Homeowners’ Insurance: carrier not required to pay replacement costs for sinkhole repairs before insured contracted for such repairs

Insurance — Homeowners — Sinkhole loss — Under sinkhole
loss settlement provision of policy, it was error for trial court to require
insurer to pay replacement costs for subsurface sinkhole repairs before insureds
contracted for the necessary repairs

STATE FARM FLORIDA INSURANCE COMPANY, Appellant, v. FRED PHILLIPS AND CAROL
PHILLIPS, Appellees. 5th District. Case No. 5D13-583. Opinion filed February 14,
2014. Appeal from the Circuit Court for Hernando County, Richard Tombrink, Jr.,
Judge. Counsel: Scot E. Samis, of Traub Lieberman Straus & Shrewsberry LLP,
St. Petersburg, for Appellant. Raymond T. Elligett, Jr., of Buell &
Elligett, P.A., Tampa, and K.C. Williams, III, of Williams Law Association,
P.A., Tampa, for Appellees.

(ORFINGER, Judge.) State Farm Florida Insurance Company appeals the trial
court’s order requiring it to pay replacement costs for subsurface sinkhole
repairs before its insureds, Fred and Carol Phillips, contracted for the
necessary repairs. We reverse.

The facts are not in dispute. In July 2010, State Farm issued the Phillipses
a homeowner’s insurance policy that contained a general loss payment clause as
well as a separate sinkhole and catastrophic ground cover collapse coverage
clause. The general loss payment clause reads, in pertinent part:

The sinkhole and catastrophic ground cover collapse coverage clause included
a loss settlement provision, which reads, in pertinent part:

In February 2011, a sinkhole damaged the Phillipses’ home. Following a
dispute over the amount that State Farm owed, the Phillipses sued to compel an
appraisal. The ensuing appraisal established the amount of the loss, including
amounts for building stabilization and foundation repairs. The Phillipses moved
for judicial confirmation of the appraisal award. State Farm responded that the
sinkhole loss settlement clause and section 627.707(5)(b), Florida Statutes
(2010),1 on which that clause was modeled,
authorized it to withhold partial payment for subsurface repairs until the
Phillipses had contracted for those repairs. The trial court disagreed with
State Farm and ruled that the statute and the sinkhole loss settlement clause in
the policy were permissive, and did not allow State Farm to withhold payment for
the replacement costs for subsurface repairs. State Farm appeals that order.

We review the trial court’s interpretation of an insurance contract and
statutes de novo. E.g., Kingsway Amigo Ins. Co. v. Ocean Health,
LLC, 63 So. 3d 63, 66 (Fla. 4th DCA 2011); Biltmore Constr. Co. v. Owners
Ins. Co., 842 So. 2d 947, 949 (Fla. 2d DCA 2003). Legislative intent is the
polestar of statutory interpretation, but when a statute is clear or
unambiguous, the reviewing court should not resort to the rules of statutory
instruction. Instead, the reviewing court should give effect to the statute’s
express terms, and its reasonable or obvious implications. E.g.,
Kingsway, 63 So. 3d at 66-67. The same rules apply to the interpretation
of insurance policies. See, e.g., Discover Prop. & Cas. Ins. Co.
v. Beach Cars of W. Palm, Inc., 929 So. 2d 729, 733 (Fla. 4th DCA 2006). The
intent of the parties governs, but “[c]ourts should resort to complex rules of
construction to determine coverage or the applicability of exclusions only when
the language used in the policy is ambiguous or otherwise susceptible of more
than one meaning. Absent such factors courts should apply the plain meaning of
words and phrases used in a policy of insurance.” Arias v. Affirmative Ins.
Co., 944 So. 2d 1195, 1197 (Fla. 4th DCA 2006) (quoting Se. Fire Ins. Co.
v. Lehrman, 443 So. 2d 408, 408-09 (Fla. 4th DCA 1984)). “If possible,
conflicting provisions of a contract are to be read in such a way as to give a
reasonable interpretation and effect to all provisions.” Beach Cars, 929
So. 2d at 733; see also U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979
So. 2d 871, 877 (Fla. 2007) (requiring courts to endeavor to give effect to
every provision). Specific provisions of a contract control over general
conditions. Underwriters of Lloyds of London v. Cape Publ’ns, Inc., 63
So. 3d 892, 896 (Fla. 5th DCA 2011) (citing Colonial Bank, N.A. v. Taylor
Morrison Servs., Inc., 10 So. 3d 653, 655 (Fla. 5th DCA 2009)). This is
equally true with regard to insurance contracts. See Herring v. Horace
Mann Ins. Co., 795 So. 2d 209, 212 (Fla. 4th DCA 2001) (holding, when
provisions of insurance policy conflict, “[w]e recognize the clear rule of
construction that a specific provision in a policy governs over a general
provision”).

In ordering State Farm to pay for the replacement costs for subsurface
repairs, the trial court relied on our holding in State Farm Florida
Insurance Co. v. Nichols, 21 So. 3d 904 (Fla. 5th DCA 2009). After a
sinkhole damaged the Nicholses’ home, they asserted a claim against State Farm,
their homeowner’s insurance company. Following an appraisal, State Farm refused
to pay the entire amount designated as subsurface damages, contending, as they
do here, that the entire amount was not due until the Nicholses entered into a
contract for those repairs. The Nicholses’ policy contained a general loss
payment clause identical to the one found here. However, their policy did not
incorporate the separate sinkhole loss settlement clause authorized by section
627.507(5)(b), and found in the Phillipses’ policy. Finding the statute to be
permissive, we held that State Farm could not take advantage of the alternate
payment methodology that the statute allowed because the policy did not
incorporate the statutory payment method. Nichols, 21 So. 3d at 905. Our
holding in Nichols is consistent with Florida case law interpreting other
statutes which permit an insurer to limit payment if the insurance policy
clearly and unambiguously elects an alternative statutory payment method.
See, e.g., Geico Gen. Ins. Co. v. Virtual Imaging Servs., Inc., 38
Fla. L. Weekly S517, S517, S521 (Fla. July 3, 2013); Kingsway, 63 So. 3d
at 67 (citing Maryland Cas. Co. v. Murphy, 342 So. 2d 1051, 1052 (Fla. 3d
DCA 1977)); see also Geico Indem. Co. v. Virtual Imaging Servs.,
Inc., 79 So. 3d 55, 57 (Fla. 3d DCA 2011) (citing Kingsway, 63 So. 3d
at 67-68).

In the instant case, section 627.707(5)(b) gave State Farm the authority to
withhold payment for the replacement costs of the necessary subsurface repairs
until the Phillipses contracted for those repairs. State Farm incorporated the
statute’s language into the policy, which distinguishes this case from
Nichols, and allows State Farm to exercise the holdback authorized by the
statute. See Geico Gen. Ins. Co., 38 Fla. L. Weekly at S521
(requiring election in policy of statutorily authorized payment limit);
Kingsway, 63 So. 3d at 67 (same). The policy is not ambiguous. To
construe the policy otherwise would render the sinkhole loss settlement
provision meaningless.

For these reasons, we reverse the trial court’s judgment to the extent that
it required State Farm to pay the replacement cost for stabilization and
foundation repairs before the Phillipses entered into a contract for those
repairs.

AFFIRMED in part; REVERSED in part; REMANDED. (SAWAYA and EVANDER, JJ.,
concur.)

__________________

1Section 627.707(5)(b), Florida Statutes
(2010), reads, in pertinent part:

This statute has since been reorganized and reworded. See §
627.707(5)(a)&(c), Fla. Stat. (2013).