In Florida, supplemental insurance claims are statutorily defined and generally treated as claims separate from the original underlying claim. Could a trial court allow coverage litigation for a supplemental claim to proceed alongside an appraisal of the amount of loss for that same supplemental claim? The Florida Supreme Court signaled an interest in tackling this question.
Insurers and insureds should be aware of this issue, because supplemental claims are common in large losses and following catastrophic events. Guidance on this issue from the Florida Supreme Court will have an immediate impact on how supplemental claims are adjusted.
A supplemental claim, defined by Fla. Stat. § 627.70132, is "a claim for additional loss or damage from the same peril which the insurer has previously adjusted or for which costs have been incurred while completing repairs or replacement pursuant to an open claim for which timely notice was previously provided to the insurer." The present statutory scheme took effect on Dec. 16, 2022, as part of the Senate Bill 2A legislative reforms. Prior versions of the statute provided different deadlines and did not apply to surplus lines insurers. Since surplus insurers often had similar endorsements in their policies but are now included in the statute, careful review of the policy and applicable statute is important.
Here's an easy example of a supplemental claim. After a hurricane, a condominium association files an insurance claim for roof damage. The claim is adjusted, coverage is accepted, and any amount owed above the deductible is paid. Later, the condominium association discovers window damage allegedly caused by the same hurricane. This damage was not part of the original claim, which was paid. The insurer may consider the window claim to be a supplemental claim, because it is additional damage from the same peril which was previously adjusted.
Florida courts have ruled that coverage for a supplemental claim is analyzed separately from coverage for the original underlying claim. Some have also ruled thatappraisal of a supplemental claim is inappropriate where coverage for the supplemental claim was denied.
In American Coastal Insurance Company v. San Marco Villas Condo Association, Inc., the Florida Supreme Court resolved a split among the district courts of appeal regarding whether a trial court is required to resolve an insurer's coverage defenses (there, fraud-misrepresentation) before considering whether the matter was ripe for appraisal. The Florida Supreme Court held that "a trial court has discretion in determining the order in which coverage and amount-of-loss issues are resolved." In San Marco, this meant that the trial court could order the parties to participate in appraisal while the fraud-misrepresentation defense was litigated.
On its face, San Marco did not have anything to say about supplemental claims. However, the insured in Ironwood, Inc. v. American Coastal Insurance Company appealed to the Florida Supreme Court, which recently quashed the Second District's opinion and remanded the matter for "reconsideration upon application of our decision in [San Marco]." Because the Second District in Ironwood had not analyzed the supplemental claim issue at all, remand was necessary to develop the issue at the appropriate appellate level.
However, upon remand to the newly created Sixth District Court of Appeal, the Ironwood parties stipulated to dismissal of the appeal. The Second District's opinion in Ironwood remains quashed. An analysis applying the San Marco holding to supplemental claims will have to wait, but the Florida Supreme Court has clearly signaled it is interested in the issue. Insurers and insureds should keep this issue in mind when analyzing supplemental claims and look for further developments at the appellate level.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
