In the past few weeks I've filed several new lawsuits on behalf of homeowners whose insurance carriers have refused to pay for damage to their homes. These include several suits over storm damage to roofs; water damage to walls from leaks; and damage from a leaking water inlet pipe.
The roof damage claims include losses from Hurricanes Charlie, Frances and Jeanne, as well as several Tropical Storm Fay claims.
Today, State Farm and the Florida Office of Insurance Regulation announced an agreement for State Farm to remain in Florida. A copy of the Consent Order between the state and State Farm can be downloaded by clicking here.
State Farm's dispute with the state began with a request by State Farm for a 67.1 percent rate increase. In the Consent Order, the state did agree to a 14.8 percent rate increase.
Defective Chinese drywall is a huge problem. Not only does it stink, but it also causes other parts of the home to corrode. What is covered, and what is not?
It appears that any damage to the home resulting from the Chinese drywall should be covered. Chinese drywall causes many of the components of the home to corrode and deteriorate. Resulting damages include corrosion to metal studs, metal lath, nails and screws, air-conditioning equipment, pipes, coils, wiring, furniture, fixture, and jewelry. Those "ensuing losses" should be covered, even if the policy does not provide coverage for the tearing out and replacing the defective drywall.
If an insurer alleges that the policy excludes corrosion or deterioration, keep in mind that that exclusion only applies to a losses that are due to a quality in the product that causes the property to damage or destroy "itself." It does not apply to deterioration or corrosion that is caused to another item. In the context of Chinese drywall, the drywall is not destroying itself, but is destroying other items.
Whether or not losses due to the fumes from the Chinese Drywall would be excluded under a pollution exclusion will be addressed in a forthcoming blog.
In the first half of 2009, insured property losses from natural disasters topped $11 Billion. Of those losses, thunderstorms led the way by causing more than $6 Billion in insured property losses in the first half of 2009. Interestingly, while thunderstorms generate a wide variety of types of losses - from wind to water - losses due to lightning are continuing to rapidly increase. According to the Insurance Information Institute, in 2008, lightning losses exceeded $1 Billion for the first time. "The reason for this, we believe is the fact that homes are absolutely loaded with electronics today. That part of the loss, particularly with homeowners but also businesses, is growing very, very rapidly."
The Insurance Information Institute also noted that
The industry remains well capitalized despite the financial crisis, despite the recession, and despite last year's catastrophe losses. In other words, it's a very resilient industry that is designed to withstand major catastrophes and market crashes simultaneously. Insurance markets continue to operate normally, and the industry's promise to pay remains intact.
In Liebel v. Nationwide Insurance Company of Florida, ____ So.3d ____ (Fla. 4th DCA October 7, 2009), the homeowner had a leaky plumbing system which led to subsidence under the home, which in turn led to damage to the home itself. Nationwide refused to pay for the damage to the home under an exclusion for losses caused by natural and unnatural earth movement. Nationwide also refused to pay to tear out and replace the leaky plumbing system.
The 4th DCA agreed that the damage to the home was excluded under the earth movement exclusion. The court reasoned that the earth movement in this case was due to an unnatural cause - the leaky plumbing - and was therefore excluded.
The Court next dealt with whether Nationwide was required to pay to tear out and replace the plumbing system. The exclusion dealing with this aspect of the case provided that the Nationwide Policy covers water losses which are due to wear and tear, or deterioration unless "otherwise excluded." In a subsequent sentence, the exclusion goes on to state that: "We also cover the cost of tearing out and replacing any part of a building necessary to repair the system or appliance."
Initially, the Court noted that that water loss in this case was "otherwise excluded" under the earth movement exclusion. But, the held that:
In the instant case, the trial court erred by not holding that the Policy covered the cost of repairing the plumbing system. This is because the Policy, by providing that it does not cover damage caused by water from a plumbing system that is otherwise excluded, but then stating that it covers the cost of repairing a system that caused water damage, has created an ambiguity, as two or more reasonable interpretations of these two intersecting provision are feasible. Specifically, one may interpret the 'otherwise excluded' language to preclude coverage for all damages caused by a matter otherwise excluded, including the cost of tearing out and replacing any part of Liebel's home necessary to repair the ruptured water line. In contrast, a reasonable person could interpret the Policy to exclude from coverage the damage caused by earth movement, but include the cost of repairing the water line that caused the loss, as it is a plumbing system that caused water damage due to its deterioration from wear and tear. As such there is an ambiguity.... [W]e hold that the cost of repairing the water line was covered by the Policy and reverse the trial court's order to the extent that it held to the contrary.
