Florida law requires a first party property lawsuit against an insurer to be filed in two stages. The first stage is a breach of contract claim with no “bad faith” allegations and very little, if any, discovery from the claims file or company representatives. After a final determination that the policy was breached and an award of damages (including attorneys’ fees) to the insured, a claim for “bad faith” may be filed. When the two claims are filed together, the Court abates or dismisses the “bad faith” claims as premature.
Until recently, there was no case law on when “consequential damages” could or should be considered by the Court. Last week the Florida Supreme answered the question holding that “consequential damages” could only be part of the “bad faith” claim. Citizens Property Ins. Corp. v. Manor House, LLC __ So. 3d __, (2021 WL 208455).
In that case, lost rental income was the alleged “consequential damage” because it was not expressly covered by the policy. The policy did not include business income coverage. Until the “amount owed pursuant to the express terms and conditions of the policy” is finally determined, no “bad faith” (including no consequential damages) can be pursued. Citizens is statutorily immune from all “bad faith” claims and so this insured should not recover any consequential damages.
In the breach of contract claim, insureds regularly pursue consequential damages for things like delay damages, increased construction costs due to procrastination (2020’s plywood cost increases), loss of customers, loss of good will, bond costs required by third parties, decreased value of the property, and even occasionally “stigma damages.” Now those damages, and the discovery related to them, will not be part of the breach of contract claim. If recoverable at all, they may only be alleged as part of the “bad faith” claim.
