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Legal Updates for Insurance Services

In a Win for Insurers, the Florida Supreme Court Affirms that Carriers Are Bound Only By the Express Terms of the Contract

Legal Updates for Insurance Services - February 2, 2021

February 2, 2021

by Corey K. Setterlund

On January 21, 2021, the Florida Supreme Court rendered a decision in Citizens Property Insurance Corporation v. Manor House, LLC (No. SC19-1394) related to bad faith and consequential damages in a breach of contract action. This case came to the court from the Fifth District, which certified the following questions of great public importance: “In a first-party breach of insurance contract brought by an insured against an insurer, not involving suit under section 624.155, Florida Statutes, does Florida Law allow the insured to recover extra-contractual damages, consequential damages?”

This case involved a first-party breach of insurance contract claim where the insureds, Manor House, LLC, Ocean View, LLC and Merritt, LLC (Manor House), sought to recover extra-contractual, consequential damages for lost rental income totaling approximately $2.5 million from the insurer, Citizens Property Insurance Corporation (Citizens). In August 2007, Manor House filed suit demanding prompt payment of the allegedly “undisputed” amount of $6.4 million and requesting the court to compel Citizens to engage in the policy-provided appraisal procedures. In addition, Manor House filed suit against Citizens alleging, inter alia, breach of contract and fraud. On the breach claim, Manor House alleged that Citizens failed to: (1) properly adjust the loss; (2) pay the undisputed amount after estimates; (3) honor Manor House’s demand for appraisal; (4) provide Manor House with documents it needed to adjust the loss; and (5) timely pay the appraisal award. Manor House sought to recover extra-contractual damages related to rental income it allegedly lost due to the delay in repairing the apartment complex based on Citizens’ procrastination in adjusting and paying Manor House’s claims.

The trial court granted Citizens’ motion for partial summary judgment regarding the breach of contract claim for lost rental income. On appeal, Manor House challenged, among other orders, the trial court’s order granting Citizens’ motion for partial summary judgment to prevent Manor House from pursuing a claim for extra-contractual, consequential damages. The Fifth District reversed the partial summary judgment regarding the consequential damages claim. The Fifth District concluded that when an insurer breaches an insurance contract, the insured is entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy in consequential damages, provided the damages were in contemplation of the parties at the inception of the contract. The Fifth District further concluded that while Citizens is immune from bad faith claims, the consequential damages Manor House sought were based squarely on breach of contract claims requiring no allegation or proof that Citizens acted in bad faith.

The Florida Supreme Court quashed the Fifth District’s decision and remanded the case based on the certified question of whether Florida law allows the insured to recover extra-contractual, consequential damages in a first-party breach of insurance contract action brought by an insured against its insurer, not involving suit under section 624.155, Florida Statutes. The Florida Supreme Court concluded that extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the policy. The court confirmed that extra-contractual damages are available in a separate bad faith action pursuant to section 624.155, but Citizens in the instant case was statutorily immune from first-party bad faith claims.

This case further solidifies that insurance contracts are interpreted based on their express terms and conditions and the Florida courts are not going to force insurance carriers to pay for more than they specifically bargained for when issuing insurance coverage to their insureds. Specifically, this case conveys that parties to an insurance contract cannot “contemplate” remedies but, in fact, are bound only by the express terms of the contract. Importantly, the court does not state that extra-contractual damages cannot be obtained once the carrier’s liability is determined. Consequential damages can still be sought through a bad faith action, which can only be brought once an insured is successful in their underlying breach of contract lawsuit. Only once coverage is determined and the carrier is found to have wrongfully (1) denied the claim or (2) underpaid the claim, can an insured proceed to attempt recovery of extra-contractual damages from their carrier.

The court was clear when it determined, based on Citizens’ unique position of being a government entity, that Citizens can avoid having such extra-contractual damages asserted against them as they are immune from bad faith litigation. However, private insurance companies do not receive the same immunity and can end up paying for extra contractual damages in a second lawsuit, which has a more liberal discovery process and greater exposure to damages that were not contemplated when the parties entered into the insurance contract. Thus, if insureds are seeking consequential or any other extra-contractual damages, they must first be successful in proving the insurance carrier wrongfully denied or underpaid them, and then must prove they suffered damages that were not specifically provided for under the express terms of the insurance contract.

