Citizens Property Insurance Corporation v. Nunez

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
CITIZENS PROPERTY INSURANCE )
CORPORATION, )
)
Appellant, )
)
v. ) Case No. 2D14-3712
)
EDGARDO NUNEZ and LUCILA LOPEZ, )
)
Appellees. )
)
Opinion filed June 24, 2016.
Appeal from the Circuit Court for
Hillsborough County; Christopher C. Nash,
Judge.
Kara Berard Rockenbach of Methe &
Rockenbach, P.A., West Palm Beach; and
Andrew P. Rock and Nyasha S. Seale of
The Rock Law Group, P.A., Maitland, for
Appellant.
Aaron S. Kling of Smith, Kling & Thompson,
P.A., Tampa, for Appellees.
LaROSE, Judge.
Citizens Property Insurance Corporation (Citizens) appeals a final
judgment, entered after a jury verdict, in favor of Edgardo Nunez and Lucila Lopez (the
insureds). The insureds sued Citizens for breach of a homeowners insurance policy;
Citizens failed to pay benefits for a sinkhole claim. We have jurisdiction. Fla. R. App. P.
9.130(b)(1)(A). We affirm, in part, and reverse, in part.
Background—The Relevant Statutory Scheme
The insureds purchased an all-risk homeowners policy from Citizens. The
policy insured against "sinkhole loss" through a separate sinkhole loss coverage
endorsement. The insureds made a sinkhole claim during the policy period.
Florida's insurance statutes establish procedures to resolve sinkhole
claims. See §§ 627.707-.7074, Fla. Stat. (2010). After the insured makes a claim, the
insurer must inspect the insured's property to determine whether there is physical
damage to the structure that may have resulted from sinkhole activity. § 627.707(1). If
so, the insurer must engage a professional engineer or geologist who will determine the
cause of loss within a reasonable professional probability; the professional must issue a
written report. §§ 627.707(2)(a), .7073(1). The professional's report certifying sinkhole
damage will include a description of the tests performed and a recommended method to
stabilize and repair the property. § 627.7073(1)(a). The report is presumed correct. §
627.7073(1)(c). If the professional verifies a sinkhole loss, the insurer must pay to
stabilize the property "in accordance with the recommendations of the professional
engineer as provided under s. 627.7073, and in consultation with the policyholder."
§ 627.707(5)(a). The insurer may withhold payment for subsurface repairs "until the
policyholder enters into a contract for the performance of building stabilization or
foundation repairs." § 627.707(5)(b).
If the policyholder does not accept the repair recommendations of the
insurer's professional, section 627.7074 provides an alternative method to resolve the
disputed claim: neutral evaluation that is mandatory if either party requests it. See
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§ 627.7074(4). The neutral evaluator prepares a report detailing his or her findings of
the need for repair and estimated costs to stabilize the property. § 627.7074(12).
These recommendations are nonbinding. § 627.7074(13). The insurer and the insured
retain their rights to seek redress in the court. Id. If the insurer agrees to comply with
the neutral evaluator's recommendation, but the policyholder refuses, the insurer is not
liable for attorney's fees under section 627.428 or other statutory provisions "unless the
[insured] obtains a judgment that is more favorable than the recommendation of the
neutral evaluator." § 627.7074(15).
This Case—The Relevant Facts
Citizens inspected the insureds' home and determined that the physical
damage may have resulted from sinkhole activity. Citizens hired Geohazards, an
engineering firm, to verify a sinkhole loss. Geohazards certified sinkhole damage and
recommended compaction grouting to stabilize the home and to repair the foundation.
Citizens informed the insureds of Geohazards' determination and recommendation.
See § 627.707(3).
Citizens paid to repair the above-ground damage to the home. It withheld
payment for subsurface repairs until the insureds contracted with a third party to
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perform that work, as required by the insurance policy1 and section 627.707(5)(b).2
Citizens advised the insureds that it was prepared to pay $10,946.20 for the subsurface
repairs. This amount, obviously, was an error; it appears to be undisputed that
Geohazards estimated the cost to be between $61,360 and $77,360.
