INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
No joy for condo insurer
American Coastal Insurance Company issued San Marco Villas Condominium Association, Inc., a policy that covered the complex against perils that included hurricanes. When Hurricane Irma struck Marco Island, San Marco’s buildings sustained damage, and the association submitted a claim to American Coastal.
After an investigation, American Coastal estimated San Marco’s losses to be $356,208.82 and paid $192,629.75, reflecting depreciation and application of deductibles. San Marco, however, obtained an estimate that showed damages that exceeded $8 million, leading to a disagreement over the amount of loss, which San Marco sought to resolve by invoking the policy’s appraisal provision.
American Coastal refused, arguing that an appraisal was premature because its investigation was ongoing. San Marco subsequently sued American Coastal, seeking the court to compel an appraisal. American Coastal contested, arguing that appraisal was inappropriate because it had completely denied coverage based on a policy condition that voided coverage when the insured committed fraud or made material misrepresentations about the insurance. The trial court sided with San Marco and ordered an appraisal. American Coastal appealed.
On appeal, the second district court of appeal affirmed the trial court’s decision, and the Supreme Court of Florida granted review based on the certified conflict.
The Supreme Court of Florida held that a trial court has discretion in determining the order in which coverage and amount-of-loss issues are resolved. It rejected American Coastal’s argument that coverage issues must be resolved before an appraisal could be ordered. The court found that the policy’s retained-rights provision contemplated appraisals that occurred before resolution of coverage issues. The court approved the decision of the second district court of appeals and disapproved the certified conflict cases to the extent they were inconsistent with this opinion.
American Coastal Insurance Company v. San Marco Villas Condominium Association, Inc.—Florida Supreme Court—No. SC2021-0883—February 1, 2024.
Bad news for insurer
Ramona Smith owned a home insured by Safeco Insurance Company. In 2019, a fire caused more than $500,000 worth of damage, and Safeco covered the loss.
Safeco hired the Michaelis Corporation to restore the property, and during this process the kitchen, identified as the origin of the fire, was demolished and the dehydrator believed to have caused the fire was discarded. Safeco subsequently sued Michaelis for negligence and spoliation of evidence, arguing that this impeded its ability to bring a successful claim against the dehydrator manufacturer.
The trial court dismissed both claims, and Safeco appealed.
The court of appeals reversed the trial court’s decision, finding that Safeco sufficiently pled third-party spoliation and negligence claims.
Michaelis petitioned for transfer, which the court granted, thus vacating the court of appeals’ opinion.
The Indiana Supreme Court held that under the given facts Indiana common law did not recognize the tort of third-party spoliation and therefore upheld the trial court’s ruling. The court established that a special relationship did not exist between Safeco and Michaelis that would impose a duty on Michaelis to preserve the evidence. Furthermore, the court ruled that it was not reasonably foreseeable that Safeco would be harmed by the loss of the dehydrator. Public policy considerations also weighed against recognizing third-party spoliation absent a special relationship.
In addition, the court ruled that Safeco’s negligence claim was essentially a third-party spoliation claim and failed for the same reasons. The court also dismissed Safeco’s argument that Michaelis assumed a duty of care to preserve the evidence, as this was not alleged in the amended complaint and was raised for the first time on appeal.
Safeco Insurance Company of Indiana v. Blue Sky Innovation Group, Inc.—Supreme Court of Indiana—No. 22A-CT-1924—April 2, 2024.
