster fees, plaintiffs’ attorneys’ fees, defense attorneys’ fees, and vendor fees. These amounts probably dwarf that $150M annual figure.

In addition, if you compare certain parts of Florida to other parts of Florida, this AOB process noted above is closely associated with an approximately $5,000.00 increase in costs per claim, and don’t compare Florida to any other state, because there is no comparison. In other words, this is a problem because for some reason Tampa and South Florida are the only targets.  The other areas must be doing something right.

Lastly, the article reminds us about what we learned from this video about AOB insurance fraud and how much insurance fraud could pervade this assignment of benefit process.

All of this suggests Florida homeowners insurers are losing control of their ability to efficiently resolve these claims.

Ultimately, the article concluded by urging the legislature to focus on fixing this problem.  As you may recall, the Homeowners Insurance Bill of Rights Working Group tried, but failed, to place strong prohibitions on assignment of benefits for insurance claims.

Lawyers and Courts are No Help

Lawyers and Courts have not systematically defeated this issue, but from what I hear, they are all going to keep trying.

Up until now, it has been tough for Florida’s homeowners insurers to commit to paying tens to hundreds of thousands of dollars to try a case when they can settle it for less than $10,000.00.  As Johnson Strategies points out, this willingness to compromise has added up to millions upon millions in additional recovery for the restoration industry and its attorneys.

Why settle?  The better question today, in this current legal climate, is “why not?” If a Florida homeowners’ insurer has a good case it wants to try, it will have to spend at least $50,000.00 to try the case unless it is using our proprietary software CaseGlide, and even the best cases may not be enough to convince a jury more than 70% of the time.  If the jury finds that the homeowners insurer undervalued the claim by $1.00, the Court could have to award the restoration company’s attorney hundreds of thousands of dollars in legal fees.

In summary, you have two main contributors

1. the lack of any meaningful legislation,

2. the cost to defend these cases with routine and manual legal work, on a case-by-case basis, exceeds the cost to resolve them.

Conclusion

As Johnson Strategies said, until the legislation comes (if ever), Florida homeowners insurers must use their power to take control today.

Insurers should not lie and convince themselves that powerful global defenses suddenly exist. Insurers should not continue paying millions of dollars to create arguments that have no statistically-justifiable results. So long as the law and insurance policies are the way they are (as I understand them), most of these cases are going to have to go to a jury trial if the insurer wants to prove its case.

What can insurers control?  Their costs to get these results.  No matter what you hear, these claims and cases aren’t going away.  The only way to address them will be from the top.  Insurers must use their power to take control of this process by demanding efficient legal services that produce better results at a fraction of the costs.  Otherwise, their own attorneys – the people that should be on their side – become a contributor to their inability to resolve these cases.   Continually charging insurers more than the cost to settle a case will never be an effective legal solution, especially when the results aren’t even very good.

But even if the attorneys can come up with legal defenses to efficiently litigate these cases, homeowners insurers still need to use their power to take control of the legal process. Insurers, when that attorney comes down from the heavens with the perfect legal strategy to control these claims, don’t pay for that same motion 1,000 times, pay for it once … and automate it.  Again, use your power and take control.

Once Florida homeowners insurers (and not attorneys) take the power and control over these AOB claims and litigation, they will be able obtain the best possible results in every case while spending the least amount of money to do so.  Until then, things will remain messy and continue to get messier.

Takeaway:

Let’s share strategies on the assignment of benefits claims.  If you share your strategies, I will share mine and those that I have received. Together, we can break this process down to the critical path for our clients.



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Florida’s Citizens Property Insurance Agrees with Thompson Trial Group to Settle 300 Sinkhole Cases

Citizens Property Insurance Corporation

Sinkhole cases are that much closer to being done in Florida. Read this article to get the details on Citizens’s recent settlement with Thompson Trial Group.


According to a press release today, Florida’s Citizens Property Insurance Corporation reached an agreement to resolve 300 litigated sinkhole homeowners insurance cases with Thompson Trial Group.  The press release contains the relevant information, including the terms of the coverage and repairs, as well as the agreed payments to Thompson Trial Group:

Download (PDF, 81KB)

This follows a March, 2014 settlement of another 300 sinkhole cases I discussed here.

Florida is now one step closer to closing the door on the billions of dollars in losses for sinkhole claims over the past decade (or more); however, hundreds, and maybe thousands, of sinkhole claims remain pending in litigation. As always, I will update you when the next mass settlement occurs.


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Florida’s Fourth DCA in Donovan v. Florida Peninsula Finds 2011 Statute of Limitations for Homeowners’ Insurance Claims is Not Retroactive

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

In Donovan v. Florida Peninsula, Florida’s Fourth DCA just issued a very important opinion for anyone unsure of the Florida statute of limitations for homeowners insurance claims.

If you have not seen them yet, you need to check out the two best pages on the site: the Florida Homeowners Insurance Statutes and the Property Insurance Blog Working Index.  Combine them, and they are a guide to handling any Florida homeowners insurance claim.


In Donovan v. Florida Peninsula, Florida’s Fourth DCA recently issued a short but informative decision clarifying the statute of limitations for Florida homeowners insurance claims.  Donovan’s case involved a 2005 insurance claim for hurricane damage.

The question was whether the 2011 version of Fla. Stat. 95.11(2)(e) applied to Donovan’s claim.  The claim occurred and was reported to Florida Peninsula before the statute of limitations was amended. Florida Peninsula asked the Court to retroactively apply the 2011 statute of limitations to Donovan’s lawsuit.  Donovan claimed that the statute was not retroactive and, as a result, she was only required to file the lawsuit within 5 years of Florida Peninsula denying the claim (which would have given her until basically the date of this article to file the lawsuit).

In 2011, Florida’s legislature changed the statute of limitations (or statute of repose) to require the homeowner to file a homeowners insurance-related lawsuit within 5 years of the date of loss.  Prior to this amendment, Florida courts would give the homeowner five years from the date that he alleged the breach of the contract occurred.  In other words, according to the old statute of limitations, the homeowner could presumably wait 10 years to report a claim and it would not be limited because he actually had 5 years from the date the claim was allegedly denied or underpaid (of course, the prompt notice provision would prohibit that claim).

The Fourth DCA determined Fla. Stat. 95.11(2)(e)‘s 2011 statutory amendments did not apply to Donovan’s claim.  Thus, Donovan did not breach the statute of limitations because she did not have to file her lawsuit within 5 years of the date of loss.  Donovan had 5 years from the date Florida Peninsula breached the contract to file the lawsuit.

In addition, the Fourth DCA determined that a trial court should not dismiss a lawsuit for breach of the prompt notice provision.  As you know if you read First Party Property Insurance Blog, the question of late notice cannot be determined at the pleadings stage.

If you want to see my other articles on hurricane claims and homeowners insurance, make sure to check out:

What You Need to Know About Handling a Florida Homeowners Hurricane Insurance Claim

What Hurricane Wilma Insurance Claims Taught Us for the 2014 Hurricane Season

Remembering the 2004 Hurricane Season and Looking Ahead to 2014

Here is a copy of the Donovan v. Florida Peninsula opinion here:

Download (PDF, 191KB)

Takeaway:

This is not rocket science.  If you are going to pay attorneys millions of dollars to litigate for you, take 5% of the time expended to build simple systems to help you achieve better outcomes while spending the least. There is no reason that every attorney handling a case for a carrier should have to analyze the statute of limitations issue “from scratch.” This is a simple question requiring a simple “check the box” answer for each case.

If you want a copy of a guide that streamlines all routine questions like these, please message me.


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