(Article from Insurance Law Alert, February 2021)
For more information, please visit the Insurance Law Alert Resource Center.
Answering a question certified by a Florida appellate court, the Florida Supreme Court ruled that Florida law does not permit an insured to recover extra-contractual, consequential damages for breach of a first-party insurance contract. Citizens Prop. Ins. Corp. v. Manor House, LLC, 2021 WL 208455 (Fla. Jan. 21, 2021).
Citizens insured several apartment buildings owned by Manor House that were damaged by a hurricane. Citizens made several payments and closed the claim file. Approximately two years later, Manor House presented another claim. Citizens reopened the file and made additional payments. However, the parties disputed the replacement costs, among other things. Ultimately, an appraisal panel awarded Manor House more than $8.6 million in replacement cost value and $8.3 million in actual cash value. Thereafter, Manor House sued Citizens, alleging breach of contract and fraud. Manor House sought extra-contractual damages related to rental income that it allegedly lost due to the delay in repairing the apartment complex.
A Florida trial court dismissed Manor House’s claim for lost rental income, noting that nothing in the insurance policy provided coverage for such loss. A Florida appellate court reversed, ruling that notwithstanding the absence of coverage for lost rental income in the policy, the insured was “entitled to recover monetary damages that will put it in the same position it would have been had the other party not breached the contract.” The appellate court noted that Citizens was immune from a claim of bad faith based on its “government entity” status, but ruled that consequential damages were permissible as a remedy for the breach of contract claim.
Quashing the appellate court decision, the Florida Supreme Court ruled that an insured is not entitled to extra-contractual damages for breach of a first-party insurance contract that does not involve an award under Florida’s bad faith statute. The court explained that for breach of contract claims, “the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the policy.” The court noted that while extra-contractual damages would be available in a separate bad faith action pursuant to section 624.155, such damages are not recoverable in this case against Citizens because Citizens is statutorily immune from first-party bad faith claims. The court expressly rejected the appellate court’s premise that parties can “contemplate” remedies outside the policy’s express terms.