Florida Supreme Court clarifies that consequential damages are not recoverable in first-party property insurance cases
Citizens Property Insurance Corporation v. Manor House, LLC, et. al.
On January 21, 2021, the Florida Supreme Court issued a ruling providing an answer to a certified question of great public importance, that is, whether an insured bringing a first-party breach of insurance contract action, not involving Section 624.155, F.S. (bad faith), could recover extra-contractual consequential damages. In coming to its considered decision, the Florida Supreme Court answered the question with a resounding “No.”
In the underlying action, Plaintiff, Manor House, sought to recover consequential damages arising from an alleged delay in payment of the claim. Essentially, Manor House sought additional payment for any lost rents under the general proposition anchored in contract law which allows a party to recover monetary damages that will “place a party in the same position it would have been had the other party not breached the contract. See Capital Environmental Services, Inc. v. Earth Tech, Inc., 25 So.3d 593, 596 (Fla. 1st DCA 2009); accord Life Investors Insurance Company of America v. Johnson, 422 So.2d 32, 34 (Fla. 4th DCA 1982) (Finding that “when an insured breaches an insurance contract, the insured is entitled to recover more than the pecuniary loss involved in the balance of payments due under the policy in consequential damages, provided that the damages were in contemplation of the parties as the inception of the contract.”) By its ruling the Florida Supreme Court rejected the application of this general doctrine to a breach of the insurance contract insofar as any such extra-contractual damages are available in a separate bad faith action pursuant to Section 624.155. Moreover, because Citizens is statutorily immune from first-party bad faith claims, the Supreme Court held that such damages were not recoverable from Citizens and reversed the 5th DCA decision allowing same.
In so doing, the Florida Supreme Court reasserted the well-established case law which confirms that in the context of a first-party insurance claim: “The contractual amount due the insured is the amount owed pursuant to the express terms and conditions of the policy.” Talat Enterprises, Inc. v. Aetna Casualty & Surety Company, 753 So.2d 1278, 1283 (Fla. 2000). Moreover, the Florida Supreme Court reasserted the distinction between a common law (breach of contract) action versus an extra-contractual (bad faith) action citing Macola v. GEICO, 953 So.2d 451, 455 – 56 (Fla. 2006) (“The only common law action available to the insured was a breach of contract action against the insurer in which damages were limited to those contemplated by the parties in the insurance policy.”) As such, the Florida Supreme Court rejected the premise posited by the 5th DCA ruling and held that “extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the insurance policy”. (Manor House at Pg. 9) Therefore, any demand for consequential damages in a first-party action are not recognizable and would only be asserted in a subsequent bad faith action. In the case of Citizens, since it is a governmental agency which is immune from bad faith, no such recovery is legally cognizable.
Supreme Court Case No.: SC19-1394, ___ ___ So.3d ___ ___ (Fla. 2021)
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