Another Big Win for Policyholders: Florida Federal Court Rules Against Liberty Mutual's
If you work on sinkhole claims in Florida, then you are aware of the consequences of Senate Bill 408, which became law on May 17, 2011. Senate Bill 408 substantially diminished sinkhole coverage in Florida by providing that sinkhole coverage no longer exists, unless the sinkhole activity causes “structural damage” under one of five highly technical definitions. Insurance carriers, including Tower Hill Select Insurance Company, Liberty Mutual Fire Insurance Company, St. Johns Insurance Company, Universal Property and Casualty Insurance Company, and Olympus Insurance Company, immediately pounced on the idea that they could deny sinkhole claims without even testing properties for sinkhole activity. For months, these carriers denied claims on policies in effect prior to SB 408’s effective date without testing the properties for sinkhole activity.
I previously discussed these issues in my prior posts titled, “Trying to Change the Past: Are the New Sinkhole Laws Retroactive” and “Vindication: Federal Court Protects Florida Policyholders’ Vested Contractual Rights.” In these posts, I explained the laws cannot be applied retroactively and carriers that wrongly applied the new statutes acted in bad faith.
On April 17, 2013, in Shelton v. Liberty Mutual Fire Insurance Company,1 Judge James S. Moody, Jr., protected insureds’ rights and held that Liberty Mutual could not apply the new limitation for sinkhole coverage if the required language is not contained within the policy.
Notably, Liberty Mutual did not insert the statutory language of section 627.706(2)(k)(2011) in the subject policy. Liberty Mutual also did not reference section 627.706(2)(k)(2011) in the subject policy (or otherwise define the phrase “structural damage”). And a term contained in an insurance policy is not considered ambiguous because the terms is not defined in the policy. Florida law is clear that the court should construe the undefined word or phrase according to the meaning a person of ordinary intelligence would reasonably give it. (Citations omitted.)
With respect to the undefined phrase “structural damage,” numerous Florida Trial courts and courts within this district, including this Court, have already held that the phrase should be read according to its plain meaning. (Citations omitted.)
Not only is it improper for carriers to apply Senate Bill 408 retroactively, is also improper for carriers to deny claims without testing properties for sinkhole activity when the subject policy does not define “structural damage.”
In the order, the Honorable Judge Moody includes a footnote that speaks volumes,
Notably, Liberty Mutual’s motion ignores bedrock Florida insurance law that an insurer may provide more coverage than is statutorily required. See Gonzalez v, Cooperative De Seguros Multiples De Puerto Rico, Inc., 2009 WL 3781492, at *5 (M.D. Fla. Nov. 10, 2009).
The carriers’ actions in this situation should be deemed unreasonable when the time comes to evaluate potential bad faith claims. This fight is not over, and carriers still refuse to properly investigate claims in accordance with the policies they write. If your insurance company denies your sinkhole loss claim without testing your property for sinkhole activity, you should immediately contact a qualified insurance professional who will help determine if your carrier acted wrongfully and in bad faith.
