The case of DIS Inv's, LLC v. Gt. Lakes Ins. SE, ___ F. Supp. 3d ___, No. NO. 23-23363-CV-WILLIAMS, 2024 WL 4005199 (S.D. Fla. Aug. 29, 2024), had at its center optional insurance coverage regarding "Replacement Cost."
DIS made a claim for alleged damage from Hurricane Ian to its warehouse. DIS's claim was made under a commercial lines policy it obtained from Great Lakes (GLISE). The GLISE policy contained an optional "Replacement Cost" coverage which was determinative of the outcome in this breach of contract case.
As quoted by the Court in this case, the GLISE policy specifically provided that DIS would have to repair the damage it claimed, before GLISE would have a duty to pay the "Replacement Cost":
As it relates to coverage in this case, the Policy provides that Defendant “will pay for direct physical loss of or damage to Covered Property ... by or resulting from any Covered Cause of Loss.” (DE 38-1 at 29.) In the event of loss or damage, the value of Covered Property is determined by the “actual cash value as of the time of loss or damage” subject to certain exceptions. (DE 38-1 at 40.) One exception, as indicated on the Policy's Declaration Page under optional coverages, relates to the valuation of the building—here, the Warehouse—which shall be estimated according to its replacement cost value. (DE 38-1 at 28.) Under the terms of the Policy, replacement cost excludes any deduction for depreciation and GLISE “will not pay on a replacement cost basis for any loss or damage: (1) [u]ntil the lost or damaged property is actually repaired or replaced; and (2) [u]nless the repair or replacement is made as soon as reasonably possible after the loss or damage.” (DE 38-1 at 43.)
DIS Investments, 2024 WL 4005199, at *5 (emphasis added).
It was an established fact that DIS did not repair or replace the damage to the warehouse. In the eyes of the Court, it was a simple matter to apply the policy language to the established facts under Florida law, which governed this dispute:
However, because Plaintiff [DIS] did not perform the necessary repairs to the Warehouse, the Court finds Plaintiff failed to comply with the Policy's conditions that would trigger GLISE's obligation to pay.
DIS Investments, 2024 WL 4005199, at *5. The Court accordingly granted the carrier's motion for summary judgment in this case.
Some readers may wonder why no insurer bad faith claim was alleged in this case. The carrier's response to the policyholder's claim was to immediately hire an outside adjuster to investigate it. The independent, outside adjuster concluded that the claimed damage was not caused by Hurricane Ian but by risks not covered by the insurance policy. However, the same independent, outside adjuster did not rest with that conclusion. It recommended that the carrier also hire an engineer to investigate the claimed loss.
The carrier accepted the adjuster's recommendation and also hired an engineer to investigate. The engineer reached the same conclusions as the adjuster. It was only then, on the strength of the adjuster's report and the engineer's report, that the carrier denied coverage for the claimed loss. See DIS Investments, 2024 WL 4005199, at *1.
Although the Court never said so, this conduct on the carrier's part may have been the reason for the complete absence of a bad faith claim in this case. The carrier's investigation was frankly commendable, and the Court must have been impressed with these facts surrounding the adjuster's retention and report, and the engineer's retention and report, because there was simply no reason to mention them in what was otherwise a straight-forward "coverage" case.
An "Overview of the participants in the claims handling process" in first-party cases, including the retention of adjusters and engineers as in the DIS Investments case, is provided by Dennis J. Wall in § 2:2, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR NATURAL AND MAN-MADE DISASTERS (June 2024 Edition).
"The question of bad faith" in first-party cases involving "Timely investigation and evaluation before and after the first-party insurer is sued for bad faith" is explored in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 9:6 (West Publishing Co. Third Edition & 2024 Supplements).
Finally, the issue of the "policy value of first-party claims" as one possible recoverable damage, is discussed in Chapter 13 on Damages in 2 id. § 13:7.
Please read the disclaimer. ©2024 Dennis J. Wall. All rights reserved. Check out my Substack newsletter.
Comments