23 Fla. L. Weekly Supp. 1031a

Online Reference: FLWSUPP 2310JAVEInsurance — Homeowners — Motion for directed verdict arguing that insurer’s payment of its adjuster’s estimate of actual cash value of insureds’ loss satisfied as matter of law insurer’s contractual obligation to pay “at least” actual cash value of loss is denied — No merit to argument that insurer is not obligated to make additional payments until and unless repairs to property are undertaken where insurer’s obligation to pay at least true actual cash value of loss exists irrespective of whether insureds elect to use payment for repairs

CESAR JAVELLANA AND SANDRA JAVELLANA, Plaintiff, vs. TOWER HILL SIGNATURE INSURANCE CO., Defendant. Circuit Court, 11th Judicial Circuit in and for Miami-Dade County, Civil Division. Case No. 14-31467. March 31, 2016. Michael A. Hanzman, Judge. Counsel: Andrew C. Barnard, Miami. Brian W. Kelley, Coral Gables.

ORDER DENYING DEFENDANT’SMOTION FOR DIRECTED VERDICT

I. Introduction

In this first party property insurance dispute, Defendant Tower Hill Signature Insurance Company (“Tower Hill” or “Defendant”), moves for directed verdict — claiming that it performed its contractual obligations as a matter of law by paying the amount of its adjusters “estimate” of the “actual cash value” of its insured’s damaged property, and that it owed the Plaintiff insureds nothing further until and unless repairs were undertaken. Put another way, Tower Hill boldly claims that:

the policy and Florida law are clear that an insurer does not breach a contract as a matter of law when it pays its estimate of damages and agrees to consider supplemental claims for damages.

See Motion, p. 2. Tower Hill is incorrect, and its reliance on Slayton v. Universal Prop. & Cas. Ins. Co., 103 So. 3d 934 (Fla. 5th DCA 2012) [37 Fla. L. Weekly D2748a] as support for this aggressive per se rule is severely misplaced.

II. Analysis

“Contracts are voluntary undertakings and parties are free to bargain for — and specify — the terms and conditions of their agreement, a right that is a constitutionally protected.” Okeechobee Resorts, L.L.C. v. E Z Cash Pawn, Inc., 145 So. 3d 989 (Fla. 4th DCA 2014) [39 Fla. L. Weekly D1871a]; NW. Nat. Life Ins. Co. v. Riggs, 203, 252-253 U.S. 243 (1906); Sky Bell Asset Management, LLC and Sky Bell Select, LLP., vs. National Union Fire Insurance Co. of Pittsburgh, Pa, and Federal Insurance Co., 23 Fla. L. Weekly Supp. 535a ((Fla. 11th Cir. Ct. 2015); Hoffman v. Boyd, 698 So. 2d 346, 348 (Fla. 4th DCA 1997) [22 Fla. L. Weekly D1991a]. Here the parties entered into an agreement that clearly and unambiguously provides that upon the occurrence of a covered loss:

We [Tower Hill] will initially pay at least actual cash value of the insured’s loss, less any applicable deductible. We shall pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred. We will not require you to advance payment for such repairs, or expenses, with the exception of incidental expenses to mitigate further damage.

Policy, RPI HO 09 SP 0611, Section I, ¶ 3 (“Loss Settlement”) (emphasis added). This clause tracks — virtually verbatim — Florida Statute § 627.7011(3)(a), which provides:

For a dwelling, the insurer must initially pay at least the actual cash value of the insured loss, less any applicable deductible. The insurer shall pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred. If a total loss of a dwelling occurs, the insurer shall pay the replacement cost coverage without reservation or holdback of any depreciation in value, pursuant to s. 627.702.

Id. The policy and statute are simpactico, clear an unambiguous, and not in need of any judicial construction or interpretation. The Court’s only task is to apply them as plainly written. See Holly v. Auld, 450 So. 2d 217, 219 (Fla. 1984) (a “statute must be given its plain and obvious meaning”); Capers v. State, 678 So. 2d 330, 332 (Fla. 1996) [21 Fla. L. Weekly S313a] (“the plain meaning of statutory language is the first consideration of statutory construction”); Flo-Sun, Inc. v. Kirk, 783 So. 2d 1029 (Fla. 2001) [26 Fla. L. Weekly S189a] ([i]t would be less than intellectually credible to conclude that the [statute] does not mean what its words plainly express”); Gulliver Sch., Inc. v. Snay, 137 So. 3d 1045, 1047 (Fla. 3d DCA 2014) [39 Fla. L. Weekly D457a] (“[w]here contracts are clear and unambiguous; they should be construed as written”).¹

The policy, as plainly written, contemplates a possible — but not mandatory — two step claim process protocol. First, the insurer is obligated to pay — and the insured is entitled to receive — “at least” the “actual cash value” of the property damaged by a covered peril. The policy does not obligate the insured to use these funds for any purpose whatsoever, including repairs or improvements. Rather, the insured can do with this payment whatever it pleases. Thus, Tower Hills’ contention that “Plaintiffs’ failure. . . to actually perform repairs. . . “precludes them from pursuing this breach of contract action” for the “actual cash value” of their loss is pure frivolity. See Motion, p. 8.

Aside and distinct from its obligation to initially pay “at least” the “actual cash value” of any damaged property, the insurer then has an additional obligations if the insured elects to initiate repairs. If its insured exercises this option, and if additional funds are required to “perform such repairs,” the insurer is obligated to “pay any remaining [i.e., additional] amounts necessary to perform such repairs” as the “work is performed and expenses are incurred.” Put simply, the policy unambiguously provides that once the “actual cash value” is initially paid, the insurer has no further monetary obligation unless: (a) the insured elects to make repairs; and (b) additional funds are needed to effectuate those repairs; and (c) the repairs were necessitated by a covered peril, and (d) the insured — at the very least — has contracted for, and is ready to undertake, the repairs. And if the insured elects to simply retain their “actual cash value” payment and make no repairs the “claim process” is over.

