Much has been written on the statute of limitations on hurricane claims, but as long as new, helpful opinions are published like the one last week in Oriole Gardens Condominiums, III v. Independence Casualty and Surety Company, 11-60294, 2012 WL 718803 (S.D. Fla. Mar. 6, 2012), we will continue to write more.

In Oriole Gardens III, a condominium association suffered damage from Hurricane Wilma in 2005. The association notified the insurance company of the damage right away. Before 2005 had ended, the insurance company investigated the loss and sent a letter to the association denying benefit payments because it determined the loss to be below the deductible. In its letter, the insurance company invited the association to provide more information if it disagreed. Four years after this letter, the association contacted the insurance company with more information about the extent of the loss. The insurance company investigated again, this time for over a year before standing by its initial loss determination that the damage fell below the deductible. This second denial of benefits came five years and one month after the 2005 letter.

The association sued and the insurance company moved for summary judgment on several grounds, one of which was that the statute of limitations had passed. The insurer argued that its determination that the loss was below the deductible in 2005 was a denial of benefits and a breach of the insurance contract that started the five-year statute of limitations clock ticking. The insurer argued that since the association’s lawsuit was filed five years and one month later, it was untimely and barred under Florida’s five-year statute of limitations. The court disagreed.

To maintain a cause of action for breach of contract, a claimant must show (1) a valid contract; (2) a material breach; and (3) damages. [Citation omitted]. A “material breach” of a contract is a failure, without legal excuse, to perform any promise or obligation or that goes “to the essence of the contract.” [Citation omitted]. However, the evidence clearly demonstrates that Oriole Gardens did not have a cause of action for breach of contract in 2005.

As discussed above, the Court held a hearing on the statute of limitations issue, and based on a through review of the record, including the December 9, 2005 letter and numerous other letters between the parties after Oriole Gardens submitted its revised damage claim, made several extensive findings of fact and conclusions of law, which are adopted here by reference. The Court held that the statute of limitations does not bar the instant action for three reasons. First, there was no specific denial of Oriole Gardens’ initial claim in the December 9, 2005 letter. In its reply memorandum and answer to interrogatories, Independence admitted that it did not specifically “deny” the claim in 2005. [] Additionally, in its 2005 letter, Independence clearly invited the submission of additional information regarding the claim when it informed Oriole Gardens that its loss fell below the deductible, indicating that the claim was open and ongoing. Second, Independence’s subsequent correspondence and actions regarding Oriole Gardens’ claim, as extensively discussed by the Court at the hearing, also clearly indicates that the claim was open and ongoing. For example, Independence rejected Oriole Gardens’ proof of loss as premature because Independence was still evaluating the claim, and then requested additional information as part of this evaluation. Third, the Policy conditions any legal action on compliance with several conditions precedent including, inter alia, the submission of a sworn proof of loss at Independence’s request. As none of these conditions precedent were completed in 2005, Oriole Gardens did not have a cause of action at that time.

In essence, the court held that a finding that damage was below the deductible was not a “denial” of benefits, but rather acceptance of coverage in an amount that did not exceed the deductible. Even though no benefits were payable in 2005, the court refused to convert the covered loss into an uncovered loss just because the deductible limit had not been reached.

  • Stephen Sarasohn

    Similarly, when a carrier determines that a covered loss is below the deductible, appraisal is still an option. If a claim is denied, appraisal is not an option.