A complicated Florida case involving homeowners, developers, a commercial general liability insurance company and Chinese drywall has hit another road block. The homeowners and developers had filed a complaint earlier this year, alleging the insurance company denied their claim in bad faith. The court ruled against them. In the present case, the court has told them that the insurance company should not cover the claim at all.
Just two months after they moved into their new home, a Florida couple discovered a problem with the air conditioning coils in one of their air handling units. They also noticed an occasional smell of sulfur. It was strange for new construction, but they figured it would work itself out. About three years later, though, the smell was actually worse, and the homeowners discovered that both the damage to the air conditioning and the sulfur odor were the results of the contractor's use of Chinese drywall.
The couple and other homeowners with Chinese drywall issues filed a suit against the developer in 2009. In January of 2010, the couple filed a complaint with the Florida Department of Financial Services, claiming that the insurance company had engaged in unfair claim settlement practices. In March, the couple filed a motion to add claims of bad faith to their existing civil suit.
The court denied the motion. In the decision, the court reviewed the conditions necessary to find an insurance company had acted in bad faith. By reviewing three past decisions of the Florida Supreme Court, the court in this case defined the key element in a bad faith claim: There must be a determination of coverage and a determination of liability or damages in the underlying lawsuit for the complaint to move forward.
The bad faith motion was premature, the court said, because the drywall suit hadn't been resolved. The commercial general liability insurance coverage could only cover a claim if a court determined that the developer was at fault. That hadn't happened yet. If liability were established, the insurance company would still have to determine if the developers' policy would cover the damages.
The denial of this motion set the stage for the next court decision about the insurance policy. We'll talk about that in our next post.
Business Insurance "Judge Rules for Insurer in Chinese Drywall Coverage Dispute" 12/02/10
Amerisure v. Popkin, 2010 WL 1856263 (S.D.Fla.) via Westlaw