The 5th District Court of Appeals in State Farm v. Phillips, 2014 WL 560853, (Fla. 5th DCA 2014) ruled that Fla. Stat. 627.707(5)(b) gave State Farm the authority to withhold payment for replacement costs of the necessary subsurface repairs until the insured entered into a contract for said repairs. The appellate court distinguished their decision from a prior ruling, (See State Farm v. Nichols, 21 So.3d 904, (Fla. 5th DCA 2009), and noted that because State Farm incorporated the statute's language into the policy, it allowed State Farm to exercise the holdback authorized by the statute.
In the Nichols decision, which was issued in 2009, the 5th DCA had ruled that because the insurance policy in question did not incorporate the separate sinkhole loss settlement clause, authorized by section 627.507(b), State Farm could not take advantage of the alternate payment methodology that the statute allowed because the policy did not incorporate the statutory payment method.
Thus, having faced this adverse ruling in the past State Farm moved to revise its policy language, leading to the Phillips appeal. As a result of the additional sinkhole less settlement clause being added to the policy, the appellate court found that the policy was not ambiguous, and to construe the policy otherwise would render the sinkhole loss settlement provision meaningless.
Although this appellate decision has not been adopted by all other District Courts of Appeal its effect should be weighed heavily by policyholders. Every policyholder and their attorney should review and analyze the terms and conditions of the policy in question and address whether the Phillips case will have an impact on their case issues.