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Rain on the roof—and inside the house

Rain on the roof—and inside the house

July 25
09:04 2019

Rain on the roof—and inside the house

Esperanza Garcia owned property in Miami-Dade County. The property was insured under a homeowners policy issued by People’s Trust Insurance Company that included a preferred contractor endorsement. Under the endorsement, Garcia agreed that in the event of a covered loss, People’s Trust could, at its option, repair the property. The endorsement’s appraisal provision stated that where People’s Trust elected to repair the property, “[i]f [Garcia] and [People’s Trust] fail to agree on the amount of loss, which includes the scope of repairs, either may demand an appraisal as to the amount of loss and the scope of repairs.” Under the provision, once the appraisers set the amount of loss and scope of repairs, “[t]he scope of repairs shall establish the work to be performed and completed by Rapid Response Team, LLC™.”

The property suffered water damage as a result of a roof leak on October 1, 2016, and Garcia reported the claim to People’s Trust. In a December 30, 2016, letter, People’s Trust informed Garcia:

THERE IS COVERAGE UNDER THE POLICY FOR THIS LOSS AS A WHOLE; HOWEVER, THE SCOPE OF DAMAGES COVERED BY YOUR POLICY INCLUDES ONLY THE INTERIOR DAMAGES BUT DOES NOT INCLUDE YOUR ROOF.

If you are not in agreement with that assessment, the question of whether the scope of repairs should include the roof, can be resolved in appraisal …

The letter stated that People’s Trust was exercising its option to repair the property and that the insurer would “repair your property to its pre-loss condition by making repairs to all covered damages, once there is a determination of what those damages are, either by agreement or by submitting the matter to an appraisal panel as set forth in the policy.”

In a letter dated February 1, 2017, People’s Trust acknowledged receipt of Garcia’s sworn proof of loss and stated that “[b]ased upon our … inspection of the damages, [People’s Trust] disputes the scope of loss and/or the amount of damages identified in your Sworn Proof of Loss. Specifically, your Sworn Proof of Loss is predicated upon a repair estimate which includes repairs that fall outside the scope of your loss.” People’s Trust demanded appraisal “of the amount of loss and scope of repairs in accordance with” the endorsement.

On March 16, 2017, Garcia filed a complaint for breach of contract (Count I) and declaratory judgment (Count II) against People’s Trust. On November 28, 2017, People’s Trust filed a motion to dismiss Count II of the complaint and a motion to compel appraisal and stay the current lawsuit. Garcia’s counsel did not appear at a hearing on January 19, 2018. After the hearing, the court entered an order denying People’s Trust’s motion to dismiss Count II but granting its motion to compel appraisal and staying the action. Garcia moved for reconsideration, arguing that her counsel’s failure to appear at the hearing was the result of a clerical error. On March 14, 2018, the court granted Garcia’s motion for reconsideration, vacated its January 19order, and denied People’s Trust’s motion to compel appraisal. The court’s order stated that “[t]he Court finds the issue is one of coverage, not amount of loss.”

People’s Trust appealed the March 14 non-final order denying its motion to compel appraisal.

On appeal, the court noted that People’s Trust admitted that the policy provided coverage for water damage to Garcia’s property as a result of a roof leak. The damage included both damage to the interior of the property and damage to the roofing system. Whether the damage to the roofing system was caused by wear and tear and deterioration, general mechanical breakdown or latent defect, and/or faulty, inadequate, or defective maintenance of the roofing system, all of which People’s Trust claimed were excluded causes under the policy, was not a coverage question but an amount of loss question for the appraisers.

In response, Garcia argued that because she suffered two losses—the original loss when the roof was damaged and an ensuing loss consisting of water damage to the interior of her home—the rule in a previously decided case that “causation is a coverage question for the court when an insurer wholly denies that there is a covered loss and an amount-of-loss question for the appraisal panel when an insurer admits that there is covered loss, the amount of which is disputed,” does not apply where there are multiple separate losses and the insurer acknowledges coverage for only one.

The court rejected this argument because it relied on cases that were not factually analogous to Garcia’s case. The court concluded that the trial court erred in denying People’s Trust’s motion to compel appraisal and reversed and remanded with directions to compel an appraisal.

People’s Trust Insurance Company v. Garcia-District Court of Appeals of Florida, Third District-January 23, 2019-No. 3D18-742.

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