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Coverage Case Update

Dear Ladies/Gentlemen:

This month we would like to share with you some recent coverage opinions of the Florida District Court of Appeals which may be of interest to you.

In Heritage Property and Casualty Insurance Co. v. Romanach, the Third District Court of Appeals found that the insurer properly sought declaratory relief to determine whether the umpire selected by two appraisers of a homeowner’s insurance claim was competent and impartial, as required by the policy agreement.

In Felipe Hernandez and Ana Hernandez v. Florida Peninsula Insurance Company, the Third District Court of Appeals held that as long as insureds maintain the right to petition to lift a stay or abatement the scope of completed repairs, there is no irreparable harm in abating a breach of contract or declaratory action to allow an insurer to proceed on its contractual right on election to repair.

In Kathleen Kurtz v. AF&L Insurance Company, the Third District Court of Appeals held that there is no ambiguity in a long-term care insurance policy, and the insurer was in full compliance with the policy when reducing a beneficiary’s payments when she transferred from an independent living facility to an assisted living facility and reinstating the policy premiums based on the move.

Heritage Property and Casualty Insurance Co. v. Octavio Romanach and Abigail Romanach, No. 15-8939 (Fla. 3rd DCA, July 12, 2017)

Facts & Procedural History

In October 2013, Heritage issued a homeowner’s insurance policy to the homeowners. On December 2013, Plaintiffs’ home sustained a water leak in an interior hallway’s ceiling. Plaintiffs hired a loss consultant who estimated the damage to be $147,257.07, whereas Heritage determined there were $62,257.41 in damages. Unable to agree on the scope and estimate of the damages, Heritage invoked the appraisal clause of the subject policy, which permitted both appraisers to choose a competent and impartial umpire to appraise the loss. Both parties’ appraisers agreed on the appointment of umpire Carlos Guerrero. Mr. Guerrero sided with Plaintiffs’ appraiser and signed off on an appraisal award setting the replacement cost value of the loss at $149,040.25. Heritage filed a Petition for Declaratory Judgment against Plaintiffs in the Miami-Dade County Circuit Court seeking relief that they are entitled to a new appraisal process because: 1) the umpire determined coverage issues outside the scope of the appraisal process established by the policy; and 2) collusion between the appraiser selected, the Plaintiffs and the umpire undermined the integrity of the appraisal process. Heritage alleged that it discovered professional and familiar relationships between Plaintiffs’ appraiser, the umpire, and the owner of a water mitigation company hired by Plaintiffs. Therefore, Heritage alleged a bonafide present controversy existed regarding the integrity of the appraisal process as its obligations for the amounts. Plaintiffs’ filed a Motion to Dismiss Petition for Declaratory Judgment or Alternatively Motion for More Definitive Statement. The Trial Court entered an order summarily granting Plaintiffs’ dismissal motion.

Appellate Proceeding

On appeal, the Court focused on whether Heritage’s petition stated a valid cause of action for declaratory relief. Relying on Higgins v. State Farm Fire & Casualty Co., 894 So. 2d 5 (Fla. 2004), the Court emphasized that “the courts have the general power to issue declaratory judgments…in suits solely seeking a determination of any fact affecting the applicability of an ‘immunity, power privilege, or right.’”  The appeals Court held that the trial court should make an evidentiary determination as to whether the umpire was competent and impartial. Accordingly, the trial court’s dismissal of the declaratory judgment action was reversed and remanded for further proceedings.

Felipe Hernandez and Ana Hernandez v. Florida Peninsula Insurance Company, No. 3D16-415 (Fla. 3rd DCA, February 22, 2017)

Facts & Procedural History

The insureds Felipe and Ana Hernandez filed an insurance claim for water damage to their home with Florida Peninsula Insurance Company (“FPIC”). FPIC inspected the property and determined that the damage was covered under the policy, but exercised the insurance policy’s option to repair the damage instead of issuing payment for the covered loss. FPIC notified the insureds that the covered damages would be repaired under FPIC’s Managed Repair Program, named a selected contractor, and gave the insureds two additional contractors to select to repair the damages. The selected contractor sent the insureds a work authorization form but the insureds refused to sign it.  About two months later the insureds brought action against FPIC alleging that FPIC breached the policy of insurance by failing to pay for the loss and sought declaratory relief. FPIC moved to abate the action, asserting that any cause of action for the covered loss was premature because the repairs had not yet commenced because the insureds failed to sign the work authorization form. At the motion to abate hearing FPIC acknowledged that if the insureds believed that the property was not adequately repaired the insureds would have a cause of action against FPIC. In response, insureds argued that they were in doubt as to their rights under the policy, and that the abatement of their action would be tantamount to a dismissal of their declaratory relief action. The trial court granted FPIC’s motion to abate or stay the proceedings. The insureds appealed for a writ of certiorari seeking to quash the trial court’s order.

