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No Bad Faith, No Consequential Damages! Florida Supreme Court Denies Insured’s Attempt To Recover Extra-Contractual Consequential Damages in a First-Party Property Claim

February 12, 2021

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<p style="text-align: justify;">A recent decision from the Supreme Court of Florida punctuates well-established federal precedent that consequential damages in insurance disputes are not recoverable absent a separate action for bad faith.  In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2021/02/Citizens-Property-Ins.-Corp.-v.-Manor-House-LLC-et-al.pdf">Citizens Property Ins. Corp. v. Manor House LLC, et al</a></em>, Manor House, owner of rental apartment buildings, filed an action against its property insurer for breach of contract and fraud related to repair of apartment complex damages by hurricane Frances, and to recover extra-contractual damages for rental income allegedly lost due to delay in repairs and procrastination in adjusting and paying claims.</p>
<p style="text-align: justify;">The certified question before the Florida Supreme Court was whether the insured can recover consequential damages, that is, damages above what the policy expressly provides in a breach of insurance contract absent a bad faith claim. The Federal court answered the certified question in the negative thereby quashing the Fifth District Court’s decision. The Supreme Court reasoned 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 insurance policy. Thus, consequential damages in a first party action are not recognizable and are only available in a separate bad faith action.</p>
<p style="text-align: justify;">Courts continue to recognize the unique nature of insurance contracts thereby distinguishing their interpretation from other general contracts, especially with the exclusion of parole evidence, and the myriad of bad faith protections afforded to insureds. It is important to note that this case does not universally protect insurance carriers from bad faith claims, but it does further deter first-party breach of contract claims seeking consequential damages, absent a claim for bad faith.</p>
<p style="text-align: justify;">Thanks to James Papadakis for this contribution to this article.  Should you have any questions, please contact <a href="mailto:tbracken@wcmlaw.com">Thomas Bracken</a>.</p>

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