Insurance Issues

October 10, 2022

Oscar Rivera Quoted in Sun Sentinel Article on Hurricane Ian Headlined: “Survivors’ Decision: Rebuild or Relocate?”

Oscar R. Rivera, our firm’s managing shareholder, was the first and the penultimate local business leader quoted in the Sun Sentinel‘s article on the repercussions of Hurricane Ian featured on the front page of today’s edition of the newspaper. The article, which is titled “Survivors’ Decision: Rebuild or Relocate?”, focuses on the consequences of the devastating storm for residents and business owners throughout the impacted areas. It reads:

Hurricane Ian gave southwest Floridians plenty of reasons to leave: It killed at least 115 people, crushed countless homes and businesses, turned area waterways into toxic soups and caused at least $50 to $65 billion in damages.

But as residents and business owners assess the devastation and reach for insurance policies that may or may not cover all of their losses, there appears to be an emerging consensus for rebuilding, and not relocating to areas perceived to be less vulnerable to catastrophic storms.

It is a mindset, analysts say, driven by a long-standing affinity for Gulf Coast living, a strong resolve among public and private sector interests, and a growing tolerance of devastating hurricanes as life disruptors.

“We have already been contacted by numerous clients and potential clients,” said Oscar Rivera, managing shareholder of the Siegfried Rivera law firm in Miami, which represents condominium owners, associations and commercial real estate investors. “Everyone we have spoken to is committed to rebuilding.”. . .

August 29, 2019

Susan Odess Authors Article in Today’s Daily Business Review: “Court Opens Citizens Property Insurance to Claims for Consequential Damages”

by Siegfried Rivera

Siegfried Rivera

The firm’s Susan C. Odess authored an article that appeared as the featured guest commentary column in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which is titled “Court Opens Citizens Property Insurance to Claims for Consequential Damages,” focuses on a recent precedent-setting ruling with a certified question to the Florida Supreme Court by the state’s Fifth District Court of Appeal. It reads:

. . . The appellate panel overturned the trial court’s decision and remanded the case back to the lower court for hearings on whether the claimant is entitled to consequential damages for lost rental income caused by the insurer’s delays and denials.

The case began with an insurance claim by Manor House with Citizens Property Insurance Corp., which accepted responsibility for the loss and paid $1.93 million. The property owner later reopened the claim seeking $10 million, and the insurer subsequently made additional payments for approximately $345,000. However, Citizens’ adjuster estimated the actual cash value and replacement cost value of the policyholder’s loss to be in the $5.5 to $6.5 million range.

The property owner eventually sued in 2007 seeking prompt payment of the allegedly undisputed amount of $6.4 million and asking the court to compel Citizens to engage in the appraisal procedures called for under the policy.

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October 16, 2017

Article by Susan Odess in Today’s Miami Herald: “Clients Must Use Insurer’s Contractor or Face $10k Cap”

by Siegfried Rivera

Siegfried Rivera

The firm’s Susan C. Odess authored an article that appeared as a “My View” guest column in the Business Monday weekly supplement of today’s Miami Herald. The article, which is titled “Clients Must Use Insurer’s Contractor or Face $10k Cap,” focuses on a new rule from Citizen’s Property Insurance that limits claim payouts to $10,000 unless policyholders agree to use the insurer’s preselected contractors. The article reads:

Beginning in February, Citizens will be able to force commercial and residential property policyholders who file claims for all non-weather water losses to use the company’s preapproved contractor or agree to limit their total payout to $10,000. This arbitrary figure is artificially low, as many claims involving water losses often cost much more to repair.

It is no surprise that Citizens and other insurance carriers would seek to impose such a measure in order to keep their claim payouts as low as possible. By forcing policyholders to use carrier-preferred contractors, insurers would be able to negotiate deeply discounted rates from their selected vendors, which will always be incentivized to acquiesce to the insurance companies in order to maintain their preferred status.

Property owners with damages in excess of $10,000 will be unable to vet and select the contractor of their choice unless they are willing to pay the additional expenses. Those who have relationships with companies in the construction field will be unable to turn to their most trusted sources unless they agree to the $10,000 cap.

For the policyholders, the fact that the insurance company and the contractor’s goals for keeping costs as low as possible would be completely aligned will create a significant conflict of interest between them and the contractor. This naturally leads to issues involving shoddy work and construction, which could easily leave property owners with no other recourse but to resort to litigation.