Not satisfied with Citizens' approach, the insureds hired their own
engineering firm, Florida Testing and Environmental (FTE). FTE recommended more
extensive compaction grouting and underpinning. FTE estimated a total cost of
1
The policy provided, in pertinent part, as follows:
CONDITIONS
In Forms CIT DP-1 and CIT DP-3:
Loss Settlement paragraph 5.d. is added as follows:
d. In event of "sinkhole loss":
....
(2) We will pay no more than the actual cash value of the
damaged property, not including underpinning or
grouting or any other repair technique performed
below the existing foundation of the building, until you
enter into a contract for the performance of building
stabilization or foundation repairs.
(3) Once you enter into such contract, we will pay the
amounts necessary to begin and perform such repairs
as the work is performed and as the expenses are
incurred.
(4) We may at our option and with your written approval
and written approval of any lienholder, make payment
directly to the persons selected by you to perform the
land and building stabilization and foundation repairs.
2
Section 627.707(5)(b) provides:
The insurer may limit its total claims payment to the
actual cash value of the sinkhole loss, which does not
include underpinning or grouting or any other repair
technique performed below the existing foundation of
the building, until the policyholder enters into a
contract for the performance of building stabilization
or foundation repairs in accordance with the
recommendations set forth in the insurer’s report
issued pursuant to s. 627.7073.
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$129,070–$31,750 of which would be for underpinning. The insureds contracted with
Green Earth Group to make the subsurface repairs. Apparently, the insureds did not
submit the contract to Citizens prior to filing suit. Although Citizens never denied
coverage, it held fast to Geohazards' repair recommendation. Consequently, the parties
reached an impasse as to the scope and cost of subsurface repairs.
After the insureds sued Citizens, Citizens invoked the neutral evaluation
process of section 627.7074. The neutral evaluator concluded that compaction grouting
was the appropriate method of repair. He estimated the cost at $79,920, a little higher
than Geohazards' earlier high mark for grouting. The insureds disagreed with the
neutral evaluator's opinion and continued with the lawsuit.
At trial, an FTE engineer testified for the insureds that the proper
subsurface repair required underpinning, at a cost of $31,750, plus compaction
grouting. The neutral evaluator also testified, confirming his earlier conclusion that
compaction grouting was sufficient. Citizens solicited the testimony of other engineers
who agreed that compaction grouting, without underpinning, was the proper repair
method for the subsurface damage. Our careful review of the record reveals some
testimony that underpinning might be harmful to the home. Suffice it to say that the jury
heard conflicting testimony on how best to fix the problem.
Citizens moved for a directed verdict, arguing that it did not breach the
insurance contract. Citizens posited that it owed nothing for subsurface repairs
because the insureds, prior to filing suit, did not provide to Citizens an executed contract
with an authorized contractor to perform the subsurface work. The insureds countered
that the presumption of correctness attached to the insurer's engineer's
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recommendation vanished when the insureds presented conflicting evidence as to the
proper method and cost of repair. See Universal Ins. Co. v. Warfel, 82 So. 3d 47, 58
(Fla. 2012). They also contended that the requirement of a repair contract before
payment is made does not bar a breach-of-contract suit when the parties dispute the
method of repair. The trial court denied the motion for a directed verdict.
Over Citizens' objections, the trial court instructed the jury that it could
award damages to the insureds for subsurface repair without addressing the need for a
repair contract to trigger Citizens' payment obligation. The trial court instructed the jury
on the burden of proof as follows:
[The insureds] have the burden of proof to establish, by the
greater weight of the evidence, that [Citizens'] repair
recommendations were insufficient to satisfy [Citizens']
obligations to stabilize the land, stabilize the building, and
repair the foundation . . . .
The verdict form asked the jury the following questions regarding
subsurface repairs:3
1. Did Citizens' subsurface repair recommendation meet its
obligations under Florida law and the subject policy to
stabilize the land, stabilize the building and repair the
foundation?
2. What is the total cost in dollars necessary to properly
stabilize the land, stabilize the building and repair the
foundation?
The jury returned a verdict in favor of the insureds regarding subsurface
damages. They answered "no" to question 1 and awarded $100,000 for subsurface
3
The verdict form also contained a question regarding above-ground
damage. However, because the jury returned a verdict for Citizens on those damages,
it is not a subject of this appeal.
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repair damages. The trial court entered a final judgment that included $19,683.64 for
prejudgment interest from the date of loss.
