The Fla. Ins. Guar. Ass'n Inc v. Devon Neighborhood Ass'n Inc. D/b/a Devon Neighborhood & Condo.S A-j Ass'n Inc

• Decision Date: 02 December 2009
• Docket Number: No. 4D09-377.,4D09-377.
• Citation: 33 So.3d 48
• Parties: The FLORIDA INSURANCE GUARANTY ASSOCIATION, INC., Appellant,v.DEVON NEIGHBORHOOD ASSOCIATION INC. d/b/a Devon Neighborhood & Condominiums A-J Association, Inc., Appellee.
• Court: Florida District Court of Appeals

33 So.3d 48

The FLORIDA INSURANCE GUARANTY ASSOCIATION, INC., Appellant,v.DEVON NEIGHBORHOOD ASSOCIATION INC. d/b/a Devon Neighborhood & Condominiums A-J Association, Inc., Appellee.

No. 4D09-377.

District Court of Appeal of Florida,

Fourth District.

Dec. 2, 2009.

Philip E. Ward, Jeffrey T. Kuntz, Roland E. Schwartz and Evan D. Appell of Gray Robinson, P.A., Fort Lauderdale, and John A. Kirst, Jr. of Gray Robinson, P.A., Orlando, for appellant.

Daniel S. Rosenbaum, John M. Siracusa, Mark G. Keegan and Richard C. Valuntas of Katzman Garfinkel Rosenbaum, LLP, West Palm Beach, for appellee.

WARNER, J.

Florida Insurance Guaranty Association (“FIGA”) appeals a non-final order denying its motion to compel an appraisal of property damage to condominium association property owned by the Devon Neighborhood Association, Inc. (“Devon”). Devon claimed that FIGA had waived its right to an appraisal by participating in the lawsuit and also by failing to comply with section 627.7015, Florida Statutes. We hold that FIGA is precluded from asserting its right to compel the appraisal process by failing to provide the notice required by the statute, the application of which does not violate the impairment of contracts clause of the constitution. We affirm.

Devon timely filed a claim with its insurer, Southern Family Insurance (“Southern”), after the condominium association property sustained damage when Hurricane Wilma struck in October 2005. Devon submitted its first sworn proof of loss claim in February 2006. Southern became insolvent and was placed into receivership in April 2006. By operation of law, FIGA assumed responsibility for Devon's claim. Three days later, Devon submitted a second sworn proof of loss statement, increasing the claimed amount of loss. It is undisputed that before becoming insolvent, Southern paid Devon approximately $2.5 million. FIGA paid Devon an additional $1.7 million for a total payment of $4.2 million. In December 2007, a contracting company hired by Devon estimated additional damage in the amount of $4.8 or $5 million. The additional claims involve three roofs and replacing all the glass sliders and windows. Devon submitted the report with the $4.8 million in additional claims to FIGA on January 30, 2008, and FIGA refused to pay.

On February 11, 2008, Devon filed a two-count complaint against FIGA. Count I alleged breach of contractual and statutory duties in failing to fully compensate it for all losses covered under the policy. Count II sought a declaration of the validity of the insurance contract, a determination of Devon's rights and obligations under the policy, a determination of whether the damages and losses were covered claims, and a declaration that the deductible provisions were void. FIGA answered, alleging various affirmative defenses, and demanding an appraisal of the damages pursuant to the terms of the Southern policy.

FIGA moved to compel an appraisal. Devon objected, both because it contended that FIGA had waived its right by participating in the lawsuit and because both Southern and FIGA had failed to comply with section 627.7015(2), Florida Statutes (2005), by not notifying Devon of the statutory mediation process available to it. Failure to do so prevented the insurer from insisting on the appraisal process as a precondition to legal action, in accordance with the statute. Ultimately, the trial court denied the motion to compel the appraisal, prompting this appeal pursuant to Florida Rule of Appellate Procedure 9.130(a)(3)(C)(iv).

FIGA claims that it is not bound by the notice provisions of section 627.7015(2), as the amendment which would have applied the statute to the insurance contract in this case was enacted after the policy went into effect. It contends that to apply it to the contract would amount to an unconstitutional impairment of contract. Because these issues are ones of constitutional and statutory interpretation, our review is de novo. Fla. Hosp. Waterman, Inc. v. Buster, 984 So.2d 478, 485 (Fla.2008). Balancing the nature and extent of the impairment of contract with the state's objective goals, we conclude that the statutory amendment is constitutionally permissible. See Pomponio v. Claridge of Pompano Condo., Inc., 378 So.2d 774 (Fla.1979).

