On March 27, 2024, the Florida Fourth District Court of Appeals issued an opinion in Citizens Property Insurance Corporation v. Marie Avril and Clifford Romain holding that “the trial court should have applied a $2,900 hurricane deductible post-verdict to offset the jury’s determination of damages.”
In issuing their opinion1, the court found that the deductible was something that must be applied pursuant to the policy and did not need to be asserted as an affirmative defense. This ruling could potentially provide an argument for insurance companies to apply other policy limitations post-verdict to off-set damages.
All property insurance policies contain deductibles. These deductibles are identified in the declaration page of the policy, and they can come in different forms depending on the coverage provided under the policy. For example, the policies that many homeowners are familiar with, commonly referred to as HO-3 or DP-3 policies, will typically have two types of deductibles listed on the declarations page:
- first, an “all other perils deductible” that is usually a fixed number and is applied to most claims made under the policy,
- second, a hurricane deductible that is frequently a percentage of the Coverage A coverage provided and is applied exclusively to claims identified as hurricane claims as defined under the policy.2
These deductibles are generally applied by the insurance company after the amount of covered damages is determined and reduce the amount of coverage actually paid by the insurance company for the claim.
Generally, under Florida law, “set-off… is an affirmative defense, which must be plead, and which must exist in favor of the defendant in the same right in which he is sued.”3 In fact, in JoJos Clubhouse, Inc. v. DBR Asset Mgmt., Inc., the Fourth District specifically noted that, “[t]he basis for set-off was established well in advance of trial, yet DBR failed to seek to amend its answer, instead, waiting until the verdict was returned to state its claim for set-off. A motion for set-off is an affirmative defense… Affirmative defenses are waived if not pled… accordingly, the trial court erred in granting the set-off based on DBR's untimely post-trial motion.”4 Based on the case law above, it is clear that prior to the court’s decision in Avril, if an insurance company failed to assert an affirmative defense of set-off, which would seem to include the deductible, then the insurance company could be deemed to have waived applying the deductible to any damage award.
However, the court’s decision in Avril has provided a new standard to applying the deductible. The facts of Avril are very straightforward. The plaintiffs sued Citizens for breach of contract, alleging that their home was damaged by Hurricane Irma in September 2017 and that Citizens failed to pay all the damages owed under the policy. Citizens introduced into evidence a copy of the policy, which showed the $2,900 hurricane deductible. At no point during trial was there any testimony, legal argument, or jury instruction regarding application of the hurricane deductible. The only mention of the hurricane deductible was in the policy itself. The jury awarded damages of $1,000 for damage to fencing. Citizens argued that final judgment should not be entered for the plaintiffs because the company was entitled to credit for the $2,900 hurricane deductible. The trial court rejected Citizens’ argument and entered judgment for the plaintiffs for $1,000. The matter was then appealed.
The Fourth District reversed the trial court’s decision and remanded the case to the trial court to issue final judgment in favor of Citizens. The court held that, a “deductible” is “a clause in an insurance policy that relieves the insurer of responsibility for an initial specified loss of the kind insured against.”5 The court also held that, “[t]he application of the deductible provision in a policy of insurance is not a defense which must be raised as an affirmative defense but is, in fact, a basic part of the policy of insurance.”6
The court reasoned that, “[s]imilar to post-trial setoffs, the general practice is for the trial court to determine the application of an insurance deductible after the jury verdict.” Id. Finally, the court ruled, “the trial court erred by failing to apply the hurricane deductible post-verdict, because the jury was never tasked with determining its applicability.”7
It is the first two holdings made by the court that may be the most impactful. First, the court noted that the deductible is a “clause in an insurance policy that relieves the insurer responsibility for…specified loss.”8 The question that this statement raises is, are there additional “clauses” in the policy that could “relieve the insurer” of a duty to make payment. Most policies contain additional provisions that place limits of liability on certain damage claims. For example, policies contain provisions that limit coverage to mold to $10,000, limit coverage for emergency measures to $3,000, or limit coverage for water damage to $10,000. All of these clauses, arguably, relieve the insurer of a duty to pay for certain losses. As such, the holding in Avril could potentially provide a legal argument that like a deductible, any clause that is specifically written into an insurance contract and specifically relieves the insurer of duty to make payment, could be applied post-verdict to reduce the damages owed, and even change a plaintiff verdict into a defense verdict.
Second, since the court specifically held that, “[t]he application of the deductible provision in a policy of insurance is not a defense which must be raised as an affirmative defense but is, in fact, a basic part of the policy of insurance.”9 The Avril court is potentially providing a legal argument that any clause that is specifically written into an insurance contract and relieves the insurer of duty to make payment—arguably does not need to be raised as an affirmative defense. If the Avril decision is read this way, it means that an insurance company could arguably assert defenses like post loss duties and policy exclusions as affirmative defenses in response to the complaint, and then seek to apply all of the applicable policy limits after the verdict is issued since they are nothing more than “a basic part of the policy of insurance.” 10
It should be noted that this reading of Avril may be going a step farther than the court intended. The court only specifically referenced the “deductible” provision in rendering its decision. As such, a narrower reading of the Avril case would mean that this case is applied exclusively to deductibles, and only deductibles could be used to reduce damages post-verdict. This narrow reading may not be correct in this case. The court in Avril made an additional statement about the “purpose” of the deductible stating it was to “alter the point at which an insurance company’s obligation to pay will ripen.”11 The court also found that “[w]here a claim of setoff is predicated upon a settlement, courts defer such setoff claims ‘until such time as liability has been found, but before judgment is rendered.’”12 This rationale would potentially apply to any provision of the policy that limits the amount of coverage owed. For example, the $10,000 aesthetic damage to flooring policy limit and the $10,000 water damage limit found in many policies specifically state a “$10,000 limit on coverage is the most we will pay for… each covered direct physical loss from all water or steam… all cosmetic and aesthetic damage, which occurs in the same loss.” This provision makes it clear that to apply the “limit”, the first issue to address would be whether the insurance company is “liable. If the company is “liable”, then the limit would apply. This provision appears to be in line with the court’s decision in Avril.