My client lost a valuable diamond tennis bracelet, and reported the loss to State Farm. State Farm's homeowners policy required it to "replace" the bracelet. Instead of offering a suitable replacement, State Farm offered my client a check, and advised her that it had contacted a vendor who stated it could replace the bracelet for the amount of the check. The problem with this (besides the fact that it violated the terms of the policy) was that if the bracelet was not a suitable replacement my client would then be embroiled in a dispute with the vendor while State Farm would be off the hook.
I filed suit and sought to force State Farm to physically replace the bracelet. State Farm argued that its tender of the check was sufficient. The court ruled today that State Farm's policy required it to provide my client with a suitable replacement bracelet - not a check.
The central question in the case was one of policy interpretation. But, a side issue was who should bear the risk of non-performance by the vendor. State Farm's position left the insured to bear the risk in the event of non-performance by the vendor. My position was that the insurer should bear that risk - and assumed that risk under the terms of the policy.
Last week I filed four lawsuits against various homeowner's insurance companies as a result of their failure to pay, or to pay in full, for roof damage arising out of Tropical Storm Fay. Two of these roofs also involved degranulation losses due to hail damage. Over the years since the massive 1992 hail storms I've successfully handled 100's of roof damage cases.
With the economy waning, I've seen many denials of claims that have been paid in years past. Many of the recent roof cases which I've filed over the past several months involve the insurance companies refusing to pay for replacement of a flat roof where the insurer has agreed to replace the shingled portion of the roof. These flat roofs frequently need to be replaced because roofers cannot get a proper and effective "tie in" without also replacing the entire flat roof. Or, the flat roof needs to be replaced because the tie in is so deep into the flat roof that more than 25% of the flat roof has to be replaced. Under the Florida Building Code, if more than 25% of a roof section has to be replaced, then the entire roof must be replaced.
In some of these cases, the insurance companies are getting their own roofers to say that they can replace the shingle roof without having to replace the flat roof. While there may be some roofers who are willing to perform repairs in this manner, beware: this is not the proper way to repair the roof. Such short cuts may work for a little while, but this improper tie in leaves the roof in a compromised position and will likely soon begin to leak. This new leaking will usually take a year or two, and once that starts, the insurance company will deny any further responsibility by claiming that the leaks are excluded as "improper workmanship.
Another problem that has been arising is the insurance companies are refusing to pay profit and overhead when there are 3 or more trades involved. Overhead and profit are owed when 3 or more trades are involved.
Interestingly, in one of my hail damage claims I was able to locate video footage of the exact hail storm on youtube.com.
Who thought roofs could be so much fun.
Yesterday, the circuit court in DeLand granted summary judgment in favor of our client in a first-party case where sewage backed up into a residential condo.
Upon returning to his condo in New Smyrna after a week away, our client found that raw sewage from 7 other units had flooded his entire condo. Needless to say, it was a mess. The source of the back up was roots growing into and blocking a gravity fed sewage line which took the sewage from the building to the city's main sewage line.
My client submitted the cost of cleanup and damage to his family's personal property to his condo owner's insurance carrier, Florida Family Insurance Company. Florida Family denied the claim based on what it claimed was a clear and unambiguous exclusion for sewage backups.
However, based on the language of the policy, I believed that the policy could be read to only exclude sewage backups which originate from a sump. As this was a gravity fed line, there was no sump involved. The court agreed, leaving one very happy condo owner.
Interestingly, upon reviewing the information which Florida Family had previously filed with the Department of Financial Services, Bureau of Rates and Forms, I found that the insurer's policy was a standard ISO policy; however, the insurer had modified this particular part of the policy. By modifying the standard policy, the insurer actually created the ambiguity which led to the confusion. Had the insurance company not modified the standard ISO form, then this loss would have been excluded.