 

Legal Updates for Insurance Services - February 2, 2021, has been prepared for our readers by Marshall Dennehey Warner Coleman & Goggin. It is solely intended to provide information on recent legal developments, and is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We welcome the opportunity to provide such legal assistance as you require on this and other subjects. If you receive the alerts in error, please send a note to tamontemuro@mdwcg.com. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2021 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved.

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New Jersey Workers’ Compensation Legislation Updates

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A1384 | S2757 - Reduce Statute of Limitations in Medical Fee Disputes This reduces statute of limitations from six years to two years in medical fee disputes in workers’ compensation matters. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. It was also introduced on the same day and referred to the Assembly Labor Committee. A1870 | S1379 - Workers' Compensation Benefits For Certain Workers Due to September 11, 2001 Terrorist Attacks This provides workers’ compensation benefits for certain public safety workers who developed illness or injury as result of responding to September 11, 2001 terrorist attacks. It was introduced on January 13, 2026 and referred to the Assembly Labor Committee. It was also introduced on the same day and referred to the Senate Labor Committee. On February 5, 2026, it was reported from the Senate Committee, 2nd Reading, and referred to the Senate Budget and Appropriations Committee. A2779 | S1521 - Excludes Certain Illegal Aliens This excludes certain illegal aliens from workers’ compensation and temporary disability benefits. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. It was also introduced on the same day and referred to the Assembly Labor Committee. A2792 | S1555 -  Prevent Intoxicated Employees from Workers’ Compensation This prevents intoxicated employees from receiving workers’ compensation. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. It was also introduced on the same day and referred to the Assembly Labor Committee. A3167 | S2372 - Workers’ Compensation Insurance Requirements for Certain Corporations and Partnerships This concerns workers’ compensation insurance requirements for certain corporations and partnerships. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. It was also introduced on the same day and referred to the Assembly Labor Committee. A3548 | S3571 – Maximum Benefits for Certain Volunteers This provides certain volunteer and other workers with maximum compensation benefit for workers' compensation claim regardless of outside employment. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. On March 2, 2026, it was reported from the Senate Committee, 2nd Reading, and referred to the Senate Budget and Appropriations Committee. It was also introduced on the same day and referred to the Assembly Labor Committee. On May 7, 2026, it was reported and referred to Assembly State and Local Government Committee. A3724 - Personal Liability to Employer Officers for Failure to Pay for Coverage This provides personal liability for owner, executive officer, or executive director of employer for failure to pay for workers' compensation coverage. It was introduced on January 13, 2026 and referred to the Assembly Labor Committee. On May 7, 2026, it was reported and referred to Assembly Judiciary Committee. A4617  - Certain Workers' Compensation Supplemental Benefits and Funding Method This concerns certain workers' compensation supplemental benefits and funding method. For a permanently and totally disabled worker or surviving dependents after December 31, 1979, with some exceptions, this bill provides for an annual cost of living adjustment in the weekly workers’ compensation benefit rate. It was introduced on March 10, 2026 and referred to the Assembly Labor Committee. S241 - Inclusion in Database of Appointed Officials This requires that workers’ compensation judges and administrative law judges be included in database of appointed officials. It was introduced on January 13, 2026 to the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee. S2290 -  Mandatory Retirement Age This increases statutory mandatory retirement age for Supreme Court Justices, Superior Court Judges, Tax Court Judges, Administrative Law Judges, and Workers’ Compensation Judges from 70 to 72. It was introduced on January 13, 2026 and referred to the Senate Judiciary Committee. S3144 - Testimony in Workers’ Compensation This concerns submission of testimony in workers’ compensation claims. It was introduced on January 13, 2026 and referred to the Senate Labor Committee. S3342  - Increase Mandatory Retirement Age This increases statutory mandatory retirement age for Supreme Court Justices, Superior Court Judges, Tax Court Judges, Administrative Law Judges, and Workers’ Compensation Judges from 70 to 75. It was introduced on February 5, 2026 and referred to the Senate Judiciary Committee.

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Appellate Court Rejects Horizontal Immunity Defense to Company Not Acting as Statutory Subcontractor

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Commonwealth Court Holds That a Claimant Who Was Struck By a Car While Crossing the Street During an Unpaid Break Was In the Course and Scope of Employment

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