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Analysis of New Case Law re: Replacement Cost Value, Actual Cash Value, and Matching

Posted by Michael A. Cassel | Mar 20, 2020 | 0 Comments

As many of you know, on October 23, 2019, the Third District Court of Appeal released their opinion in Glendys Vazquez v. Citizens Property Insurance Corporation (hereinafter " Vazquez"). [1]  This opinion contained some drastic and far reaching implications with regards to the application of Section 626.9744, Florida Statutes, [2] more colloquially referred to as the “Matching Statute,” as it relates to calculations of payment for replacement cost value versus actual cash value on claims. 

In Vazquez, the insured sustained a loss to her kitchen cabinets and twelve ceramic floor tiles as a result of water intrusion.  Citizens paid $33,759.52 for the damages based on the actual cash value of the loss. [3]  The insured presented an estimate in the amount of $84,542.93 and, when same was not paid, the insured filed suit.  During litigation, an affidavit was executed by the consultant who drafted the insured's estimate stating that $70,000 of the estimate was included for matching costs.  Citizens then moved to exclude evidence and testimony of these repairs stating that matching costs were not due as actual cash value damages until the repairs were performed.  The trial court agreed, seemingly in no small part, due to the fact that the insured's lawsuit only specifically alleged the insufficiency of the actual cash value payment.

Originally, the Vazquez court determined that payment for the cost to match like kind and quality materials under the Matching Statute was not due until “the repairs are made.”  Their rational was essentially that the policy only provides coverage for direct and physical loss until such a time as the remaining work is performed and expenses are incurred. [4]  This was also due to the court's analysis of the term “replaced items” as included in the Matching Statute - because “replaced” was past tense, the legislative intent was such that the repairs for items needed to actually be completed. [5]  Of course, this created a huge issue for policyholders in that it would result in many insureds being unable to pay for repairs thereby completely frustrating the purpose of their insurance as a whole. 

The Vazquez opinion was released in the days leading up to the 2019 Winter Conference for the Florida Association of Public Insurance Adjusters.  Needless to say, it was a hot topic of conversation amongst attorneys and adjusters alike.  While the practical application of the opinion was being discussed, there seemed to be no alternative to the fact that someone needed to take action.  Ultimately, that responsibility fell to Hillary Cassel and I, along with Valorie Chavin and James Mitchell from Chavin Mitchell Shmuely.  By the time the conference was over, we were in contact with Elliot Kula and Aaron Daniel from Kula & Associates, P.A., board certified appellate attorneys, to move forward with a motion for rehearing in an attempt to correct what we believed were improper applications of law and allow Ms. Vazquez her day in court. 

On March 18, 2020, the Third DCA released their opinion on our motion for rehearing.  Unfortunately, we were unable to change the court's opinion in its entirety; however, the court ultimately withdrew its prior opinion and justified its original reasoning through a somewhat different analysis.  To that point, the entire analysis regarding the Matching Statute was removed and the only discussion was relegated to a passing statement and a footnote; however, the court did maintain that “matching” was not a direct physical loss [6] and, therefore, did not need to be paid under an actual cash value analysis unless the repairs were performed.  Because the insured's complaint only alleged a failure to pay actual cash value, the appellate court upheld the decision to exclude reference to matching until such a time as the repairs were performed as irrelevant evidence. [7] 

Regardless of the final outcome of this opinion, I am extremely proud of the work performed by our team.  We did our best to address the issues with the original Vazquez opinion both for the insured and the industry as a whole, and believe we provided the Third DCA with pause to consider how their original opinion affects these types of claims moving forward… which allows me to segue perfectly into another decision released on the same day. 

Along with Vazquez, the Third DCA released their opinion in Citizens Property Insurance Corporation v. Olga Tio (“Tio”). [8]  The Tio opinion provides solid distinguishing facts with regards to Vazquez and may serve to mitigate any unfortunate industry-wide effects of same.

In Tio, the insured sustained a loss caused by a collapsed drain line.  She reported the claim to Citizens who adjusted the loss and denied the claim.  The insured filed a lawsuit alleging a breach of contract.  During litigation, Citizens stipulated as to coverage but filed a motion for summary judgment alleging that the actual cash value of the loss fell below the policy's deductible.  The trial court denied their motion for summary judgment and allowed the case to proceed to trial on damages only.  Like in Vasquez, the trial court also limited the evidence to a presentation of actual cash value; however, in Tio the court granted the insureds motion for rehearing and allowed the jury to consider the full extent of loss.  Ultimately, the jury rendered a finding of $70,000.00 in favor of the insured and a final judgment was entered accordingly. 