In Citizens Property Ins. Corp. v. Mallett, 2009 WL 485038 (Fla. 1st DCA Feb. 27, 2009), the First DCA dealt with three issues which are common in homeowners insurance claims: 1) interpreting Florida’s Valued Policy Law (VPL); 2) when payment is due under debris removal, and law and ordinance coverage; and 3) when prejudgment interest begins to running after a loss.
VPL
In Mallett, wind and flood combined to render the home a constructive total loss. Wind damage was a covered cause of loss under the Citizens’ policy, and flood damage was excluded. There was uncontroverted evidence that the wind was a “substantial” cause of the loss to the Mallett’s home. The insureds argued that under Florida Statute Section 627.702(1), Florida’s VPL, Citizens was required to pay its entire policy limits because the home was a constructive total loss, and wind substantially contributed to causing that total loss. The trial court agreed, granting summary judgment to the insured for the entire policy limits.
The 1st DCA reversed, holding that Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2007) governed:
The summary judgment on appeal is expressly contrary to the holding in Cox, and accordingly, we reverse that part of the summary judgment granting the Malletts additional compensation for the damage sustained to their residence not solely attributable to wind.
However, in my mind, this still leaves open several issues. Who has the burden of proof at the trial level to prove which portion of the loss is due to the uncovered peril of flood? Typically, if an insurer is claiming that all or a portion of a loss is due to an excluded peril, then the insurer has the burden of proving which portion of the loss is due to the excluded peril. Thus, if these two perils (wind and flood) combined to cause the loss, then does the insurance company need to prove by a preponderance of the evidence which part of the loss was due to flood? Or, does the insured have to prove which portion is due to wind? There is also an issue raised by the “anti-concurring cause clause” that is typically present in these types of policies.
Debris Removal and Law and Ordinance Coverage
In Mallett, the insured argued that because the home was a total loss, and the insurer owed its entire policy limits under the VPL, then Citizens was required to pay out under the debris removal and the law and ordinance coverage. It is unclear from the opinion if the insureds had actually incurred these expenses, or were seeking these as additional coverages that were simply due because they had recovered the entire policy limits at the trial level. In any event, the 1st DCA held that summary judgment was improper on the issues of debris removal and law and ordinance, and that there would need to be a trial on the issue of how much was due under these two additional coverages that was attributable to wind alone.
Prejudgment Interest
The insureds argued that they were entitled to prejudgment interest running from the date of the loss. However, the Citizens’ policy specifically stated that Citizens was not obliged to pay a claim until twenty days after it reached a written agreement with the Malletts, or sixty days after entry of a final judgment on the claim or after the filing of an appraisal award or mediation settlement with Citizens. Relying on this language, the court sided with Citizens and held that: “It is the terms of a contract for insurance which determine the date from which the coverage payment is due, as well as when interest is due on the amounts payable.”
Obviously, this ruling allows an insurance company to breach the insurance contract, force the insured to file suit, retain the use of the money while the case is litigated, and not be liable for interest on the money they illegally retained.
One way to possibly avoid this result is to file a Civil Remedy Notice pursuant to Florida Statute 624.155, and then seek the prejudgment interest as damages in a subsequent bad faith case.
My client, a water extraction and mold remediation company, performed services for a homeowner insured under a State Farm Florida insurance policy. State Farm refused to pay the entire bill, and in accordance with Florida Statute Section 627.7015, Fla. Stat., offered our client the opportunity to participate in the state sponsored mediation program. My client accepted that offer and attended the mediation. The mediation was unsuccessful and our client asked us to file suit on her behalf as assignee of State Farm’s insured.
Both before filing suit and after, State Farm requested appraisal under the homeowner’s policy. However, pursuant to Section 627.7015, Fla. Stat., I asserted that appraisal is not available to an insurer if: 1) the insurer does not notify the insured of their rights to state sponsored mediation at the time a dispute arises; or 2) when the parties participate in an unsuccessful state sponsored mediation. Because my client had participated in an unsuccessful state sponsored mediation, it was my position that State Farm was no longer entitled to ask for appraisal.
The issue was presented to the court on State Farm's Motion to Dismiss/Abate, and the court denied State Farm's motion, holding that State Farm was no longer entitled to ask for appraisal under the policy because it participated in the state sponsored mediation program.
