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

Following Judge Scola’s December 22, 2010, opinion, the insurance company asked the Court to reconsider. On New Year’s Day, in Ocean View Towers Ass'n, Inc. v. QBE Ins. Corp., 11-60447-CIV, 2012 WL 8569 (S.D. Fla. Jan. 1, 2012), Judge Scola denied that motion. Below are some of the highlights of Judge Scola’s denial.

In support of its Motion for Reconsideration, QBE cites numerous opinions from the Southern District of Florida in cases involving this very same Defendant-none of which were cited by QBE in its Response to the Corrected Motion for Summary Judgment. It boggles the mind to consider how QBE could not be aware of opinions in its own cases from the same federal district court and yet not cite those cases until after receiving an adverse ruling from the court.
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QBE cites no decision holding that the insured must submit a supplemental claim before bringing suit where, as here, the insured alleges breach of contract and has not sought an appraisal or declaratory relief as to coverage under the policy.
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QBE also cannot demonstrate any “manifest error” because, in this case, the Court simply followed the plain language of the policy. The Court reached the conclusion that Ocean View complied with its post-loss duties, despite the fact that Ocean View never submitted a supplemental claim before filing suit, because nothing in the policy's plain language required Ocean View to do anything more than provide the initial notification of the “loss,” which it unquestionably did in the days after Hurricane Wilma. That QBE failed to fully exercise its investigatory rights cannot be blamed on Ocean View or this Court. Although QBE argues that “the Court's order essentially abolishes the concept of a supplemental claim,” see Mot. at 7, this is hyperbole. The Court followed the law and interpreted the unambiguous policy terms according to their plain meaning. If QBE is unsatisfied with this result, it can only blame itself. If QBE wanted to ensure a contrary result, it should have included a provision in its policies expressly requiring insureds to submit supplemental claims as a prerequisite to bringing suit. It failed to do so, and this Court will not rewrite the policy for QBE after the fact.

As I stated last week, Judge Scola’s reading of the insurance policy sends a strong message to insurance companies to get their investigations right the first time. If they don’t, they can’t blame it on the insured, the court, or anyone else for that matter. The blame lies squarely on an insurance company that fails to fully exercise its investigatory rights.

Later, after the damages become more evident, the association finds that the damages from Hurricane Wilma were much more severe than originally thought. Roof leaks begin to appear, sliding glass doors and windows appear fogged or do not work properly, and residents begin to complain. At that point, the association hires its own consultant to do a full investigation, asks the insurance carrier to re-assess the previous denial and pay what is owed under the policy.

The scenario above was common to a large number of condominium associations over the past few years. This has led insurance carriers and their attorneys to come up with ways to attempt to avoid payment, many of which have relied on so called “late notice” defenses to fight coverage.

Recently, in Ocean View Towers Association, Inc. v. QBE Insurance Corporation, a federal trial court in the Southern District of Florida heard argument on competing motions for summary judgment. One of the main issues was whether the association was barred from recovery because it had not notified QBE of the additional damages and instead filed suit for breach of contract.

The court rejected QBE’s “late notice” arguments, finding that the clear and unambiguous language of the policy controlled the obligations of the policyholder. The policy, like most policies, required Ocean View to “[g]ive [QBE] prompt notice of the loss or damage” and “[i]nclude a description of the property involved.” Based on this requirement, the court determined that since Ocean View undisputedly provided prompt notice that Hurricane Wilma had damaged the property and had included a description of the damages known at that time, Ocean View had fulfilled its requirements under the policy and was not required to do more. As the court noted, QBE had ample opportunity to inspect and adjust the loss after the Hurricane and simply chose not to utilize all the means at its discretion.

This is an important case that all adjusters, attorneys, and insurance professionals should read carefully. Numerous other issues are addressed in the opinion, aside from the notice issue, however, those are highly technical and do not lend themselves to a single post. This decision will undoubtedly be cited by both sides in legal briefs for a long time.

In Summit Towers Condominium Association, Inc. v. QBE Insurance Corporation, the condominium association filed a lawsuit for breach of contract against QBE in Florida state court in October 2010, regarding a claim from Hurricane Wilma. The damaged property consisted of two twenty-five story buildings (567 units) and a three story parking garage. The association submitted an insurance claim to QBE, and QBE denied the claim in November 2005, asserting that the damages would not exceed the hurricane deductible of nearly $2 million. Summit Towers claimed the damages of approximately $11 million.

QBE removed the case to federal court and contested a count of the complaint which sought a declaration from the Court on the date that QBE breached the insurance contract, and the date the statute of limitations began to run.

The Court analyzed whether there was an actual dispute or controversy between the association and QBE surrounding the facts related to the statute of limitations. The court cited a case from the Eleventh Circuit Court of Appeals which stated:

[A] justiciable controversy is . . . distinguished from a difference or dispute of a hypothetical or abstract character; from one that is academic or moot.

