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Florida Sinkhole Homeowners Insurance Update on Lobello v. State Farm

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

Once Senate Bill 408 began limiting Florida insurance sinkhole claims under newer policies, homeowners insurers started to see more “back-dated” claims.  “Back-dated claims” involve homeowners reporting claims with dates of loss two, three and four years old.  Many homeowners insurers reacted by denying the claims with the late notice defense.

Florida’s Second DCA recently issued an opinion that touches on the subject, but does not answer the most important questions.  Regardless, if you handle homeowners insurance claims, you must read the article to see what the Second DCA had to say about the late notice defense for sinkhole claims.


In LoBello v. State Farm, Florida’s Second DCA teases us with a ruling on the late notice defense for a homeowners sinkhole claim, but if you read closely, you will notice that the Second DCA left the door open for a homeowners insurer to use the right arguments and evidence to prevail on this issue.

What do I mean by that?

The Second DCA determined that the Circuit Court failed to apply the two-prong test for late notice claims in Florida homeowners insurance cases:

  1. Was the notice late? and
  2. If so, can the homeowner overcome the presumption that the late notice prejudiced the homeowners insurer?

If you already read First Party Property Insurance Blog’s articles on late notice, then I know you would never allow the Court to miss the two prong late notice test.

Unfortunately, in LoBello, there is no indication that State Farm had evidence to support either of the prongs.

Late Notice

First, although the homeowners reported the claim four years after first noticing the damage to their property, State Farm failed to tie that together with the required proof that the homeowners should have known they had a claim at that time.  I could go on for days about how tricky of an issue this is considering most engineers will attribute most cracking to excluded causes; however, that is for another post.

What you do need to realize is that the Second DCA wanted State Farm to prove why the homeowners should have known to report the claim at that time.  Some examples of this could have been asking the homeowners under oath whether their neighbors had any claims, whether they knew about them, whether they knew about sinkhole activity and sinkhole claims, and whether they had consulted with anyone.

In fairness, State Farm’s attorneys could have asked these questions, but the Second DCA’s opinion suggests that State Farm’s attorneys solely relied on the time that passed – 4 years – without discussing why the homeowners should have known to report the claim when they saw the cracks.

Prejudice

Next, the Second DCA also dismissed the Circuit Court’s reasoning because it never went on to the second prong of the late notice analysis – prejudice.

When the Circuit Court determined the notice was late, then it was required to consider the evidence and make a ruling as to whether the homeowner could overcome the presumption that the late notice prejudiced State Farm. There is no mention of an affidavit from an engineer stating that it could not determine the timing of the damages due to the late notice, which I have been recommending to homeowners insurers since my first late notice sinkhole case.  That would have been the evidence necessary to support the prejudice, and the homeowner would have had to produce some expert testimony stating that cause and timing still could be determined four years later.

Essentially, by failing to go through this two prong analysis, the Circuit Court gave the Second DCA no choice but to reverse the ruling.

Although there were some other issues in this case that you should read, this late notice discussion was the main focus.

Importantly, the Second DCA did not remand the case for a further review of the evidence by the Circuit Court Judge; instead, the Court determined that the jury would have to decide whether the homeowners failed to timely report the claim by reporting 4 years after noticing the cracks and, if so, whether they could overcome the presumption of prejudice.

Another issue that homeowners insurers need to address for these late notice sinkhole cases – new policy language may give the homeowners a 2 year “safe harbor” to report sinkhole claims, depending on how the Courts interpret it.  If you are familiar with the new policies, then you know what I am talking about.  If you are not, then I encourage you to quickly contact me to discuss this issue.  (This was not relevant to the LoBello case because the policy was written well before Senate Bill 408’s amendments took effect.)

Here is the complete LoBello v. State Farm order:

Download (PDF, 152KB)

The Second DCA in LoBello discussed several of the recent Florida late notice cases, and I have very comprehensive articles on these cases here.

Homeowners insurers need to get a firm grasp on the late notice law. Not only do they need to make sure they have the right arguments and evidence for these “back-dated” sinkhole claims; more importantly, they need to be prepared if another hurricane hits.

