Article Courtesy of The Palm
Beach Post
By JANE MUSGRAVE
Published August 29, 2007
WEST PALM BEACH — In what was described as a
victory for condo owners who are battling their insurers, a federal jury
today found QBE Insurance acted in bad faith and ordered it to pay a Boca
Raton condominium $8.1 million for damages it sustained in Hurricane
Wilma.
While less than the $12.1 million Chalfonte
Condominium was seeking, the verdict could ultimately pave the way for the
owners of the 378 units in the oceanfront twin towers to recover as much
as $40 million from the insurance giant, said condominium attorney Daniel
Rosenbaum.
In agreeing that the insurance company acted in bad
faith when it said the condo's hurricane damage didn't even meet its
deductible, the jury set the stage for a second trial in which the biggest
condo insurer in the state could be ordered to pay three times the initial
award.
Further, in a finding that will force U.S. District
Court Judge Donald Middlebrooks to plow new legal ground, the jury found
that a provision of QBE's policy didn't comply with state law.
Florida law is very specific about how an insurance
company must alert policy-holders that their hurricane deductible is
different than that for their general coverage. The law not only dictates
what words must be used but even the size of the type.
In the case of QBE, the jury found that the words
were different and the size of the type was smaller than state law allows.
Exactly what Middlebrooks' options are to remedy the
apparent error are unclear, Rosenbaum said. But, he said, he will ask the
judge to order QBE to refund Chalfonte's $1.6 million deductible.
"This is a huge case in terms of its importance
in all the cases where the insurers are wearing people down through the
legal process," Rosenbaum said. "I think the message to QBE is
that they cannot treat the insured that way. They can't beat them down and
beat them down."
William Berk, a Miami attorney who represents QBE,
pointed out that the jury verdict was nearly $4 million less than
Chalfonte was seeking. In addition, Chalfonte's $1.6 million deductible
will be subtracted from the jury award.
Further, he said in an e-mail message, the policy
language that the jury found violated state law was approved by the
Florida Department of Insurance.
Rosenbaum countered that QBE will also have to pay
about $1 million in interest that has accumulated since Chalfonte filed
its claim. The owners are also automatically entitled to recover the
roughly $500,000 they spent on attorneys and other costs to battle QBE in
court, he said.
The jury's decision came after roughly five hours of
deliberation at the conclusion of a seven-day trial.
QBE maintained that Chalfonte exaggerated its
damages, using the estimated 110 mph winds of the October 2005 storm as an
excuse to unnecessarily replace windows and sliding glass doors that
sustained no damage. While experts hired by Chalfonte said the frames and
glass in more than half of the windows and 80 percent of the sliding doors
had to be replaced, QBE experts countered that less than three dozen
needed replacement.
One of their experts, adjustor John Wareham,
admitted during the trial that he had been convicted of insurance fraud 20
years ago and lied to state regulators about it.
Chalfonte spent roughly $13 million on repairs. When
QBE finally adjusted the claim in March, it found the condo sustained
$460,000 in damage.
Since the record-breaking hurricane seasons of 2004
and 2005, QBE has found itself as a defendant in lawsuits that claimed it
both denied and delayed payments to its insured. It provides coverage to
1,800 condominiums in Florida with a combined insured value of $33 billion
— more than any other insurer in Florida, according to state records. An
Australian-based company, it does business in Florida through Florida
Intracoastal Underwriters.
QBE had already come under fire from the beleaguered
owners of the 1515 Tower in West Palm Beach, which was hammered by
Hurricanes Frances and Jeanne in 2004. After denying coverage for the
nearly $20 million in damage claimed by the owners of the 30-story tower
along the Intracoastal Waterway, the condominium ultimately filed suit.
However, when a mock jury found that condominium
residents had blamed the hurricanes for pre-existing damage, residents
ultimately decided to settle the lawsuit for $2.25 million.
The company, which reported a 56 percent increase in
net profit in the six months ending June 30, faces about two dozen
lawsuits in South Florida. Rosenbaum alone said he has about 10 pending
cases.
Chalfonte
is still a QBE customer. Now, however, instead of paying about $331,000
annually for coverage, it pays $1.3 million.
Condo, insurer duel over storm costs
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