Articles Posted in Insurance

We hope that you and your loved ones are safe after the storm with little to no damage to your property.  Our thoughts remain with those whose homes and loved ones were impacted by Hurricane Irma.  As local, state and federal officials throughout Florida respond to those who have been impacted—whether it is because of loss of power, property damage or fallen powerlines or trees—we want to make sure we do our part to help our commuIrma-1024x535nity as well.

If you have had a chance to drive around, you will notice that there are a number of trees that have fallen on homes, causing serious damage to their roofs, windows, and even their foundation. If you’ve been able to tune in to the news to see coverage of the storm’s aftermath you have seen that many areas experienced massive flooding. Due to the property damage that some Floridians are currently experiencing, we want to make sure that everyone is well-informed on the proper way to handle any insurance claims that may arise. Keep in mind that it is important that condominium, cooperative Continue reading

Hurricane Irma is now a category five storm that is predicted to impact the state of Florida by late this week.  As all community associations prepare their properties for the storm, they should also take specific measures to prepare for any insurance claims that may arise.  Below is an excerpt from an article by firm partner Laura M. Manning-Hudson on these pre-storm insurance recommendations that was posted in this blog earlier this year:

At the start of every hurricane season, association board members or property management should photograph and/or video all of the main public areas of the condominium property.  These images could become vitally important in the event that a storm strikes and claims are filed.   Associations should also take the time to store copies of their wind, flood and property insurance policies in waterproof cases in a secure location.  If possible, digital copies should also be stored in several computers and devices.

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With hurricane season now underway, Florida condominium associations should take the time to ensure that they and their owners are prepared for a storm.  In addition to ensuring that hurricane shutters are operational and all of the necessary supplies are on hand, associations should communicate with owners about insurance and liability under state law.

Florida law requires associations to maintain insurance for all portions of the condominium property as originally installed in accordance with the original plans and specifications, as well as alterations or additions made to the condominium property.  Personal property, including floor, wall and ceiling coverings (i.e., paint, wallpaper, wood flooring), electrical fixtures, appliances, water heaters, water filters, built-in cabinets and countertops, and window treatments including curtains, drapes, blinds, and similar window treatment components, located within a unit or that unit’s limited common elements, and which serve only that unit, are not covered by the association’s insurance policies.  Unit owners are responsible for maintaining their own insurance coverage for these items.

strm-300x240At the start of every hurricane season, association board members or property management should photograph and/or video all of the main public areas of the condominium property.  These images could become vitally important in the event that a storm strikes and claims are filed.   Associations should also take the time to store copies of their wind, flood and property insurance policies in waterproof cases in a secure location.  If possible, digital copies should also be stored in several computers and devices.

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Michael-Clark-Gort-photo-thumb-120x180-45140Firm partner B. Michael Clark, Jr. authored a guest column that appeared as a “Board of Contributors” feature in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper.  The article, which was titled “Court Upholds Concurrent Cause Doctrine in Win for Property Policyholders,” focused on the positive ramifications for Florida commercial and residential insurance policyholders of the state Supreme Court’s recent decision in the case of Sebo v. American Home Assurance.  Michael’s article reads:

The recent Supreme Court of Florida decision in Sebo v. American Home Assurance rejecting the “efficient proximate cause doctrine” in favor of the “concurrent cause doctrine” for property insurance claims represents a significant win for residential and commercial policyholders.

The state’s highest court has determined that the appropriate theory of recovery for claims in which two or more perils contribute to a loss but at least one of the perils is excluded from coverage is the concurrent cause doctrine. Under the rejected efficient proximate cause theory, when multiple perils cause a loss, it is the efficient cause — the one that sets the other in motion — to which the loss is attributed.

For the insurance industry, the efficient proximate cause doctrine has always been preferred. If the carriers are able to demonstrate that the efficient cause behind a loss is excluded from coverage under the policy, then the entire claim may be denied.

dbr-logo-thumb-400x76-51605-300x57Sebo makes the concurrent cause doctrine the legal standard to be applied for property insurance claims in Florida. Now insurers must cover a loss even if the covered peril is the secondary cause of the loss, which was concurrent with but not the primary or efficient cause.

