The majority of sinkhole policies include language that refers to the insurer’s ability to withhold funds for repairs until such time as the policy holder enters into a contract for building stabilization and repair with a contractor. Additionally, the majority of sinkhole insurance policies provide that the contract for the repair must be approved or secured by the insurance company before insurance benefits are due. Together the above conditions establish a condition precedent to insured receiving sinkhole coverage.
In a recent decision from the Second District Court of Appeal this condition precedent was challenged. See Pena v. Citizens Property Insurance Co., 2012 WL 1366730 (Fla. 2nd DCA 2012). In the Pena case, Citizens contended that the Pena’s were not entitled to additional funds for repairs under the policy language until they entered into a contract for building stabilization and repair with a contractor. Via a Motion for Summary Judgment, Citizens argued that a dismissal of the plaintiff’s complaint was warranted because the Penas did not complete this condition precedent before filing suit.
Initially the trial court agreed and dismissed the Pena’s breach of contract action with prejudice. The Second District however reversed. In its reversal, the Second District Court of Appeal held that Citizens did not establish that there was either no breach or no damages. The court went on to hold that “precluding a substantive issue of full payment for damages on the bases of a procedural irregularity in this instance was excessive” and that the court’s dismissal with prejudice precluded forever what appears to be a viable cause of action based upon a good faith dispute between the parties that is not related to the merits of the case.
It can be argued that the Pena case establishes that when a defendant insurance company concedes that the policy holder has suffered a covered injury/peril and that it is required to pay substantial damages a dismissal on the grounds of the plaintiff not establishing a condition precedent is not warranted.