SFR Services, LLC v. Empire Indemnity Insurance Company

Filing 40

ORDER granting 38 Defendant's Motion to Dismiss. Plaintiff may file a second amended complaint within fourteen (14) days of the date of the Opinion and Order. See Order for details. Signed by Judge John E. Steele on 1/6/2021. (TLP)

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 1 of 10 PageID 476

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
SFR SERVICES, LLC,
Plaintiff,
v.

Case No:

EMPIRE INDEMNITY
COMPANY,

2:19-cv-369-FtM-99NPM

INSURANCE

Defendant.

OPINION AND ORDER
This matter comes before the Court on review of defendant’s
Motion to Dismiss Plaintiff’s Amended Complaint (Doc. #38) filed
on June 12, 2020.
26, 2020.

Plaintiff filed a Response (Doc. #39) on June

For the reasons set forth below, the motion is granted,

the Amended Complaint is dismissed without prejudice, and leave is
granted to file a second amended complaint.
I.
The Court adopts and incorporates by reference the procedural
history and background facts as set forth in Plaintiff’s Response.
(Doc.

#39,

¶¶

1-14.)

Plaintiff

plaintiff),

as

assignee

of

the

SFR

Services,

insured,

asserts

LLC

(SFR

that

or

Empire

Indemnity Insurance Company (Empire or defendant) breached an
insurance Policy insuring six buildings at a condominium complex
in Naples, Florida (the Insured Property).

1

The operative pleading

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 2 of 10 PageID 477

is the one-count breach of contract Amended Complaint, which
attaches a copy of the Policy and an Appraisal.

(Doc. #37.)

While conceding Empire has paid the amount determined by a
court-ordered Appraisal performed pursuant to the Policy (Doc.
#37, ¶¶ 16-24), the Amended Complaint nonetheless asserts that
Empire has refused to pay all damages covered by the Policy.

(Id.

at ¶ 25.) The Amended Complaint further asserts that the Appraisal
calculation of the roof repair costs for three of the six buildings
was premised on using tiles “harvested” from the other three
buildings (which were to receive new roofs).

(Id. at ¶ 21.)

However, according the Amended Complaint, a building permit is
required to do the roof repairs/replacement, but the harvested
tiles are not approved by the Collier County Growth Management
Division—Planning and Regulation (the Building Department).
at ¶¶ 22-23.)

(Id.

Thus, the Amended Complaint alleges, Empire “failed

to properly indemnify the Plaintiff for loss to the buildings . .
. because the payment amount [of the Appraisal] was based upon the
use of materials which are no longer approved products or under a
current NOA [Notice of Acceptance].”

(Id. at ¶ 24.)

“In other

words, by utilizing a methodology requiring repairs to be made
using

a

product

not

approved

or

under

a

current

NOA,

the

[Appraisal] umpire exceeded the scope of his authority . . ..”
(Id.)

In sum, the Amended Complaint asserts that the Policy

required Empire to pay “an amount sufficient to repair the damages
2

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 3 of 10 PageID 478

of the Insured Property resulting from the covered Loss” (Id. at
¶ 29), and

that Empire materially breached the Policy “[b]y

refusing to pay Plaintiff the amount necessary to repair or replace
the damage to the Insured Property.”

(Id. at ¶ 30.)

Defendant moves to dismiss plaintiff’s Amended Complaint,
arguing that it fails to state a cause of action for breach of
contract. (Doc. #38, pp. 1-2.)

Defendant asserts that it complied

with the Policy’s Loss Payment condition when it elected to pay
“the value of lost or damaged property,” which under the Policy is
the Replacement Cost Value (RCV). (Id., p. 2.) Defendant contends
that the Amended Complaint concedes defendant paid plaintiff the
RCV (less the deductible), and that by paying the amount determined
by the Appraisal it has paid all amounts due and owing under the
Policy.

(Id., pp. 5-6.)

As such, Defendant maintains that the

face of the Amended Complaint establishes it did not breach any of
the terms or obligations set forth in the Policy. (Id., p. 6.)
II.
The Court begins, as it must, with the language of the Policy.
See Zodiac Grp., Inc. v. Axis Surplus Ins. Co., 542 F. App'x 844,
849-50 (11th Cir. 2013). Empire agreed with the insured to provide
insurance as stated in the Policy.

