On May 11, 2011, the Florida Fourth District Court of Appeal released an opinion addressing a policyholder’s claim for prejudgment interest following an appraisal award. Green v. Citizens Property Insurance Corp., 2011 WL 1775731 (Fla. 4th DCA 2011). This blog continues the discussion from my March 2011 post, Recent Third District Court of Appeal Ruling Regarding Entitlement To Prejudgment Interest Following An Appraisal Award In Florida, as well as Chip Merlin’s post from a couple weeks ago, Prejudgment Interest Following A Wrongful Denial.
The facts of the Green case are not unusual. Mr. Green filed a claim with Citizens after his home was damaged during Hurricane Frances in 2004. Citizens appointed an adjuster and paid Mr. Green the damages estimated by its adjuster. Mr. Green claimed he was entitled to additional payment, and he participated in a Florida Department of Financial Services mediation program with Citizens. After the mediation, Citizens paid Mr. Green more toward his claim but less than the amount he sought.
Mr. Green then filed a lawsuit asserting that Citizens denied him coverage and refused to pay the remaining sums due under the policy. The court stayed the litigation and ordered Citizens to participate in an appraisal. Ultimately, a final appraisal award was entered, and, pursuant to the loss payment provision of the insurance policy, Citizens was required to pay the award amount to Mr. Green within sixty days of the award. Citizens paid Mr. Green the amount, and then Mr. Green then filed a motion for prejudgment interest on the funds paid. The trial court denied the motion, and Mr. Green appealed.
On appeal, Mr. Green argued that because Citizens underpaid his claim on two occasions before the appraisal award, it waived the policy provision allowing for deferred payment on the claim. Additionally, he argued that once that provision was waived, the claim became due from the date of loss and interest ran from that date. In support of his argument, he cited North Pointe Ins. Co. v. Tomas, 16 So.3d 977 (Fla. 3d DCA 2009), where the Third District Court of Appeal held that prejudgment interest from the date of the loss was applicable because once the insurer denied coverage for the claim, it was deemed to have waived the policy provision for deferred payment.
The Green Court distinguished Tomas because Citizens never formally denied coverage for Mr. Green’s claim. In Tomas, the insurer initially denied coverage for the claim, and then later reversed its position and proceeded with the appraisal process. The Fourth District also noted that:
It is the terms of a contract for insurance which determine the date from which the coverage payment is due, as well as when interest is due on the amounts payable.
In support, the Court quoted Citizens Prop. Ins. Corp. v. Mallett, 7 So.3d 552, 556 (Fla. 1st DCA 2009), which Chip discussed in Prejudgment Interest Following A Wrongful Denial.
The appellate court emphasized the fact that Citizens timely paid the appraisal award during the policy loss payment provision, but the Court did not address Florida Statute §627.70131(5)(a) in the opinion. (Similarly, in Alberto Jugo v. American Security Insurance Company, No. 3D09-3246 (Fla. 3d DCA 2011) there was no discussion of this statute). The pertinent part of §627.70131 states:
Insurer’s duty to acknowledge communications regarding claims; investigation
(5) (a) Within 90 days after an insurer receives notice of a property insurance claim from a policyholder, the insurer shall pay or deny such claim or a portion of the claim unless the failure to pay such claim or a portion of the claim is caused by factors beyond the control of the insurer which reasonably prevent such payment. Any payment of a claim or portion of a claim paid 90 days after the insurer receives notice of the claim, or paid more than 15 days after there are no longer factors beyond the control of the insurer which reasonably prevented such payment, whichever is later, shall bear interest at the rate set forth in s. 55.03. Interest begins to accrue from the date the insurer receives notice of the claim. The provisions of this subsection may not be waived, voided, or nullified by the terms of the insurance policy. If there is a right to prejudgment interest, the insured shall select whether to receive prejudgment interest or interest under this subsection. Interest is payable when the claim or portion of the claim is paid. Failure to comply with this subsection constitutes a violation of this code. However, failure to comply with this subsection shall not form the sole basis for a private cause of action.
Similarly, the Court did not address whether the insurer’s refusal to pay any amount beyond its own estimates for several years after the date of loss constitutes a “wrongful refusal to pay” that would subject the insurer to liability for prejudgment interest from the time of the loss. Importantly, the Florida Supreme Court has adopted the “loss theory” of prejudgment interest as another element of “pecuniary damage.” In Argonaut Ins. Co. v. May Plumbing Co., 474 So.2d 212 (Fla. 1985) the Florida Supreme Court stated:
Under the “loss theory,” [] neither the merit of the defense nor the certainty of the amount of loss affects the award of prejudgment interest. Rather, the loss itself is a wrongful deprivation by the defendant of the plaintiff’s property. Plaintiff is to be made whole from the date of the loss once a finder of fact has determined the amount of damages and defendant’s liability therefor.
These issues related to prejudgment interest as an element of damage for a wrongful refusal to pay. Particularly following an appraisal award under Florida’s loss theory, these issues will likely need resolution, as it does not appear to have been discussed in recent opinions. As Chip stated in Prejudgment Interest Following A Wrongful Denial, “Insurers should not feel they are safer to delay payment on this issue and escape the payment of interest.”
