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Court Rules an Insured Can Only Get Damages That Are in the Insurance Contract


The Florida Supreme Court recently issued an opinion that limits the damages that a consumer can get when the insurance company breaches the insurance contract. The opinion is one that insurance companies will surely use to discourage consumers from suing.

Consequential Damages

The issue in the case has to do with what are known as consequential damages.

Let’s assume you have a barbershop, and your building sustains $50,000 worth of damage because of a covered cause. There is no doubt the damage is covered, but the insurance company argues with you over whether the damage is covered, or how much they have to pay. You eventually win your case in court.

Of course, the court will award you the $50,000 needed to make the repairs on the property. But what about other damages that you incur as a result of the insurance company’s delay or refusal to pay the claim?

For example, if your business was out of business for 3 months because of the failure to fix the property, is the insurance company liable for that also? If you had to miss a vacation that you had pre-paid for because you were fighting with the insurance company, would the insurance company have to pay for that also?

The Argument For and Against Consequential Damages

Those are called consequential damages—as the name implies, damages that are incurred as a consequence of the breach of the agreement.

But insurance companies have long argued that they can’t be responsible for consequential damages because the insurance contract only obligates them to pay for the actual, insured damages to the property.

Insured parties have said that consequential damages were certainly known by the parties when they contracted, and are included in the contract as damages, even if they aren’t expressly stated. The logic is that sometimes, damages can be awarded so long as the parties contemplated them—that is, they were aware that they existed and were a possible measure of damages—at the time the contract was formed.

Florida Supreme Court Rejects Extra Contractual Damages

The Florida Supreme Court has now settled this question in favor of insurance companies. The Court ruled in a recent case that these consequential damages are “extra contractual,” meaning they are beyond the express terms of the insurance contract, and thus cannot be recovered by the insured.

Bad Faith is the Only Option

The Court did say that an insured could get consequential damages in a bad faith action against the insurance company. This happens when the insurance company fails to pay or evaluate a claim in a good faith manner, or acts unreasonably towards the insured.

In those cases, damages can go beyond the contract. However, the bad faith burden is higher, and proper notice to the insurance company must be given before a bad faith action can be filed by an insured.

Contact the Miami property damage insurance attorneys at Velasquez & Associates P.A. today for help if you have a conflict or problem with your insurance company.

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