Archive: October 2021

Even when an insurance company is required to cover some damages arising from a specific event, such as water damage, that does not necessarily mean the policy covers all damages incidental to the event. Of course, an insurer is required to pay a valid claim in good faith. But they are not under any legal obligation to go beyond the scope of the policy’s coverage.

Take this recent decision from the Florida Third District Court of Appeal, State Farm Insurance Company v. Shotwell. This case involved a dispute over water damage to a private residence. The homeowner’s toilet overflowed, causing substantial water damage to his master bathroom, master bedroom, and adjoining parts of the house.

The homeowner held an “all-risk” policy with State Farm. The insurer acknowledged coverage for some of the water damage and issued an initial payment of $888.72, which accounted for the homeowner’s deductible and depreciation.

Homeowner’s insurance policies often contain appraisal clauses. Appraisal is a form of alternative dispute resolution similar to arbitration. In its simplest form, an appraisal clause states that if the parties disagree as to the amount of an insured loss, each side will appoint an independent appraiser. If the appraisers cannot agree on a value, they will jointly appoint an umpire to act as a tie-breaker. The final decision is then binding on the insurance company and the policyholder.

Florida Court: Roofing Contractor Must Submit Insurance Claim to Appraisal

When an insurance policy provides for binding appraisal, then either party may initiate the process and the other party must comply. But what happens if the homeowner assigns their claim to a third party, such as a company hired to perform repairs? Does the appraisal process bind the third party as well?

Earlier this year, the Florida Second District Court of Appeal addressed just such a case, Webb Roofing & Construction v. FedNat Insurance Company. Here, the insurance company sought to compel appraisal over the objections of the third-party contractor.

Insurance disputes often involve complex questions of law and contract interpretation. Yet many cases boil down to a single question: Does the insurance policy actually cover the claim at issue? Sometimes this question proves relatively easy to answer.

For example, there is this recent decision from a federal judge in Tampa, Ditech Financial LLC v. AIG Specialty Insurance Company. The plaintiff in this case was a mortgage loan servicing company. The plaintiff ran into trouble with regulators in 2014 over purported “deficiencies” in its business practices. As relevant to this case, the plaintiff had failed to conduct annual escrow analysis for borrowers involved in Chapter 13 bankruptcy cases.

Basically, Ditech was supposed to analyze any changes to a borrowers’ property tax and insurance payments while they were in bankruptcy. The failure to conduct this analysis meant that there were shortages in the borrowers’ escrow accounts, which they remained liable for under their mortgages. Ditech made up for these shortfalls and then tried to get its money back from the borrowers after they exited bankruptcy.

Florida law requires all insurance companies to act in good faith when approving, denying, or settling claims. An insurer that fails in this duty may face a bad faith lawsuit from an aggrieved policyholder or third-party victim. In defending against such claims, however, the person alleging bad faith still has to present evidence in support of their case. Put another way, an insurance company is not guilty of bad faith based merely on the say-so of the plaintiff.

Federal Court Rules GEICO Not Responsible for $14.9 Million Stipulated Judgment in Motorcycle Accident

A recent decision from the U.S. 11th Circuit Court of Appeals, Pelaez v. Government Employees Insurance Company, provides a useful example. This case arose from a 2012 motor vehicle accident in Florida. An 18-year-old man was driving his mother’s car to his high school prom when he collided with a motorcycle. The mother insured the car with GEICO. The son reported the accident to GEICO but did not mention any injuries, even though the motorcycle driver had been airlifted to a hospital.