(Doc. #37, p. 15.)

Coverage

was provided for six condominium buildings, each of which selected
the Optional Coverage valuation of replacement cost.
17, 19.)
3

(Id., pp.

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 4 of 10 PageID 479

The Policy’s Condominium Association Coverage form provided
that Empire “will pay for direct physical loss of or damage to
Covered Property . . . caused by or resulting from any Covered
Cause of Loss.”

(Id., p. 30.)

It is undisputed that the six

condominium buildings were Covered Property and that there was a
direct physical loss or damage caused by or resulting from a
windstorm, which is a Covered Cause of Loss.

(Id.; Doc. #37, ¶

6.)
The loss payment for such covered losses is ordinarily at the
option of Empire pursuant to the following Policy provision:
4. Loss Payment
a. In the event of loss or damage covered by this
Coverage Form, at our option, we will either:
(1)

Pay the value of lost or damaged property;

(2)

Pay the cost of repairing or replacing the
lost or damaged property, subject to b.
below;

(3)

Take all or any part of the property at an
agreed or appraised value; or

(4) Repair, rebuild or replace the property
with other property of like kind and
quality, subject to b. below.
We will determine the value of lost or damaged
property, or the cost of its repair or
replacement, in accordance with the applicable
terms of the Valuation Condition in this
Coverage Form or any applicable provision which
amends or supersedes the Valuation Condition.
b. The cost to repair, rebuild or replace does not
include
the
increased
cost
attributable
to
4

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 5 of 10 PageID 480

enforcement of any ordinance or law regulating the
construction, use or repair of any property.
. . .
g. We will pay for covered loss or damage to Covered
Property within 30 days after we receive the sworn
proof of loss, if you have complied with all of the
terms of this Coverage Part and:
(1)

We have reached agreement with you on the
amount of loss; or

(2)

An appraisal award has been made.

(Doc. #37, p. 39)(emphasis added).
Empire’s

options

under

this

Policy,

however,

were

more

restricted because the Declaration pages to the Policy show that
an Optional Coverage valuation was selected for all six buildings.
(Id., pp. 17, 19.)

Thus, as discussed below, replacement cost

became the loss payment standard, and payment of increased cost
attributable

to

enforcement

of

ordinance

or

law

became

a

possibility.
With the Policy’s Optional Coverage selected, “Replacement
Cost (without deduction for depreciation) replaces Actual Cash
Value in the Loss Condition, Valuation, of this Coverage Form.”
(Id., p. 43, ¶ 3a.)

Under the Replacement Cost standard, Empire

would not pay more than the least of “(1) The Limit of Insurance
applicable to the lost or damaged property; (2) The cost to replace
the lost or damaged property with other property: (a) Of comparable
material and quality; and (b) Used for the same purpose; or (3)

5

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 6 of 10 PageID 481

The amount actually spent that is necessary to repair or replace
the lost or damaged property.”

(Id., p. 43, ¶ 3e.)

Empire and SFR disagreed on the value of the amount of loss,
and therefore an appraisal was available under the Policy.
#37, p. 45, ¶ B.)

(Doc.

Each party selected an appraiser, and the two

appraisers selected an umpire.
any two will be binding.”

(Id.)

“A decision agreed to by

(Id.)

The Amended Complaint alleges that the Appraisal determined
the RCV, which has been paid by Empire.

(Doc. #37, ¶¶ 18-19.)

The Amended Complaint alleges, however, that the determination and
payment did not include the increased repair costs caused by the
inability to use harvested tiles and obtain the required County
permit. (Id. at ¶¶ 21-24.) Plaintiff asserts an entitlement under
the Policy to these increased costs as part of the Appraisal.
at ¶ 25.)

(Id.

The Policy establishes, however, that while plaintiff

may eventually be entitled to an additional amount, it is not due
now as part of the Appraisal.

See (Doc. #37, p. 43, ¶ 3f.)