Takeaway:

Like any claim, a late notice sinkhole claim can be broken down into a scope of work. Homeowners insurers have groups of very skilled attorneys that, together, could have solved this issue years ago. There are key questions and evaluations insurers must ask their counsel every time, and State Farm missed them in this case.  Why?  Because it is clear that State Farm did not automate the process of gathering claim and case information that it needs.  Otherwise, it would have been forced to make sure that all of its attorneys agreed with the strategy, and it would have built a system around the best combined strategy from all of its attorneys.  Its unlikely this strategy would have included the mistake discussed in Lobello.

You can supervise/adjust these claims the old fashioned way, or you can supervise claims and cases using software that automates the checklist nature of a cases like these. Don’t just hand claims and cases off without a structured system for evaluating and communicating the key information.  If you are interested in learning more about checklists and software for supervising sinkhole claims, especially late notice sinkhole claims, please message me.


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

Florida Homeowners Insurance Claims and Litigation Handbook

If you are looking for Hurricane Irma Florida insurance claims resources, click here.


Any questions? 

Please contact us.


Overview:

Although it has been eight full hurricane seasons since Hurricane Wilma, we can still learn lessons about how the next Florida hurricane could impact Florida’s homeowners insurance industry.

Hurricane Wilma was one of the most powerful storms ever.  Within 24 hours of becoming a hurricane, Wilma intensified to winds of 185 mph. By the time it reached Florida, its wind speed dropped to 120 mph; however, that drop in windspeed did not correlate to a drop in damages.

Hurricane_Wilma_200510212015

By the time Hurricane Wilma passed, Florida suffered approximately $20.6 billion dollars in damages. Hurricane Wilma left 98% of South Florida without power.  These approximately 6,000,000 people would go on for 8-15 days without any power. Ultimately, this 2005 storm was the fifth costliest storm in United States history.

Florida’s homeowners insurers responded to record claim numbers.  In response to the more than 1 million property insurance claims, Florida homeowners insurers paid out more than $9.2 billion dollars.

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Hurricane Wilma made landfall one year after the famous 2004 hurricane season, when three powerful storms ravaged Florida.  Unlike the 2004 hurricane claims, though, Hurricane Wilma claims would continue punish Florida’s homeowners insurers for years to come.

The Biggest Surprise

From the insurance claims perspective, Hurricane Wilma’s biggest surprise was that it kept generating claims for several years. Unlike any prior hurricane, Hurricane Wilma produced tens of thousands of supplemental, reopened, and late hurricane damage claims.

In these claims, which lasted through 2010, homeowners or public adjusters would notify homeowners insurers that there was damage or that more damage had occurred.  In other words, despite Hurricane Wilma making landfall almost nine years ago, homeowners insurers have only gone a few years without handling hurricane insurance claims. Some insurers claimed that homeowners requested the reopening of 25% of the claims they previously believed were resolved.

As a statistical example, in the year of 2010, Citizens received approximately 600 Hurricane Wilma lawsuits and another 645 Hurricane Wilma claims.  In the homeowners insurance industry, this lag time is what Hurricane Wilma will be remembered for.

Late Notice of Hurricane Claims

In the process of dealing with these very complex insurance coverage issues, Florida courts issued libraries of rulings that carved out new homeowners insurance law.  As you know, First Party Property Insurance Law Blog previously discussed several Hurricane Wilma cases from 2012 and 2013.  In those cases, courts were faced with determining whether a homeowner, in 2008 or 2009, could report a homeowners insurance claim for Hurricane Wilma.

As you also know, the courts never provided a hard line on how late is too late for insurance coverage.  Although there was a statute of limitations, the vast majority of the cases involved claims that did not violate the statute of limitations. Instead, they were cases where the homeowners insurers were concerned that they could not tell whether the reported damage was from Hurricane Wilma, another storm, or wear and tear.  Instead of saying something to the effect of “notice is late when it is received three years after the hurricane,” Florida courts addressed each case’s expert testimony and other evidence. Ultimately, this issue led to the legislative changes discussed below.

Preparing for the Next Florida Hurricane

For those of you getting ready to handle claims this 2014 hurricane season, you need to know how the law has changed.  The most important statutory amendment is:

  • homeowners now have only three years from the date of the Hurricane’s landfall or damage to report the claim to their homeowners insurers.  Fla. Stat. § 627.70132.

So instead of eight or nine years of claims and litigation, Florida homeowners and homeowners insurers can expect the next major hurricane to generate perhaps four or five years.  If the next Florida hurricane makes landfall in a populated area like Miami, Fort Lauderdale, West Palm Beach, or Tampa Bay, then homeowners insurers can expect at least 1 million claims, as we saw with Hurricane Wilma.

