Loss Notice Dispute Blocks Repairs

Homeowners	Loss Notice
Breach of Contract

Walter and Yasmin Gonzales’ home was insured under a homeowners policy issued by People’s Trust Insurance Company (People’s). The policy contained a Preferred Contractor Endorsement. In exchange for a reduced premium and in lieu of paying cash to the insured, the form allowed People’s to send its own contractors to assess and repair the insured property.

On September 10, 2017, the Gonzalez property sustained damage from Hurricane Irma when a tree fell on the house. Walter Gonzalez reported the loss to People’s on September 13, 2017, and on September 15 it sent its preferred contractor, Rapid Response Team, LLC, to perform emergency mitigation prior to sending out a claims adjuster to estimate the cost of repairing the damage.

People's sent its claims adjuster to perform an inspection on November 10, 2017. On December 10, 2017, People's sent a letter to the Gonzalezes notifying them that it had completed its investigation and determined that the loss was covered. The letter explained that, pursuant to the Preferred Contractor Endorsement, People's would use its preferred contractor, Rapid Response, to restore the property to its pre-loss condition. The letter further advised the Gonzalezes that People's had not yet completed its own estimate of the loss by stating, “[o]nce we finalize our inspection with our field adjuster, a list of what we believe needs to be repaired will be provided to you.” In that letter, the insurer also requested that the Gonzalezes provide an executed sworn proof of loss within 60 days.

On January 24, 2018, Walter Gonzalez provided the signed sworn proof of loss and executed a work authorization to People's, modifying the forms People's Trust provided him by deleting the “agreement as to scope of repairs” clause. His wording replaced the provision, stating instead that Rapid Response must—with time being of the essence—commence repairs to “put the Insured back to their pre-loss condition.” Gonzalez testified that because he had not received an estimate from People's, he indicated on the proof of loss form that the “Whole Loss and Damage” and the “Amount Claimed” were “pending.” People's accepted Gonzalez's work authorization form. However, it rejected his proof of loss form as deficient. People’s notified the Gonzalezes that their contractor could not begin repairs without knowing what was damaged along with an estimate of repairs. 

Further, the appraisal provision in the Preferred Contractor Endorsement stated that “[i]f [the Gonzalezes] and [People's Trust] fail to agree on the amount of loss, which includes the scope of repairs, either may demand an appraisal as to the amount of loss and the scope of repairs.” Under the appraisal provision, once the appraisers set the amount of loss and the scope of repairs, “[t]he scope of repairs shall establish the work to be performed and completed by Rapid Response Team, LLC.”

People's notified Gonzalez that until he agreed to a what specifically needed to be repaired and provided the specific dollar estimate of the repairs, People's contractor could not begin repairs.

In March 2018, the Gonzalezes filed a complaint against People's. Their request for declaratory judgment included one count for breach of the Preferred Contractor repair contract, and one count for breach of the policy for failing to begin the covered repairs. The Gonzalezes’ complaint and subsequent amended complaint sought a declaratory judgment determining that People's Trust “must begin the repair process immediately.”

In response, People's filed a counterclaim with one count for declaratory relief and one count in the alternative for material breach of the policy and the Preferred Contractor repair contract, alleging that the Gonzalezes’ failure to substantially comply with their post-loss obligations relieved People's Trust of any further coverage obligation related to the claim. People's Trust subsequently filed a motion for summary judgment, arguing that the Gonzalezes failed to substantially comply with People's Trust's request for a policy-compliant sworn proof of loss and failed to acknowledge that People's Trust's estimated scope of repair was sufficient in scope for the purpose of restoring the insured dwelling to its pre-loss condition.

The trial court entered final summary judgment in favor of People's Trust. The Gonzalezes appealed.

On appeal, the court noted that no dispute existed that the Gonzalezes’ property incurred damage from Hurricane Irma and no dispute existed that People’s Trust conceded coverage for those as yet unspecified losses under the policy. The policy indicated that the Gonzalezes must continue to comply with their post-loss obligations even after People's Trust invoked its right to repair their property.

On this record, the court stated, whether the Gonzalezes substantially complied with their post-loss obligations once People's Trust acknowledged coverage, or whether they totally failed to comply, was a disputed issue of fact and therefore summary judgment was improvidently granted.

According to the court, it remained to be determined whether the Gonzalezes’ submitted sworn proof of loss constituted a breach of the policy to the extent of justifying forfeiture of coverage when People’s Trust had conceded coverage. Until the policy's post-loss obligations were met, there could be no disagreement as to the amount of the loss.

The trial court’s grant of summary judgment in favor of People’s Trust was reversed, and the case was remanded for further proceedings.

Gonzalez v. People’s Trust Insurance Company—District Court of Appeal of Florida, Third District—October 21, 2020—No. 3D19-646.