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Supreme Court Backs Insurer in Lost Rent Dispute

Fla. Supreme Court: State-run Citizens Property Ins. doesn’t have to compensate a Brevard County apartment owner for rental income lost after hurricane-caused damage.

TALLAHASSEE, Fla. – In a win for Citizens Property Insurance Corp., the state-operated “insurer of last resort,” the Florida Supreme Court on Thursday ruled that it can’t be forced to compensate owners of Brevard County apartment buildings for lost rental income predicated by storm damage.

The Supreme Court unanimously overturned a decision by the 5th District Court of Appeal in a dispute rooted in damage caused by Hurricane Frances in 2004.

The apartment owners, Manor House LLC, Ocean View LLC, and Merritt LLC argued that Citizens should be required to make up for lost rental income that occurred as the insurer and the owners battled over a damage claim.

But the Supreme Court, in an 11-page ruling, said coverage for lost income was not included in “the express terms of the subject insurance policy.”

If a private insurer was involved, the Supreme Court said the apartment owners could pursue what is known as a bad-faith lawsuit to try to recover the money. But it said state law shields the government-backed Citizens from bad-faith lawsuits.

“(We) conclude that extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the insurance policy,” Justice Ricky Polston wrote for the court. “Extra-contractual damages are available in a separate bad faith action … but are not recoverable in this action against Citizens because Citizens is statutorily immune from first-party bad faith claims.”

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 lawsuit.

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 2019 decision by the 5th District Court of Appeal. The property owners filed another lawsuit that, at least in part, sought 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 case drew attention from numerous insurance groups, which joined Citizens in warning that a ruling in favor of the apartment owners could ultimately lead to increased insurance premiums.

“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 argued that Citizens breached a contract in handling the claim and, as a result, could 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 wrote in a brief. “If the policy justifications offered by Citizens warrant such limitation, the Legislature, not the judiciary, should engage in that enterprise.”

Source: News Service of Florida