The Option to Repair: Making it Work

by Rumberger Kirk & Caldwell
Contact

Rumberger Kirk & Caldwell

Florida homeowner insurers are seeing a significant increase in claims and litigation and are seeking ways to avoid costly litigation and expedite the claims process for their insureds. One option for the insurer is to exercise its option to repair the property as opposed to tendering monetary payment to the insured. This provides the insurance company a cost-effective method to resolve the claim and allows the insured to have the property repaired without dealing directly with many of the headaches of selecting and hiring a contractor, obtaining permits, and overseeing the work. But, the option to repair is not without risks to the insurer. Florida courts have not fully resolved the various issues that can arise concerning the option to repair, including whether a lawsuit can be abated where a dispute exists regarding the scope of the damages. Understanding these issues and providing clear direction to the insured during the option to repair process may avoid litigation.

An initial issue concerns the nature of the obligation assumed by the insurer. Florida courts have held that once the option to repair is elected a new contract is formed. Does this mean the policy coverage exclusions or limitations no longer apply? In the automobile context, Florida courts have held that in the event of a breach of the option to repair contract, an insured can recover damages proximately caused by the breach, including damages that would not have been covered under the policy. See Travelers Indemnity Co. v. Parkman, 300 So.2d 284 (Fla. 4th DCA 1974). In Drew v. Mobile USA Inc. Co., the 4th DCA stated in dicta that damages beyond the policy limits may be recoverable in the event of a breach, but there should be an outer limit. Drew v. Mobile USA Inc. Co., 920 So.2d 832 (Fla. 4th DCA 2006). This can present an issue not only regarding the cost of repairs, but also any additional living expenses the insured may claim.

Another issue becomes how long it will take to repair the property. The insurer is bound to restore the property within a reasonable time. Unlike an automobile repair, the insurer and its contractor may need to obtain city and/or county permits. Additionally, there may be required inspections during the construction, as well as final inspections. The insured may be entitled to additional living expenses during this entire process until the certificate of completion is issued by the city or county.

Recent Florida case law is split regarding the issue of abating a lawsuit to allow an insurer to repair the property where there is a dispute as to the scope of the repairs. The 4th DCA held that “a homeowner is entitled to dispute the scope of repairs before the repairs are completed.” Diaz v. Florida Peninsula Ins. Co., 204 So.3d 460 (Fla. 4th DCA 2016). Under similar facts, the 3rd DCA held that the lawsuit should be abated to allow the repairs to be completed and the homeowner may thereafter lift the abatement and re-open proceedings to dispute the scope of work or failure by the insurer to return the property to its pre-loss condition. Fernandez-Andrew v. Florida Peninsula Ins. Co., 2017 WL 363135 (Fla. 3rd DCA 2017). Abating the case allows the insurer to complete repairs and potentially avoid further litigation. Additionally, during the abatement and repair period, the insured and insurer may be able to agree on the scope of the repairs. On the other hand, completing repairs when the insured has raised an issue regarding the scope may put the insurer in a position of paying for the work twice.

Alternatively, in situations where the insured refuses to participate in the option to repair and then files suit, an effective alternative to seeking an abatement of the action is to file a motion for summary judgment. The argument is that when the insurer invokes its option to repair pursuant to the policy, the insured’s participation and cooperation in the option to repair process is not optional. If the insured refuses to cooperate with the insurer’s efforts to effect repairs when the option to repair clause is invoked, then it is the insured, not the insurer, who has failed to comply with the policy. Moreover, in those circumstances, the Suit Against Us provision of the policy bars any action against the insurer due to the insured’s failure and/or refusal to cooperate in the repair process. Essentially, there is no breach of contract by the insurer on which to base a breach of contract action. If an issue does arise during the repair process, final judgment from the first lawsuit does not trigger the doctrine of res judicata and preclude a subsequent action premised on any failed repairs or scope issues that may arise during the repair process. This is because the second action would be based upon different facts and circumstances than the initial lawsuit.

When the insurer advises the insured that it is exercising the option to repair, the insurance company should make its expectations clear. The contractor will need to complete an inspection of the property and multiple trades may need access to the property. The insurer should make clear to the insured who will coordinate the inspection, how to contact the contractor, and when it expects contact to be made by. Once the initial inspection is completed, the contractor should prepare a detailed estimate that includes the scope of the work and quality of the material to be used. The more detailed the estimate the more likely a dispute after the work is completed can be avoided. Once the work commences, the insurer should apprise the insured of the projected schedule to completion and provide updates if there are any delays, including what caused the delay, i.e., city inspector’s first availability two weeks out, etc. Good communication with the insured may avoid future litigation.

Exercising the option to repair may be a cost-effective method to adjust a claim and avoid litigation. If the insured does sue, the insurer may be in a better position because the repairs have been completed, or the insurer may be successful in obtaining early dismissal of the lawsuit so that repairs can be effectuated. The insured will need to prove the insurer incorrectly identified the scope of damage or that the repairs are not of like kind and quality. Quality, detailed photographs of the repaired work may be persuasive in this type of litigation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Rumberger Kirk & Caldwell | Attorney Advertising

Written by:

Rumberger Kirk & Caldwell
Contact
more
less

Rumberger Kirk & Caldwell on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!