Homeowner's Insurance Claims: The Legal Effect of F.S. 627.70131(5)(a)

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

In keeping with the policy that an insurer should be diligent in the investigation and settlement of insurance claims, the Florida legislature enacted Florida Statute §627.70131 which applies to certain types of insurance claims. In relevant part, subsection (5)(a) imposes a duty on an insurer to pay or deny your claim within 90 days of receiving notice of the claim by a policyholder. Thus, when an insured submits a claim to its insurer, the 90-day investigation period is triggered, and the insurer is expected to have completed its investigation and have either paid of denied the claim in full or in part. Pursuant to subsection (4) of this statute, this statutory duty only applies to residential property insurers. Thus, cases not involving residential property claims will not trigger this statutory duty

The only exception to this statutory duty is if the insurer is reasonably prevented from paying out the claim by factors that are outside of the insurer’s control. Examples that could be found to have reasonably prevented an insurer from paying the claim include acts of god, impossibility of performance, or acts carried out by the insured, such as fraud or misrepresentation, that necessarily bring into question the claim’s legitimacy and that typically would prolong the investigation period. This exception is narrow, and generally an insurer will not be allowed to escape this statutory duty.

The statute goes on to state that an insurer’s failure to abide by this statutory duty results in the insurer having to pay interest calculated as of the date the notice of the claim is received. In effect, this language imposes a penalty on an insurer, and a corresponding benefit to the insured, in the form of interest dating back to the day the insurer received the claim. Thus, this statute is designed to reduce an insurer’s incentive to wrongfully withhold funds that belong to the insured. However, if the claim must be litigated, and the insured receives a judgment in their favor, pursuant to this statute, the insured will have a choice of either receiving prejudgment interest or interest pursuant to this statute. Sometimes prejudgment interest is calculated pursuant to the terms of the insurance policy which is often not as favorable as the interest rate provided by this statute. Fortunately, the insured will be entitled to elect the rate that yields the greatest return. 

Moreover, intending to prevent insurance companies from escaping this duty, the Florida statute unambiguously provides that this duty cannot be waived by any provisions in an insurance policy. This is important because without this language insurers would draft their contracts to evade this responsibility. Fortunately, the Florida legislature recognized the threat that this statutory requirement could be easily manipulated by carefully drafted contract terms and provided that this duty is non-waivable.

An issue that arises from time to time is the applicability of this statute in the face of choice of law provisions in an insurance contract. Since many insurance companies are situated outside of Florida, many insurance contracts provide that in the event of a dispute a different state’s laws will apply. Although many states have laws that mirror this statute, an insurer’s specific duties will often vary. Unfortunately, courts often find these provisions authoritative, thus rendering this statute inapplicable in some cases. A review of your specific policy is necessary to determine whether there is a choice of law provision that would affect an insurer’s specific duties. 

Moreover, policyholders often assign their contractual rights to other individuals. In assignment of benefits cases, the assignee steps into the shoes of a policyholder, and thus becomes eligible to enforce the same rights that the insured would have been entitled to enforce.  However, courts generally hold that the right of an assignee to enforce these rights will only become effective once notice of the assignment has been given to the insurer. Moreover, any attempt to enforce a claim by an assignee before the insurer receives proper notice of the assignment will be premature and thus not trigger the statute. So if you are an assignee of an insurance policy, you must first perfect your right to enforce the contract by giving notice to the insurer. If an assignee submits a claim before proper notice, the 90-day investigation period will not be triggered unless and until proper notice is given.

In addition, the statutory language at the end of subsection (5) stating that “a failure to comply… does not form the sole basis for a private cause of action” has been held to mean that there must be an underlying action, such as a breach of contract claim, before the statutory requirement will apply. This language generally comes into play in cases involving appraisal. Often, appraisal takes longer than the 90-day period, seemingly triggering the requirement that an insurer pay interest as of the date of receiving notice of the claim. However, Florida courts typically hold that an insurer that participates in appraisal and pays the appraisal award resolves the underlying action. Unless the insurer fails to pay the appraisal award, there is no longer a cause of action that may be pursued by the insured, and the insured will not be able to recover interest pursuant to this statute. In effect, this means that the insurer must have wrongfully withheld the funds before the insured will be entitled to interest. Thus, if either there is no coverage for the loss suffered by the insured, or if the insurer takes longer than the 90-day period to pay the claim resulting from the invocation of its contractual right to appraisal,  then the insured will not be entitled to interest pursuant to this statute, so long as the insurer pays the appraisal award when it has been established.

If you’re met with opposition during the claims process, an experienced insurance claims attorney can help you through the claims process.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].