Armed with the case law and statistics from Hurricane Wilma, adjusters and attorneys should be ready to apply what they learned for the next hurricane. Homeowners insurers will undoubtedly take more precautions during the initial inspections to try to limit the need for supplemental and reopened claims.  Public adjusters and homeowners’ attorneys will expedite their reinspections to ensure their clients don’t miss out on additional available coverage by failing to report it within three years. Lastly, everyone now knows it will take several years, not months, to put the next hurricane behind us.

Takeaway:

Unless insurers have new systems in place, the next hurricane will be just as tough on insurers as the last one.  My fear is that insurers still handle claims just like they did in 2005 – manually.  For those insurers that understand that technology has changed in the past nine years, we legal technology innovators are here to help with automated legal documents, data analytics to predict settlement, and structured project management software to reduce costs.  For those insurers still doing things the old fashioned way, call us when you need power and control over escalating legal fees and poor outcomes.

If you want more information on legal checklists and guides to prepare for hurricane season, please message me.


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Remembering the 2004 Hurricane Season and Looking Ahead to 2014

Florida Homeowners Insurance Claims and Litigation Handbook

If you are looking for Hurricane Irma Florida insurance claims resources, click here.

Any questions? 

Please contact us.


Overview

Let’s not only think about what the 2014 Hurricane season may bring. Let’s also remember that this is the ten year anniversary of the most memorable hurricane season ever.


hurricane

This photograph is from this fantastic Palm Beach Post story that inspired this article.


Remembering 2004

Before we talk about what could happen in 2014, can you believe it is the 10 year anniversary of the most notable hurricane season ever?

Ten years ago, in 2004, Floridians experienced these four powerful hurricanes and their landfall windspeeds and locations:

  • Hurricane Charley: 145 mph, landfall in Fort Myers
  • Hurricane Frances: 105 mph, landfall in Stuart, Port St. Lucie, and Jensen Beach
  • Hurricane Ivan: 130 mph, landfall in the Panhandle
  • Hurricane Jeanne: 120 mph, landfall in Stuart, Port St. Lucie, and Jensen Beach

The hurricanes ravaged Florida, from Key West to Pensacola.  As a former Stuart, Florida resident, I can remember what it was like to clean up after not one, but two hurricanes in a few weeks.  Never in Florida’s history have we seen that many punishing hurricanes in one season. Sadly, 125 Floridians reportedly passed away because of the four storms.

And the economic damages from these storms were earth-shattering:

  • Hurricane Charley: $14 billion
  • Hurricane Frances: $4 billion
  • Hurricane Ivan: $5-$15 billion
  • Hurricane Jeanne: $6-$8 billion

Ten Years Later

Ten years later, the 2014 hurricane season started June 1st.  The last hurricane to make landfall in Florida was Hurricane Wilma in 2005.  Who would have ever predicted we would go another eight years without a hurricane?

Since 2005, resinsurance rates have dropped.  As a result, Florida homeowners insurers are more financially prepared for this hurricane season than any before.  Florida’s Hurricane Catastrophe Fund has accumulated $13 billion, and Citizens has a $7.6 billion surplus.

As First Party Property Insurance Blog discussed last month, the Weather Channel forecasters predict 11 named storms this season.  Of the 11 named storms, Weather Channel predicts that five will become hurricanes and two will shape into major hurricanes.

According to forecasters, Floridians should stand to benefit from an El Nino pattern that will hold the number of storms below average.  Nevertheless, 80% of Florida’s residential and commercial property lies in vulnerable coastal areas.  These properties are valued at $3 trillion.

Ultimately, as the Tallahassee Democrat points out, hurricane predictions are more “guesses” than “predictions.”  As we all found out from Hurricane Sandy, all it takes is one major storm to cause nightmares and cost billions.

One thing we can all agree on: nobody wants another 2004 Hurricane Season.


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Florida Homeowners Insurance Claims for Hail Damage to the Roof

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

This article about hail damage and insurance claims is the most popular article on First Party Property Insurance Blog for a reason…

What happens when a homeowner has a roof leak?  Was the leak from the eventual wear and tear on the roof?  Or did hail cause the damage to the roof and the roof leak?  Is it covered by insurance, or it is not? How do I find out if it was hail?  What if my roofer is saying hail caused it, but I am not sure? These are some of the toughest questions facing homeowners and homeowners insurers today.