Section 627.7015 establishes a mediation alternative for the handling of property insurance claims. The legislatively approved purpose provided:

There is a particular need for an informal, nonthreatening forum for helping parties who elect this procedure to resolve their claims disputes because most homeowner's and commercial residential insurance policies obligate insureds to participate in a potentially expensive and time-consuming adversarial appraisal process prior to litigation. The procedure set forth in this section is designed to bring the parties together for a mediated claims settlement conference without any of the trappings or drawbacks of an adversarial process. Before resorting to these procedures, insureds and insurers are encouraged to resolve claims as quickly and fairly as possible.

§ 627.7015(1), Fla. Stat. (2005). Upon receiving a claim, the insurer must notify the claimant of its right to mediation. § 627.7015(2), Fla. Stat. (2005).

The version of the statute in effect when the policy in this case became effective provided for mediation for homeowners' residential policies only. The legislature amended the statute, effective July 1, 2005, extending the mediation alternative to “commercial residential insurance policies.” Included within the statutory definition for such policies is coverage provided by condominium associations for common elements. See § 627.4025, Fla. Stat. (2005). The policy in this case constituted a commercial residential policy.

The amended statute also added a penalty for the insurer's failure to comply with the notice requirements: “[T]he insured shall not be required to submit to or participate in any contractual loss appraisal process of the property loss damage as a precondition to legal action for breach of contract against the insurer for its failure to pay the policyholder's claims covered by the policy.” § 627.7015(7), Fla. Stat. (2005).

It is undisputed that the notice provisions of section 627.7015(2) were not complied with in this case. FIGA, however, contends that the provisions of the amended statute cannot be applied retroactively because the insurance contract was executed prior to the date of the statutory amendment, even though the loss occurred and the claim was submitted after the enactment of the amendment.

The prior version of the statute, which was in effect at the time the parties entered into the contract, did not apply to condominium associations nor did it provide a penalty for failing to notify the claimant of its right to mediation.

Similar to the federal constitutional contract clause, Article I, Section 10 of the Florida Constitution, prohibits the enactment of any “law impairing the obligation of contracts.” In Pomponio, after reviewing the evolution of contract clause analysis by the United States Supreme Court from strict prohibition to the use of a balancing approach, the Florida Supreme Court itself adopted a balancing approach to determine whether a statute amounted to a constitutionally impermissible impairment of contract. The court said:

In our view, any realistic analysis of the impairment issue in Florida must logically begin both with Yamaha Parts Distributors, Inc. v. Ehrman, [316 So.2d 557 (Fla.1975) ] which applied the well-accepted principle that virtually no degree of contract impairment is tolerable in this state, and with the notion enunciated in Louisiana ex rel. Ranger v. New Orleans, [102 U.S. 203, 26 L.Ed. 132 (1880) ] that “he who pays too late, pays less.”

....

Our conclusion in Yamaha that “virtually” no impairment is tolerable necessarily implies that some impairment is tolerable, although perhaps not so much as would be acceptable under traditional federal contract clause analysis.

....

To determine how much impairment is tolerable, we must weigh the degree to which a party's contract rights are statutorily impaired against both the source of authority under which the state purports to alter the contractual relationship and the evil which it seeks to remedy. Obviously, this becomes a balancing process to determine whether the nature and extent of the impairment is constitutionally tolerable in light of the importance of the state's objective, or whether it unreasonably intrudes into the parties' bargain to a degree greater than is necessary to achieve that objective.

378 So.2d at 780 (footnotes omitted). The court noted that in Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978), the Supreme Court listed factors to be considered in a balancing test:

(a) Was the law enacted to deal with a broad, generalized economic or social problem?

(b) Does the law operate in an area which was already subject to state regulation at the time the parties' contractual obligations were originally undertaken, or does it invade an area never before subject to regulation by the state?

(c) Does the law effect a temporary alteration of the contractual relationships of those within its coverage, or does it work a severe, permanent, and immediate change in those relationships irrevocably and retroactively?

Pomponio, 378 So.2d at 779 (footnotes omitted).

At issue in Pompon...