Just in time for hurricane season, the Florida Supreme Court, finally made its decision on numerous important issues that have a dramatic effect on insurance law in the state. As Chip Merlin mentioned in his recent post “Policyholders Lose Rights in Florida Courts,” the Court recently rejected a condominium association’s arguments relating to five important questions of law in QBE Insurance Corporation v. Chalfonte Condominium Association Inc., Case No. SC09-441 (Fla. May 31, 2012).
While the analysis and consequences of this thirty-two page decision cannot be fairly summarized in a single post, one important point that will adversely effect many associations is the negative response to the fourth certified question:
Does an insurer’s failure to comply with the language and type-size requirements established by Florida Statute §627.701(4)(a) render a noncompliant hurricane deductible provision in an insurance policy void and unenforceable?
I previously discussed this topic in 2010 in “Is Your Hurricane Deductible and Coinsurance Provision Enforceable?” As I described at that time, Florida Statute 627.701 requires:
Any policy that contains a separate hurricane deductible must on its face include in boldfaced type no smaller than 18 points the following statement: "THIS POLICY CONTAINS A SEPARATE DEDUCTIBLE FOR HURRICANE LOSSES, WHICH MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU." A policy containing a coinsurance provision applicable to hurricane losses must on its face include in boldfaced type no smaller than 18 points the following statement: "THIS POLICY CONTAINS A CO-PAY PROVISION THAT MAY RESULT IN HIGH OUT-OF-POCKET EXPENSES TO YOU.
Despite this requirement, it became apparent after Hurricane Wilma that many insurers failed to comply. Many lawsuits and large class actions were filed against carriers like Citizens, Arch Specialty, and QBE, arguing that the failure to comply with the statute makes the deductible void and unenforceable.
The Chalfonte case, which has been pending since 2009, finally addressed this issue on May 31, finding against the policyholder’s argument. After a detailed analysis of the legislative history, intent, and drafting of 627.701, the Court found that the statutes do not contain a penalty for non-compliance, so the courts were not at liberty to provide one. Further, the Court found that QBE had “substantially complied” with the requirements and there was no allegation that Chalfonte did not receive notice of the deductible provision as the statute intended. Finally, the Court determined that voiding the deductible, regardless of compliance with the statutory requirements of 627.701, would impermissibly alter the terms of the contract “because the insurance contract bargained for by the parties and the lower premiums paid by Chalfonte included this hurricane deductible.”
The Chalfonte decision concludes six years of uncertainty in Florida insurance law and the decision will be studied and discussed for years to come. Unfortunately for associations and policyholders in general, the Supreme Court has set a precedent that there is no consequence for noncompliance with this statutory requirement. Consumer protection is an important role of both the legislature and the judicial system. This decision does not further that role in any way.
