Chip Merlin | Property Insurance Coverage Law Blog | July 9, 2018
Denied water damage claims are one of the more frequently handled claims by our law firm. The cost to repair these claims can be quite high depending on many factors including the length of time the water leaked, the length of the leak, the nature of the water, and the location of the water leak itself.
Many insurance companies have recently changed policy language or taken positions so water damage claims are more frequently in litigation. Merlin Law Group recently noted denied water damage claims in Follow-Up: My Insurance Claim Was Denied Because My Water Leak Lasted Over a Period of 14 Days or More – Was the Denial Proper, and Policyholders Beware: When You Hear “Drip…Drop” Think “Tic Tock.”
Insurance adjusters can say and do the most outrageous comments and actions. It results with very upset and frustrated policyholders, especially if the claim is denied. Does that mean that if adjusters act unethically and even in bad faith, that such conduct relieves the requirement that coverage is found?
In a water damage denial case, one court recently answered this question “no” stating:
The central fact issue for the jury in this case was whether the Insureds’ loss fell under the repeated seepage or leakage exclusion of the policy. If so, there was no coverage; if not, there was coverage. The main problem with the jury instructions and the Insureds’ arguments at trial is that the jury could have decided the case solely because the adjuster did not “do a good job” regardless of whether the incident fell within the policy exclusion. The instructions focused on whether the adjuster “properly investigated” or “properly adjusted” the claim and talked about a code of ethics. While such considerations may be appropriate in a bad faith case, they have no place in a simple breach of contract action….The Insureds were free to criticize the adjuster’s conclusions without arguing that he breached a duty or obligation to them. If an adjuster makes a mockery of the code of ethics but the insurance company correctly denies a claim, there is no action for breach of contract.1
I am not certain I agree with this in every instance. Suppose an adjuster agrees to coverage, intentionally instructs the policyholder to do something which destroys the evidence of the cause of the loss, and then changes his position and claims no coverage? I could make up many other scenarios.
But, the court correctly noted that whether an adjuster did a good job does not absolutely mean that such breach of the good faith and ethical duties of the adjuster means that coverage exists.
1 Citizens Prop. Ins. Corp. v. Mendoza, No. 4D16-1302 (Fla. 4th DCA July 5, 2018).