The Court explained that the statute of limitations is an affirmative defense which must be specifically pled and QBE had not yet raised a statute of limitations defense in the case. The Court ruled that,

If QBE has not raised the defense, there can be no ‘dispute’ that a declaratory judgment will resolve.

A unilateral concern, without a contrary position asserted by QBE, was apparently one of the decisive factors for the Court in ruling that the statute of limitations issue was not ripe for determination.

As this case and last week’s reveal, determining the date the statute of limitations begins to run in Florida is a fact specific analysis.

The association and QBE actually filed competing Motions for Summary Judgment interpreting the same policy provisions in different ways. QBE sought a judicial ruling that the policy provided no coverage for the windows and sliding doors, while the association sought a judicial interpretation of coverage for these items. The Court used a two part analysis to resolve the issue. First, the Court analyzed whether the association’s condominium declarations obligated the association to insure the windows and sliding glass doors for hurricane damage. QBE asserted that the declarations (under maintenance) require the unit owners to perform all necessary repairs and replacements to windows and doors at the unit owner’s sole expense. Royal Bahamian’s counsel distinguished the maintenance obligation from the insurance obligation; each is in a distinct provision within the declarations.

The Court looked at two administrative decisions by the Florida Department of Business and Professional Regulation Division of Florida Land Sales, Condominiums, and Mobile Homes, which specifically identify an association as the party responsible for insuring windows and sliding glass doors. One of the decisions specifically held that, despite a paragraph in a condominium declaration that made it the unit owners’ responsibility to maintain, repair, and replace screens, windows, entrance doors, and all other doors, the association was obligated to insure and pay for repair and replacement of those items due to hurricane damage. In re Petition for Declaratory Statement Molokai Villas Condo. Ass'n, Inc., DS 2006-028, Docket No. 2006035317, ¶ 35 (Aug. 28, 2006). The Division stated that Florida Statute §718.111(11) controls any provision to the contrary in a declaration of condominium and is deemed to apply to every residential condominium in the state, regardless of the date of its declaration. So the Court found that the association had a clear obligation to insure the windows and sliding glass doors from hurricane damage. The Court was most persuaded by the Division’s administrative decisions providing clarity on the topic since the Division has special expertise in regulating condominiums and interpreting the condominium statute.

Second, the Court analyzed whether the windows and sliding glass doors were classified as some “other portion” of condominium property and covered by the policy provision providing coverage for “Any other portion of the condominium property, if your Condominium Association Agreement requires you to insure it.” The Court found that the association is required under its general obligation to insure the ‘building ... including all of the units and common elements.” The Court applied a standard to construe the policy provision in light of the skill and experience of an ordinary person in concluding that the doors and windows are a portion of the condominium property, and surely an ordinary person would understand that construction. QBE had argued that the notices circulated by the association’s board after Wilma revealed that they understood that the unit owners were required to repair and replace these components under the policy provision. The Court was not influenced by that argument and it ruled in favor of the association and coverage for the windows and sliding glass doors under the policy and declaration language.

The Royal Bahamian ruling on this summary judgment is important and provides clarity for the distinction between an association’s obligation to insure items from hurricane damage which are typically within an individual unit owner’s maintenance responsibility, absent a hurricane catastrophe. Royal Bahamian went on to trial by jury and obtained a favorable verdict.

The recent case, King Cole Condo. Assoc., Inc. v. USPlate Glass Ins. Co., 2010 WL 3239179 (Fla. 3d DCA August 18, 2010), involved a condominium association’s claim from Hurricane Wilma. The insurer provided coverage for the association’s plate glass windows and sliding glass doors, as well as coverage for boarding up openings after a covered loss. The association timely reported the Hurricane Wilma claim to the insurer, which authorized the association to retain a glazier of its choice to complete any necessary glass replacements or repairs. The glazier provided the insured with an estimate in the amount of $104,928.48. The insurer paid that estimate in full, but did not inspect the property or the damages claimed.

By letter with the payment, the insurer stated that it had fulfilled its policy obligations related to the damage caused by Hurricane Wilma and invited the association to notify the insurer of any other damages, offering to reopen the claim should the need arise. The letter stated:

This claim is now closed. If you should find any additional damage as a direct result of Hurricane Wilma we will reopen the claim as necessary.

The association had no contact with the insurer for more than two years after the payment. Counsel for the association broke the silence by sending the insurer a letter informing the insurer that it did not adequately compensate the association for the Wilma damages. The additional damages claimed included additional damages to the glass windows and doors and several thousand dollars of board-up costs. When the claim was initially reported to the insurer, the association stated that it had suffered damage and would require reimbursement for board-up repairs and glass replacement.

