Condominium Insurance Law : Condo Insurance Lawyers & Attorneys : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables & West Palm Beach

The fact pattern is simple and quite common. An association suffered damages from Hurricane Wilma on October 24, 2005, and immediately notified its insurance carrier that the loss had occurred. The insurance carrier, in turn, retained an adjuster to investigate the loss and determine what was owed under the policy. After a brief inspection, the adjuster determines that the damages do not exceed the large hurricane deductible contained in the policy and denies payment.

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On March 7, 2011, Jeremy Tyler wrote Litigating The Right To Resolve Disputes Without Litigation, providing an excellent synopsis of various appeals Citizens Property Insurance Corporation (Citizens) pursued in the Florida Third District Court of Appeal related to compliance with policy conditions before appraisal. He discussed how Citizens is forcing policyholders to “proceed with evidentiary hearings to prove entitlement to an alternative dispute resolution proceeding that was, ironically, created as an alternative to litigation.” With so much contractual and judicial support for appraisal, policyholders may wonder what this evidentiary hearing that Citizens keeps requesting is supposed to accomplish.

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Almost twelve years ago, Florida’s Third District Court of Appeal published its opinion in U.S. Fid. & Guar. Co. v. Romay, 744 So. 2d 467 (Fla. 3d DCA 1999). As of the writing of this post, Romay has been cited in no less than 44 published court opinions. Most of these cases, like the recent Citizens Prop. Ins. Corp. v. Gutierrez, 59 So. 3d 177 (Fla. 3d DCA 2011), cite the language from Romay which requires that “[t]he insured must comply with all of the policy's post-loss obligations before the appraisal clause is triggered.” Unfortunately, this statement is only half of Romay. This is the half that focuses on the insured’s obligations. There is another side of Romay that focuses on the insurer’s obligations, and although this other side is not often discussed, it recently found its way into a published opinion from the United States District Court for the Southern District of Florida in 200 Leslie Condo. Ass’n, Inc. v. QBE Ins. Corp., No. 10-61984-CIV, 2011 WL 2470344 (S.D. Fla. June 21, 2011).

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With the passage of Senate Bill 408, (Chapter Law 11-39), many have asked how the new laws will affect their current insurance claims. While sweeping changes are rarely passed, even a small change in a law can determine the outcome of a claim.

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When a new condominium is constructed, the developer initially owns the property. Typically the developer will start selling individual condominium units, but maintain ownership and control over the common elements and unsold individual units. At some point, usually after a majority of the individual units have been sold, the developer will turn over ownership and control of the common elements to an association of individual condominium unit owners. These are usually times of transition, and different parties at different times carry different interests in the property. When an insured loss occurs during these transitory times, complicated issues can arise regarding who is entitled to insurance benefits.

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The Southern District Court in Florida recently issued an unreported opinion involving a discovery dispute between the parties where the insurer sought to have the condominium association’s expert reports stricken from consideration at trial because they were not timely disclosed. The ruling focused on disclosure requirements found in the Federal Rules of Civil Procedure. The crux of the condominium association’s case was potentially at stake in this dispute.

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A standard clause in most property insurance policies requires an insured to sit for an examination under oath (EUO) if the insurance company requests one during the claims process. This clause is often listed as one of the insured’s duties after loss. A separate clause, sometimes entitled “Suit Against Us,” may also require that the insured comply with its post-loss duties before suit may be filed against the insurer. The question of whether an insured condominium association complied with its duty to sit for an EUO before filing suit was one of the issues discussed in the case of El-Ad Enclave at Miramar Condo. Ass'n, Inc. v. Mt. Hawley Ins. Co., 752 F. Supp. 2d 1282 (S.D. Fla. 2010).

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As I have discussed in the past, some insurers attempt to avoid bad faith actions by arguing that the current law requires a judicial determination that the insurer breached the contract as a prerequisite to liability. Simply by participating in the appraisal process, these carriers believe that they somehow have immunity for any previous actions that delayed a claim.

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In a recent opinion, a federal trial court reviewing Florida law ruled on the issue of whether a Complaint involving a condominium association stated a claim against insurers for breach of a fiduciary duty in adjusting a first-party claim for damages. Grandrimo v. Parkcrest Harbour Island Condo. Assoc., Inc., No. 10-964, 2011 WL 550579 (M.D. Fla. February 9, 2011). The claim involved significant water damage, requiring extensive repairs forcing the Plaintiff, a unit owner within the condominium association, to stay in a hotel. The Plaintiff filed suit against the condominium association and numerous insurer Defendants asserting, among other things, that the insurers breached a fiduciary duty in the handling of the claim.

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Last week on the Property Insurance Coverage Law blog, I wrote about new appeals that had been filed in Florida’s Third District Court of Appeal in Miami regarding insurance appraisals. Since November of 2010, three new cases regarding appraisal had come out of the Third District: Citizens Prop. Ins. Corp. v. Galeria Villas Condo. Ass’n, Inc., 48 So. 3d 188 (Fla. 3d DCA 2010), Citizens Prop. Ins. Corp. v. Maytin, No. 3D10-693, 36 Fla. L. Weekly D51 (Fla. 3d DCA Dec. 29, 2010), and Citizens Prop. Ins. Corp. v. Mango Hill Condo. Ass’n 12, Inc., No. 3D10-2014, 2011 WL 613518 (Fla. 3d DCA Feb. 9, 2011). As of last week’s blog post, four new appeals had been filed by Citizens, which makes a total of seven (7) appraisal appeals filed by Citizens in the Third District alone.

