An interesting insurance suit case filed by Florida homeowner, Kathy Johnson, was reversed last Friday overturning the initial ruling ordering Omega Insurance Co. to pay her attorney’s fees in a dispute over coverage for sinkhole damage.
State law is intended to penalize insurers for wrongfully causing a policyholder to resort to litigation when the company could have resolved the conflict itself.
Johnson originally sought benefits from Omega after noticing damage to her home that, in her opinion, appeared to be the result of sinkhole damage.
Florida law specifies insurers are liable to inspect the property in question for sinkhole claims, and if damage is found, but the source is in question, the policyholder has the right to demand a neutral evaluation at the cost of the insurer.
In this instance, Omega did hire a professional engineering and geology firm to evaluate Johnson’s home, and the report concluded the sinkhole did not cause the damage. Thus, Omega informed Johnson it was denying her claim.
The company subsequently informed Johnson, through disclosure, of her rights to have a third party evaluator come in at Omega’s expense. Johnson never responded to the letter, but did hire her own civil engineering firm to conduct a review.
After the firm found the sinkhole did play a role in the damages, Johnson filed suit against Omega, approximately one year after her final communication with Omega.
During discovery, Omega was allowed a motion for another neutral evaluation. The second reviewer found the sinkhole was at the root of the damages. Following this, Omega agreed to pay the benefits claims.
In the end, the Florida appeals court found the insurer followed procedure and did not force the policyholder to file suit.
“We do not believe that, under the facts and circumstances of this case, Omega’s actions in investigating and handling Johnson’s claim pursuant to the pertinent statutory provisions contained in chapter 627, and in relying on the presumptively correct report it commissioned to deny the claim, establish a wrongful or unreasonable denial of benefits that forced Johnson to file suit to obtain her policy benefits,” the three-judge panel found.
“I guess if there is a lesson for agents and brokers if they are involved in the claims process would be to encourage their policyholders, to when they can, work through that procedure and respond to the letter, for example,” explained Peter Kochenburger Executive Director, Insurance Law Center at the University of Connecticut School of Law.
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