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In Manor House, LLC Ocean View LLC and Merritt, LLC v. Citizens Property Ins. Corp., Case No. 5D17-2841, May 31, 2019, the Fifth District Court of Appeal held that where Citizens allegedly breached its policy with the insureds by failing to pay the undisputed amount of the insureds’ claim and otherwise failing to properly adjust the insureds’ loss, the insured could seek consequential damages, over and above the insurance benefits the carrier allegedly owed.  This was so despite the fact that Citizens is statutorily immune from suit for bad faith. 

In this case, the insureds owned nine (9) apartment buildings damaged in September, 2004 when Hurricane Frances struck.  Citizens paid the claim and in April 2006, the insureds’ public adjuster requested that the claim be reopened.  Two months later, the insureds presented another claim which Citizens adjusted.  The parties disagreed as to the amount of the claim, and the insureds requested that the carrier pay it that portion of the claim that was undisputed as to the amount. When Citizens declined to do so because there was a dispute as to whether the field adjuster had the authority to bind the company to an estimate, the insureds filed suit seeking payment of the amount the field adjuster determined was due and owing. 

The trial court ordered the parties to appraise the loss and the appraisal panel awarded the insureds an amount in excess of what Citizens had already paid.  Citizens paid the appraisal award but the insureds filed another suit, alleging breach of contract and fraud, in which they sought to recover extra-contractual damages, including rental income occasioned by the delay in repairing the property, allegedly caused by Citizens’ failure to timely adjust and pay the claims. Notably, the insureds’ property damage policy did not cover lost rental income. 

The trial court granted Citizens partial summary judgment on the breach of contract claim regarding the insureds’ alleged lost rental income, on the grounds that the insurance policy did not provide that coverage.  On appeal, the appellate court reversed this order, finding that the trial court erred in failing to take into account that a party allegedly injured by a breach of contract is entitled to recover monetary damages that would put it in the same position it would have been in if the other party had not breached the contract.  The Court held that if the damages sought were within the contemplation of the parties at the inception of the contract, they may be recoverable.  Accordingly, the appellate court reversed the partial summary judgment to enable the parties to litigate “all issues” related to the insureds’ lost rent claim.  

The upshot of this case, which is not specific to Citizens, is that in a breach of contract action against a property insurer, an insured may be able to recover extra-contractual damages without having to file a bad faith action if the insured can demonstrate that he/she/it has suffered additional, and non-covered, consequential damages as a result of the alleged breach that the insured can prove were contemplated by the parties at the inception of the policy.