J.C. Penney Company, Inc. v. Dillard’s, Inc.
Case No. 4D10-1770

JCPenney sued Dillard’s for damage to its store at the Turtle Creek Mall in Mississippi. In 2005, the roof over the Dillard’s store (which was adjacent to the JCP store) collapsed from Hurricane Katrina, severing a sprinkler main and causing uncontrolled water flow into the mall and the JCP store. Dillard’s moved for partial summary judgment, arguing that pursuant to the Turtle Creek Mall Operating Agreement (OA), JCP and Dillard’s agreed to release each other from liability from any loss or damage to property covered by the party’s insurance policy. However, they expressly reserved the right to bring an action for any “deductible” amount contained in their insurance policies. Dillard’s also filed a second motion for partial summary judgment, arguing that JCP could not recover any damages because JCP had already recovered from its insurer the entire damage amount claimed without any deductible being applied. In opposition, JCP argued that the notion that it had been made whole for its Turtle Creek Mall losses was illusory because JCP’s insurer treated Hurricane Katrina-related losses at several covered JCP stores as one “occurrence” for coverage purposes and unilaterally elected to apply the policy’s entire $2.5 million-per-event deductible to one JCP store (the Biloxi, Mississippi store). JCP argued that it had not been made whole for its losses in the Turtle Creek Mall. The trial court granted both partial motions for summary judgment.

The Fourth District Court of Appeal disagreed with JCP’s argument that the trial court erred in limiting its recovery to the deductible because under Mississippi law, Dillard’s cannot contractually exculpate itself against breaches of duties imposed by common law and for torts involving gross negligence. Instead, the court noted the parties were sophisticated national retailers, occupying equal bargaining positions, in negotiations for a commercial operating agreement and that the exculpatory clause was valid and did not contravene public policy. The court also found that Dillard’s conduct did not rise to the level of gross negligence simply because a different Dillard’s roof, in a different store, sustained damage in a prior hurricane, and Dillard’s internal memoranda acknowledged the potential for damage due to hurricanes and the need to perform maintenance prior to such storms. The Fourth District Court of Appeal reversed the trial court’s summary judgment order and held that a genuine issue of material fact existed as to how the deductible was apportioned and whether the application of the deductible was beyond JCP’s control.

Rahabi v. FIGA
Case No. 4D10-846*

The issue on appeal was whether our clients were entitled to an award of attorney’s fees because FIGA affirmatively denied our clients’ claim under the insurance policy prior to paying the appraisal award.

Our clients’ roof was damaged by Hurricane Wilma in 2005. Our clients sought coverage under the insurance policy to repair their roof. FIGA took over our clients’ insurance policy with Atlantic Preferred. In 2007, our clients filed a complaint and, initially, FIGA moved for dismissal. Later, FIGA filed an answer with affirmative defenses, and, after several months of discovery, FIGA decided to send the dispute for appraisal. An appraisal award was issued to our clients and FIGA paid the appraisal award. Our clients requested an award of attorney’s fees and costs from the trial court. The trial court denied the request reasoning that FIGA never affirmatively denied coverage of our clients’ claim. Our clients appealed arguing that FIGA affirmatively denied their claim by its actions.

The Fourth District Court of Appeal agreed. The court held that FIGA affirmatively denied our clients’ claim by asserting, in several of its affirmative defenses that our clients’ damages “were not caused by a covered loss.” The court disagreed with FIGA’s argument that its actions amounted to no more than a delay in payment of the claim. The court distinguished our clients’ decision from its recent decision in Ehrlich in which it held that FIGA did not affirmatively deny the party’s claim by filing its affirmative defenses because it was forced to file the pleading by a court order and sought an extension of time to complete its investigation. The court held that, in our clients’ case, FIGA neither sought an extension to complete its investigation nor had a court order compelling it to file a responsive pleading. The Fourth District Court of Appeal reversed and remanded with instructions that the trial court set an evidentiary hearing to determine our clients’ reasonable sum of fees and to determine whether our clients were entitled to a reimbursement of their costs.

* The Mandate has yet to be issued.

The economic downturn the country has been experiencing has affected families, individuals and corporations alike.  In Florida in particular, the insurance industry has been hard hit and eventually, the losses get passed down to the consumer.  In most cases, consumers will obtain insurance from underwriters who have contractual relationships with the actual providers.  The underwriters are charged with obtaining all requisite application materials, including any necessary waivers.  The underwriters request insurance based on the information obtained.  This procedure can lead to the insurance provider’s liability if they fail, mistakenly or otherwise, to obtain all necessary documentation prior to binding coverage.  For this reason, insurance companies are even more careful to scrutinize application materials.  Robin Bresky, P.A. was retained by a law firm who represented the insurance company, to assist on an appeal, which was successfully reversed.  The Third District Court of Appeal reversed a trial court’s decision, which had entered judgment in favor of an insurance underwriter.

As individuals we often times pay high monthly automobile premiums to ensure we are abiding by the law and more importantly are covered in the event of an accident.  Therefore, it should come as no surprise that in the event of an accident, insureds expect that their insurance companies will cover their losses.  But, what happens when an underwriter fails, intentionally or negligently, to secure proper insurance?  The underwriter owes a contractual fiduciary duty to the insurance company.  The underwriter must also proceed with great care to secure all required documentation in an effort to ensure that the appropriate coverage is secured.  For example, Florida law requires that no automobile policy be issued without uninsured motorist (“UM”) coverage unless the insured expressly rejects such coverage in writing.  See, § 627.727(1), Fla. Stat. (2009).  Therefore, it is imperative that when an individual wishes to decline UM coverage, an underwriter MUST procure a written rejection.  Absent said rejection, an insurance company is required by law to provide said coverage.

In our case, an insured expressed his wish to decline UM coverage because of the high premium attached to said coverage.  The insurance company binded automobile coverage on behalf of the insured based on the underwriter’s representation that the insured declined uninsured motorist (UM) coverage.  Subsequently, the insured was involved in an automobile accident.  It was at this time that it was discovered that there was no UM waiver.  Because the underwriter failed to secure a proper UM waiver, the insurance company was forced under Florida law to re-issue the policy retroactively with UM coverage.  The insurance company was then required to make a significant payout to the insured for damages that resulted from the accident.

A lawsuit for breach of contract resulted.  The insurance company alleged that the underwriter breached its contract when it failed to secure a written UM rejection from the insured.  At summary judgment, however, the underwriter successfully argued that the insured wanted UM coverage and absent a written rejection, the insurance company was required to cover the losses.  On appeal, we were successful in arguing that the insurance company presented material issues of fact at the summary judgment hearing that could reasonably support the inference that the insured did in fact wish to decline UM coverage and therefore the underwriter, that failed to procure the UM waiver, was responsible for the insurance company’s loss.  Specifically, there was evidence presented that showed that the underwriter either negligently or fraudulently failed to obtain the necessary waiver when in fact the insured had expressed a wish to decline it and the insured had likewise not been paying premiums consistent with UM coverage.  Thus the appellate court reversed the trial court’s order granting summary judgment.