You have heard it in the news whether you are in the insurance industry or not: hail claims are increasing in rapid numbers.  Hail claims raise many insurance issues.  What do you need to know about them?


Understanding the Issue: Could the Actual Roof Be Covered by Homeowners’ Insurance?

Here is the issue: when an aged roof leaks, people understand that the Florida homeowners insurers will not pay to replace the roof. Most people know that the Florida homeowners insurers specifically exclude wear and tear from coverage, and the only time a homeowners insurer will pay for a new roof is if there was a hurricane or some other event. So, when a roof fails, people report a claim for the damage that was caused by the actual water leaking through the roof, but not the roof itself.

Now, however, people are reporting more hail claims than ever, and homeowners insurers are seeing some suspicious hail claims.

Why is this an issue?  Because if someone reports a roof leak as a hail claim instead of from wear and tear, the homeowner may be entitled to insurance coverage for the roof repairs (in addition to the damage from the water leak).

Thus, now you see where the suspicion comes in: when a homeowners insurer responds to dozens to hundreds of homeowners insurance claims where the adjuster cannot find hail damage on the roof … but the homeowners’ roofer is 100% certain that there is hail damage.

So, have homeowners insurers taken the suspicion too far?

Have the homeowners insurers’ attorneys taken the suspicion too far?

That’s what Chip Merlin says.  In that article, he explains his objections to this hail article in Claims Journal from Steve Badger, an attorney who represents homeowners insurance companies.


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.


I am not going to say who is right and who is wrong, but I will take the chance to quickly point out some of homeowners insurers’ biggest mistakes when handling an insurance claim for hail damage, and how to fix them.

The Mistakes in Handling a Hail Claim

In my experience, the worst thing an insurer can do is simply hand a hail damage property insurance claim to an adjuster or attorney and ask them to have an engineer or roofer provide a cause and origin opinion. First, its expensive.  Second, it will become even more expensive if the insurer relies solely on the expert without considering whether there is evidence of a hailstorm in that area.

Easy Ways to Avoid Costly Mistakes

Even if you don’t have your own database to evaluate similar claims in the area, similar claims from that roofer, or similar claims from that attorney, there are plenty of databases that reflect evidence of a hail storm, including online search tools (Hailstrike and StormIntel for example) and public records requests to see if anyone else in the neighborhood replaced their roof.

If there is evidence of hail reports in the area, it will be difficult and costly to defend against coverage, and the insurer should use the available technology to limit its loss adjustment expenses moving forward.  If there were not any hail reports, then a cause and origin expert and attorney might be necessary to solidify a defense (wear and tear, marring, and oftentimes late notice).

As the author of the Claims Journal article noted, the only ways to actually stop suspicious claims would be to amend policies and statutes. Otherwise, insurers’ most likely method of defending this cases requires a costly jury trial on the factual issue of causation.

Takeaway:

Remove the emotion and judgment from these cases and just focus on the facts.  How do you focus on the facts?  First, figure out what those facts are.

Next, once you have decided what you need to know about a claim to make a coverage decision, make a checklist, provide some guidelines, use software, or do anything.  Just don’t leave these determinations up to a subjective decision without any structured evaluation prepared by your top management and top attorneys.

Software can make this issue much simpler.  If you want to know more about how software is doing remarkable things to control hail claim litigation, please message me.




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Florida Appellate Court on Rodrigo v. State Farm and Insurance Policy Conditions Precedent After Curran

Florida Homeowners Insurance Claims and Litigation Handbook

A Florida appellate court recently made some important decisions for anyone interested in Florida homeowners insurance.  Do you need to know about the legal impact of issues with Examinations Under Oath, Proofs of Loss, and the Other Policy Conditions.  Then you must read this article.


The Fourth District Court Appeals recently issued the first decision on conditions precedent in insurance policies since the Curran case.

Download (PDF, 132KB)

Things are too busy at Todd Legal, P.A. to do the usual “deep dive” into the ruling and the impact, but I wanted to make sure everyone was aware of the decision.  As you know, we at Todd Legal provide software and other innovative services to Florida’s property insurers and their attorneys to deliver legal services that are smarter, cheaper, and quicker than what insurers have come to expect.  We are nearing the delivery stage, so I am not going to be able to timely analyze this Rodrigo decision in enough detail to assess its overall impact.