The association filed the lawsuit before informing the insurer of the amount it was claiming and also without providing the insurer with any information related to the parties’ disagreement over the loss. The insurer argued that the association never presented its “supplemental” claim to the insurer and that it was required to do so before filing the lawsuit. The trial court awarded summary judgment in favor of the insurer on its late notice defense. The association appealed and argued in its brief that it gave appropriate notice to the insurer of its claim for damages and that the claim was re-opened and not a “supplemental” claim. The association asserted that the initial reporting of the claim included all hurricane damages, and further noted that the policy did not define or even mention “supplemental” claims.

The appellate court reversed the trial court’s ruling and held that there were factual questions related to the defenses involving the notice provisions of the insurance policy. Thus, the distinction between a “supplemental” claim and re-opened claim, as it relates to the insurer’s late notice defense, has seemingly been recognized by the Third District Court of Appeals in Florida.

This is a scenario that can occur with any condominium association. On May 17, 2010, my post, Condominium and Homeowner Associations’ Fiduciary Duties Particularly in Light of Approaching Statutes of Limitation, discussed an association board’s duties to ensure they have covered the bases in investigating a potential re-opening of an insurance claim before it is too late.

I am writing about this scenario again because it seems to be prominent in board members' discussions as the five year anniversary of Hurricane Wilma (October 24, 2010) approaches. There is still some time for re-evaluation. As my father used to say to me “Don’t worry about what you need to do, just go do it.”

It is better for a board to take action now while there is time and know whether there is a basis to re-open a claim. This knowledge will allow for an informed decision before it is too late and can potentially avoid a lawsuit for breach of  fiduciary duties.

Associations with concerns should consult with experienced insurance professionals immediately to ensure they do not miss the deadline.

In Florida, an action for breach of contract has a five year statute of limitations. Thus, the insured has five years to commence an action for breach of contract or the suit may be barred. While there certainly are exceptions to this rule, the main question that arises in the context of an insurance dispute is when the five year statute begins to run.

Insurance companies generally argue that the five year statute begins to run from the date of loss, i.e. the date the storm caused damage to the property. In some states like North Carolina and Wisconsin, this position is correct. In Florida, however, courts have generally held that the statute of limitations for breach of an insurance contract runs from the date that the insurer breached the contract. Therefore, the proper beginning of the five year timeframe should be the date the insurer breached the contract by failing to pay the amounts owed.

While the timeframe for filing a claim for breach of an insurance contract may seem clear in Florida, there are a number of other factors that need to be considered. Because most associations and board members are not familiar with insurance law, they may not realize when the breach actually occurs. Similarly, there can be issues raised with supplemental and re-opened claims that may cause the statute of limitation to run sooner than the policyholder thinks.

Hurricane Wilma was one of the most destructive hurricanes to hit the State of Florida. Many associations in southern portions of the state were significantly damaged. As the five year anniversary of Wilma approaches, associations should mark October 24, 2010 on the calendar. If you feel that you have not been properly paid for your damages, currently have an open claim being investigated, or are involved in an appraisal with the insurance company, I strongly suggest contacting an insurance coverage attorney now to ensure that your rights are protected. Waiting until it is too late may leave even the strongest claims unrecoverable.

Dr. William Gray, head of Colorado State University’s well known Tropical Meteorology Project, recently announced that the team would be revising its predictions for 2010. While he did not comment on the exact number of storms that would be predicted for the year, he offered a hint: "The numbers are going to go up quite high….this looks like a hell of a year."

Far be it for me to speculate on the number of hurricanes that may form, but from his comments, it appears that the 8 hurricanes (4 major) predicted in the Project's April Forecast Schedule is out the window. When considering that a “major hurricane” has winds in excess of 111 miles per hour, the thought of a large number of such storms should concern everyone in coastal areas.

It has been almost five years since Hurricane Wilma severely damaged Florida, and has been even longer since Hurricanes Frances, Jeanne, and Charley. While in the grand scheme of things five years is only a brief moment, many in this part of the country have become complacent. As I stated in a previous post, Recent Earthquake Activity Causes Many to Wonder About Coverage, “[i]t is important for associations to have a good relationship with their insurance agent so that an open and frequent dialogue occurs.” Unfortunately, many times during these “off years” this dialogue breaks down. Policies are left unchecked, and new boards members are not familiar with insurance issues.

With Hurricane season just around the corner, now is the time to ensure that you have the appropriate coverage and that you understand what to do in case of a loss. This will help make sure you are fully protected in the event a hurricane damages your property, and prepare you for what to do in such an event.

I want to help begin this process with you. Over the next few weeks I will be writing about some of the common mistakes associations make in purchasing coverage and in complying with post-loss duties. While I certainly could not cover every issue, I hope this will provide a general overview of what you can do to protect yourself and your association.