Ordinarily under the Policy, the Replacement Cost “does not
include the increased cost attributable to enforcement of any
ordinance or law regulating the construction, use or repair of any
property.”

(Id.)

However,

which

the

Additional

buildings

to

Replacement

applies.”

(Id., p. 33, ¶ 4e(1).)

6

Coverage
Cost

applies

Optional

“to

Coverage

As noted above, such optional

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 7 of 10 PageID 482

Replacement Cost coverage is shown on the Declaration pages of the
Policy. (Id., pp. 17, 19.)
With this Additional Coverage, Empire agreed to “pay the
increased costs incurred to comply with enforcement of an ordinance
or law in the course of repair, rebuilding or replacement of
damaged parts of that property, subject to the limitations stated
in e.(3) through e.(9) of this Additional Coverage.”
¶ 4e(2).)

(Id., p. 33

The limitations, however, includes a provision that

Empire will not pay for the increased amount “[u]ntil the property
is actually repaired or replaced” and “[u]nless the repairs or
replacement are made as soon as reasonably possible after the loss
or damage . . ..”

1

(Id. at ¶ 4e(7).)1

The Policy states in pertinent part:
e. Increased Cost Of Construction
(1)

This Additional Coverage applies only to buildings
to which the Replacement Cost Optional Coverage
applies.

(2)

In the event of damage by a Covered Cause of Loss
to a building that is Covered Property, we will pay
the increased costs incurred to comply with
enforcement of an ordinance or law in the course of
repair, rebuilding or replacement of damaged parts
of that property, subject to the limitations stated
in e.(3) through e.(9) of this Additional Coverage.

(3)

The ordinance or law referred to in e.(2) of this
Additional Coverage is an ordinance or law that
regulates the construction or repair of buildings
or establishes zoning or land use requirements at
the described premises, and is in force at the time
of loss.
7

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 8 of 10 PageID 483

The Appraisal properly did not consider “increased costs
incurred to comply with enforcement of an ordinance or law in the
course of repair, rebuilding or replacement of damaged parts of
that property” since such costs had not yet been incurred.

See

Jossfolk v. United Prop. & Cas. Ins. Co., 110 So. 3d 110 (Fla. 4th
DCA 2013).

The Amended Complaint contains no allegations that SFR

had actually repaired or replaced any roof, or applied for or
obtained a building permit to do so, and the Court is limited to

(4)

.
(7)

Under this Additional Coverage, we will not pay any
costs due to an ordinance or law that: (a) You were
required to comply with before the loss, even when
the building was undamaged; and (b) You failed to
comply with.
.

.

With respect to this Additional Coverage:
(a)

We will not pay for the Increased Cost of
Construction:

(i)

Until the property is actually
repaired or replaced, at the same or
another premises; and

(ii)

Unless the repairs or replacement
are made as soon as reasonably
possible after the loss or damage,
not to exceed two years. We may
extend this period in writing during
the two years.

(Doc. #37, p. 34)(emphasis added).

8

Case 2:19-cv-00369-JES-NPM Document 40 Filed 01/06/21 Page 9 of 10 PageID 484

the four corners of the Amended Complaint and its attachments.
Hi-Tech Pharm., Inc. v. HBS Int'l Corp., 910 F.3d 1186, 1189 (11th
Cir. 2018).

The Court therefore may not consider the new facts

asserted in Plaintiff’s Response, which alleges that plaintiff
applied

for

a

permit

through

the

Collier

County

Building

Department, and it was rejected due to the invalid NOA for the
harvested tiles. (Doc. #39, pp. 4-5.)
The Court finds that the Amended Complaint does not plausibly
show that defendant has failed to comply with its obligations under
the insurance Policy.

Because it may be possible to make such

allegations, however, the Court will allow an amended complaint to
be filed.
Accordingly, it is hereby
ORDERED:
1.

The Amended Complaint (Doc. #37) is DISMISSED without
prejudice.

2.

Plaintiff may file a second amended complaint within
fourteen (14) days of the date of the Opinion and Order.

DONE and ORDERED at Fort Myers, Florida, this
January, 2021.

9

6th

day of

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Copies:
Parties of Record

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