In Universal Property and Casualty Insurance Co. v. Qureshi, Florida's Fourth District Court of Appeal ruled on July 24 that the lower court had mistakenly allowed the jury to consider evidence of repair estimates in a claim for replacement cost value benefits where repairs were not actually completed.¹

Qureshi is directly at odds with Florida's Third District Court of Appeal's 2020 decision in Citizens Property Insurance Company v. Tio, where the appellate court affirmed the trial court's decision to allow, in addition to actual cash value, evidence and the recovery of replacement cost value for unrepaired property because the insurer had breached the policy.²

The conflict between Qureshi and Tio has important implications on the damages recoverable under property insurance policies in Florida, particularly where the policyholder has not made all repairs that form the basis of its insurance claim.

The Florida Supreme Court will need to weigh in to resolve the conflict and give policyholders and insurers clarity about the proper measure of damages in breach claims involving unrepaired property.

By way of background, in Qureshi, at the trial court level, a jury awarded the policyholders damages on their claim that their insurer breached their homeowner's insurance policy by paying them only for damage caused by mold, without providing coverage for other damage caused by the water leak that resulted in the mold.³

While the property owner insureds had submitted a repair estimate to the insurer for reimbursement, the insureds sold the property before making repairs to the damaged items. The scope and calculation of covered losses, particularly when repairs to damaged property have not yet been made, formed the basis of the ultimate dispute in Qureshi.

Before trial, the insurer unsuccessfully sought to preclude the policyholders from introducing evidence concerning, among other things, the cost of repairs not performed before the sale of the property.

The insurer based its argument on the policy's loss settlement terms and Florida Statutes Annotated Section 627.7011(3)(a), which provides that, in the event of a loss for which a dwelling is insured on a replacement cost basis, "the insurer must initially pay at least the actual cash value of the insured loss" and "shall pay any remaining amounts necessary to perform such repairs as work is performed and expenses are incurred."⁴

Specifically, the insurer argued that the evidence it sought to exclude was irrelevant to calculating the policyholders' covered losses because the repairs had not been completed.

Although the trial court initially agreed with the insurer's argument that the evidence of uncompleted repair estimates should be excluded, it reversed its decision on reconsideration, allowing the policyholders to introduce repair estimates for work they had not performed on the property. The jury's award to the policyholders included repair costs, despite the repairs not having been undertaken.

The insurer appealed the trial court's decision and the appellate court agreed with the insurer and reversed the trial court's ruling. The appellate court ultimately found that the policyholder's ability to recover replacement cost value benefits under its homeowner's policy was contingent on the policyholder actually performing the repairs at issue.

It is important to note, however, that the decision does not affect policyholders' ability to introduce evidence of the actual cash value of damaged property, which is still recoverable even before any repairs are made.

As explained by the dissent in Qureshi, actual cash value is generally defined as "'fair market value' or '[r]eplacement cost minus normal depreciation.'"⁵

This measure provides compensation to policyholders before they undertake any repairs, but it falls short of compensating the policyholder for the full expense of replacing or returning the damaged property back to its preloss condition. Replacement cost value, on the other hand, represents the actual costs incurred by a policyholder as repairs to the property are made.

In support of its decision to preclude evidence of replacement cost value, the appellate court in Qureshi explained that "in similar insurance policy disputes, '[c]ourts have almost uniformly held that an insurance company's liability for replacement cost does not arise until the repair or replacement has been completed.'"⁶

The court also cited general principles of contract construction, including that when "the language of an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with [its] plain meaning in order to give effect to the policy as written."⁷

Applying that principle, the appellate court concluded that the policy clearly and unambiguously stated that the policyholders were not entitled to their repair costs unless the "work is performed and expenses are incurred."⁸

This finding emphasizes the appellate court's hesitance to deviate from what it considered was the insurance policy's plain contractual language. Thus, the appellate court reversed the trial court's decision and remanded the case for a new trial to determine the policyholders' recoverable damages.

The key takeaway from Qureshi is that even if an insurer breaches a policy by not paying covered loss, the policyholder will not be entitled to recover replacement cost damages if the policyholder did not repair the property at issue. The policyholder's recovery for unrepaired property will be limited to the actual cash value of the property.

On the other hand, in Tio, Florida's Third District Court of Appeal affirmed the trial court's decision to allow, in addition to actual cash value, evidence and the recovery of replacement cost value for unrepaired property because the insurer had breached the policy.⁹

In Tio, a property owned by the insured sustained water damage.¹⁰ At the outset of the litigation, the insurer maintained that the loss was not covered under the insured's policy, but reconsidered its denial during the discovery phase of the case and stipulated that the loss was covered.¹¹ Since coverage was undisputed, the case went to trial only on the issue of the insured's damages.¹²

Before trial, the court granted the insurer's motion in limine, restricting the presentation of evidence on damages to the property's actual cash value.¹³ The insurer had argued that the policyholder was not entitled to any consideration of replacement cost value damages because the policyholder had not repaired the property.¹⁴

The insured asked the court to reconsider its decision to limit the evidence to the property's actual cash value, and, on rehearing, the court decided to allow the jury to hear the parties' competing valuations.¹⁵

Thus, at trial, the insurer presented evidence of the property's actual cash value while the insured introduced evidence of the property's higher replacement cost value.¹⁶ Ultimately, the jury awarded the insured damages consistent with the property's replacement cost value.¹⁷

The insurer in Tio appealed the award of replacement cost value damages to the insured.¹⁸ But unlike in Qureshi, the appellate court in Tio disagreed with the insurer, and affirmed the trial court's decision to allow evidence and the recovery of replacement cost value for unrepaired property because the insurer had breached the policy.¹⁹

Tio directly conflicts with the majority's decision in Qureshi, which effectively limited recovery to actual cash value for unrepaired property by ruling that the jury should not have considered evidence of the replacement cost value of such property when determining the policyholders' damages regardless of the insurer's breach.

In sum, the difference between the two opinions is that Florida's Third District Court of Appeal is saying in Tio that policyholders are entitled to the full replacement cost value for their loss, even where they have not completed repairs, so long as the insurer breaches the policy.

Meanwhile, in Qureshi, Florida's Fourth District Court of Appeal is saying that notwithstanding the insurer's breach of the policy and failure to pay the covered loss, policyholders are nonetheless limited to the actual cash value of their loss if they fail to make repairs.

Notably, the dissenting judge in Qureshi stated that the court should have applied Tio. Recognizing the differing decisions, the court in Qureshi certified the conflict between Qureshi and Tio for review by the Florida Supreme Court.

This appellate court split creates uncertainty for policyholders in Florida about what the proper measure of damages is, and what loss they can recover under their insurance policies when property is damaged but unrepaired.

Regardless of how this conflict is ultimately resolved, Qureshi is a reminder of the importance for policyholders to carefully examine and understand the intricacies of their insurance policies.

Unless policyholders take a proactive approach at understanding the requirements for recovering replacement cost value benefits under their property policies, policyholders risk recovering less for unrepaired property than they had originally anticipated.

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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] Universal Prop. & Cas. Ins. Co. v. Qureshi, 2024 WL 3514542, at 1 (Fla. 4th DCA 2024).

[2] Citizens Property Insurance Company v. Tio, 304 So. 3d 1278 (Fla. 3d DCA 2020).

[3] See Qureshi.

[4] Id. at 1.

[5] Id. at 7.

[6] Id. at 2.

[7] Id. at 3.

[8] Id.

[9] 304 So. 3d at 1280 (Fla. 3d DCA 2020).

[10] Id. at 1279.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id. at 1280.