January 12, 2017

Article Authored by Michael Clark in Today’s Daily Business Review: “Court Upholds Concurrent Cause Doctrine in Win for Property Policyholders”

by Siegfried Rivera

Siegfried Rivera

Firm partner B. Michael Clark, Jr. authored a guest column that appeared as a “Board of Contributors” feature in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper. The article, which was titled “Court Upholds Concurrent Cause Doctrine in Win for Property Policyholders,” focused on the positive ramifications for Florida commercial and residential insurance policyholders of the state Supreme Court’s recent decision in the case of Sebo v. American Home Assurance. Michael’s article reads:

The recent Supreme Court of Florida decision in Sebo v. American Home Assurance rejecting the “efficient proximate cause doctrine” in favor of the “concurrent cause doctrine” for property insurance claims represents a significant win for residential and commercial policyholders.

The state’s highest court has determined that the appropriate theory of recovery for claims in which two or more perils contribute to a loss but at least one of the perils is excluded from coverage is the concurrent cause doctrine. Under the rejected efficient proximate cause theory, when multiple perils cause a loss, it is the efficient cause — the one that sets the other in motion — to which the loss is attributed.

For the insurance industry, the efficient proximate cause doctrine has always been preferred. If the carriers are able to demonstrate that the efficient cause behind a loss is excluded from coverage under the policy, then the entire claim may be denied.

Sebo makes the concurrent cause doctrine the legal standard to be applied for property insurance claims in Florida. Now insurers must cover a loss even if the covered peril is the secondary cause of the loss, which was concurrent with but not the primary or efficient cause.

December 5, 2016

Firm’s Michael Clark and Susan Odess Author Article in Today’s Miami Herald: Insurers Make Mockery of Work Product Privilege Laws

by Siegfried Rivera

Siegfried Rivera

The firm’s B. Michael Clark, Jr. and Susan C. Odess wrote an article that appeared as the “My View” guest column in today’s Business Monday section of the Miami Herald. The article, which was titled “Insurers Make Mockery of Work Product Privilege Laws,” focused on the abuse by insurance companies of the state’s untenable work product privilege laws shielding their entire “claim file” from discovery in litigation. The article reads:

A series of misinterpreted and sometimes contradictory court rulings during the last decade have created a situation in which the state courts and federal courts in Florida disagree on whether insurance carriers’ claim files are subject to discovery by plaintiffs in first-party property litigation. As a result, insurers are now afforded greater work product protection than any others in Florida’s state courts by being allowed to shield important reports, estimates, communications and photographs that would be subject to discovery in the state’s federal courts as well as in many of the other courts in the country.

The work product doctrine, which is incorporated into both the Federal and Florida Rules of Civil Procedure, is intended to shield from discovery documents and communications that are created in anticipation of litigation. It has been extended by Florida’s state courts to include all insurance company reports, communications, correspondence and routine claims investigation documents simply because the companies deem these materials to be part of their claim file, regardless of the fact that these documents were not generated in anticipation of litigation but rather during the routine course of claim investigation.

This has created a de facto new “insurer claim file” privilege that exists solely to enable insurers to exempt relevant documents from discovery, and it has quickly become the most confusing and arbitrarily enforced privilege in the state’s legal system. Insurers routinely invoke this privilege to avoid divulging everything except for copies of the actual policy and any written communications they had previously sent to the policyholder.

It seems preposterous to identify all pre-loss reports, photographs and emails starting from the moment when an insurer first issued a policy to have been generated in preparation for litigation. Yet somehow the state courts in Florida have (mis)interpreted several rulings and created an all-encompassing work product immunity for everything that insurers deem to be a part of their sacred claim file, regardless of whether litigation was actually being contemplated.

December 24, 2014

Guest Column by Oscar Rivera Calling for Renewal of Federal Terrorism Insurance Program Appears in Today’s Daily Business Review

by Siegfried Rivera

Siegfried Rivera

The firm’s Oscar Rivera contributed a guest column that appeared in today’s edition of the Daily Business Review about the instability in the real estate and insurance industries that will be caused by the failure of the U.S. Senate to reinstate the Terrorism Risk Insurance Act. Our firm congratulates Oscar for drawing attention to this vital legislation and calling on the Congress to make it a priority when it reconvenes in January.

Oscar’s article reads:

In a move that caught many of those in the real estate and insurance industries by surprise, the U.S. Senate adjourned Dec. 16 without a vote on a bill to extend the Terrorism Risk Insurance Act for six years. The program will now expire Dec. 31, and the negative repercussions for the real estate industry are expected to be significant.

The TRIA program has served as the backstop for insurance companies’ losses from acts of terrorism ever since it was ratified with widespread bipartisan support after the 9/11 terrorist attacks, which caused the private market for terrorism insurance to collapse.

Once the program is allowed to lapse at the end of the year for the first time since its inception, insurers will have the right to cancel terrorism policies. Insurance industry analysts believe that is exactly what many of the carriers will do, as they would be at risk of insolvency without the government backup if a massive terrorist attack were to take place.

Under the TRIA law, the federal government covers 85 percent of all losses after the first $100 million in damages from a terrorist attack. Thankfully, the government has never had to pay out to the insurers under the law, but unfortunately the need for this type of insurance is as strong today as it was when the program was enacted in 2002.

