In one of my most recent blog posts, Interprets the Common and Ordinary Meaning of a Ordinance or Legal Insurance Provision; What does it mean to "incur" and when does this I discussed when a policyholder is considered to have "incurred" ordinances or legal damages necessary to trigger coverage under the provision of their Florida insurance policy.
On January 26, 2021, the 11th District Court of CMR Constr. & Roofing, LLC v. Empire Indemnity Insurance Company 1 used the Florida Supreme Court's interpretation of what it means to "incur" from Ceballo v. Citizens Property Insurance Corp. 2 opinion to apply it in a case where the policyholder tried to recover the compensation cost value ("RCV") for his damaged property.
Instead of looking at a regulation or statutory provision, this blog post looks at a standard insurance policy for compensation costs that is found in many commercial property insurance policies. The provision looks something like this:
d. We do not pay compensation costs for any loss or damage:
(2) Unless repairs or replacements are made as soon as reasonably possible after the loss or damage.
Normally, a replacement cost appraisal and an actual analysis would be seen in conjunction with applicable law and Florida statute 627.7011, this blog will focus on Florida commercial real estate insurance, such as a surplus lines commercial real estate insurance. Florida's charter 627.7011 applies only to homeowners insurance and not to commercial property insurance, such as surplus insurance. 3 Since there is no comparative Florida charter related to commercial real estate insurance that explicitly deals with RCV payments, the analysis will require a look at available case law in Florida.
The question then becomes when is a policyholder for commercial real estate who can get back his legally due RCV insurance benefits according to the above provision? If the damage is extensive and spread over a large property, will they not be able to get back RCV damage until the entire property as a whole is completely repaired? What exactly does it mean when the insurance provision states that the insurer will not pay on a compensation cost basis until the damaged property is "actually repaired or replaced"?
While the Ceballo court did not deal specifically with this type of compensation cost assessment, similar provisions were mentioned towards the end of the Ceballo court discussion. There, the court compares the ordinance or law "deleted" with the insurance company's liability for damages in Langhorne v Fireman & # 39 ;s Fund Insurance Company . 4 The Court stated:  Instructively, the U.S. District Court in and for the Northern District of Florida in Langhorne v. Fireman & # 39; s Fund Insurance Co. 432 F.Supp.2d 1274 (NDFla.2006), considered the matter before us and stated that "because the plaintiff has so far not" actually used "any amount to repair, rebuild or replace his home, the defendant has no obligation to pay him under [Extended Replacement Cost Coverage] approval " which provided coverage of up to an additional 100% of the nominal value of the insurance. Id. at 1279. Similarly, in the present case, the third district ruled that the citizens had written the policy to demand that the insured incur the loss before receiving further payments under the supplementary law and regulation. 5
This section of Ceballo paved the way for future analysis regarding a commercial property policyholder who "incurs" compensation cost value damages in Florida. CMR Constr. opinion, which was included in January 2021, is one of the cases to address the problem of Ceballo .
I CMR Constr. and Roofing, LLC v. Empire Indemnity Insurance Company the 11th circuit concerned a commercial property insurance claimant's claim for damages. 6 The insured applicant had not started repairing before claiming RCV, but when disputes arose, the plaintiff's questioning answer showed that they had made "temporary repairs."
What is important in this case is the fact that CMR Const. the court used the analysis in Ceballo of "incur" for the application of damages. Specifically, the court stated:
The insurance provides that a claim for compensation cost value will not be paid & # 39; [u] until the lost or damaged property has actually been repaired or replaced & # 39; and & # 39; [u] unless repairs or replacements are made as soon as reasonably possible after the loss or damage. The "even" provision is clear and unambiguous. This means that Empire was not obliged to pay CMR the replacement cost value until CMR had actually made the repairs and incurred the costs for this. See Ceballo v. Citizens Prop. Ins. Corp 967 So. 2d 811, 815 (Fla. 2007) (& # 39; [C] ours has almost uniformly considered that an insurance company's liability for compensation costs does not arise until the repair or replacement has been completed. & # 39;) (Citing State Farm Fire & Cas. Co. v. Patrick 647 So. 2d 983 (Fla. 3d DCA 1994)).
Empire could not have violated the insurance policy based on the compensation cost value because the "until and if not" provision had not been satisfied.The CMR's questioning answer says that they have only made temporary repairs, not that they have completed the repairs of all the damage caused by Hurricane Irma.
Empire could not have broken by not paying CMR's estimated replacement cost value because CMR had not made all repairs covered by the policy; and certainly not the millions of dollars that CMR's estimate lists and that CMR seeks in this lawsuit.
The key points presented in the cited opinion are thus: (1) Courts are reluctant to rule that these provisions are ambiguous. The Court of CMR Constr. pronounced "until and unless" the language was clear and unambiguous. (2) There is now support for the idea that a policyholder for commercial real estate can recover RCV damage when making repairs. The court ruled that Empire was not liable to pay CMR the replacement cost value until CMR had actually made the repairs and incurred the costs thereof, leading to the belief that initiating and making concrete progress with repairs and / or exchanges of covered and damaged property may be sufficient. to trigger the RCV provision, which entitles the commercial property policyholder to due RCV benefits at that time. rule in such a matter. If a policyholder for commercial real estate can prove that they have incurred these costs (for example by proof of signed agreements with repair contractors and payments made to said contractors on behalf of the policyholder), a court may allow the policyholder to recover RCV damages for as long as they are deemed to have arisen. As shown by CMR Constr. however, the demonstration that the commercial property policyholder has so far only made "temporary repairs" may not be sufficient to trigger the coverage at that time.
1 CMR Constr. and Roofing, LLC v. Empire Indem. Ins. Co. 20-11524, 2021 WL 246201 (11th Circ. 26 January 2021).
2 Ceballo v Citizens Property Ins. Corp. 967 So.2d 811 (Fla. 2007).
3 Essex Ins. Co. v. Zota 985 So. 2d 1036, 1041 (Fla. 2008).
4 Langhorne v Fireman & # 39; s Fund Ins. Co., 432 F.Supp.2d 1274 (NDFla.2006).
5 Ceballo 967 So.2d at 815.
6 CMR Constr. 2021 WL 246201, at * 2. (The insured had assigned his rights to the construction company).