Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

In Ocean View Towers Ass'n, Inc. v. QBE Ins. Corp., 11-60447-CIV, 2011 WL 6754063, *9 (S.D. Fla. Dec. 22, 2011), a South Florida condominium association suffered substantial damage to its property in 2005 from Hurricane Wilma. Immediately after the storm, the association notified its insurance company, QBE, and QBE conducted an investigation of the loss. The association cooperated with all requests put upon it by QBE, including notice of the loss, a reasonable description of the damage, keeping an accurate record of all repair expenses, and disclosure of books and records QBE requested. QBE issued payment of $125,312.09 in 2006, which represented the damage QBE found less the policy deductible. In 2010, the association hired a public adjuster who found approximately $4-5 Million in damage to the property. Without notifying QBE of the newly found damage or submitting a supplemental claim, the association filed suit against QBE for breach of contract.

QBE alleged that the association had the responsibility to file a supplemental claim and comply with the “Duties In The Event Of Loss Or Damage” provision of the policy a second time for the newly discovered damage. QBE argued that the alleged failure to comply with the required duties a second time was a material breach of the policy by the association that precluded recovery. The association moved for summary judgment on this issue.

Here, QBE argues that Ocean View failed to notify it of the additional claimed damages prior to filing suit and that there is at least an issue of fact as to whether Ocean View provided prompt notice to the insurer of the claimed damages. The Court finds Ocean View did all that the policy demanded of it.
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In short, the policy required Ocean View to provide prompt notice of the “loss or damage.” It did so by informing QBE of the Hurricane Wilma “loss.” The insurance contract required no more. QBE had a full and fair opportunity to investigate the damage from the windstorm loss and to request additional information from Ocean View, but failed to fully do so. [citation omitted] Absent such, Ocean View was under no obligation to give QBE notice of the additional claimed damages before filing suit. While it may not make sense to QBE that an insured can submit notice of a loss, receive payment for claimed damages, and then years later run into court claiming millions of dollars in additional damages, that is not this Court's concern. [citation omitted]. This Court is obliged to enforce the plain policy language as written. [citation omitted]. Therefore, the Court must grant Ocean View's motion of summary judgment as to QBE's second affirmative defense. [emphasis added].

Judge Scola’s written opinion sends a strong message to insurance companies to get it right the first time. The opinion also addressed several other issues, such as matching and ACV/RCV payments, which will be addressed in upcoming articles. This is a federal trial court opinion, therefore not binding authority on other courts, and consultation with legal professionals is advised before pursing a similar course of action.

Supplemental Claims

As Shaun pointed out last week, there is no clear definition of what is a “supplemental” claim, and there is no case law in Florida that is directly on point. The dictionary definition of a supplement is an addition. As Shaun explained last week, other states’ case law requires a supplemental claim to be an addition in the type of damage rather than the amount of damage. Those cases are not binding on Florida courts, but if found persuasive by a Florida court, here is an example of what a supplemental claim might look like in a hurricane damage case.

Hurricane A hits Florida in 2005 causing damage to Homeowner B’s house. Homeowner B timely notifies Insurance Company C, which timely inspects the damage. After a thorough inspection, Insurance Company C finds damage to the doors and roof. Insurance Company C then pays Homeowner B the benefits due under the insurance policy to make the necessary repairs to the doors and roof. Homeowner B makes the repairs. In 2009, after several seasons of relatively quiet windstorm activity in Homeowner B’s part of the state, Homeowner B decides to clear out the birds’ nests accumulating in his hurricane shutters. He notices that some of the shutters have been damaged and do not close properly. He contacts a licensed contractor to inspect, who attributes the damage to the last major windstorm to pass through this area, Hurricane A in 2005.

When Homeowner B contacts Insurance Company C about the damage, Insurance Company C is likely to open up a supplemental claim for damage to the windows and shutters that was not previously addressed in the 2005 claim. This supplemental claim for newly discovered damage would now subject to coverage defenses, including failure to provide timely notice.

Reopen Claims

Based on the same persuasive cases outside of Florida from Shaun’s post last week, a reopened claim would look similar, but notice the distinction between the type and amount of loss that are claimed.

Hurricane A hits Florida in 2005 causing damage to Homeowner B’s house. Homeowner B timely notifies Insurance Company C, which timely inspects the damage. After a cursory inspection, Insurance Company C finds damage to the doors and roof. Insurance Company C then pays Homeowner B to replace one door and fifteen tiles on the roof. Homeowner B makes the repairs recommended and paid for by Insurance Company C. In 2009, several years after Hurricane A, Homeowner B goes up into the attic to dig out some old photo albums she hasn’t looked at in years. Homeowner B finds leaks, mold, and rotten roof trusses. Homeowner B contacts a licensed contractor to inspect, who attributes the damage to the last major windstorm to pass through the area, Hurricane A in 2005. The contractor finds that in order to repair the roof properly, it should have been completely replaced rather than repaired with fifteen new tiles.