The reauthorization bill would have renewed the program for six years and decreased the government’s exposure by gradually increasing the threshold to $200 million in losses before the federal funds are allocated. In addition, the government’s share of the catastrophic losses would have been gradually lowered to 80 percent.

U.S. Sen. Charles Schumer, D-N.Y., who negotiated the current reauthorization bill in the Senate and helped to get the original law ratified in 2002, has said that billions of dollars in new real estate developments and hundreds of thousands of jobs are at risk due to the expiration of TRIA.

Insurance and real estate industry analysts tend to agree, as terrorism insurance coverage is required for practically all of types of loans and financing options that are available for major real estate developments such as shopping centers, office towers, residential towers, stadiums, arenas and public sector infrastructure projects. Indeed, once the program lapses and insurers begin to cancel these policies, the loans for these projects that lose their terrorism coverage will be in technical default.

The instability that the loss of the TRIA coverage is going to cause in the insurance and real estate industries will be significant. When the U.S. Congress reconvenes Jan. 6, it should make the reinstatement of this insurance program one of its foremost priorities.

February 18, 2014

Upcoming Presentations at ICSC Events

by Oscar R. Rivera

Oscar R. Rivera

Founded in 1957, the International Council of Shopping Centers (ICSC) is the global trade association of the shopping center industry with more than 60,000 members in the U.S., Canada and over 90 other countries. I have had the honor of leading numerous courses and seminars at the organization’s events in recent years, and in the next few months I look forward to continuing these presentations at two of ICSC’s professional development events.

On Monday, March 10, I will lead the three-hour course titled “The Economics of a Lease: Rent, Escalations and Pass-Throughs” at the ICSC University of Shopping Centers, which is an advanced level educational program aimed at elevating each attendee’s level of knowledge of the industry by learning directly from experienced professionals. The course will cover the strategies and tactics of negotiating monetary provisions, including minimum and percentage rent clauses, security deposits, operating costs, real estate taxes and merchants/marketing fund payments. Attendees will be led through an analysis of the key elements of each of the lease provisions: base rent, percentage rent, operating costs, real estate taxes, marketing funds, security deposits, utilities and services, and tenant improvement allowances and their monetary impact interrelationship with the net return to the landlord as well as to the tenant. Sample clauses, included in the materials, will be distributed and dissected in an effort to analyze their strengths and weaknesses.

The next University of Shopping Centers will take place March 10-12, 2014, on the campus of the Wharton School of the University of Pennsylvania in Philadelphia. For additional information and online registration, visit www.icsc.org/2014UV.

I will also be presenting a course titled “Construction Law, Insurance and Ethics” at the ICSC John T. Riordan School for Retail Real Estate Professionals on Wednesday, April 2. The course will take a fresh look at various construction law and insurance protocols. Topics will include basic real estate and construction contracts, insurance and how it relates to real property coverage, insurance documents, and practicing good ethics in the workplace. The course will cover the purpose and content of contracts and other legal documentation, and the general tenets of construction, development, and real estate law. It will review insurance principles and practices, and the various types of policies that are common to development, design, and construction activities and practices.

The event will take place at the Doubletree Paradise Valley Resort in Scottsdale, Arizona, March 30 to April 3, and information and registrations are available at www.icsc.org/2014SAZ.

November 19, 2012

Insuring Tenant Improvements

by Fern F. Musselwhite

Fern F. Musselwhite

Landlords and tenants are business people, and as such they are always trying to minimize costs. One expense that can have a significant impact is that of insurance. For landlords, insurance costs generally are passed through to tenants as part of operating expenses. However, even though a landlord doesn’t absorb those costs, to remain competitive in the rental market it wants to keep them as low as possible.

For the tenant, any coverage that it has to add directly to its own insurance policy comes out of its pocket. If the landlord can include certain coverage in its policy at a better rate and spread that across the entire project, it may save the tenant substantial dollars.

Tenant improvements tend to be an item that can be insured by either party. In some cases the landlord builds out the tenant space; in other cases the landlord delivers a shell and the tenant is responsible for all of the work. In either case, the parties will negotiate who is responsible for the associated costs, as this obligation will vary from lease to lease.

Regardless of who builds or pays for the improvements, the parties should clarify who is responsible for insuring them. Most leases will require that the tenant maintain this coverage. However, some tenants, such as those with national insurance programs, may try to place this obligation on the landlord. Generally, whoever is responsible for reconstructing the tenant improvements should carry the insurance. Since the rebuilding obligation typically is that of the tenant, more often than not the tenant should also carry the insurance for the tenant improvements.

Before you agree to any terms regarding insurance, be sure to discuss the terms with your risk management department or insurance agent and have them review the lease provisions to confirm that you have the proper coverage.