In State Farm Florida Insurance Company v. Nichols, ____ So.3d ____ (Fla. 5th DCA November 6, 2009), the insured homeowners submitted a claim to State Farm for sinkhole damage.  The amount of the loss was settled by appraisal.  Although the appraisal awarded an amount for subsurface sinkhole repairs, State Farm refused to pay for the subsurface repairs until after its insureds’ entered into contracts for the performance of the repairs. 

State Farm based its position on Florida Statute Section 627.707(5)(b) which states:

The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs.

The homeowners argued that, notwithstanding the 627.707(5)(b), State Farm’s policy itself required State Farm to pay the full amount of the appraisal award within 60 days after the amount of the loss was settled by the appraisal. 

State Farm’s policy stated:


10. Loss Payment. We will adjust all losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Loss will be payable:

a. 20 days after we receive your proof of loss and reach agreement with you; or

b. 60 days after we receive your proof of loss and:

(1) there is an entry of a final judgment; or

(2) there is a filing of an appraisal award with us.

The 5th DCA agreed with the homeowners.  According to the Court, the language of the statute is

permissive, not mandatory.  Because it is permissive, the policy language that requires payment of subsurface repairs within sixty days after the appraisal award is not in conflict with the statute and is binding on the parties to the insurance contract.