Citizens filed a motion to set aside the verdict and to enforce the statutory
requirement that the insureds enter into a repair contract before payment is due. The
trial court denied the motion. This appeal follows.
Analysis
Presuit Contract Requirement
Citizens argues that it had no obligation to pay for subsurface repairs
because the insureds failed to provide an acceptable repair contract before they filed
suit. We rejected a similar argument in Roker v. Tower Hill Preferred Insurance Co.,
164 So. 3d 690 (Fla. 2d DCA 2015). In Roker, Tower Hill's engineer recommended a
subsurface repair consisting of compaction and chemical grouting. Id. at 691. Tower
Hill told Roker that she must enter into a repair contract consistent with the engineer's
recommendations before Tower Hill would pay the sinkhole claim. Id. Roker sought a
second opinion from a different engineer. As in our case, that engineer recommended
underpinning and grouting. Id. at 692. Roker contracted with a third party to make the
repairs. Id. Tower Hill rejected the contract and requested neutral evaluation. Id. The
neutral evaluator agreed with Tower Hill's engineer that underpinning was unnecessary.
Id.
Still dissatisfied, Roker sued Tower Hill for breach of contract. Id. As with
Citizens here, Tower Hill denied breaching the insurance contract, arguing that Florida
law and the policy required Roker to enter into a repair contract in accordance with
Tower Hill's repair recommendations before payments were due. Id. The trial court
agreed and granted Tower Hill a summary judgment. Id. We reversed, observing that
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neutral evaluation is nonbinding and, importantly, that "the parties retain access to
court." Id. at 693 (quoting § 627.7074(13)).
[T]he legislature clearly intended and understood that some
sinkhole disputes would still need to be resolved by juries.
We cannot conceive of any scenario in which the insured
could obtain a judgment more favorable than the neutral
evaluator's recommendation if the insured were not able to
challenge the method of repair in court before a jury.
Id.
We added that, in the litigation context, the insurer is not entitled to rely on
section 627.7073(c)'s presumption that the insurer's engineer's recommendation is
correct when the insured provides evidence challenging the insurer's proposed repair
method. Roker, 164 So. 3d at 694 (citing Warfel, 82 So. 3d at 57-59). Accordingly,
Roker was entitled to a jury determination of the proper method of repair without
entering into a contract acceptable to Tower Hill. See id. at 694. Roker compels the
same conclusion here. Citizens' effort to distinguish Roker, by observing that there the
insured presented a repair contract prior to suit, rings hollow.
Postsuit Contract Requirement
In its posttrial motion, Citizens argued that it had no obligation to pay the
damages awarded by the jury until the insureds contracted with a third party to perform
the subsurface repairs. The trial court denied the motion. Citizens informs us that the
contract requirement applies, even postverdict, in order to promote the legislature's
concern that sinkhole damage be repaired. See ch. 2011-39, § 21, at 570, Laws of
Fla.;4 Fla. S. Comm. on Banking & Ins., Issues Relating to Sinkhole Insurance 29
4
"[M]any properties remain unrepaired even after loss payments, which
reduces the local property tax base and adversely affects the real estate market.
Therefore, the Legislature finds that losses associated with sinkhole claims adversely
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(2010), http://www.flsenate.gov/UserContent/Session/2011/Publications/InterimReports/
pdf/2011-104bi.pdf.5
Recently, in Citizens Property Insurance Corp. v. Amat, 41 Fla. L. Weekly
D448, D450 (Fla. 2d DCA Feb. 19, 2016), we held that, although Citizens denied
coverage, it could still insist that the policyholder enter into a postjudgment contract for
subsurface repairs before it was obligated to pay the claim. See also Citizens Prop. Ins.
Corp. v. Blaha, 41 Fla. L. Weekly D885, D887 (Fla. 2d DCA Apr. 8, 2016); Tower Hill
Select Ins. Co. v. McKee, 151 So. 3d 2, 4 (Fla. 2d DCA 2014). Our holding in Amat
gave continued voice to the legislature's intent that insurance payments for sinkhole
claims be used to repair the damaged property. Citizens' case, here, is more
compelling. Unlike Amat, Citizens did not deny coverage; the parties had a legitimate
dispute about how to effect the subsurface repairs. Accordingly, we reverse that portion
of the final judgment that requires Citizens to pay for subsurface repairs before the
insureds contracted to make those repairs.
affect the public health, safety, and welfare of this state and its citizens." Ch. 2011-39,
§ 21, at 570, Laws of Fla.
