A recent appeal in Florida confirmed a recommendation, which I call a “managed repair” approval.1 Here is the recommendation in question:
SECTION I – PROPERTY COVERINGS
E. Additional coverage
Reasonable repairs are deleted and replaced with the following for losses other than sinkholes:
a. If a hazard causing loss and related damage is covered. . . and repairs are necessary to protect covered property from further damage, “you” must notify us before approving or commencing repairs, so “we”, at our option, may select Rapid Response Team, LLCTM to perform the covered reasonable repairs.
b. If ̵6;you’ do not notify ‘us’ and allow ‘us’, at our option, to select Rapid Response Team, LLCTM for the covered reasonable repairs, ‘our’ obligation is for repairs made to protect the covered property from further damages limited to at least one of the following:
(1) The reasonable cost “you” incur for necessary repairs made solely to protect the property from further damage; or
(2) The amount “we” would have paid to the Rapid Response Team, LLCTM for necessary repairs made solely to protect the covered property from further damage.
The court describes how this recommendation works:
The endorsement thus required notification to the insurer of the occurrence of a loss or damage before the rescue service began to allow the insurer to select its chosen supplier, RRT, to carry out reasonable repairs. If the insured did not notify the insurer of the damage, the insurer’s obligation to pay was limited to the lessor by the reasonable cost of necessary restrictions or the amount that the insurer would have paid RRT to perform these emergency services.
The “kicker”, which is incredible for those of us with experience in restoration costs for property insurance, is that the insurer has a sincere contract to make each such claim for only $ 2000. I do not believe that this restoration company can meet OSHA requirements, pay full insurance limits, including work injury compensation, and perform work to the required specifications and standards for only $ 2000 on each individual job. They can make it illegal. They can do this by cutting corners. They may receive supplements or other side agreements. But I’m asking this contractor and insurer to sue me for defamation when they say they will do a first-class and legal job every time for no consideration other than $ 2000.
This case is not over. It is important for hard-working and law-abiding restoration contractors to pay attention to this case. Policyholders will receive second-class service at this rate, and the Florida Office of Insurance Regulation should be concerned about this obvious “not at arm’s length” alleged $ 2,000 contract in good faith.
While the case has been returned to the trial court for further investigation and hopefully discovery, the court upheld the policy and the $ 2,000 limit at this stage of the case:
The transferor claims that the service agreement between the insurer and RRT actually changes the policy to limit the payment for water reduction to $ 2,000, and that the insured should have been notified of this. The service agreement does not change the policy. It does not create another policy limit for coverage. The service agreement also did not need to be incorporated into the insurance, where it was simply offered to prove how much the insurer would have paid RRT for the work. No policy provision prevents RRT from providing what may be a volume discount to the insurer through its service agreement.
Insured could have rejected the preferred contractor approval, but instead opted for a very modest discount on the price in exchange for being obliged to use RRT to mitigate and repair any property losses. That choice may have been a bad find, but it was agreed by the insured.
Fake news is cheap to produce. Genuine journalism is expensive.
—Toomas Hendrik Ilves
1 People’s Trust Ins. Co. v. Restoration Genie Inc.No. 4D21-628 (Fla. 4th DCA March 30, 2022).