Water, water everywhere
Risbel Mendoza and Vincente Jubes had a homeowners policy issued by Citizens Property Insurance Corporation. The insureds incurred water damage to their house caused by a water heater leak. They filed a claim with Citizens, and the insurer sent an adjuster to investigate the claim. The insurer denied the claim pursuant to the policy’s exclusion of constant or repeated seepage or leakage. The insureds filed suit against Citizens alleging breach of contract.
At trial, Citizens offered testimony that the leak was a continued and repeated seepage of water over a long period of time, which fell under the policy exclusion, and not a sudden and accidental discharge of water, for which there would have been coverage.
The insureds alleged that the adjuster violated state-mandated ethical standards and applied the wrong exclusion to deny the claim, and they asserted that he should have applied the “more specific” exclusion rather than the “more general” exclusion.
The judge instructed the jury regarding Citizens’ duty to adjust the insureds’ claim in accordance with the requirements of the state law that pertain to ethical practice and that prohibit an adjuster from performing his or her duties in a manner that is prejudicial to the insured.
The judge also instructed the jury regarding interpretation of the policy, stating that when two exclusions cover the same loss, the more specific exclusion takes precedence over the general exclusion.
The verdict form posed this question to the jury: “Did Citizens properly exclude the claim from coverage under the policy?” The jury answered “No” and awarded the insureds $22,000 in damages. Citizens appealed.
The central fact issue for the jury was whether the insureds’ loss fell under the repeated seepage or leakage exclusion. If so, there was no cover-age; if not, there was coverage. The appellate court noted that the main problem with the jury instructions and the insureds’ arguments at trial was that the jury could have decided the case solely because the adjuster did not “do a good job,” regardless of whether the incident fell within the policy exclusion. The instructions focused on whether the adjuster
“properly investigated” or “properly adjusted” the claim and talked about a code of ethics. Although such considerations may be appropriate in a bad faith case, the court said, they have no place in a simple breach of contract action. The insureds were free to criticize the adjuster’s conclusions without arguing that he breached a duty or obligation to them. If an adjuster makes a mockery of the code of ethics but the insurer correctly denies a claim, there is no action for breach of contract.
A second problem with the jury instructions, the court stated, was that they tasked the jurors with a job reserved for the judge. The insureds contended that a different exclusion trumped the one on which Citizens relied; they argued that if Citizens were forced to rely exclusively on the one it had applied, there would have been coverage because that exclusion applied only to property that had been vacant for more than 30 days.
The court pointed out that the two exclusions were not in conflict and said it was the trial judge’s job to so inform the jury or to sustain objections to argument to the contrary.
The court reversed the judgment in favor of the insureds and remanded the case for a new trial on the breach of contract claim.
Citizens Property Insurance Corporation vs. Mendoza-District Court of Appeals of Florida, Fourth District-Nos. 4D16-1302 and 4D17-2286-July 5, 2018.