Last week I discussed the carrier’s obligation to fully investigate a reported loss. This week, I want to discuss an interesting issue that arises during sinkhole losses related to the insured’s duty to mitigate. In the event of a sinkhole loss, the insured has an obligation to enter into a subsurface repair contract to remediate the property. Some carriers wrongfully issue a Notice of Nonrenewal if the insured does not immediately enter such a contract. The issue that I want to discuss is whether an insured is failing to mitigate his or her damages when contesting the carrier’s repair recommendations.
I think an example is helpful for discussion purposes. A common situation involves an insured’s sinkhole loss claim wherein the carrier retains an engineering company to conduct a subsidence investigation, who then confirms a sinkhole loss. The carrier’s engineer recommends compaction grouting to remediate the sinkhole conditions. The insured seeks a second opinion from an independent engineer that may recommend additional remediation, for example, chemical grout to stabilize the shallow soil zones at the site. The insured submits the second opinion to the carrier, but the carrier refuses to pay for the additional remediation. This scenario often leads to neutral evaluation. To continue the example, the appointed neutral evaluator holds his conference three months later, and after an additional three months, issues his report agreeing with the insured and includes chemical grout. Thus, for an additional six months, the insured is aware of his or her sinkhole loss, but does nothing significant to remediate the property. During the process a carrier issues a Notice of Nonrenewal taking the position that the insured failed to mitigate his or her damages by not entering into a subsurface repair contract. The quagmire is the insured did not mitigate or repair the property because he or she wants ensure the property is repaired correctly.
Citizens Property Insurance Corporation is notorious for issuing these types of Notices for Nonrenewal. In fact, I currently have a case wherein Citizens is refusing to adopt the neutral evaluator’s recommendation for chemical grout in additional to Citizens’ compaction grout recommendation. During the process, Citizens nonrenewed my client’s insurance policy. This conduct is egregious and places a burden on my client to either go without insurance or repair her property in such that a neutral evaluator deemed inadequate.
In my opinion, it is a mistake for a carrier to take the position that the insured failed to mitigate his or her sinkhole loss by not repairing the property the way the carrier demands because the insured has a contractual and a statutory entitlement to the neutral evaluation process and a constitutional right to a jury determination. Contesting the carrier’s recommendations in good faith is not a failure to mitigate. Hence, any carrier taking such a position may be opening itself up to extracontractual liability under Florida’s bad faith laws.