5
The state has a public policy interest in ensuring that
policyholders, who have legitimate sinkhole losses,
use insurance proceeds to repair their homes and
stabilize their properties. The failure of one
policyholder to remediate sinkhole conditions
underlying his or her property can subsequently affect
their neighbors who may also experience sinkhole
loss as the soils underlying the neighbor’s property
begin to ravel downward.
Issues Relating to Sinkhole Insurance, supra.
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Damages Amount
Citizens wants a new trial, arguing that the $100,000 jury verdict for
subsurface repairs was against the manifest weight of the evidence. Citizens stresses
the point that the jury award matched neither party's repair estimate. Citizens argues
further that we should order a new trial because it is impossible to determine what repair
method the jury approved. We disagree.
The highest estimate in evidence for compaction grouting was $84,500.
The $100,000 verdict reasonably indicates that the jury determined that the proper
repair method was compaction grouting plus underpinning. The insureds' engineer
testified that underpinning would cost $29,250. He testified that compaction grouting
would cost between $72,000 for subsurface grouting at five-foot intervals and $84,500
at two-foot intervals. Adding $29,250 and $72,000 totals $101,250, a mere $1,250 off
the $100,000 mark. We cannot say that the jury award was contrary to the manifest
weight of the evidence. Therefore, we affirm on this issue.
Prejudgment Interest
Citizens argues that the trial court should not have awarded prejudgment
interest to the insureds. Citizens contends that no payment was due for subsurface
repairs absent a repair contract. It also argues that damages were not liquidated until
the jury returned a verdict. We examine this part of the final judgment through the lens
of de novo review. Santini v. Cleveland Clinic Fla., 65 So. 3d 22, 34 (Fla. 4th DCA
2011).
"A claim becomes liquidated and susceptible of bearing prejudgment
interest when a jury verdict has the effect of fixing the amount of damages." Berloni
S.p.A. v. Della Casa, LLC, 972 So. 2d 1007, 1011 (Fla. 4th DCA 2008). "[W]here a
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disputed contractual claim becomes liquidated by jury verdict as to the amounts
recoverable, interest should be awarded from the date the payment was due." Id.
(alternation in original) (emphasis added) (quoting Celotex Corp. v. Buildex, Inc., 476
So. 2d 294, 295 (Fla. 3d DCA 1985)).
In McKee, we held that the policy requirement of a sinkhole repair contract
before payment was due did not preclude McKee from filing suit. 151 So. 3d at 4.
However, we also held that McKee had to contract for the sinkhole repairs before Tower
Hill was obligated to pay any judgment. Id. Thus, we reversed an award of
prejudgment interest because no payment was due until McKee executed a repair
contract. Id. We stated:
McKee's failure to enter into a contract for subsurface repairs
was a factor outside Tower Hill's control that reasonably
prevented payment. Section 627.70131(5)(a), Florida
Statutes (2013), authorizes an award of prejudgment interest
on "[a]ny payment of an initial or supplemental claim or
portion of such claim made 90 days after the insurer
receives notice of the claim, or made more than 15 days
after there are no longer factors beyond the control of the
insurer which reasonably prevented such payment,
whichever is later." (Emphasis added). Therefore, the trial
court's award of prejudgment interest on the subsurface
damage award was premature.
Id. at 4 (alteration in original).
Interestingly, section 627.70131(5)(a) also provides that "[i]f there is a right
to prejudgment interest, the insured shall select whether to receive prejudgment interest
or interest [as delineated] under this subsection." This provision clarifies that section
627.70131(5)(a) is not necessarily a statutory source for prejudgment interest.
Nevertheless, McKee's result remains correct because Tower Hill had no payment
obligation absent a contract for subsurface repairs.
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Allstate Insurance Co. v. Martinez, 790 So. 2d 1151 (Fla. 3d DCA 2001),
offers an analogous, and instructive, situation. The Third District reviewed a judgment
confirming an arbitration award and held that, where the insurance policy gave Allstate
sixty days from the date of the appraisal award to make payment, prejudgment interest
was to be calculated from sixty days after that award. Id. at 1152; see also Aries Ins.
