In Tower Hill Signature Insurance, ETC v. Speck, et al., a construction company appealed a final judgment entered against it at the conclusion of a jury trial that ordered the defendant to pay over $160,000 in costs to make subsurface repairs and stabilization repairs to the homeowners' property.
The homeowners' claim against the insurance policy occurred in January 2010. After the insurance company completed an initial investigation, it denied the claim and rescinded the homeowners' policy, stating that the home on the property had unrepaired damage in existence at the time the policy was issued. The homeowners then sued the insurance company for breach of contract, and in response the insurer asserted an affirmative defense that the contract was void because the homeowners failed to disclose a material fact--the unrepaired damage.
In 2001, the homeowners had made another claim with a prior insurer regarding sinkhole damage for the same property. The claim stated that the house was a total loss and that they were entitled to their policy limit of $330,000. The insurer retained an engineer, who stated that $166,000 in below ground damages was appropriate. According to the homeowners, an additional $64,000 for above ground repairs was needed. The parties settled the claim for $260,000. Documents indicated that the homeowners only spent $15,000 on repairs to the home and that the rest was used to pay two mortgages on the property.
The homeowners hired a contractor to make the repairs, which they testified were completed by 2004. During trial, the second insurer attempted to show that the first sinkhole damage claim was not repaired completely. The second insurer also offered testimony from a tenant who had rented the home after the alleged repairs that contradicted the homeowners' testimony regarding the completion of the repairs. The lower court excluded evidence of the $260,000 settlement, deeming it irrelevant pursuant to Florida Statutes Section 90.401. During closing arguments, the defendant's lawyer argued that the homeowners' property had substantial unrepaired damage that rendered it ineligible for coverage. The jury concluded that the second insurer breached its policy agreement and was liable for over $160,000.
On appeal, the insurer argued that the exclusion of evidence regarding the first payment was an abuse of discretion. In reviewing the matter, the Fifth District Court of Appeal first stated that evidentiary rulings from a lower court are reviewed according to the abuse of discretion standard, but within the confines of the rules of evidence.
According to the appellate court, the lower court committed an abuse of discretion when it failed to admit evidence regarding the amount the homeowners received for the repair of the home from an insurance company after they made a prior sinkhole claim on the parcel. Although evidence regarding a prior settlement is sometimes inadmissible at trial, the amount of the settlement may be relevant to determining the extent of the defendant's liability or the amount of damages to which the plaintiff is actually entitled. The appellate court vacated the final judgment and remanded the case for a new trial, while also awarding attorneys' fees to the defendant.
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