In summary, the Fourth DCA held that the proof of loss provision is still a condition precedent after Curran.  I encourage you to read the full opinion and focus on how the requirement was laid out in this policy, including the loss settlement provision.  Once again, we will await the next decision to see how courts may eventually interpret the EUO provision after Curran, but this decision certainly helps insurers and their attorneys when they try to explain to the judges that Curran may only apply to auto accident/UM cases.  I apologize for the brief analysis and will try to supplement this article in the near future.

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Florida Supreme Court Decides Curran Regarding Compulsory Medical Examination in Uninsured and Underinsured Case is a Condition Subsequent

Florida Homeowners Insurance Claims and Litigation Handbook

Florida’s Supreme Court recently issued an opinion that could change the way insurance claims and evaluated.  Do you know what the Court said?


In March, Florida’s Supreme Court decided whether an insurer of uninsured motorist (“UM”) coverage has to prove prejudice when the insured fails to attend a compulsory medical examination (“CME”).  As you know, we first addressed this issue almost a year ago in this article.

Here is the Court’s complete decision in Curran v. State Farm:

Download (PDF, 135KB)

The Curran decision contains a lengthy analysis of the relevant Florida case law; however, in summary, the Court determined that a CME provision in the UM insurance policy context is a condition subsequent to coverage for UM benefits; therefore, State Farm was required to plead and prove that the insured’s failure to attend the CME prejudiced State Farm.

photo from http://www.peterbottcher.ca/sc/deco/contract_300x220.jpeg

Ultimately, the Curran decision hinged on what type of policy provision the CME provision is: a condition subsequent or a condition precedent. State Farm argued that the CME was a condition precedent to coverage. If State Farm prevailed, then it would have had a presumption throughout the litigation that the insured’s failure to attend the CME prejudiced State Farm (like breach of the prompt notice provision). By contrast, the insured sought to have the CME be characterized as a condition subsequent because, if so, State Farm would have to plead and prove that the insured’s failure to attend the CME prejudiced State Farm.repair 1

The Court agreed with the insured; therefore, the Court required State Farm to prove it was prejudiced.  The Court started the analysis by describing the public policy behind the UM statute, Fla. Stat. 627.727(1). The Court explained its decision must include the public policy behind this statute. Next, the Court simply stated that the CME occurs after the parties enter into a contract and after a claim occurs; therefore, the Court opined that the CME provision was a condition subsequent to coverage. The Court reasoned that the CME provision was a part of the cooperation clause. Under Florida law, insurers have the burden of proving prejudice for breach of the cooperation clause provisions.

Importantly, the Court did not remand the case for further fact finding; instead, it determined that State Farm failed to prove prejudice as a matter of law.  Thus, not only did State Farm fail to obtain the presumption, they lost the issue altogether.

What does Curran mean for Examinations Under Oath in homeowners insurance cases? Advocates for insurers would argue nothing, and insureds’ attorneys would argue everything. The Court was careful to explain that this decision was strongly influenced by the UM statute and public policy, and the Court did not mention whether the cases it cited on the EUO provision were incorrectly decided.  Thus, insurers’ and insureds’ attorneys have room to argue their points on whether Curran should be extended to property insurance EUO failures; however, neither has direct support from the Florida Supreme Court. This decision is similar to the Court’s decision in GEICO v. Nunez, where the Court heavily relied on the specific statute at issue, and not just the insurance policy.


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New Florida Federal Court Decides Franqui re Florida Sinkhole Structural Damage Definition and Sinkhole Testing Requirements

Florida Homeowners Insurance Claims and Litigation Handbook

Are you up to date with the latest Florida Court rulings on homeowners insurance, sinkhole claims, and sinkhole activity?  If you aren’t sure, then make sure to check out this article!


Federal Judge James Whittemore recently joined Judges Radabaugh, Merryday and Lazzara in finding that “structural damage” caused by sinkhole activity must mean more than “damage to the structure caused by sinkhole activity”  This litigation involved an insurance policy that did not incorporate the Senate Bill 408 “structural damage” definition; therefore, the parties disputed whether coverage for sinkhole activity required more than just cracks caused by sinkhole activity.

