Somerset Homeowners Association (the insured) brought action to enforce the appraisal process against Florida Insurance Guaranty Association (FIGA), which assumed obligations under a property insurance policy after the original insurer was placed in receivership. The trial court entered judgment confirming the appraisal award and FIGA appealed.
The 4th DCA held that the doctrine of prevention of performance did not apply and thus did not entitle the insured to recover the difference between the replacement cost value (RCV) of the loss and the actual cash value (ACV) of the loss under the property insurance policy before the insured actually repaired or replaced buildings that were damaged during hurricanes, although the insurer delayed payment of appraisal award; the application of the doctrine would have impermissibly rewritten the policy, which by its terms required the insured to actually repair or replace damaged property as a condition precedent to payment of replacement costs.
The Somerset condominium buildings sustained extensive damage due to two hurricanes. Somerset was covered by an insurance policy, the obligations for which were assumed by FIGA after the original carrier was placed in receivership. Somerset submitted claims for coverage, and both the former carrier and FIGA made partial payments on the claims. While the suit was pending, the parties agreed to submit the dispute over the amount of the claim of loss to the appraisal process set forth in the policy. Ultimately, the claim was submitted to an independent umpire who entered an award which set the RCV of the loss at $12,581,471.43 and the actual cash value ("ACV") of the loss at $11,630,208.55. As replacement cost policies are intended to operate, following a loss, both actual cash value and the full replacement cost are determined. The difference between those figures is withheld as depreciation until the insured actually repairs or replaces the damaged structure. FIGA neither timely paid nor disputed the award. Somerset moved to confirm the appraisal award, prompting FIGA to move to vacate it. The court entered a final judgment in the amount of $6,262,339.83, which reflected a deduction of $5,026,539.25 in prior payments and a deductible of $1,292,592.35.
On appeal, FIGA argued that contrary to the express terms of the policy, the appraisal award included $951,262.88 attributed to depreciation. Somerset countered that it was entitled to depreciation under the doctrine of prevention of performance because FIGA failed to timely pay the appraisal award.
The policy provided:
d. We will not pay on a replacement cost basis for any loss or damage:
(1) Until the lost or damaged property is actually repaired or replaced; and
(2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.
Under the terms of the policy, an insured must actually repair or replace the damage as a condition precedent to payment of replacement costs. Somerset failed to do so in this case. Notwithstanding the policy's express terms, Somerset argued that under the doctrine of prevention of performance, it was excused from the contractual obligation to complete the repairs before receipt of payment because FIGA delayed payment of the appraisal award. (Under the doctrine of prevention of performance, one who prevents the happening of a condition precedent upon which his liability is made to depend, cannot avail himself of his own wrong and thereby be relieved of his responsibility to perform under the contract.)
The 4th DCA held that applying the doctrine of prevention of performance would impermissibly rewrite the insurance contract. Under Florida's binding law, courts are not free to rewrite the terms of an insurance contract and where a policy provision is clear and unambiguous, it should be enforced according to its terms. Accordingly, the case was remanded to the trial court to deduct from the final judgment the amount attributed to depreciation.