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Insurance coverage and claims are often among the most confusing and troublesome matters that developers and community associations must address, and large claims involving serious property damage from any type of disaster will typically require the guidance and expertise of attorneys and public adjusters.

Florida law stipulates that associations must maintain insurance for all portions of the property as originally installed or renovated. However, the statutes exclude certain portions of the units from the insurance coverage which an association must carry, and they do not provide that associations’ insurance coverage must extend to the personal property of individual residents. As such, unit owners are responsible for maintaining their own insurance to cover damages to the floors, walls, ceilings, electrical fixtures, appliances, cabinets, counters and window treatments in their units.

In the event of a loss that will require the filing of an insurance claim, your first responsibility is to mitigate the damages and do everything in your power to stop it from getting worse. Leaks should be plugged and blown out windows should be boarded, but by no means should an association make any permanent repairs prior to an insurance claim being properly filed. Insurance policies will typically require that the carrier have the opportunity to have its representatives investigate the loss prior to any permanent repairs by the policyholder, as repairs made prior to the investigation may interfere with such right.

The claims process will typically begin with the filing of a formal incident report to the insurance carrier. Since these reports are often filed immediately following the loss, it is important that they be updated and corrected with new information on the extent of the loss as it becomes available during the claims process. Should a dispute arise, the carrier may point to a lack of notice of the extent of the damages, so it is vital for the report to be kept as accurate and up-to-date as possible. Additionally, association counsel and a qualified adjuster should assist associations in the filing of this report.

In addition to having the insurance carrier’s adjuster inspect the damage, it is usually also wise for the property to have its own independent expert conduct a thorough inspection. water.jpg This is especially true if there are any questions as to the cause and origin of the damage. Insurance carriers may not provide all of the information to their insureds from the reports that they receive from their own claims investigators, so it is typically very helpful for the property to have its own detailed analysis of the nature and extent of the loss.

The next phase typically involves the hiring of a mitigation contractor to conduct the necessary repairs. It is imperative for properties to use reputable contractors that are properly licensed and insured. Also, in order to help avoid any potential problems with the contractors after their work has commenced, it is advisable to have the property’s attorney review the contract prior to finalizing it.

Some of these contracts call for an assignment of benefits to enable the contractor to speak on behalf of the property to the carrier and receive the payments directly from the insurer. This may not be in the best interests of the insured. Bear in mind that the insurance company is not tasked with policing the quality of the repairs, so it is incumbent on the association to have its own experts conduct ongoing inspections to certify the work.

There are many aspects of the claims process that typically require the guidance of qualified professionals for associations and developers. Insurance carriers may require recorded statements, proof of loss statements, and examinations under oath to evaluate the claim and determine whether the extent of the loss is being exaggerated by the insured.

In addition, in determining the amount of coverage that will be provided for the claim, insurers may use different figures based on the replacement cost value, actual cash value and actual cost of construction. Experienced insurance attorneys and independent adjusters can help associations to force the carriers to properly categorize the costs for the necessary repairs and maximize the recovery.

After growing up in the insurance industry as the daughter of one of Florida’s premier policyholder advocates, my exposure to insurance practices began at a remarkably young age. As a dually licensed public adjuster and attorney, I focus on insurance matters for our firm’s community association clients as well as property and business owners. Through my unique upbringing in conjunction with my years of practice, I have learned that virtually all insureds would amass a great benefit by working with a loss consultant and experienced legal counsel when handling an insurance claim.

Two of my recent cases illustrate the benefits for associations and property owners in working with an insurance attorney and public adjuster for their claims. The first case involved a water loss in the common areas of the Cutler Cay Homeowners Association in southeast Miami-Dade. Upon discovering the loss, the association filed its insurance claim with its insurance company without first consulting a public adjuster or an attorney that specializes in insurance litigation. As a result, the insurance company denied the association’s claim and concluded that the loss was not covered under the association’s insurance policy.