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More specifically, the Court answered the following questions:

  • Does “structural damage” mean “damage to the structure” or does it mean something more, such as:
  • (1) the five part definition in Fla. Stat. 627.706 (2011);
  • (2) damage to the load bearing portions of the property; or
  • (3) damage that could cause the house to collapse?
  • Does an insurer with a pre-408 policy breach the policy when it does not conduct a full subsidence investigation in accordance with the pre-408 version of Fla. Stat. 627.707?

Structural Damage: The Court ruled “structural damage” in this insurance policy means “damage to the structural components of the building, excluding damage that is cosmetic in nature.”

Testing Requirements: Judge Whittemore also determined that Liberty Mutual did not breach the policy when it did not conduct a “full” subsidence investigation to eliminate sinkhole activity as a cause of the damage.

Analysis:

Here is the complete order:

Download (PDF, 829KB)

Again, we see trial courts construing the words “structural damage” to mean more than what we are used to seeing.  As you know, 20+ courts have determined “structural damage” simply meant “damage to the structure.”  This “lowered” standard resulted in any cracks triggering coverage for “sinkhole loss.”  With the newer interpretations, though, courts are now asking the homeowners’ expert to show that the sinkhole activity is causing substantial damage to important parts of the property.

As you know, this issue only remains relevant to those claims and cases arising under policies without a definition of “structural damage.”  Since late 2012, many of the insurers added a definition and removed all doubt on this issue.  Nevertheless, thousands of cases remain with these pre-408 policies, so these rulings could continue to build substantial momentum for insurers.

Conclusion:

I think the most amazing thing about this line of decisions is that this issue is still relevant in 2014.  Why is the “structural damage” issue still relevant?  If insurers had innovative services in 2006 using the same arguments they had now, they would be done paying the millions it continues to cost to litigate these issues, and the “structural damage” issue would have been irrelevant (one way or the other) 8 years ago.


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A Rare Win Win in Property Insurance as Citizens Settles Portion of Confirmed Sinkhole Claims

Citizens Property Insurance Corporation

What happens when Florida’s Citizens Property Insurance Corporation and a group of Plaintiffs’/Policyholders’ attorneys decide that the litigation just doesn’t make business sense anymore? Read this first of a series on Citizens’s multimillion dollar settlements with plaintiffs’ attorneys to resolve hundreds of sinkhole cases.


Quick Update:

After this article was posted, Citizens settled an additional 300 cases with Thompson Trial Group and 600 cases with Marshall Thomas Burnett.  Make sure to read those articles after you finish this one.

Correction: The Tampa Bay Times is reporting that Citizens may have reported the settlement without having confirmed that the policyholders agreed to it.  For more information on this and other issues relating to Citizens’s legal defenses, see this March 18, 2013 article.

Nevertheless, because it appears the policyholders’ attorneys in this settlement agree this is a good outcome for their clients, there is a good chance that many of these cases will get resolved.  If new information arises, I will update this article.

On March 12, 2014, Citizens announced it will settle 300 policyholders’ confirmed sinkhole claims.  The terms of the settlement include:

  • Citizens agrees to pay for the repairs and stand by the repairs
  • Citizens agrees to allow policyholders to choose their contractors from a pre-approved list
  • Citizens will pay the policyholders’ law firms $2M – $5,000.00 per nonlitigated cases, $10,000.00 per litigated cases

Here is the press release:

Download (PDF, 66KB)

Citizens’ press release applauded coordinating counsel for the settlement.  In the press release, Citizens states that this settlement will save it $30M in legal fees.

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In my opinion, this appears to be a win-win for both parties.  No one can be sure without reviewing the terms of the releases; however, what is clear is that (1) the policyholders will obtain repaired homes and (2) Citizens will be spending its money repairing homes, instead of litigating these issues.  That means the parties achieved what they set out to do.

Although you might argue that this result could have happened sooner, both sides had significant victories over the past year or so, and this allowed each side to modify their position towards the middle.  This settlement shows that both sides had a mutual respect for each other and put Florida’s and the policyholders’ interests ahead of their own. Congratulations to all involved.

This is also a win for litigation project management. Innovative services like THIS are the only way to effectively handle property insurance litigation.  These cases were not that complicated when you approach them categorically.  For insurers with more than 5-10 law firms handling their cases, panel counsel need a coordinating counsel or a software tool that performs the same tasks and oversight. Panel counsel simply do not have the tools or the incentives to make these types of decisions.

