Policyholders Need to be Aware of the Potential Finality of Claim Payments

In a recent decision, Florida’s Third District Court of Appeal granted a directed verdict in favor of United Property and Casualty Insurance Company and reversed a trial court’s summary judgment ruling for the policyholders.

According to the published opinion, Armando and Martha Valladares’ claim arose from a pipe break that caused property damage a lack of hot water in their home. The trial court granted the policyholders’ claim for additional living expenses and interest.
The Third District reversed the trial court because “United had already paid the Valladeres $23,000 to repair the home, the payment was accepted without reservation, and thus any suit for additional payments relating to the same claim is without merit because the claim existed at the time Valladares accepted settlement and was not excluded from the settlement.”

The Court determined the $23,000 was a final settlement of the Valladares’ claim for damage resulting from the broken water pipes.
The opinion, released earlier this week, does not provide many details regarding what information the policyholders or their representatives were given in connection with the claim payment or what facts indicated the claim payment was, in fact, final. The insureds involved the Office of Insurance Regulation, and the OIR instituted an action against United in connection with the claim. The $23,000 payment was made pursuant to a consent order. But the language on the order or claim payment was not discussed, except to say that the claim number was listed on the payment.

After receiving the $23,000.00 payment for the structure coverage, the Valladares sued United for breach of contract for their incurred additional living expenses and interest, and while the trial court recognized the claim, the appellate court reversed.
It is important for policyholders to be aware that accepting a payment from an insurance company with the mindset that the payment is only for partial damages or partial coverages can be problematic if the insurance company considers the check to be a settlement.
In this case, a consent order perpetuated the payment from United, but it is important for policyholders and those who assist policyholders to be aware that even if a claim payment is not marked as final or as a settlement, the insureds are better served if they let the insurance company know that by accepting payment, they do not intend to release the insurer from liability on the claim.

Sometimes a carrier will issue a payment and explain that a claim payment is issued with the understanding that the claim is ongoing or that additional damages should be brought to the attention of the carrier so the carrier can continue to evaluate the claim. However, when in doubt, it only helps a policyholder to tell the insurance company in advance of cashing the payment that the funds are not accepted as a final settlement of a case, and that the check will be considered a partial payment of the loss unless the insurance company promptly advises otherwise.