After unsuccessfully dealing with its insurance company for more than two years, the association contacted our firm to enlist our services. Our firm closely worked with a public adjuster to determine the full extent of the insured’s damage. Within several months of filing a lawsuit on the association’s behalf, we were able to effectively demonstrate the clear coverage for the association’s loss and recover over $269,000 for the association.

water.jpgThe second case involved two separate water-related losses at a single-family home in Broward County. The homeowner immediately retained a public adjuster to assist in the filing and presentation of her claims. In both claims, the homeowner received payment from her insurance company, although the insurance company’s payments were insufficient to restore the home to its pre-loss condition. When negotiations between the public adjuster and the insurance company reached a stalemate, the insured contacted our firm. In less than four months, we were able to recover approximately five times the amount of the insurance company’s prior payments.

These cases highlight the importance for associations and homeowners of working with experienced insurance attorneys and public adjusters for their insurance claims. Ideally, it is best to retain the services of these professionals prior to the filing of a claim, as their guidance and experience can play a pivotal role in how the claim is handled by the insurance company and ultimately whether the claim is adequately paid. However, it is never too late to enlist these insurance professionals, even if the insurance company denied or issued payment for your claim, as we can often re-open the claim to secure additional funds.

susanodess-srhl.jpgThe firm’s Susan C. Odess, who focuses exclusively on insurance law and represents community associations as well as individual residential and commercial property owners in insurance matters, wrote the following guest column that appeared in the May 25 edition of the Miami Herald’s “Business Monday” section:

Citizens Property Insurance is commonly known as the insurer of last resort, as it traces its roots to the exodus of insurance carriers from the Florida market after Hurricane Andrew in 1992. The state-run insurer has earned a poor reputation for its mishandling of claims, but for many homeowners, condominium associations and businesses in the state’s coastal areas it has been their only option.

Unfortunately for all of those who must remain with Citizens for their insurance coverage, a ruling filed on May 14 by the Supreme Court of Florida will now make the insurer considerably less accountable for its actions in its handling of claims than it has been in the past. The ruling is undoubtedly the worst that has ever come from the Florida courts for the state’s approximately 595,000 Citizens policyholders, and it demands a simple and immediate legislative fix during the special session in June.

The court’s decision in the case of Citizens Property Insurance Corp. v. Perdido Sun Condominium Association has completely shielded the insurer from liability for acting in bad faith. The ruling revokes, exclusively for Citizens, one of the most powerful tools that policyholders and their advocates have to hold Citizens accountable during the claims process. Under the law, insurers owe a duty of good faith and fair dealing to their policyholders, and they are thereby legally liable for using unfair, dishonest or deceptive practices in their claims and underwriting processes. If the carriers unreasonably delay investigations, deny claims, underpay claims, fail to timely respond to claims, fail to issue coverage decisions, withhold coverage documentation, cancel policies, or conduct other egregious acts they can face bad faith lawsuits for punitive and exemplary sums that go beyond the coverage limits under the standard breach-of-contract claims.

flasupcourt.jpgAfter conflicting decisions by two of the state’s district courts of appeal, the Supreme Court of Florida took up the question of whether the Legislature intended for Citizens to be liable for bad faith claims as an exception to its statutory immunity, which as a state agency was based on the principle of sovereign immunity and was enacted by the Legislature to protect the carrier. The case stems from a statutory first-party bad faith suit filed by the Perdido Sun Condominium Association after the association had already prevailed in its breach-of-contract lawsuit against the insurer. The bad faith claim alleged that Citizens refused to pay the full amount owed and take part in the required appraisal process; used the appraisal process in an attempt to forestall litigation; delayed payment of the appraisal award and improperly attempted to condition the payment upon the execution of a universal release; and engaged in a pattern and practice of seeking to avoid or delay the settlement of the claim.

