A new Florida appellate decision may dramatically affect recovery in homeowner property insurance lawsuits.

 In Universal Property & Casualty Insurance Company v. Qureshi, No. 4D2023-1338 (Fla. 4th DCA, July 24, 2024), a panel majority of Florida’s Fourth District Court of Appeal held that the insured homeowners were not allowed to present evidence at trial of estimated replacement costs without repairs being performed.  This holding conflicts with Citizens Property Insurance Company v. Tio, 304 So. 3d 1278 (Fla. 3d DCA 2020), where the Third District Court of Appeal allowed recovery of replacement cost benefits because the carrier had denied the claim.  The Fourth District certified conflict for review by the Florida Supreme Court. 

In Qureshi, the insureds sued their carrier for not paying the estimated cost to repair water damaged property. But the insureds did not perform any repairs.  Before trial, the carrier moved to preclude evidence about estimated cost of repairs that the insureds still had not performed. 

The trial court denied the motion and allowed the insureds to present repair cost estimates for covered damages despite their failure to perform repairs and incur costs as required by both the policy and section 627.7011(3)(a), Florida Statutes (2020).  The jury returned a verdict for the insured for the estimated replacement cost amount.  The carrier moved for a directed verdict and a new trial based upon the error of allowing replacement cost evidence.  The trial court denied the motion.

The carrier appealed and the Fourth District reversed.  The appellate court ruled that the trial court improperly admitted replacement cost evidence, observing that the “insureds are not entitled to their repair costs unless and until ‘work is performed and expenses are incurred.’” 

The crux of Qureshi is that replacement cost coverage cannot be expanded by any waiver or estoppel theory, as insisted by the insured and the dissent.  Both the policy and the homeowners’ statute 627.7011(3)(a) require payment only “as work is performed and expenses are incurred.”  These are clear policy and statutory coverage terms. Tio’s rationale for allowing replacement cost coverage without repairs being performed amounts to coverage by estoppel, a doctrine rejected by the Florida Supreme Court in Doe on behalf of Doe v. Allstate Ins. Co., 653 So. 2d 371 (Fla. 1995). 

And, as the Qureshi decision reiterates, an insurance company’s liability for replacement cost “does not arise until the repair or replacement has been completed.”  Ceballo v. Citizens Prop. Ins. Corp., 967 So. 2d 811, 815 (Fla. 2007) (quoting State Farm Fire & Cas. Co. v. Patrick, 647 So. 2d 983, 983 (Fla. 3d DCA 1994).  In other words, coverage for replacement cost is not triggered unless and until repairs are performed. 

If the homeowners decide to pursue discretionary review, the Florida Supreme Court will decide this issue in response to the Fourth District’s certification of conflict in Qureshi.  It will either enforce the replacement cost coverage terms strictly as coverage terms and affirm Qureshi or follow Tio and create an exception to allow replacement cost recovery when claims are denied and repairs are not performed.  In the meantime, practitioners will need to be cognizant of the law in the district where they are practicing.