Supreme Court of Florida Issues Opinion on Insurer’s Duty to Pay Overhead and Profit

by | Apr 21, 2015 | Florida Insurance

On July 3, 2013, the Supreme Court of Florida issued its written opinion in the case of Trinidad v. Florida Peninsula Insurance Company.  In the underlying insurance claim, Trinidad filed an insurance claim for fire damage occurring on February 11, 2008 with his homeowner insurer, Florida Peninsula Insurance Company. Florida Peninsula accepted coverage and paid on the Trinidad’s replacement cost insurance policy. However, the amount paid did not include overhead and profit because Florida Peninsula believed it was not obligated to pay overhead and profit until those expenses were incurred by Trinidad. Trinidad did not hire a general contractor and did not make repairs to his home. The trial court and Third District Court of Appeal both agreed with Florida Peninsula holding that overhead and profit was not payable by the insurer until hired a general contractor or incurred the costs of the repairs. The case was subsequently appealed to the Supreme Court of Florida.

The Supreme Court of Florida held that an

insurer’s required payment under a replacement cost policy includes overhead and profit, where the insured is reasonably likely to need a general contractor for the repairs.
The Court reasoned
that because the insured would be required to pay costs for a general contractor’s overhead and profit for the completion of repairs in the same way the insured would have to pay other replacement costs he or she is reasonably likely to incur in repairing the property. Because section 627.7011, Florida Statutes (2008), and the replacement cost policy in this case, did not require the insured to actually repair the property as a condition precedent to the insurer’s obligation to make payment, the insurer was not authorized to withhold, pending actual repair, its payment for replacement costs, which is measured by what it would cost the insured to repair or replace the damaged structure on the same premises if the insured were to do so.

It is important to note that this decision only applies to claims occurring prior to the 2011 revision to Fla. Stat. 627.7011.  Essentially, in any claim falling under the 2008 version of Fla. Stat. 627.7011, the insurer must pay overhead and profit if the insured is reasonably likely to need a generally contractor for the repairs necessary by the covered loss.

The entire Supreme Court of Florida opinion in Trinidad v. Florida Peninsula Insurance Company can be found here.