Co. v. Hercas Corp., 781 So. 2d 429, 430 (Fla. 3d DCA 2001) (holding insured was
entitled to prejudgment interest from the date of the appraisal award "as that is the date
on which the damages were liquidated"). The Allstate policy provision allowing payment
within sixty days after an appraisal award, which the Martinez court held was the
liquidation date governing prejudgment interest, is analogous to the Citizens policy
provision allowing payment upon execution of a repair contract.
In Martinez, the insured argued that he should get interest from an earlier
date because Allstate used delaying tactics. 790 So. 2d at 1152 n.3. The Third District
rejected this plea; nothing in the record supported that accusation. Id. Neither does the
record before us. Nothing indicates that Citizens acted with an improper purpose in
delaying payment. "[N]either the merit of the defense nor the certainty of the amount of
loss affects the award of prejudgment interest." Argonaut Ins. Co. v. May Plumbing Co.,
474 So. 2d 212, 215 (Fla. 1985).
In Citizens Property Insurance Corp. v. Alvarez, 40 Fla. L. Weekly D2428,
D2429 (Fla. 2d DCA Oct. 30, 2015), we reversed a prejudgment interest award but
made no mention of the need for a repair contract before payment was due. Citizens
claimed that McKee and Argonaut controlled as to prejudgment interest. Alvarez, 40
Fla. L. Weekly at D2429. We stated that "[w]e [were] not convinced that these
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precedents [were] controlling." Id. We stated that the insureds did not raise the claim
for prejudgment interest until after the jury verdict, the parties disputed the cost of
repair, the jury instructions and verdict form asked the jury to decide the amount of loss
by determining the cost to repair the damage, and the jury resolved the repair cost
dispute and "liquidated the claim as of the date of the verdict." Id. We reversed the
award of prejudgment interest because "[t]here simply [was] no factual determination
establishing an earlier 'fixed date of loss' from which to calculate prejudgment interest."
Id.6
In Amat, we cited Alvarez and applied its reasoning in reversing the
prejudgment interest award. Amat, 41 Fla. L. Weekly at D450. We stated that "[f]or the
purpose of assessing prejudgment interest, a claim becomes liquidated and susceptible
of prejudgment interest when a verdict has the effect of fixing damages as of a prior
date." Id. (quoting Argonaut, 474 So. 2d at 214). We held that because the insured did
not request prejudgment interest until after the jury verdict, "and there was no indication
that the jury was determining the amount of the loss for any date other than the date of
the verdict," the trial court erred in awarding prejudgment interest. Id. at D450 (citing
Alvarez, 40 Fla. L. Weekly at D2429); see also Blaha, 41 Fla. L. Weekly at D887.
Although we held that the trial court erred in ordering Citizens to pay for subsurface
repairs before the insureds executed a postjudgment contract for those repairs, we did
not cite the repair contract requirement as a reason for reversing the prejudgment
interest award. Id.
6
We did not rule out the possibility that a plaintiff could present such a
claim to a jury in a way that might allow for prejudgment interest but held that the
Alvarez plaintiffs failed to do so. Alvarez, 40 Fla. L. Weekly at D2429.
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In this case, in contrast to Amat and Alvarez, the insureds' complaint
requested prejudgment interest. However, as in Amat and Alvarez, the parties disputed
the repair method and cost, the jury instructions asked the jury to decide the amount of
loss without determining a date of loss, and there was no factual determination
establishing an earlier fixed date of loss. Therefore, we reverse the trial court's award of
prejudgment interest.
Conclusion
We affirm the trial court's final judgment to the extent that a repair contract
was not a condition precedent to filing a lawsuit for breach of contract. We also affirm
the trial court's denial of the motion for a new trial on the amount of subsurface repair
damages. We reverse that portion of the final judgment that requires Citizens to pay the
judgment for subsurface repairs before the insureds execute a contract for those
repairs. We also reverse the award of prejudgment interest on the subsurface damages
award. On remand, the trial court shall enter an amended final judgment in accordance
with this opinion and the provisions of the sinkhole endorsement to the insurance policy.
Affirmed in part, reversed in part, and remanded with directions.
KHOUZAM and CRENSHAW, JJ., Concur.
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