Applying litigation project management principles, coordinating counsel and/or equivalent software needs to direct panel counsel by (1) identifying the insurers’ goals with the client, (2) breaking down each stage of litigation, and (3) determining how to optimize the process at each stage (and not waste money).

Coordinating counsel must also identify and automate the routine tasks, and insurers can purchase customized software for litigating property insurance claims in Florida to automate the routine tasks. Otherwise, all the time and money goes towards attorneys and adjuster laboring over routine tasks all day, and there is no time for critical thinking.

As you can see from the Citizens example, when insurers set up the structure to make intelligent results happen, intelligent results happen. Companies that make these tough, innovative decisions will be rewarded.  Companies that punt these tasks to their attorneys without a top-down strategy will waste millions of dollar and hours to achieve less favorable results.

Takeaway:

Citizens did a phenomenal job of embracing litigation project management.  If they would have added the key component of software to the mix, they could have really gained power and control over these cases from the lawyers.  If you want checklists and guides to help you reach results even better than this without spending a fraction of what Citizens spent, please message me.


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Florida’s 5th DCA Enforces Homeowners Insurance Sinkhole Stabilization Contract for Repair Requirement

Florida Homeowners Insurance Claims and Litigation Handbook

The Fifth DCA, in State Farm v. Fred & Carol Phillips, held that the homeowners had to enter into a contract to obtain coverage for sinkhole stabilization repairs determined by the appraisal process.

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The full order is here:

Download (PDF, 72KB)

http://static6.businessinsider.com/image/4fa29707eab8eaf23d000005/sinkhole.jpg

This is a positive order for the insurance industry; however, it may not be broad enough to provide certainty in the trial courts on the main issues being litigated.  Policyholders’ attorneys will argue that this order is limited to appraisal awards where no other breaches exist. They will say that this case does not apply when an insurer chooses its own engineer, refuses the repairs recommended by the insureds’ engineer, and does not resolve damages in the appraisal process.  This is a much more common scenario than the situation in Phillips.

Insurers’ attorneys may argue this is the authority they have been looking for to support a multitude of arguments they have been urging the trial courts to enforce.  To support any statutory sinkhole argument, insurers’ attorneys will urge the trial courts to conduct the same analysis the Fifth DCA did in Phillips on the legislative intent of the sinkhole statutes.  Insurers’ attorneys may also argue that this order shows they could never breach the policy in a sinkhole insurance claim until the insureds entered into a contract for repairs and the insurers refused to pay in accordance with that contract.

From a practical standpoint, the important question is whether this order creates any legal issues that help the parties avoid trying sinkhole cases.  In other words, does this order create any summary judgment potential that was not already present? Probably not.

Ultimately, this case is not broad enough to provide any specific guidance on these issues; however, insurers do have authority to ask the trial courts to genuinely assess the legislative intent of the sinkhole statutes.  Moving forward, it is important to note insurers do have many important sinkhole issues currently pending with the Second DCA, so we should not have to wait too much longer to get answers on the most litigated questions in Sinkhole Alley.

Takeaway:

I have all of the forms and strategies you need to make results like these a reality in any case.  If you are interested in seeing templates, checklists, and guides to assist you with your sinkhole case, please message me.


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Florida’s Second DCA Finds Sinkhole Insurance Claim Neutral Evaluation is Mandatory … All the Time

Florida Homeowners Insurance Claims and Litigation Handbook

Overview:

Want to read about the definitive appellate decision on sinkhole coverage and neutral evaluation? You have come to the right place.


In Trapeo v. Citizens, the Second DCA recently reminded us that neutral evaluation for sinkhole claims is mandatory regardless of when requested. 

Here is a copy of the order:

Download (PDF, 63KB)

In 2009, Citizens issued the insurance policy at issue to the Plaintiff, Gary Trapeo.  In 2010, he reported a sinkhole claim.  In 2012, he filed a lawsuit against Citizens alleging its repair recommendation was not sufficient to stabilize the property.  In December of 2012 and after the parties engaged in discovery, Citizens requested neutral evaluation.  In addition, Citizens filed a “Notice of Automatic Stay” with the trial court requesting the case be stayed until after the parties participated in neutral evaluation.  Mr. Trapeo objected to the Notice and argued that Citizens, by participating in the litigation for approximately 10 months, waived its right to stay the case and demand neutral evaluation.  The trial court agreed with him and denied Citizens the opportunity to submit the claim to neutral evaluation.

