Insurer Can Keep Using its Own Repair Contractor, Florida Appeals Court Finds

For the fourth time this year, a Florida appeals court has decided in favor of People’s Trust Insurance Co., requiring homeowners to let the carrier’s chosen contractor make the needed repairs.

Josh Beck

“Yes, this is a big one,” said Joshua Beck, the Boca Raton attorney who represented the insurer in People’s Trust Insurance Co. vs. Miguel and Maria Tosar. The case was decided Dec. 15 by Florida’s 3rd District Court of Appeal.

“This reaffirms that the policy provisions are enforceable. The insurer has a right to repair,” Beck said.

People’s Trust, headquartered in Deerfield Beach, is one of the largest insurers in Florida. Its chief operating officer is Tom Gallagher, a popular former Florida insurance commissioner.

The company helped pioneer a new property insurance business model more than a decade ago when it created its own contractors, Rapid Response Team and Rapid Response Team Roofing Inc. In return for discounts on premiums, policyholders agree to let Rapid Response make the repairs.

Plaintiffs’ attorneys and homeowners in Florida, though, have complained that the in-house contractors have, at least in some cases, provided only limited repairs, have done inferior work, and have used cheaper materials. A 2020 lawsuit by Miami homeowners charged that the insurer gave bonuses to contractors who cut corners, and that the workers caused their own damage and left repairs unfinished.

In the Tosar case, the insureds’ Miami-area home was damaged by Hurricane Irma in 2017. A People’s Trust adjuster inspected the home a few weeks later, estimating repairs at $7,083. With the couple’s deductible at $6,180, and $32 in depreciation, the payout on the claim came to only $871.

People’s Trust informed the Tosars that the claim would be covered, but that Rapid Response would have to do the work. The letter also explained that under the policy, if the owners disagreed, they should provide their own repair estimate. Six months later, the Tosars did that. People’s Trust demanded an appraisal panel, pursuant to the policy’s appraisal clause. Under that provision, both sides choose appraisers and the panel provides a final repair estimate.

Tom Gallagher

Instead of participating in the appraisal, though, the Tosars in August 2018 filed suit against People’s Trust in Miami-Dade Circuit Court. In its opinion, the appeals court stated flatly that the suit “falsely alleged that People’s Trust … had denied coverage.”

People’s Trust then filed its own motion, asking the trial court to compel the homeowners to comply with the insurer’s right to repair the property with its preferred contractor, pay their deductible amount, and to participate in an appraisal process. The circuit judge ordered an appraisal.

An appraisal panel accepted the homeowners’ adjuster’s estimate and calculated replacement value at about $54,000. The Tosars then proceeded to find another contractor who would make the repairs, arguing that they were due loss payments from the insurance company, in keeping with a section of the policy.

People’s Trust argued that by signing with another repair company, the Tosars had breached the contract of the policy.

Miami-Dade Judge David Miller sided with the homeowners and ordered People’s Trust to pay more than $42,000 for the restoration work. The insurer appealed.

The 3rd DCA panel’s opinion, written by Judge Edwin Scales, reversed the trial court. The decision said that the trial judge transformed the appraisal award into an award of monetary damages, which was not warranted.

The Tosars had argued that a policy provision authorized the policyholders to begin their own repair work in certain circumstances and that People’s Trust should pay at least what it would have paid to its own contractor. But the appeals court found that was misguided. Unlike some insurance appeals, which have turned on poorly worded policies, the People’s Trust policy endorsement in this case is not ambiguous, the court found.

“Contrary to the insureds’ suggestion, this provision does not authorize an insured, after People’s Trust has exercised its right-to-repair option, either to hire its own contractor to effectuate the repairs or to obtain a loss payment,” the 3rd DCA wrote.

Construing the policy that way would “upend the insurer’s right-to-repair option.” Previous court rulings have established that under the preferred-contractor policies, the insurer has a right and an obligation to use its own contractor.

“When People’s Trust timely exercised its right to repair the insureds’ covered loss, People’s Trust was obligated to make those repairs in lieu of making a loss payment,” the appeals court said. And once the appraisal panel had decided on an appraisal amount, “the insureds were then contractually obligated to authorize RRT (Rapid Response Team) to perform the repairs and to pay the hurricane deductible.”

The appeals court instructed the trial judge to order the homeowners to authorize Rapid Response to perform the repairs and pay their deductible.

Beck, the lawyer for People’s Trust, called the decision a win for the insurer and for the homeowners, because the preferred contractor’s work will be warrantied for three years. Although $42,000 is considerably more than the carrier’s original estimate, the contractor will do a thorough job, he said.

“They are going to restore the property to its pre-loss condition,” Beck said. “If there are any issues at all, there’s a warranty on everything that’s being done.”

The attorney for the Tosars, Timothy Crutchfield, could not be reached for comment Monday.

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