In first-party breach of insurance contract actions, the parties oftentimes dispute whether the policyholder may seek damages that are not explicitly provided for in the policy, with the policyholder arguing such indirect damages flow from the alleged breach of contract. By doing so, policyholders blur the lines between breach of contract actions and bad faith actions. The Florida Supreme Court recently considered this issue in Citizens Property Insurance Corp. v. Manor House, LLC,[1] and held that “extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the insurance policy.”
Manor House arose from a Hurricane Frances insurance claim filed by an owner of apartment buildings. Citizens issued payments totaling approximately $1.9 million. Approximately nineteen months after the loss, Manor House’s public adjuster asked Citizens to reopen the claim. After reopening the claim, Citizens made additional payments and continued its adjustment. Several months after reopening the claim, Citizens’ field adjuster informally estimated the actual cash value of the loss at approximately $5.5 million and the replacement cost value at $6.4 million.
At around the same time, there was a change in ownership at Manor House. The new owner demanded Citizens pay the “undisputed” amount of $6.4 million and demanded appraisal. Citizens sought documentation regarding the new owner’s authority to act on behalf of Manor House, as well as other documentation such as invoices and contracts for work in progress. Manor House then filed suit seeking, amongst other things, extra-contractual damages related to rental income that it allegedly lost due to delay in repairing the apartment complex based on Citizens’ “procrastination in adjusting and paying the Manor House claims.”[2]
The trial court granted Citizens’ motion for partial summary judgment regarding the lost rental income. On appeal, the Fifth District reversed, concluding that “the trial court’s ruling ignores the more general proposition that ‘the injured party in a breach of contract action is entitled to recover monetary damaged that will put it in the same position it would have been had the other party not breached the contract.”[3] The Fifth District concluded that consequential damages are available in breach of insurance contract actions, provided that the damages “were in contemplation of the parties at the inception of the contract” and can be proven “with reasonable certainty.”[4]
The Florida Supreme Court reversed the Fifth District’s decision, agreeing with the trial court that the parties must rely on the express terms and conditions of the insurance policy, which, in this case, did not provide for lost rental income coverage. The Court reiterated that under Florida law, courts are to give effect to the intent of the parties as expressed by the policy language, rather than the “reasonable expectations” of the insured. Accordingly, “extra-contractual consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the policy.”[5] For a policyholder to obtain extra-contractual consequential damages, it must pursue and prove bad faith under Florida Statutes § 624.155.
Manor House affirms a simple principle: the terms and conditions of the insurance policy govern disputes over coverage. In a first-party property breach of contract case, the only remedies “contemplated” by the parties are those set forth in the policy’s express terms.
[1] Citizens Prop. Ins. Corp. v. Manor House, LLC, No. SC19-1394, 2021 WL 208455 (Fla. Jan. 21, 2021).
[2] Id. at *2.
[3] Manor House, LLC v. Citizens Prop. Ins. Corp., 277 So. 3d 658, 661 (Fla. 5th DCA 2019).
[4] Id.
[5] Manor House, 2021 WL 208455, at *2 (Fla. Jan. 21, 2021).