State Farm attempted to avoid the clear application of the statute by arguing that the right to appraisal is only lost when the insurer requests the mediation, but that appraisal remains available when the insured asks for the mediation. I do not believe that the statute makes such a distinction, especially given the fact that the insurer is never allowed to request the mediation. The insurer is required to notify the insured of the insured’s right to state sponsored mediation. It is then up to the insured agree to participate. State Farm’s reading of the statute would result in an absurdity, where the parties would always be required to participate in appraisal after every unsuccessful mediation; something clearly not contemplated by the statute.
The Goff’s sustained hurricane damage to their home and submitted their claim to State Farm, their homeowners insurer. The Goffs carried a “replacement cost” policy with State Farm. State Farm’s replacement cost policy allowed State Farm to pay only the actual cash value of the loss until such time as repairs were made. Only after the repairs were actually made was State Farm required to pay the difference between the actual cash value and the replacement cost.
The estimate for the damage to the Goff’s residence included projected costs for “overhead and profit” to the general contractor. State Farm agreed that it owed the overhead and profit, but withheld a portion of the overhead and profit until such time as the repairs were made.
The Goff’s filed a declaratory judgment action arguing that State Farm cannot withhold any portion of the overhead and profit pending repairs. The trial court granted summary judgment in favor of State Farm. The 2nd DCA affirmed and held that: “We are unpersuaded by the Goffs’ argument that the policy entitles them to the total amount of overhead and profit in the actual cash value payment. Therefore, we affirm the summary judgment for State Farm on count II.” Goff v. State Farm Florida Insurance Company, 33 FLW D2833a (Fla. 2nd DCA December 12, 2008).
Importantly, this case did not deal with or mention Florida Statute Section 627.7011. Section 627.7011 was amended in 2005 (after the loss in Goff) and states in subsection (3) that:
In the event of a loss for which a dwelling or personal property is insured on the basis of replacement costs, the insurer shall pay the replacement cost without reservation or holdback of any depreciation in value, whether or not the insured replaces or repairs the dwelling or property.
Subsection (3) does not state whether it is to apply only prospectively or may also apply retroactively.
Recently, I filed suit against Nationwide Florida for denying a homeowners insurance for substantial hurricane damage to our clients' home. Our clients sustained wind and rain damage to their home from Hurricanes Charley, Francis and Jeanne. After the storms, our clients submitted the claim to Nationwide Florida, their homeowners insurance company.
Our clients have expended roughly $1,200,000 thus far in repairs to their home. Nationwide hired an engineer who advised that the damage (which did not exist before the 3 hurricanes ravaged the home) was due to problems with the original construction. Interestingly, this is almost the exact same issue which we successfully tried to a jury verdict a few months ago in Orange County Circuit Court against State Farm. In that case we obtained a verdict of nearly double the policy limits.
The lawsuit was filed in Hillsborough County Circuit Court. We have successfully pursued 100's of similar claims for homeowners and business owners throughout the State of Florida.
Tropical Storms can cause significant property damage. In August, 2008, Tropical Storm Fay caused extensive damage across Florida, prompting President Bush to declare the entire state of Florida a Federal Disaster Area. The Orlando Sentinel reported that Brevard County, alone, suffered approximately $10 to $12 million dollars in property damage due to Fay.
One of our clients suffered roofing damage from Tropical Storm Fay's winds. Our client is insured with Tower Hill Select Insurance Company, and submitted his claim for the storm's damage to Tower Hill. In response, Tower Hill retained the services of engineering firm "Rimkus Consulting Group, Inc." to examine the roof. Rimkus has stated that the roof damage is not due to Tropical Storm Fay's winds, but instead is due to improper construction, and poor maintenance. On the contrary, we believe that we will be able to show that the roof, which never leaked until after Tropical Storm Fay, was indeed damaged by Fay's high winds, and extraordinary rainfall amounts.
The Nation Law Firm has previously been successful in showing an extensive (both long-lasting and deep) financial relationship between Rimkus Consulting and the insurance industry. We anticipate being able to once again demonstrate that connection.
As usual, if we are successful in prosecuting our client's roofing claim, Tower Hill will be required to pay our attorney's fees and costs to bring the claim and secure justice for our clients. If The Nation Law Firm is not successful in securing insurance coverage for our client, we will work for free.
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