Citizens moved to dismiss the lawsuit by arguing that it is shielded from bad faith lawsuits under its immunity statute. After a review of the statute, the Supreme Court found no support that the Legislature intended for Citizens to be liable for statutory first-party bad faith claims. Even though the Legislature codified Citizens’ duty to handle claims in good faith, it did not list first-party bad faith claims as one of the exceptions to Citizens’ immunity. The court found that if the Legislature had intended to establish an exception for bad faith claims, it would have done so clearly and unequivocally by including it among the limited exceptions to Citizens’ immunity within the statute.

This is precisely what the Legislature should do during the special session in June or during next year’s session. Based on the wording of the statute, lawmakers may have believed that bad faith claims did fall under the exception to Citizens’ immunity for a “willful tort,” but the court ruled that statutory first-party bad faith claims such as the one filed by Perdido Sun are not technically considered a willful tort.

Citizenslogo1.jpgThe end result of the ruling is that Citizens’ policyholders will no longer have the only bargaining chip they had to hold Citizens accountable for how it handles claims. It creates an uneven playing field for Citizens against all of the private-sector carriers in Florida that must act in good faith and avoid dishonest and unfair practices with their policyholders. Citizens will face no legal repercussions or liabilities even if it blatantly disregards its duty to make timely claim decisions and payments, conduct fair and unbiased claim assessments, or respond to routine requests for policy and claim documents. The company will have free rein to act with impunity in how it responds to and handles claims, which has horrific implications for all those who will face the prospect of filing a claim with Citizens in the future.

With the hurricane season starting in June, it is imperative for the Legislature to remedy this ruling by adding bad faith lawsuits to the list of exceptions in the Citizens immunity statute. Without this legislative fix, there will be no constraints for the state-backed insurer to act within the bounds of fairness with its policyholders.

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MHymanseminar2015.jpgIn January I had the privilege of leading one of the courses for the attendees of the 36th annual Community Associations Institute Law Seminar in San Francisco. More than 550 community association attorneys from throughout the country attended the four-day event, which focused on discussions of emerging trends and legislative issues that are important to the practice of community association law.

My seminar, which I led together with Daniel B. Odess of GlobalPro Recovery, focused on the association attorney’s role when disaster strikes. It covered how attorneys are able to counsel associations through every facet of the insurance claims process. We discussed the activities that need to take place immediately after the loss occurred in order to document and investigate the nature of the damage, and the best practices for working with mitigation contractors and public adjusters.

Dan and I also answered a number of questions from the attendees about the claims process and how to ensure a maximum recovery. We also included a discussion of the rebuilding/remediation process and working with contractors.

As a member of CAI’s College of Community Association Lawyers (CCAL), I have had the honor of conducting several seminars at this annual event over the years. CCAL was established in 1993 to acknowledge CAI member attorneys who have distinguished themselves through contributions to the evolution or practice of community association law. Of the thousands of attorneys practicing community association law in the United States, fewer than 150 have been granted membership in the college.

Community associations maintain a number of different types of insurance policies to cover various risks, including physical damage, bodily injury, and employee or director dishonesty. Association boards typically rely on their insurance agents to help them shop the major insurance carriers for the most competitive premiums and coverage. Ultimately, policies are acquired by associations, often times with little thought about their provisions other than the costs of the premiums related to the coverage. However, recent experiences with two of our firm’s community association clients have served as reminders pertaining to the importance for board members and property managers to understand the provisions of their insurance policies, including the exclusions and conditions of such coverage.

The first case involved a lawsuit filed against a community association wherein a unit owner claimed that he sustained property damage due to water leaking from a fire sprinkler discharged within the unit located above his unit. The owner alleged that the association was negligent in its hiring of a contractor engaged to perform annual evaluations of the building’s fire sprinkler system. During one of the inspections, a sprinkler pipe burst causing major water damage to the claimant’s residence and other portions of the common elements and units located below. When the association filed its insurance claim related to the damage caused by the leak, the insurance carrier denied coverage indicating that the association failed to meet some of the complex conditions for defense and coverage to be afforded. water.jpg Specifically, the policy in question required that tedious steps be taken to ensure that the association was named as an additional insured under the contractor’s policies, and it also stipulated that the contracts with such contractors include an indemnification clause to protect the association.

