A Florida appellate court recently held that the improper denial of coverage in a sinkhole claim does not result in a waiver of the right to withhold payment in the absence of a contract for subsurface repairs. Citizens Prop. Ins. Corp. v. Amat, 2016 WL 670189 (Fla. 2d DCA Feb. 19, 2016).

The insureds sustained damage to their residence as a result of a suspected sinkhole. The insureds sued their insurer for breach of contract, alleging that the insurer wrongfully denied coverage for the claim. The trial court entered judgment in favor of the insureds and against the insurer for money damages. The insurer appealed the award for money damages because the policy required the insureds to enter into a contract for the performance of subsurface repairs before the insurer was required to pay for damages in a sinkhole claim.

On appeal, the insurer argued that the trial court erred in entering a money judgment requiring it to pay for subsurface repairs without requiring the insureds to enter into a contract for those repairs. The insureds argued that the insurer waived its right to insist on their compliance with the disputed provisions of the policy because the breach of contract allowed the insureds to treat the policy as “put to an end.” The appellate court disagreed and held that the trial court erred in ordering the insurer to pay for subsurface repairs before the insureds entered into a contract for those repairs. The appellate court considered the fact that the case involved a dispute about coverage, not rescission, and that given the jury’s finding of coverage, the appellate court held that the trial court was obligated to enforce the contract, including the policy’s restrictions on the insurer’s obligation to pay for the cost of the repair for subsurface damages.

The appellate court reversed and amended the judgment to the extent that it awarded money damages payable to the insureds without recognizing the insurer’s right to withhold payment for the cost of the subsurface repairs until the insureds entered into a contract for those repairs.