Florida Justices Rule on Hurricane Insurance Issues

Customers cannot sue insurance companies for violating a law that requires hurricane policies to include warnings of large deductibles in oversize, boldface type and capital letters, but even if they could there’s no penalty, the Florida Supreme Court ruled Thursday.

Those were among four questions the justices unanimously answered at the request of the 11th U.S. Circuit Court of Appeals in Atlanta to help it decide a case stemming from Hurricane Wilma in 2005.

Australia-based QBE Insurance Corp. is appealing a $7.2 million final judgment won by Chalfonte Condominium Apartment Association of Boca Raton in a federal jury trial. Chalfonte also is appealing a judge’s ruling that reduced the jury’s original award by its deductible amount – $1.6 million.

“It is not a consumer-friendly opinion,” said Daniel S. Rosenbaum, a lawyer for Chalfonte. “It makes it difficult for the individual policyholder to fight large insurance companies. … It eviscerates that legislative mandate.”

The ruling is expected to affect several other cases, including a pair of class-action lawsuits that were put on hold pending the Supreme Court’s ruling, Rosenbaum said.

QBE’s lead attorney, former state Justice Raoul Cantero, said the ruling applies only to cases involving the type size and wording of the warning.

“This is not a case where the warning was not given at all,” Cantero said.

The case now returns to the Atlanta court for further action. Cantero said he expects the federal court to order a new trial as a result of the Supreme Court’s opinion.

State law requires homeowners and other property insurance policies with large deductibles to include, in headline-size 18-point or larger type, this warning: “THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.”

The jury found QBE violated that provision because it used slightly smaller 16.2 point type and substituted the word “windstorm” for “hurricane” in Chalfonte’s policy.

There’s nothing in the law, nor did the Legislature express any such intent, that customers have a private right to sue insurers who fail to follow the notice requirements, Justice Peggy Quince wrote for the court. She added that lawmakers likewise included no penalty and that the court cannot provide one when the Legislature’s failure to do so is consistent with the position of Florida courts in other contexts.

Chalfonte had argued that QBE should be penalized by making the insurer pay the $1.6 million deduction.

The Supreme Court also ruled Florida law does not support Chalfonte’s claim for a breach of implied warranty of good faith and fair dealing, but Rosenbaum pointed out that decision affects a relatively small portion of the judgment – $271,888.68. That decision made a fifth question asked by the federal court moot, Quince wrote.

The bulk of the judgment came in response to a breach of contract claim, but Cantero said it also was tainted by the misapplied good faith and fair dealing claim.

Finally, the justices rejected Chalfonte’s argument QBE should immediately pay the judgment under a provision of the policy requiring payment upon “entry of a final judgment.” Quince wrote that final judgment was stayed when QBE appealed and posted a bond covering the full amount.

Although the ruling was unanimous, Chief Justice Charles Canady and Justices R. Fred Lewis and Ricky Polston agreed only with the outcome, not Quince’s reasoning. They did not explain.

The case is QBE Insurance Corp. vs. Chalfonte Condominium Association Inc., SC09-441.