Florida Insurance Law Blog

Second DCA Rules Homeowners Must Enter Contract for Subsurface Repairs in Confirmed Sinkhole Cases

In Pena v. Citizens Property Insurance Co., ____ So.3d ____ (Fla. 2nd DCA June 6, 2012), Citizens confirmed the existence of a sinkhole, and that the insureds' home was damaged by sinkhole activity.  Geotechnical Engineers retained by Citizens recommended a subsurface remediation plan.  It appears from the opinion that Citizens paid for the damage to the home itself, but refused to pay any money for subsurface repairs unless and until the insureds entered into a contract for those subsurface repairs.  Because Citizens refused to pay any further funds, the homeowners filed suit against Citizens.

Citizens argued that the homeowners were not entitled to any further funds, and that their insurance lawsuit should be dismissed, because under the language of the homeowners policy no further funds were due until the insureds entered into a contract for building stabilization and repair.  The trial court dismissed the case with prejudice.  (In this case, in addition to failing to comply with a condition precedent, the trial court found that the insureds had committed a fraud on the court with regard to whether they had actually entered into a contract for subsurface repairs.  The Court did not describe the nature of that fraud.)

The 2nd DCA reversed and held that: 

It wold have been appropriate for the trial court to either abate the cause until the condition precedent was fulfilled or dismiss the Penas' suit with leave to amend.

 On the broader issue of whether homeowners are required to enter into a contract for subsurface repairs before being able to sue their homeowners insurance company, there are several important issue to consider. 

First, does the language of the policy require it?  Some  do and some don't.  See, State Farm v. Nichols, 21 So.3d 904 (Fla. 5th DCA), which I blogged on here.

Second, I believe that the insurance company waives this condition precedent when it offers a deficient remediation plan.  It doesn't appear that this was argued in this particular case.  How could a homeowner be required to enter into a contract for an inappropriate repair technique before being allowed to pursue a breach of contract case.  It doesn't make sense. 

Third, I will typically have my own geotechnical engineer prepare a competing remediation plan.  Then I file a declaratory judgment action against the homeowners insurer seeking a judicial declaration that the insurance company's remediation plan is inadequate. 

Fourth, one can consider entering into a contract for subsurface repairs based on the Plaintiff's competing remediation plan, and then file a breach of contract suit based on the differences between the competing plans.

Fifth, one can simply file suit without entering into a contract for subsurface repairs, and consider doing so if the insurance company files the motion to dismiss. 

Random musings, for what it is worth. 

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