Insurer Not Liable For Lost Rental Income: Florida Supreme Court

By John Hilton

The Florida Supreme Court settled last week a critical property/casualty coverage issue dating to Hurricane Frances in 2004, ruling that an apartment complex owner cannot sue for lost rental income.

The lawsuit -- Citizens Property Insurance vs Manor House -- had major precedent-setting implications for P&C insurers. Manor House is an apartment complex that was damaged extensively by Hurricane Frances, which ripped through Florida in early September 2004.

Manor claimed Citizens should cover "lost rental income" from the hurricane damage. A circuit judge ruled in favor of Citizens on the issue, finding no evidence that the insurance policy covered lost rent. But a panel of the appeals court overturned that ruling “so that the parties may litigate all issues related to Manor House’s [the property owners’] claim of lost rent.”

The Supreme Court ruling overturning the appeals court decision puts the matter to rest.

"The express terms of the subject insurance policy did not include coverage for lost rental income," the court decision reads. "Specifically, the trial court concluded that '[n]othing in the insurance contract provides coverage for lost rents,' and 'there is no coverage as a matter of law for these damages sought by [Manor House].'”

Nine Buildings Damaged

After the hurricane, three separate businesses -- Manor House, Ocean View and Merrit -- all presented claims to Citizens for damage sustained at nine apartment buildings. After payments for a portion of the property damage were sustained, Citizens continued to dispute the full amount due. According to court documents, Manor was paid $2 million.

Two years later, Manor "sought to reopen the claim," court documents say, and Citizens assigned a new adjuster.

"Manor House submitted a supplemental claim estimating repairs at over $10 million," court documents say. "After reinspection of the property, Citizens paid another $345,192."

Meanwhile, the apartment owners suffered lost rental income because of the delay. In court documents, Manor estimated its lost rental income at more than $2.5 million.

Ultimately, the insureds filed suit against Citizens alleging, among other things, breach of contract and fraud, and sought to recover extra-contractual damages for loss of rental income due to the delay in adjusting and repairing the damaged property.

Citizens is a state-run insurance group and often the only choice for many South Florida residents and businesses seeking coverage. At least 11 insurers were rendered insolvent after Hurricane Andrew in August 1992.

Many of the smaller companies that stayed went under after the severe 2004-05 storm seasons, when Florida was battered by Hurricanes Charley, Frances, Ivan, Jeanne, Dennis, Katrina and Wilma. Those hurricanes cost Florida insurers a total of $41 billion in today's dollars.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.