On January 21, 2021, in the case of Citizens Property Insurance Corporation v. Manor House, LLC, et al., SC19-1394 (Fla. 2021), the Florida Supreme Court held that extra-contractual, consequential damages are not recoverable in a first-party breach of contract action, but instead are only recoverable in a bad faith suit brought under section 624.155, Florida Statutes.
After Hurricane Frances struck and damaged the Insureds’ apartment complex, the Insureds filed a claim with the Insurer. The Insureds claimed the Insurer delayed in adjusting and paying the claim, causing the Insureds to lose rental income. The Insurers then sued the Insurer, alleging breach of contract and fraud, and seeking extra-contractual damages related to lost rental income.
The trial court granted the Insurer’s summary judgment motion on the loss of rental income claim, noting “[n]othing in the insurance contract provides coverage for lost rents,” and “there is no coverage as a matter of law for these damages.” On appeal, the Fifth District Court of Appeal reversed the trial court’s order despite its recognition that the insurance policy did not explicitly provide for lost rent. Nevertheless, the Fifth District concluded that when an insurer breaches an insurance contract, the insured may be entitled to recover more than the pecuniary loss due under the policy as consequential damages if the damages were contemplated by the parties at the inception of the contract.
The Fifth District certified to the Florida Supreme Court the following question of great public importance:
IN A FIRST-PARTY BREACH OF INSURANCE CONTRACT ACTION BROUGHT BY AN INSURED AGAINST ITS INSURER, NOT INVOLVING SUIT UNDER SECTION 624.155, FLORIDA STATUTES, DOES FLORIDA LAW ALLOW THE INSURED TO RECOVER EXTRA-CONTRACTUAL, CONSEQUENTIAL DAMAGES?
The Florida Supreme Court answered in the negative. In its Opinion, the Florida Supreme Court explained that the only contractual amount due to an insured is the amount owed under the express terms and conditions of the policy. The Court reiterated that only at common law could an insured recover additional damages contemplated by the parties. However, Florida has never recognized a common law first-party bad faith cause of action; instead, the only mechanism to seek extra-contractual, consequential damages is outlined in section 624.155, Florida Statutes. Thus, the Florida Supreme Court held that extra-contractual, consequential damage can only arise in a bad-faith action, and such damages are not ripe or recoverable in a first-party breach of contract action.
To view the Florida Supreme Court’s Opinion, visit: https://www.floridasupremecourt.org/content/download/714811/opinion/sc19-1394.pdf
Cole Scott & Kissane's Property Group remains dedicated to expeditiously and efficiently resolving both first-party breach of contract claims and bad faith claims. For further information or inquiry, please contact Aram Megerian at (813) 864-9373 or aram.megerian@csklegal.com, or George Hooker at (786) 268-6807 or george.hooker@csklegal.com.
Our team is available to discuss the topics written here and ready to provide additional information contained in this article. Contact us for more information.
