It is no secret that association board members, for the most part, have no formal training in dealing with insurance issues. In fact, neither do most association managers. While an association or manager can deal with a small claim without help, claims involving widespread damage or confusing policy issues often require outside help.
Many associations choose to hire a public insurance adjuster to help estimate damages and support a claim. Relying on their experience in insurance claims, it is easy to see why claimants represented by public adjusters often find their claim resolved more easily than if the association had gone through the process on its own. As with everything, competent representation is not free. Generally, public adjusters charge a percentage of the amounts received on a claim in return for their help in preparing, estimating, and adjusting the claim.
One common question I am asked by board members and managers alike, is whether these fees are recoverable if there is subsequent litigation against the insurer for breach of contract. While public adjuster fees are often recoverable in a bad faith case, in a strict breach of contract case the answer is: “it depends.”
The goal in awarding damages in a breach of contract action is to restore the injured party to the condition it would have been in had the contract been performed. Generally, this means that an insurer will be liable for amounts owed under a contract and, possibly, interest and attorneys fees. In some situations, however, consequential damages are recoverable in a breach of contract case.
Consequential damages are those damages that arise naturally from the breach of contract or were reasonably expected to flow from such a breach. See Life Investors Ins. Co. v. Johnson, 422 So.2d 32 (Fla. 4th DCA 1982). If this requirement is satisfied, there is a potential to recover additional monies from the insurer aside from the amounts owed under the policy.
As a consequential damage, public adjuster fees could be recoverable under certain circumstances. For instance, if an association hires a public adjuster in response to an insurer’s refusal to pay amounts owed under the policy, this is arguably a damage that would flow naturally from the breach of the contract and would likely be a reasonably foreseeable expense. In a subsequent breach of contract action, the adjuster’s fees may be recoverable by the association.
Recovering consequential damages in a breach of contract case against your insurer is not a guarantee by any means, and this blog should not be interpreted as such. Only analyzing the surrounding facts and circumstances of a case will determine whether or not these fees may be recoverable.