Florida Supreme Court Defines Damages Recoverable by First-Party Insureds in Actions Alleging Breach of Policy

Jeffrey Michael Cohen | PropertyCasualtyFocus

In Citizens Property Insurance Corp. v. Manor House, LLC, the Florida Supreme Court recently answered “no” to the following question certified as a matter of “great public importance”:

In a first-party breach of insurance contract action brought by an insured against its insurer, not involving suit under section 624.155, Florida Statutes, does Florida law allow the insured to recover extra-contractual, consequential damages?

The case involved a dispute over property insurance coverage for apartment buildings that were damaged in 2004 by Hurricane Frances. Citizens, the property insurer, had paid the insured’s initial claim but disputed later claims. The insured filed suit in 2007; however, the court stayed the proceedings and directed the parties to proceed with an appraisal. An appraisal award was ultimately entered and, in January 2010, Citizens paid an additional $5.5 million. The insured then sued Citizens for breach of contract and fraud alleging that Citizens failed to properly adjust the loss, pay all undisputed damages, honor a demand for appraisal, provide appropriate documents, and timely pay the appraisal award, thereby causing a significant loss of rental income.

The trial court entered summary judgment for Citizens, holding that the insurance policy did not provide coverage for lost rental income. Florida’s Fifth District Court of Appeal reversed the judgment that denied the insured’s claim for consequential loss of rents stating that “when an insurer breaches an insurance contract, the insured is entitled to recover more than the pecuniary loss involved in the balance of the payments due under the policy in consequential damages, provided the damages were in contemplation of the parties at the inception of the contract.” The court held that summary judgment was improper because the insured was entitled to prove that lost rental damages were within the contemplation of the parties at the inception of the policy.

Significantly, the insured’s claim might have been pursued in a bad faith action under Florida Statutes section 624.155. However, Citizens is statutorily immune from first-party bad faith claims. Thus, the insured was limited to damages for breach of the policy. In reversing the appellate court and upholding the trial court’s summary judgment, the Supreme Court held:

[E]xtra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the policy.

The court noted that Florida’s common law precludes extra-contractual claims for breach of a first-party policy. First-party bad faith claims for consequential damages may be pursued only under Florida Statutes section 624.155, which excludes claims against Citizens. Accordingly, absent a viable statutory bad faith claim, damages for breach of a first-party policy are limited to “the contractual amount due to the insured … pursuant to the express terms and conditions of the policy.”

The court’s decision is likely to have an impact outside of the narrow arena involving suits against Citizens. Absent reversal of the Fifth District Court of Appeal’s decision, first-party insureds would have been able to pursue consequential damage claims without following the statutory procedures that provide certain protection for insurers. It is predictable that first-party insureds whose claims are disputed by their insurer will be more aggressive in using Florida Statutes section 624.155 to try to trigger the right to obtain consequential damages. Indeed, first-party insurance claims will be limited to the policy benefits if the statutory procedures are not invoked. Moreover, third-party insureds, who are entitled to pursue both common law and statutory bad faith claims, may be more inclined to invoke the statute, which specifically authorizes recovery of damages that are a “reasonably foreseeable result of a specified violation of this section.”

A Consequential Ruling: Florida Supreme Court Rejects Recovery of Consequential Damages in First-Party Breach of Contract Actions

John David Dickenson, Chad A. Pasternack and Alexandra Schultz | Property Insurance Law Observer

In first-party breach of insurance contract actions, the parties oftentimes dispute whether the policyholder may seek damages that are not explicitly provided for in the policy, with the policyholder arguing such indirect damages flow from the alleged breach of contract. By doing so, policyholders blur the lines between breach of contract actions and bad faith actions. The Florida Supreme Court recently considered this issue in Citizens Property Insurance Corp. v. Manor House, LLC,[1]  and held that “extra-contractual, consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the insurance policy.”

Manor House arose from a Hurricane Frances insurance claim filed by an owner of apartment buildings. Citizens issued payments totaling approximately $1.9 million. Approximately nineteen months after the loss, Manor House’s public adjuster asked Citizens to reopen the claim. After reopening the claim, Citizens made additional payments and continued its adjustment. Several months after reopening the claim, Citizens’ field adjuster informally estimated the actual cash value of the loss at approximately $5.5 million and the replacement cost value at $6.4 million.

At around the same time, there was a change in ownership at Manor House. The new owner demanded Citizens pay the “undisputed” amount of $6.4 million and demanded appraisal. Citizens sought documentation regarding the new owner’s authority to act on behalf of Manor House, as well as other documentation such as invoices and contracts for work in progress. Manor House then filed suit seeking, amongst other things, extra-contractual damages related to rental income that it allegedly lost due to delay in repairing the apartment complex based on Citizens’ “procrastination in adjusting and paying the Manor House claims.”[2]

The trial court granted Citizens’ motion for partial summary judgment regarding the lost rental income. On appeal, the Fifth District reversed, concluding that “the trial court’s ruling ignores the more general proposition that ‘the injured party in a breach of contract action is entitled to recover monetary damaged that will put it in the same position it would have been had the other party not breached the contract.”[3] The Fifth District concluded that consequential damages are available in breach of insurance contract actions, provided that the damages “were in contemplation of the parties at the inception of the contract” and can be proven “with reasonable certainty.”[4]

The Florida Supreme Court reversed the Fifth District’s decision, agreeing with the trial court that the parties must rely on the express terms and conditions of the insurance policy, which, in this case, did not provide for lost rental income coverage. The Court reiterated that under Florida law, courts are to give effect to the intent of the parties as expressed by the policy language, rather than the “reasonable expectations” of the insured. Accordingly, “extra-contractual consequential damages are not available in a first-party breach of insurance contract action because the contractual amount due to the insured is the amount owed pursuant to the express terms and conditions of the policy.”[5] For a policyholder to obtain extra-contractual consequential damages, it must pursue and prove bad faith under Florida Statutes § 624.155.

Manor House affirms a simple principle: the terms and conditions of the insurance policy govern disputes over coverage.  In a first-party property breach of contract case, the only remedies “contemplated” by the parties are those set forth in the policy’s express terms.


[1] Citizens Prop. Ins. Corp. v. Manor House, LLC, No. SC19-1394, 2021 WL 208455 (Fla. Jan. 21, 2021).

[2] Id. at *2.

[3] Manor House, LLC v. Citizens Prop. Ins. Corp., 277 So. 3d 658, 661 (Fla. 5th DCA 2019).

[4] Id.

[5] Manor House, 2021 WL 208455, at *2 (Fla. Jan. 21, 2021).