Florida Supreme Court: Extracontractual Damages Not Recoverable in Florida First Party Property Policy Claim Litigation Absent Policyholder Compliance With Florida’s Civil Remedy Notice (CRN) Statute

by Anne E. Kevlin

On January 21, 2021, the Florida Supreme Court decided in the negative the following certified question:

In a first-party breach of insurance contract action brought by an insured against its insurer, not involving [bad faith] under section 624.155, Florida Statues, does Florida law allow the insured to recover extra-contractual, consequential damages?

The Florida Supreme Court’s determination does not change the law in Florida, but generally reinforces that parties cannot litigate extracontractual damage claims (including bad faith and consequential damages) prior to adjudication or formal appraisal of policy damages. This holding, in essence, ensures that contract damage litigation is bifurcated from bad faith and consequential damage litigation in Florida first party property matters. Citizens Prop. Ins. Corp. v. Manor House, No. SC19-1394, 2021 Fla. LEXIS 91.

Procedural History

The Florida Supreme Court reviewed of a certified question of the Florida Fifth District Court of Appeal in Manor House, LLC v. Citizens Prop. Ins. Corp., 277 So. 3d 658 (Fla. 5th DCA 2019). In Manor House, Florida’s Fifth District Court of Appeal found that the trial court erred in awarding partial summary judgment to Citizens on Manor House’s claim regarding lost rental income – not covered under the property policy – as consequential damages. The Fifth District determined that Citizens, which is statutorily immune from bad faith claims, was not statutorily immune from consequential damages. The Fifth District held that the consequential damages suffered by Manor House arose out of the breach of the insurance contract, requiring no demonstration that Citizens acted in bad faith.

Florida Supreme Court Ruling

The Florida Supreme Court concluded that “extra-contractual [(bad faith)], 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. Extra-contractual damages are available in a separate bad faith action pursuant to section 624.155 but are not recoverable in this action against Citizens because Citizens is statutorily immune from first-party bad faith claims.” Citizens Prop. Ins. Corp. v. Manor House, No. SC19-1394, 2021 Fla. LEXIS 91, at *11-12 (Jan. 21, 2021).

Florida Supreme Court Rationale

The Florida Supreme Court reasoned that “the trial court properly concluded [that] the parties must rely on what they actually have pursuant to the express terms and conditions of the insurance policy,” instead of what “parties can ‘contemplate’ [their] remedies [are] outside the insurance policy’s express terms” as concluded by the Fifth District. Id. at 10. Moreover, given that Citizens is a governmental entity and the Court had “concluded that Citizens was statutorily immune from first-party claims… extra-contractual damages are not recoverable in this action against Citizens.” Id. at 11.

Learning Point: The Florida Supreme Court has made clear that no bad faith or any other damages that fall outside of policy terms can be brought in a Florida first party property matter until/unless the Insured complies with Florida’s Civil Remedy Notice (CRN) statute, Section 624.155(3)(a), which bifurcates extra-contractual claim litigation from policy claim litigation.