This case involved a 2004 hurricane claim made by Citizens’ insured Manor House LLC, a rental apartment complex, for which Citizens admitted coverage and subsequently paid. Manor House sued Citizens for breach of contract, alleging among other things that Citizens’ delay in adjusting and paying for the loss caused it to lose rental income due to its inability to rent the allegedly damaged units until repairs were complete.
While loss of rental income was not included as an element of recoverable damages under its insurance policy, Manor House argued that these damages should have been “foreseeable” to Citizens as naturally flowing from its alleged breach. Although the trial court initially entered summary judgment in Citizens’ favor, the Fifth District Court of Appeals overturned that decision, noting that the parties should have foreseen these types of damages at the contract’s inception as they can “contemplate remedies outside the insurance policy’s express terms.”
When ruling for Citizens, the Florida Supreme Court held that these types of damages are “extra-contractual” in nature, and thus only recoverable in bad faith actions brought under Florida Statute § 624.155. As Citizens is immune from bad faith suits pursuant to Florida Statute § 627.351, the Florida Supreme Court held that these types of damages are simply not recoverable by its insureds under any legal theory.
Although this case is certainly a win for Citizens, it is also relevant for private carriers, as although they are not immune to bad faith claims, the Court’s ruling clearly indicates that extra-contractual damages – regardless of what Plaintiff attorneys call them – are not recoverable by insureds in first-party breach of contract actions.
For additional information, please contact Evan Zuckerman, Esq.