In this case, a dispute exists about the amount of damage to the roof. This claim for roof damage has already been afforded coverage and partially paid. This type of dispute over the amount of damage makes the case ripe for appraisal. Insurance Company C may classify the reopened claim as a supplemental or “additional” loss because more than the original fifteen tiles are being claimed, but this would be a mischaracterization of the claim. This type of mischaracterization could eventually slip by to result in a denial of the claim that has already been decided was covered.

While there is not a Florida case directly on point with regard to what exactly is a “supplemental claim,” cases from other states shed some light on this issue. A “supplemental claim” is for new or additional damages not previously disclosed or adjusted in an insurance claim. See D.C. Concrete Mgmt, Inc. v. Mid-Century Ins. Co., 39 P.3d 1205 (Colo. App. 2001) (the initial claim was for theft of several items from a job site; while the supplemental claim was for new damage for lost profits never before claimed); Rossmanith v. Union Ins. Co. of Providence, 2001 WL 1451050 (Iowa App. 2001) (the initial claim was related to exterior and interior damage from a hailstorm; while the supplemental claim involved mold damages never before mentioned); Basuro v. 21st Century Ins. Co., 108 Cal. App. 4th 110, 114 (Cal. App. 2d Dist. 2003) (the initial claim was for damage related to the Northridge earthquake in 1994; there were supplemental claims for subsequent roof problems, asbestos damage and cracks in the foundation and moisture damage to the wood floors).

Most insurance policies do not mention or define “supplemental claim.” The question often arises in situations where the insurance carrier is simply attempting to mischaracterize the parties’ disagreement over the amount of loss as a “supplemental claim” in an effort to delay the resolution of the claim, particularly when the insurance carrier has already reached its claim determination and issued payment previously.

If the re-open claim seeks new damages never before claimed, then it may in fact be a “supplemental claim.” That situation is distinguishable from the situation where there is a re-open of a hurricane claim involving roof damage that was not adequately addressed initially or in which there could now be a simple disagreement over the amount of loss. This becomes important: Is the issue one concerning coverage for the loss or is it simply a disagreement over the amount of loss? For help in answering these fact specific questions, consult coverage counsel.

Besides having a duty to take all reasonable measures to protect the property from further damage, an insured also has an obligation to keep an accurate record of repair expenses. Failing to do so could be considered a breach of the insured’s duties after loss and may lead to the claim being underpaid. See Starling v. Allstate Floridian Insurance Company, 956 So.2d 511 (Fla. 5th DCA 2007) (holding insured had breached the insurance contract by failing to submit a record of expenses and proof of loss).

This certainly does not mean that if an insured does not have every receipt or invoice the entire claim will be denied, and an insured should NEVER create a fraudulent invoice in an attempt to satisfy an insurer’s request. Everyone is human and will misplace a receipt from time to time. This does not necessarily result in the claim denied or severely underpaid, but a lack of documentation for repair expenses can cause problems.

Problems arise when the claim is brought or re-opened many years after the storm. One situation I hear often is that the insured received benefits for roof repair but later found that the repairs were inadequate and replacement was the only way to fix the damage. When this happens, the first question the insurance company usually asks is: “Where are the receipts for the previous work?” If the policyholder can show the insurer documentation that the recommended work had been performed, the insurer is more likely to pay for replacement of the roof than if the documentation does not exist.

On the other hand, if the policyholder does not have any documentation of the repair, the insurer is less likely to agree to pay for the replacement of the roof. The insurer will probably question whether the work was performed by a qualified professional or whether the work was even done at all. If an insured cannot show the receipts for what work has been performed, the insurer commonly argues that the damages are the result of the policyholder’s failure to mitigate or repair the damages in the first place, and not the result of the entire roof being damaged from an insured event.

So what is the best practice for policyholders to follow when it comes to a loss? Pay attention to the details and do the best you can to retain documentation of repairs even after the property has purportedly been put back into pre-loss condition. Keeping a separate folder with receipts, invoices, and estimates relating to the claim is always a good idea. Similarly, keeping a timeline of the events surrounding the claim is also very helpful and should consist of the repairs performed and also the individuals involved. Keep this information in one place so that it can be easily located without having to dig through old boxes stacked up in the attic.

I know what most policyholders out there are thinking: “I won’t have a supplemental or re-opened claim in the future so this won’t apply to me.” While this may be true, as with other things in life, hope for the best but plan for the worst.