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In my last condominium blog post, I discussed a recent case from Florida in which a condominium unit owner sued a condominium association for allegedly failing to maintain and repair the condominium roof, which resulted in damage to the unit owner’s property. The United States Court of Appeals for the Fifth Circuit recently published an opinion on a similar case out of Louisiana, in which a condominium unit owner sued a condominium association for failure to procure adequate flood insurance and failure to pursue an insurance claim on the unit owner’s behalf.

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The question of insurer responsibility for damages from a pipe break in a condominium association is a common question. Often times, the individual unit owner has an insurance policy providing coverage for portions of the interior of that unit, while the association has a master policy providing coverage for association property pursuant to the condominium declarations and certain state statutes. In a recent California case, Dover Village Association v. Jennison, (Cal. Ct. App. December 21, 2010), an individual unit owner had a leaky sewer pipe two feet beneath the concrete slab of his Newport Beach condo. The association said he was responsible for the repair bill on the theory that the sewer pipe was “exclusive use common area” for which he was responsible. The trial court entered a judgment declaring that the association should bear the expense of the repair cost, and awarded that unit owner damages, attorney’s fees and court costs. The association appealed that judgment.

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The Southern District Court of Florida entered summary judgment in favor of the Royal Bahamian Condominium Association and found coverage for the windows and sliding doors damaged during Hurricane Wilma in 2005. Royal Bahamian Association, Inc. v. QBE Insurance Corporation, No. 10-21511 (S.D. Fla. October 28, 2010). It is an important ruling, since a majority of the damage claimed by the association from Hurricane Wilma was to the windows and sliding doors. QBE took the position that the windows and doors were not covered because those items are the individual unit owners’ responsibility to maintain under the condominium declarations. The association board members operated under the mistaken belief for several years after the loss that the unit owners were responsible for repairing and replacing the windows and doors damaged during the hurricane. The board sent out notices advising the unit owners of its interpretation of the condominium declarations and quoting the pertinent sections of the declarations related to unit owner responsibility to maintain the windows and doors. Once the association retained counsel and a team of experts experienced in first-party property insurance, it submitted a Proof of Loss to QBE for over $8 million in damages caused by Hurricane Wilma in 2009.

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Recently, the Florida Fourth District Court of Appeal reversed a trial court decision that denied attorney’s fees for a condominium association after it was successful in getting a suit against it dismissed. In Point East Four Condo. Corp., Inc. v. Zevuloni & Assoc., Inc., No. 4D09-3221, 2010 WL 4962853 (Fla. 4th DCA Dec. 8, 2010), a condominium association signed a contract with a public adjuster to handle its claim under an insurance policy. The contract provided that 10% of the amount recovered would be payable to the public adjuster. The contract also provided that the prevailing party in “any action” would be entitled to attorney’s fees, payable by the losing party.

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A recent California case, Affan v. Portofino Cove Homeowners Association, Inc., No. G041379, (Cal. App. 4th October 29, 2010), involves an interesting issue of liability for resulting damage and contamination to the interior of a condominium unit related to a sewage back-up from the association common area plumbing.

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The day before Thanksgiving last week, the Florida Third District Court of Appeal issued a non-final opinion in the case of Citizens Property Ins. Corp. v. Galeria Villas Condo. Ass’n, No. 3D10-807, 2010 WL 4740049 (Fla. 3d DCA Nov. 24, 2010).

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What happens when a condominium or homeowners association enters into a settlement agreement with an insurance company and later finds out that the settlement was not enough or was fraudulently induced? That is exactly what happened in California in the case of Village Northridge Homeowners Ass’n v. State Farm Fire and Cas. Co., 237 P.3d 598 (Cal. 2010).

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Recently, the Third District Court of Appeals issued an opinion reversing a summary judgment that had been entered in favor of an insurer in a case involving a condominium association’s hurricane damage claim. I wanted to write about the case because it is an interesting ruling related to the topic of an insurer’s late notice of a “supplemental” claim defense, which is a topic that Jeremy Tyler and I have written about previously.

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Last week, the 11th Circuit Court of Appeals issued its opinion in Buckley Towers Condo., Inc. v. QBE Insurance Corp., No. 09-13247, 2010 WL 3551609 (11th Cir. Sept. 14, 2010). The appeal and opinion dealt mostly with actual cash value (ACV) versus replacement cost value (RCV) damages, as well as law and ordinance damages and prejudgment interest. In a nutshell, actual cash value damages cover the cost of replacing the damaged property, minus depreciation, and replacement cost value damages cover the actual cost expended to replace the property, up to the policy limits. Michelle Claverol explained ACV and RCV calculations in much greater detail in her posts on the Property Insurance Coverage Law Blog titled, Understanding Replacement Cost Coverage: Valuation Issues in Florida, Part 5, and Replacement Cost Value Coverage After a Claim Denial: Florida Valuation Issues, Part 6.

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I wanted to continue a discussion that Jeremy Tyler initiated last week in his blog post, Mandatory Arbitration for Disputes Between Unit Owners and Condominium Associations. Jeremy introduced a recent case, Gomez v. Lakes of Carriage Hills Condo. Assoc., Inc., --- So. 3d ---, 35 Fla. L. Weekly D1822 (4th DCA August 11, 2010), which concerned the question of whether claims brought by unit owners against the association and various members of its board of directors must first be pursued through non-binding arbitration.  Jeremy's post also presented an excellent analysis of certain “disputes” that by Florida Statute §718.1255 must first be submitted to non-binding arbitration before a lawsuit may be filed.

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