During the appeal, Citizens asserted that, even when an insurer wrongfully denies coverage of a claim, Section 627.7011, Florida Statutes, still only requires payment of the actual cash value until such  time as the repairs are performed. [9]  The appellate court did not accept this argument; instead, the Tio court stated that the above referenced statute “governs an insurer's post-loss obligations in adjusting and settling claims covered by a replacement cost policy, and does not operate as a limitation on a policyholder's remedies for an insurer's breach of an insurance contract . . .  After Citizens breached that contractual obligation, the trial court properly instructed the jury on how to value the insured's relevant damages…” [10]  The appellate court further distinguished the case from Vazquez stating that the denial of coverage prevented Section 627.7011, Florida Statutes, from controlling the damages of the lawsuit, and qualified Vazquez by stating that the only dispute at issue was whether coverage was due for the  actual cash value of the undamaged matching floor tiles. [11]  

The language used by the Tio court raises an interesting question: does the Vazquez opinion have any effect on the damages that may be presented as part of a lawsuit?  I believe that, absent a circumstance where the amount paid by the insurer under actual cash value was above that claimed by the insured or the only question is one of matching undamaged portions of the property, the answer is an emphatic “no.”

In Florida, there are three (3) elements required to establish that there has been a breach of contract: 1) a valid contract; 2) a material breach; and 3) damages. [12]  A payment from an insurance company is performance under an insurance policy and typically not sufficient to be considered a breach of contract. [13]  For there to be a breach on an otherwise covered claim, the carrier must first be placed on notice of a dispute. [14]  In order to present such a dispute, the insured must, at a minimum, present the carrier with an estimate evidencing a discrepancy of either the scope or pricing of damages. [15]  Once an estimate, or other such evidence of a discrepancy, has been presented, “a homeowner is entitled to dispute the scope of repairs before the repairs are completed.” [16] 

Of course, one cannot simply send an estimate along with a lawsuit as insurers have a right and a duty to adjust claims within certain time frames. [17]  To that end, “[w]hen an insurer is aware that an insured disputes the settlement of a claim and the insurer fails to respond in any fashion to the insured's demands for further action, that failure has the legal effect of denying coverage.” [18]  This means an insurer's failure to provide a timely response to a dispute over the scope and/or pricing of a claim can be deemed a breach of the insurance contract.  Taking this into consideration, along with a reading of both Vazquez and Tio, the restrictions set forth in the Vazquez opinion should only apply in situations where there is a total agreement on the scope and pricing of the actual cash value of the claim; otherwise, when a valid dispute exists and the insurer has either explicitly or constructively denied the insured's position, a breach of the insurance policy has occurred thereby entitling the insured to a trial on all damages related to the replacement cost value. [19]  

Perhaps the fact that the Vazquez complaint only sought damages under an actual cash value theory was the distinguishing factor in Vazquez, or perhaps it was because the plaintiff's expert tacitly acknowledged the sufficiency of the actual cash value payment tendered for the damaged areas.  Regardless, I believe the Tio opinion provides us all with a road map on how to avoid the same issues in future cases. 

​As always, should you have any questions about how this analysis may relate to your own claim,  please do not hesitate to contact us for a free consultation.

[1]  Vazquez v. Citizens Prop. Ins. Corp. , 44 Fla. L. Weekly D2578 (Fla. 3d DCA 2019).

[2] Fla. Stat. § 626.9744(2) states as follows: “When a loss requires replacement of items and the replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.” 

[3] Actual cash value of a loss is calculated by determining the replacement cost value and subtracting depreciation.   Trinidad v. Florida Peninsula Ins. Co. , 121 So. 3d 433 (Fla. 2013).

[4]  Vazquez  at 2

[5]  Id.  at 4.

[6]  See  Ocean View Towers Ass'n, Inc. v. QBE Insurance Corp., No. 11-60447-Civ., 2011 WL 6754063 (S.D. Fla. Dec. 22, 2011).

[7]  Vazquez  at 8 citing to Fla. Stat. § 90.401 (2019).