The second example involves a dispute regarding a request for a service animal accommodation at a condominium. After the association responded to the request with specific inquiries regarding the nature of the accommodation and disability, the unit owner filed a lawsuit against the association alleging that its requests are discriminatory. The association filed a claim under its “directors and officers” insurance policy to cover its legal costs and defense, but the carrier immediately responded by pointing out that the policy specifically excluded coverage for any claims related to assistance animals.

In both of the above examples, the respective association board members and property managers claimed that they were unaware of the exclusions or coverage conditions, despite the costly consequence to the associations related to the associations’ failure to comply. While the above-described exclusions or coverage conditions may be rare or may not be found in all community association insurance policies, these cases illustrate the need for managers and directors to be informed as to the critical terms of their insurance policies. In an effort to avoid encountering costly experiences such as these, it is vital for association boards and property managers to have a detailed discussion with their insurance agents and legal counsel in order to gain a comprehensive understanding about the exclusions of their associations’ insurance policies and the conditions with which associations must comply to ensure that they are obtaining the coverage for which they are under the impression they have paid.

For the last several years, the state of Florida has been pursuing major efforts to shrink the size of the state-run Citizens Property Insurance, and the company’s policy count has reached its lowest level since 2006. Now the legislature is considering expanding these efforts to Citizens’ insurance policies for condominiums and apartments. Senate Bill 7062 would increase rates for new master condo policies and allow unregulated “surplus lines” insurers to pull existing condominium and apartment policies away from Citizens. However, in an election year when Gov. Rick Scott has expressed concerns about any measures that would increase rates, the bill faces a difficult uphill climb.

Recently, the Senate’s Banking and Insurance Committee, which is now considering and shaping the bill, voted to eliminate a measure that would have allowed rate hikes of up to 15 percent for commercial-residential policies instead of the current 10 percent maximum. An amendment to the bill stipulates that “prominent notice” must be given stating that surplus lines policies are not protected by the Florida Insurance Guarantee Association and their rates are not controlled by the Florida Office of Insurance Regulation. The amendment also allows Citizens policyholders to reject offers from surplus lines companies, and it states that those who opt to switch from Citizens to a surplus lines carrier will be allowed to switch back to Citizens if they so choose.

Citizens sign.jpgThe lawmakers in the committee did not debate a provision in the bill that eliminates a discount for master condo policies which bundle hurricane coverage with other perils such as fire and plumbing leaks (which is what condominiums purchase now). The bill would preclude Citizens from selling these “multi-peril” bundled policies, so condo associations would be required to purchase separate hurricane and “all other perils” policies at very likely a higher cost. This provision would only apply to new policies issued after June 30, 2014.

Currently, there are few insurers that are actively involved in the commercial-residential market. Citizens underwrites 43 percent of the market, representing nearly $93 billion in insured value. American Coastal Insurance Co., QBE Insurance Corp. and American Capital Assurance Corp. represent another 40 percent, and the remaining 20 percent is shared among a handful of other insurers. There are also very few insurance agents who specialize in the commercial-residential market for condominium policies.

Citizen Property Insurance has issued statements indicating that it would take 18 months to develop the commercial business clearinghouse, but even then it would have to be different than the personal-residential clearinghouse because of the complex nature of these policies for condos and apartments. According to Citizens, the number of commercial-residential policies only represents two percent of its overall policy count, but that two percent accounts for 20 percent of the insurer’s probable maximum loss from a hurricane.

Our firm’s other community association attorneys and I will continue to monitor the status of this bill, and we encourage association directors, members and property managers to submit their email address in the subscription box at the top right of the blog in order to receive all of our future articles.