Court Rules No Right to Payment for Sinkhole Sub-Surface Damage Without Contract for Repairs

Most insurance policies include conditions precedent, which must be performed for an insured to receive benefits under the policy.  These conditions are included in many types of policies including homeowner’s policies and/or sinkhole coverage. The term “condition precedent” refers to required acts or omissions to be performed by the insured before the insurance carrier has a duty to pay benefits under the policy.  Common examples include the duty to notify the carrier of a loss in a timely fashion and to provide a sworn proof of loss.  A recent decision by the Florida 2nd District Court of Appeals, Tower hill Select Insurance Company v. McKee reveals the importance of understanding these conditions and fulfilling their terms.

The insured filed a claim with his homeowner’s carrier related to property damage allegedly caused by sinkhole activity.  The insurer retained an engineer who (predictably) concluded that the damage to the subject property was not caused by a sinkhole.  Based on the engineer’s opinion, the carrier denied the claim was covered under the policy.  The insured also retained an engineer who determined that the damage to the home was caused by sinkhole activity.  While the insured’s expert’s report was submitted to the insurance company, the carrier denied coverage.  The insured filed a lawsuit for breach of contract.  The trial court granted summary judgment in favor of the homeowner in the amount of $181,317, which included 22,429 in prejudgment interest.

On appeal, the insurance company alleged that the insured was not entitled to the recovery for the subsurface repairs because the insured failed to enter into an agreement to have the repairs performed.  The insurance policy contained a provision that tracked the language of 627.707(5)(b), Florida Statutes (2010), which authorized the carrier to withhold payment until a contract was executed between the homeowner and the entity that was to undertake the repairs.

The appellate court also reversed the appellate court on the right of the insured to prejudgment interest.  The court indicated that 627.70131(5)(a) authorizes payment of prejudgment interest on “[a]ny payment of an initial or supplemental claim or portion of such a claim made 90 days after the insurer receives notice of the claim or made more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later. [Emphasis in original].  Applying this rule, the court determined that the failure of the insured to execute an agreement for performance of the repair work was the factor preventing the insurer from making payment under the policy.  Because the insured was in control of the obstacle to payment of benefits under the policy, the 15 day period had not expired because the insured was in control of satisfying the condition that would give rise to the duty to pay under the policy.

While this might appear to be a “hyper-technical” outcome, the decision demonstrates the importance of complying with all required conditions imposed under the policy.  Frequently insurance carriers make bogus claims that a condition precedent has not been performed, so policyholders should seek legal representation if their claim is denied on this basis.  In fact, an insured can always benefit from seeking legal advice anytime their claim is denied.  

If your insurance carrier is refusing to comply with its contractual obligation, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney.  My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM. 

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