Analysis and Interpretation by Michael A. Cassel
On November 12, 2015, the 4th DCA released their decision in Robinson v. Florida Peninsula Insurance Company, Case No. 4D14-1350, 2015 Fla. App. LEXIS 16983 (Fla. 4th DCA 2015) The Robinson court dealt with an appeal of a non-final order granting an abatement of the action in a situation where the insurer invoked their option to repair and the insured filed suit prior to the option to repair having been enforced
In Robinson v. Florida Peninsula Insurance Company, Henry Robinson was issued a homeowner’s insurance policy by Florida Peninsula Insurance Company (hereinafter “FPIC”). Similar to many HO-03 policies, the subject insurance policy contained a clause allowing for FPIC to invoke an option to repair damaged property as opposed to tendering monetary payment. During the effective dates of coverage of the FPIC policy, the insured property sustained a loss and same was reported to FPIC. Coverage for the loss was afforded, FPIC advised Mr. Robinson of their invocation of the option to repair as prescribed by the subject policy, and FPIC attempted to coordinate the proposed repairs through their contractor. Mr. Robinson then questioned the scope and adequacy of said repairs and requested an appraisal. FPIC did not respond to the appraisal request and, instead, denied the insured’s claim due to his refusal to allow the repairs to take place. Ultimately, Mr. Robinson completed most of the repairs without the assistance of insurance proceeds.
Mr. Robinson then filed a two (2) count complaint alleging a breach of contract for the failure to pay a covered loss and seeking a declaratory judgment as to whether the option to repair was properly exercised, whether the subject policy required the insured to allow the contractor to perform the repairs when there was no agreement to scope, and whether the insurer was entitled to deny coverage when there was a dispute as to the proposed repairs. FPIC responded by filing a motion to abate the action and compel compliance with FPIC’s right to repair. The trial court granted FPIC’s motion and the insured sought an appeal of same.
4th DCA Opinion
Upon review, the 4th DCA determined that the trial court’s order abating the action and requiring that the insured must comply with the insurer’s repair attempt was tantamount to a dismissal of the insured’s complaint and, as such, departed from the essential requirements of law. Additionally, because the repairs were allegedly completed prior to the initiation of the action, the abatement of the action would likely result in an indefinite dismissal despite FPIC’s concession that Robinson may be entitled to a monetary judgment for the amount of FPIC’s contractor’s estimate. See Arch Roberts & Co. v. Auto-Owners Ins. Co., 305 So. 2d 882, 882-84 (Fla. 1st DCA 1974) (affirming summary judgment and finding insurer liable for payment to the insured in the amount of the appraisal for repair where insured prevented insurer from completing repairs). The court also held that it may be possible for Robinson to dispute the amount of the estimate prepared by FPIC’s contractor. See Fla. Ins. Guar. Ass'n v. Branco, 148 So. 3d 488, 491-92 (Fla. 5th DCA 2014) (finding that a dispute over the method of a proposed repair to a home is an “amount of loss” issue rather than a coverage issue).
FPIC argued that the lawsuit filed by the insured was premature and was properly abated because a new contract between the parties was created when the option to repair was invoked and the insured must allow the repairs to take place prior to challenging the sufficiency of same; however, the 4th DCA refused to address FPIC’s argument holding that the issue should be litigated in line with the allegations contained in the action for declaratory judgment.
Impact and Effect
Under Florida law, “when the insurer makes its election to repair, that election is binding upon the insured and creates a new contract under which the insurer is bound to [perform repairs] within a reasonable time.” Drew v. Mobile USA Ins. Co., 920 So. 2d 832, 835 (Fla. 4th DCA 2006) citing Travelers Indemnity Co. v. Parkman, 300 So. 2d 284, 285 (Fla. 4th DCA 1974). See also State Farm Mut. Auto. Ins. Co. v. Dodd, 276 Ala. 410, 162 So. 2d 621, 626 (Ala. 1964) ("It is the general rule that where a policy gives the insurer an election to repair or pay, the exercise of the option to repair converts the original contract into a contract to repair, subject of course to various refinements and exceptions."). Therefore, in a situation where the option to repair has been invoked, the insured and the insurer would become parties to a separate repair contract wherein the insurer is obligated to perform repairs which will adequately return the insured property to its pre-loss condition. See Siegle v. Progressive Consumers Ins. Co., 819 So. 2d 732, 739 (Fla. 2002).
The Drew court also held that “[w]here the insurer breaches this new contract to repair, it becomes liable for the damages proximately caused by this breach.” Drew v. Mobile USA Ins. Co., 920 So. 2d at 835. Furthermore, the Drew court affirmed the notion outlined in Travelers Indemnity Co. v. Parkman that, despite no allegations of bad faith, an insured may recover extra-contractual damages outside of the scope of the insurance policy due to the formation of a subsequent repair contract between the parties. As such, when an option to repair has been invoked but the repairs were not adequately performed, an insured may be entitled to damages caused by the insufficient repairs outside of the scope of the subject policy of insurance.
It must be noted that, as the repairs in Robinson were effectuated by the insured, the facts are distinguishable from other option to repair fact patterns where allegedly inadequate repairs were performed by the insurer or no repairs were performed by either party and suit was filed. It is only in the latter circumstance where it seems that abatement may be justifiable in order to allow for the repairs to be effectuated by the insurer. See generally Angrand v. Fox, 552 So. 2d 1113, (Fla. 3d DCA 1989).
It must be further noted, however, that the Restatement of Contracts states that “[w]here, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or circumstances [of the contract] indicate the contrary.” Restatement (Second) of Contracts § 265 (1981). In line with the maxims set forth in the Restatement of Contracts and in the Drew opinion, inasmuch as an insurer may be held to have breached the contract by failing to perform adequate repairs when electing their option to do so, so too does the insured breach their contract when refusing to allow the option to repair to take place.
Based on the above, any situation where the insured prevents the repairs from being effectuated, the legal analysis employed by the courts should be similar to other post-loss conditions where a two (2) step prejudice analysis is utilized. See generally LoBello v. State Farm Fla. Ins. Co., 152 So. 3d 595, (Fla. 2d DCA 2014) and Yacht Club on the Intracoastal Condo. Ass'n v. Lexington Ins. Co., 599 F. App'x 875, 879 (11th Cir. 2015). If the court determines that the option to repair was properly invoked, a subsequent repair contract was formed and, for one reason or another, the insurer was unable to effectuate their repairs, the insurer should be granted a presumption of prejudice that may be rebutted by the insured at the time of trial.
Of course, while the rebuttal of a presumption of prejudice is an uphill battle for an insured, Florida courts have offered various ways by which an insured can rebut the presumption of prejudice. It seems that if the insured’s failure to comply with the option to repair would not have materially changed the outcome of the claim, the presumption of prejudice may be rebutted. See generally Niesz v. Albright, 217 So. 2d 606, 608 (Fla. 4th DCA 1969). As such, in line with the holding in Drew v. Mobile USA Ins. Co., if the scope of the repairs proposed by the insurer is ultimately found to have been insufficient in some way, it may not matter that the insured failed to comply with the insurer’s request to effectuate said repairs.