June 12, 2021

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Has Your Insurer Elected to Repair Your Damage? It Needs to Do the Work In a Reasonable Time and Correctly

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Insurance companies in Florida are increasingly invoking a right to make repairs. It creates a hornet’s nest because the policyholder may get left with a delayed and insufficient repair. Then, what happens?

A recent case, Vainberg v. Avatar Property & Casualty Insurance Company,1 indicates that a new contract is created by invoking the right to repair and the insurance company has duties to perform the repair:

Under Florida law, ‘when the insurer makes its election to repair, that election is binding upon the insured and creates a new contract under which the insurer is bound to [perform repairs] within a reasonable time.’ Drew, 920 So. 2d at 835 (emphasis in original) (quoting Travelers Indem. Co. v. Parkman, 300 So. 2d 284, 285 (Fla. 4th DCA 1974)). Therefore, in a situation where the option to repair has been invoked, the insured and the insurer would become parties to a separate repair contract wherein the insurer is obligated to perform repairs which will adequately return the insured property to its pre-loss condition. See Siegle v. Progressive Consumers Ins. Co., 819 So. 2d 732, 739 (Fla. 2002).

Historically, insurance companies rarely invoked this option. It is fraught with problems including poor performance of the repair. Accordingly, while analyzing this case of a repair gone awry, the court stated:

In Drew, we held that ‘[w]here the insurer breaches this new contract to repair, it becomes liable for the damages proximately caused by this breach.’ 920 So. 2d at 835. As such, when an option to repair has been invoked but the repairs were not adequately performed, an insured may be entitled to damages caused by the insufficient repairs outside of the scope of the subject policy of insurance. See id.

Here, pursuant to Drew, a repair contract was formed when Insurer completed an inspection of the property and elected to repair appellants’ damaged floors. The repair contract is separate and distinct from the policy agreement between appellants and Insurer. By virtue of that contract, Insurer hired a contractor who replaced the floors. After the contractor finished, appellants reported to Insurer that the repairs made by the contractor were inadequate because they were unsightly, quick fixes that diminished the appearance and value of the condominium. Pursuant to Drew, because the repairs were not adequately performed, appellants alleged that they were entitled to damages caused by the defective workmanship.

The bottom line is that insurance companies who go into the construction business do so at their own peril. If getting an insured timely paid for the fair and full amount of the covered loss is a problem, actually doing the repair often opens an entire new can of worms for the insurer, which can be far costlier than just paying the claim.

Thought For The Day

You can dream, create, design, and build the most wonderful place in the world. But it requires people to make the dream a reality.
—Walt Disney
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1 Vainberg v. Avatar Prop. & Cas. Ins. Co., 46 Fla. L. Weekly D1141d, — So.3d — (Fla. 4th DCA May 19, 2021).

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