The appellate court reversed the jury verdict in favor of the homeowners based upon improper instructions purporting to impose a duty to adjust the claim and how to construe a contract. Citizens Prop. Ins. Corp. v Mendoza, 2018 Fla. App. LEXIS 9497 (Fla. Ct. App. July 5, 2018).
The insureds incurred water damage to their home caused by a water heater leak. After a claim was filed, the insurer sent an adjuster to investigate the claim. The insurer denied the claim due to an exclusion for constant or repeated seepage or leakage.
At trial, the insurer offered testimony that the leak was a continued and repeated seepage of water over a long period of time, which was excluded under the policy, and not a sudden and accidental discharge of water, which would have been covered.
Over the insurer's objection, the trial judge instructed the jury regarding the insurer's "duty to adjust" the claim. This included the following:
- Every adjuster shall adjust or investigate every claim, damage or loss.
- Ethical rules provided that an adjuster shall not approach investigations, adjustments, and settlements in a manner prejudicial to the insured.
- Ethical rules also required that the adjuster to make truthful and unbiased reports of the facts after making a complete investigation.
The insureds complained about the way the adjuster denied the claim, asserting that it was a violation of the ethical responsibilities. The verdict form posed this question to the jury: "Did [the insurer] properly exclude the claim from coverage under the policy?" The jury answered no and awarded $22,000 in damages.
The central fact issue for the jury was whether the insureds' loss fell under the repeated seepage or leakage exclusion of the policy. If so, there was no coverage. If not, there was coverage. The jury instructions and the insureds' arguments at trial meant that the jury could have decided the case solely because the adjuster did not "do a good job" regardless of whether the incident fell within the policy exclusion. The instructions focused on whether the adjuster "properly investigated" or "properly adjusted" the claim and addressed a code of ethics. While such considerations may be appropriate in a bad faith case, they were inappropriate in a simple breach of contract action.
Accordingly, the case was reversed and remanded for a new trial on the breach of contract claim.