In this case — like in most first party disputes — Tower Hill sent an adjuster to estimate the “actual cash value” of the property damaged by an admittedly covered peril. The adjuster estimated the “actual cash value” of the loss at approximately thirty three thousand dollars ($33,000.00), and Tower Hill paid that estimated amount, less the deductible and claimed depreciation. Tower Hill also paid certain subsequent repair bills submitted by Plaintiff. Dissatisfied with the amounts paid, Plaintiffs then brought suit claiming that Tower Hill misadjusted the claim and paid less — indeed far less — than the “actual cash value” of the damaged property.

At trial Plaintiff called an expert who testified that the “actual cash value” of Plaintiffs’ loss was almost three (3) times the amount of Tower Hill’s “estimate” — and corresponding payment. Yet Plaintiffs admitted they have not initiated — or contracted for — any repairs other than those previously paid for by Tower Hill. So the posture of the case at the conclusion of the trial was straightforward. Tower Hill had paid what its adjuster “estimated” to be “actual cash value” of the damaged property; additional amounts had been paid by Tower Hill for specific repairs that had been made and invoiced; and Plaintiffs had not contracted for any additional repairs.

Against this backdrop Tower Hill moves for directed verdict, again arguing that it satisfied all its contractual obligations as a matter of law by paying the amount “estimated” by its adjuster, and agreeing to pay additional amounts if necessary repairs were contracted for and undertaken. Tower Hill relies upon Slayton to support the bewildering claim that by paying the amount “estimated” by its adjuster it ipso facto met its obligation to pay “at least” the “actual cash value” of Plaintiffs’ damaged property.

Slayton and its progeny do not stand for — or remotely support — the proposition advanced by Tower Hill; namely, that an insurer, as a matter of law, satisfies its contractual obligation to pay “at least” the “actual cash value” of damaged property simply by paying the amount “estimated” by its adjuster. In Slayton, the court did no more than enforce the policy before it as written; a policy which — unlike the policy here — did not obligate the insurer to pay “at least” the “actual cash value” of the loss regardless of whether the insured undertook any repairs at all. And § 627.7011(3)(a) was not addressed by the court because it was not raised at the trial level. Finally, there is nothing in the Slayton opinion which suggests that the parties presented conflicting evidence as to whether the initial amounts paid by the carrier satisfied its policy obligations. In sum, nowhere does Slayton hold — or even intimate — that an insurer satisfies its contractual obligations as a matter of law by paying an amount equal to the “estimate” of its adjuster no matter how far off the mark that “estimate” may be.

This Court concludes — without difficulty — that an insurer does not — ipso facto — comply with an obligation to pay “at least” the “actual cash value” of damaged property merely by paying any amount “estimated” by its adjuster, regardless of whether that “estimated” amount is in fact “at least” the “actual cash value” (or close to the “actual cash value”) of the property damaged by an insured peril. If the adjuster’s “estimate” equals the “actual cash value” of the loss, then paying that amount necessarily satisfies the insurer’s contractual obligation. But if the “estimate” is for an amount that is materially less than the true “actual cash value” of the damaged property, the payment of that “estimated” amount obviously does not satisfy the insurer’s obligation to initially pay “actual cash value.” And no legal precedent (or common sense) supports the proposition that an adjuster’s “estimate” is — as a matter of law — the equivalent of “actual cash value,” and that an insurance carrier — as a matter of law — satisfies its contractual obligation to pay “actual cash value” by tendering its adjuster’s “estimate,” however flawed and deficient it may be.² Contrary to Tower Hill’s wishful thinking the policy does not obligate it to initially pay only the amount of its adjuster “estimate.” It obligates the company to pay “at least” the “actual cash value” of the damaged property. The precise obligation imposed by statute. That obligation is clear and unequivocal, and exists regardless of whether the insured decides to use those funds to repair the home or bet them on a hand of blackjack. And if the carrier pays an amount materially less than the true “actual cash value” of the property damaged by a covered peril it is in breach of its contract. It is just that simple.

Here, Plaintiffs presented evidence supporting the claim that Tower Hill paid an amount substantially less than the true “actual cash value” of her property that was damaged by a covered peril. Tower Hill, on the other hand, presented evidence to support is claim that the amount it paid (i.e., its adjusters estimate) was “at least” the “actual cash value” of the property which suffered a loss. It is for the jury to decide which party is correct. See Tylinski v. Klein Auto., Inc., 90 So. 3d 870 (Fla. 3d DCA 2012) [37 Fla. L. Weekly D1350a] (“a motion for directed verdict should be granted when there is no reasonable evidence upon which a jury could legally predicate a verdict in favor of the non-moving party”).

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¹To the extent the policy and statute conflicted, the latter would control. But no such conflict exists here. See, e.g., Citizens Prop. Ins. Corp. v. River Manor Condo. Ass’n, Inc., 125 So. 3d 846 (Fla. 4th DCA 2013) [38 Fla. L. Weekly D820a].

²An insurance carrier is of course not obligated to rely upon only the “estimate” prepared by its adjuster in calculating the “actual cash value” of its insured’s damaged property. It is free to secure actual construction bids, subcontractor’s proposals, or any other relevant information. So if it chooses to rely exclusively on its adjuster’s “estimate,” its contractual compliance (or lack thereof) will be dictated by the adjuster’s competency and the “estimate’s” accuracy, for good or ill.