A coverage dispute arising as a result of property damage from Hurricane Frances, which occurred in 2004, will continue following a Florida appellate court decision in an action brought against Citizens Property Insurance Corp.

The insureds, Manor House, LLC, Ocean View, LLC, and Merrit, LLC, presented a claim to Citizens for damage sustained at nine apartment buildings as a result of Hurricane Florence. After payments for a portion of the property damage were sustained, Citizens continued to dispute the full amount due. Meanwhile, the insureds suffered lost rental income because of the delay. Ultimately, the insureds filed suit against Citizens alleging, among other things, breach of contract and fraud, and sought to recover extra-contractual damages for loss of rental income due to the delay in adjusting and repairing the damaged property.

The trial court granted Citizens’ motion for partial summary judgment on several issues, including Citizens’ motion for partial summary judgment regarding appraiser and umpire fees; motion for partial summary judgment to prevent the insureds from pursuing a claim for extra-contractual, consequential damages; and motion for judgment on the pleadings on the insured’s claim for fraud.

Despite finding that the trial court had accurately interpreted the insurance policy at issue – to not provide coverage for lost rental income – Florida’s Fifth District Court of Appeals reversed the lower court’s decision, finding that the trial court ignored the “more general proposition” that the injured party in a breach of contract action was entitled to recover monetary damages that would put it in the same position it would have been in had the other party not breached the contract. As a result, the court held that, when an insurer breached a contract of insurance, the insureds were “entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy” as consequential damages, provided that the damages “were in contemplation of the parties at the inception of the contract.”

The appellate court determined that the insureds were denied the opportunity to prove whether the parties contemplated that the property at issue would suffer consequential damages in the form of lost rental income if Citizens breached its contractual obligations. The opinion further made clear that, even though Citizens was immune from bad-faith claims, it was not statutorily immune from this aspect of the insureds’ claim because the consequential damages claimed by the insureds were “based squarely on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.”

The decision is a significant win for policyholders as it reiterates their ability to seek all damages flowing from an insurer’s breach of contract, even if such damages are in addition to policy benefits. And, more importantly, this applies even where the insurer is a an entity that is immune from bad faith liability under Florida law.

The Hunton Insurance Coverage team congratulates our friend, Molly Chafe Brockmeyer, of Boyle & Leonard, P.A., and her colleagues, Mark Boyle and Alexander Brockmeyer, on this victory for Florida insureds. Molly has presented with members of our team at the ABA Insurance Coverage and Litigation Committee Annual Conference and Mark and Molly have co-counseled with members of our team on prior cases.

For more information, please visit our Hurricane Insurance Recovery and Advisory center.