Hurricane Frances insurance fight still brewing

by | Sep 2, 2020

Almost exactly 16 years after Hurricane Frances pounded Florida, the state Supreme Court is poised to take up an insurance dispute stemming from the storm.

Justices next week will hear arguments in an appeal by the state-backed Citizens Property Insurance Corp., which is fighting the possibility of having to compensate owners of Brevard County apartment buildings for lost rental income that occurred as the insurer and owners tangled over a damage claim.

The case has drawn attention from numerous insurance groups, which have joined Citizens in warning that a ruling in favor of the apartment owners could ultimately lead to increased insurance premiums. They are asking the Supreme Court to overturn an opinion last year by the 5th District Court of Appeal and say the apartment owners should not be able to recover what are known as “consequential” damages.

“Citizens is essentially the state’s property insurer of last resort. … The (appeals court) opinion would expose Citizens to litigation expense and unpredictable exposure beyond policy limits,” Citizens lawyers wrote in a brief. “Those costs will ultimately be borne by both individual policyholders — those the Legislature sought to assist by creating an insurer that could offer affordable rates — and, more broadly, by private insurers and by taxpayers.”

But attorneys for the apartment owners argue that Citizens breached a contract in handling the claim and, as a result, can be required to pay damages for lost rental income.

“Citizens wants this (Supreme) Court to do what the Legislature has not — limit the common law remedies available against it in a breach of insurance contract action based on public policy justifications,” attorneys for the apartment owners, Manor House, LLC, Ocean View, LLC, and Merritt, LLC, wrote in a brief. “If the policy justifications offered by Citizens warrant such limitation, the Legislature, not the judiciary, should engage in that enterprise.”

Hurricane Frances made landfall in Florida on Sept. 5, 2004, and caused widespread damage as it crossed the state. That included damage to nine apartment buildings in Brevard County at the center of the legal dispute.

After Citizens initially made payments of $1,927,747 and $345,192, the property owners filed a lawsuit that led in 2010 to Citizens paying an additional $5.5 million, according to the appeals-court opinion. The property owners filed another lawsuit that, at least in part, sought consequential damages related to lost rental income because of the delay in paying the claim.

A circuit judge ruled in favor of Citizens on the issue, but a panel of the appeals court overturned that ruling “so that the parties may litigate all issues related to Manor House’s (the property owners’) claim of lost rent.” The apartment owners alleged that Citizens’ breach of the policy prevented them from repairing numerous apartments and resulted in lost rents of about $2.5 million, according to a brief filed by Citizens.

The Supreme Court, which will hear arguments in the case Sept. 8, decided last year to take up the dispute.

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