[8] Citizens Prop. Ins. Corp. v. Tio, 45 Fla. L. Weekly D641, 2020 WL 1291855 (Fla. 3d DCA 2020).

[9] The Statute states, in pertinent part, as follows:  (“(3) In the event of a loss for which a dwelling or personal property is insured on the basis of replacement costs: (a) For a dwelling, the insurer must initially pay at least the actual cash value of the insured loss, less any applicable deductible. The insurer shall pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred.”  Fla. Stat. § 627.7011(3) (2015).

[10]  See Tio  at 5.

[11]  Id.  at fn. 2.

[12]  Friedman v. N.Y. Life Ins. Co. , 985 So. 2d 56, 58 (Fla. 4th DCA 2008).

[13]  See Rizo v. State Farm Fla. Ins. Co. , 133 So. 3d 1114, 1115 (Fla. 3d DCA 2014).   See also Quiroz v. Tower Hill Select Ins. Co. , 178 So. 3d 963 (Fla. 4th DCA November 25, 2015) citing  Slayton v. Universal Prop. & Cas. Ins. Co. , 103 So. 3d 934 (Fla. 5th DCA 2012);  Luciano v. United Prop. & Cas. Ins. Co. , 156 So. 3d 1108, 1110 (Fla. 4th DCA 2015). 

[14]  Siegel v. Tower Hill Signature Ins. Co. , 225 So. 3d 974, 979 (Fla. 3d DCA 2017).

[15]  See Sanchez v. Tower Hill Signature Ins. , 181 So. 3d 1211 (Fla. 5th DCA 2015) (where above-ground sinkhole coverage required insurer to pay actual cash value, competing estimates of actual cash value created jury question; new trial required on that question due to evidentiary and jury instruction error);  D.R. Mead & Co. v. Cheshire of Florida, Inc. , 489 So. 2d 830, 832 (Fla. 3d DCA 1986) (the amount of the actual cash value of property loss is a question of fact for the jury to determine).

[16]  Diaz v. Fla. Peninsula Ins. Co. , 204 So. 3d 460, 462 (Fla. 4th DCA 2016) rehearing denied August 16, 2016.   See also   Cincinnati Ins. Co. v. Cannon Ranch Partners, Inc. , 162 So. 3d 140, 143 (Fla. 2d DCA 2014).

[17]  See  Fla. Stat. § 627.70131 (2019).

[18]  Clifton v. United Cas. Ins. Co. of Am. , 31 So. 3d 826, 832 (Fla. 2d DCA 2010);  See Sanchez v. Am. Ambassador Cas. Co. , 559 So. 2d 344, 346 (Fla. 2d DCA 1990) (holding that when an insurer was aware of its insured's demand for either payment or arbitration and it chose not to respond to the demand until after suit was filed, the insurer's actions amounted to a denial of coverage).

[19]  See  Fla. Ins. Guar. Ass'n v. Somerset Homeowners Ass'n, Inc. , 83 So. 3d 850, 851 (Fla. 4th DCA 2011) (stating, “[a]s replacement cost policies are intended to operate, following a loss, both actual cash value and the full replacement cost are determined. The difference between those figures is withheld as depreciation until the insured actually repairs or replaces the damaged structure.'”)

About the Author

Michael A. Cassel

Michael A. Cassel, LL.M., is the managing partner and co-founder of Cassel & Cassel, P.A., where he represents policyholders throughout the state of Florida in first party property insurance claims.  Michael is licensed by the Florida Bar as well as in the Southern, Middle, and Northern Federal Districts of Florida, the U.S. Court of Appeals for the 11th Circuit, and has argued before the Judicial Panel for Multidistrict Litigation.  He has earned an AV Preeminent rating from Martindale Hubbell.  He has also been named a Florida Super Lawyer for the last two years by Florida Super Lawyers Magazine and a Rising Star for the prior six consecutive years, was named as one of South Florida Business Journal's 40 Under 40 for 2020, and one of the Cystic Fibrosis Foundation 40 Under 40 Outstanding Young Professionals of South Florida for 2022.  Michael regularly publishes blogs on newly released case law pertaining to first party property insurance claims and has become a regular on the lecture circuit presenting on topics such as building code compliance, ordinance and law coverage, bad faith litigation, technology in claims adjustment, and providing updates on case law and legislative changes.  He obtained his Masters of Insurance Law from the University of Connecticut in 2023.


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