Appellate Proceeding

The Third DCA affirmed the trial court’s ruling granting the motion to abate or stay the proceedings and denied the writ of certiorari seeking to quash the trial court’s order. To obtain a writ of certiorari a petitioner must show that the lower court departed from the essential requirements of law which resulted in a material injury that cannot be corrected on post judgment appeal. Here insureds contented that abatement of their action effectively amounts to a dismissal of their amended complaint. The Third DCA disagreed stating that since FPIC acknowledged that the insureds would still have the remedy of bringing suit if after the repairs were complete and they were still not content that the property had been brought back to its pre-loss condition. Thus, the order abating the insured’s action did not constitute an irreparable harm.

Kathleen Kurtz v. AF&L Insurance Company, No. 3D16-935 (Fla 3rd DCA, February 22, 2017)

Facts & Procedural History

In 2000, AF&L Insurance Co. issued a long-term care insurance policy to Charlotte James that provided long-term care benefits for a maximum of three years up to a maximum of $170 per day for each day she either received medically necessary services in her home or was confined to a nursing home. The policy also provided for a waiver of premiums after James received policy benefits “for at least 90 continuous days” of home health care.

While James lived in an independent living facility at the Five Star Residences of Plantation, Florida, AF&L paid for home health care benefits for her at the rate of $170 a day and waived the policy premiums after 90 days of continuous home care. When James had to move to an assisted living facility due to her increasing inability to care for herself, AF&L reduced her daily payment to the $116 cost for room and board based on a policy provision under which the insurer was obligated to pay “the lesser of…the Reasonable Charges incurred for daily room and board, or … the daily benefit amount for Nursing Home Confinement [$170 a day].” And, because an assisted living facility by definition under the policy is not a “home,” AF&L terminated the premium waiver benefit applicable to long term home health care recipients.

In February 2014, James’ daughter, Kathleen Kurtz, filed a complaint against AF&L on behalf of James alleging breach of contract asserting that James still qualified for long-term home health care benefits even though she had moved to an assisted living facility, so the policy premiums still should have been waived. Also, she asserted, James was entitled to receive $170 per day in benefits, not just $116 per day, because “marketing materials” and the policy application “provided that [AF&L] would pay up to the nursing home maximum benefit while plaintiff resided in an assisted living facility.”

Both parties moved for summary judgment, and the Circuit Court awarded judgment to AF&L after finding no ambiguity in the policy and no basis for recovery on Kurtz’s claims. Kurtz appealed to the Third District Florida Court of Appeal, arguing that the Circuit Court erred in determining that the policy at issue is unambiguous and that AF&L was in full compliance with the policy.

Appellate Proceeding

The Third District panel affirmed, rejecting Kurtz’s argument on appeal that the policy was ambiguous because while “the policy tells an insured who is living in an assisted living facility that the insurer will pay the assisted living facility benefit in any combination with the home health care benefit… [it also] purports to preclude the home health care benefit when the insured is in an assisted living facility and thus does not reside at ‘home.’”

The panel concluded the policy was not ambiguous because the “in any combination” language did not relate to the number of services that must be provided at the same time, but relates instead to the total number of days of services covered during the life of the policy. The panel also said that although James was covered for a combination of home health care and assisted living facility benefits, both benefits were not covered on a single day.

The panel noted, “Simply put, the policy provides that it will pay for home health care while the insured is living at ‘home,’ but not in an assisted living facility, and will also pay assisted living facility benefits but only for a combined total of three years,” the panel said. “Because the policy does not permit stacking long term home health care benefits with assisted living facility benefits, the court below correctly concluded that no ambiguity exists.”

Further, the panel also held that there is no ambiguity in the policy’s premium waiver provision. “Here Ms. James was accorded a premium waiver while she was receiving long term home health care while living independently. However, when she transferred to the assisted living facility, she was no longer covered by the long term care provisions of this policy and was no longer entitled to the premium waiver. No ambiguity with regard to either this provision or its application exists.”

Very Truly Yours,


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