On January 21, 2021, the Supreme Court of Florida answered the following certified question from the Fifth District Court of Appeal in the negative:
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, DOES FLORIDA LAW ALLOW THE INSURED TO RECOVER EXTRA-CONTRACTUAL, CONSEQUENTIAL DAMAGES?
The Supreme Court of Florida held that extra-contractual, consequential damages are not available in a first-party breach-of-contract action. Claims for extra-contractual damages are available only in a separate bad-faith action brought under § 624.155.
In the underlying suit, Manor House, LLC and the other plaintiffs (collectively “Manor House) sought to recover extra-contractual, consequential damages for lost rental income after the property was damaged by Hurricane Frances in 2004. The trial court granted Citizens’ motion for partial summary judgment excluding damages for lost rental income because the policy did not provide coverage for such damages. On appeal to the Fifth District Court of Appeals, the appellate court held 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.’” Manor House, LLC v. Citizens Property Insurance Corp., 277 So. 3d 658, 661 (Fla. 5th DCA 2019) (internal citation omitted). The Fifth District concluded that while Citizens is immune from bad faith, it was not immune to the consequential damages stemming from the breach-of-contract action. Id.
The Supreme Court of Florida has previously held that the “contractual amount due the insured is the amount owed pursuant to the express terms and conditions of the policy” and that insureds could only seek those damages in a breach-of-contract action that were “contemplated by the parties in the insurance policy.” See Talat Enters., Inc. v. Aetna Cas. & Sur. Co., 753 So. 2d 1278, 1283 (Fla. 2000); Macola v. Gov’t Emps. Ins. Co., 953 So. 2d 451 (Fla. 2006). Here, the Supreme Court of Florida held the policy covered property damage but not lost rental income. When interpreting an insurance contract the parties must rely on the express terms and conditions of the insurance policy. See Prudential Prop. & Cas. Ins. Co. v. Swindal, 622 So. 2d 467 (Fla. 1993). The Supreme Court found that the damages Manor House sought were based upon the alleged failure to timely adjust the loss, wrongful denial of the claim, delay and failure to timely pay the claim, which are proper under a first-party bad-faith action under §624.155, but are improper in a first-party breach-of-contract action. Further, Citizens is a “government entity that is an integral part of the state, and is not a private insurance company,” and the Court has previously concluded that Citizens is immune from first-party bad-faith claims. See § 627.351(6)(a),(s)1; see also Citizens Prop. Ins. Corp. v. Perdido Sun Condo. Ass’n, 164 So. 3d 663, 664 (Fla. 2015).
With this decision, the Supreme Court of Florida has upheld the longstanding rule that extra-contractual, consequential damages are not recoverable in a first-party breach-of-contract action; rather, the contractual amount due is the amount owed pursuant to the express terms and conditions of the policy. The only avenue for extra-contractual consequential damages is in a bad-faith action brought under Fla. Stat. §624.155.