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The Second DCA first addressed whether the 2009 or 2011 version of Fla. Stat. 627.7074 (the neutral evaluation statute) applied by the trial court.  The main difference between the two statutes is that the 2011 version mandates stay of the case and participation in the neutral evaluation process “regardless of when noticed.”  The Second DCA determined the stay portion of the 2011 statute was “procedural” rather than “substantive;” therefore, the 2011 statute must be applied to a lawsuit filed after its effective date.

The Court explained why Citizens could not waive its right to request neutral evaluation:

Citizens correctly argues that neutral evaluation, once requested, is mandatory. The trial court’s determination that neutral evaluation was waived conflicts with the express language of the statute. “Neutral evaluation is available to either party,” “supersedes the alternative dispute resolution process under s. 627.7015,” and is “mandatory if requested by either party.” § 627.7074(2), (3), (4). The statute’s language is compulsory; it repeatedly and almost exclusively directs that acts “shall” occur. There is no waiver provision and no timeframe for requesting neutral evaluation.2 It is an optional but statutorily guaranteed process. That is, once the request for neutral evaluation has been filed with the Department, participation in neutral evaluation is mandatory and guaranteed. See § 627.7074(4); cf.Williams, 62 So. 3d at 1135-36. Certiorari relief is appropriate because the trial court’s order purports to deprive Citizens of a statutory process to which it is entitled resulting in material harm. Cf.Williams, 62 So. 3d at 1136-37. This conclusion is supported by language of the statute applicable at the time the lawsuit was filed. The 2012 statute specifically provides, “Regardless of when noticed, any court proceeding related to the subject matter of the neutral evaluation shall be stayed pending completion of the neutral evaluation and for 5 days after the filing of the neutral evaluator’s report with the court.” § 627.7074(10) (emphasis added); cf. Cruz, 76 So. 3d at 398 n.1 (“We also note that section 627.7074 does not impose a waiver or other penalty when a neutral evaluation is not completed within forty-five days. Its proviso that ‘[n]eutral evaluation shall be conducted as an informal process in which formal rules of evidence and procedure need not be observed,’ § 627.7074(5), suggests that the legislature intended no sanction for failure to strictly adhere to the time period.”). The statute provides neutral evaluation as both a potential precursor to litigation and as a parallel, contemporaneous process. It is not an “either or” or “opt out of litigation” procedure, unlike contractual arbitration provisions. Cf. ch. 682, Fla. Stat. (2011) (applying to those instances where the parties have an arbitration agreement). It is also not a process that occurs as part of a civil proceeding, unlike court-ordered mediation, nor is it a presuit requirement.

In addition, the Second DCA held “the circuit court does not have authority over the neutral evaluation process.  The Department [of Financial Services] does.”  Accordingly, the court determined that only the Department has the power to decide whether a party has waived its right to neutral evaluation.

In addition, the court determined that Citizens correctly invoked the process simply by filing the Notice of Automatic Stay.

In a footnote, the court acknowledged the trial court’s concern that this ruling allows a party to request neutral evaluation on the eve of trial; however, the court responded that “the current language of the statute is clear.”

Thankfully, this issue is now resolved.  By my count, this is now the third time the Second DCA has ruled in an insurer’s favor requiring the parties to participate in neutral evaluation.  I would assume this will be the last.  To summarize, when a party requests neutral evaluation, the case is stayed and the parties must attend neutral evaluation.  There do not appear to be any exceptions.  In addition, if a party thinks there may be an exception, the trial court is not the forum, the Department of Financial Services is.

For more information on sinkhole claims and insurance litigation, feel free to contact me at (813) 513-5440 or email me at [email protected] You can also find several articles addressing the legal issues arising from sinkhole claims here.

Takeaway:

Here is one of the few occasions when plaintiffs’ attorneys failed to properly use litigation project management.  Although they might argue that they had an obligation to fight this issue, the statutes were pretty clear (and the majority of plaintiffs’ attorneys agreed) that neutral evaluation is required when requested.  Plaintiffs’ attorneys are usually the best at making efficient and effective decisions using project management; however, they failed here.

If you want to know more about the remarkable things that are being done to control homeowners insurance litigation, including checklists and guides for sinkhole claims, please message me.


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