Pauly v. Hartford Insurance Company of the Midwest

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA FORT MYERS DIVISION ROBERT E. PAULY, SANDRA M.

PAULY, ROBERT E. PAULY AND SANDRA M. PAULY REVOCABLE TRUST, ROBERT E. PAULY and SANDRA M. PAULY, individually, Plaintiffs, v. Case No.: 2:24-cv-874-SPC-NPM HARTFORD INSURANCE COMPANY OF THE MIDWEST, Defendant. / OPINION AND ORDER Before the Court is Defendant Hartford Insurance Company of the Midwest’s Motion for Summary Judgment. (Doc. 62). Plaintiffs Robert and Sandra Pauly, individually and as trustees of the Robert E. Pauly and Sandra M. Pauly Revocable Trust, filed a response in opposition (Doc. 84), and Defendant replied (Doc. 87).1 For the following reasons, the Court grants in part and denies in part Defendant’s motion.

Plaintiffs also claimed loss to their personal property, but Defendant has issued no payment for such contents.

Dissatisfied with this result, Plaintiffs received their own estimate.

Their public adjuster, Rene Espinosa, prepared a revised estimate with a $180,773.75 ACV and a $181,544.94 RCV. Notably, the ACV estimate only includes depreciation for paint work and sealant in the various rooms in the residence. Despite Plaintiffs’ proffered estimate, Defendant has not issued any payment. So Plaintiffs sue for breach of contract seeking both ACV and RCV. practice in any future action in this Division. Otherwise, the Court will exercise its discretion to “strike filings that fail to heed this directive.” (Id.).

STANDARD OF REVIEW Sitting in diversity, the Court applies Florida substantive and federal procedural law. Glob. Quest, LLC v. Horizon Yachts, Inc., 849 F.3d 1022, 1027 (11th Cir. 2017). “The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing law.”

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). And a material fact is in genuine dispute “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. The moving party bears the initial burden to show a lack of genuinely disputed material fact. Clark v. Coats & Clark, 929 F.2d 604, 608 (11th Cir. 1991). If carried, the burden shifts to the nonmoving party to point out a genuine dispute. Id. At this stage, a court views all facts and draws all reasonable inferences in the light most favorable to the nonmoving party.

Rojas v. Florida, 285 F.3d 1339, 1341–42 (11th Cir. 2002).

DISCUSSION Defendant moves for summary judgment on several grounds. It argues that Plaintiffs’ damages are limited to ACV (which also precludes matching and ordinance-or-law damages); Plaintiffs cannot collect contents damages or, alternatively, such damages are limited to ACV; Plaintiffs cannot show Defendant breached the Policy because their ACV estimate is speculative; that damages to Plaintiffs’ pavers are excluded under the Policy’s water-damage exclusion; and the Policy’s rainwater limitation precludes recovery for interior damages. The Court addresses each issue in turn.

A. Plaintiffs’ damages are limited to ACV.

Subject to exceptions not at issue here, the Policy’s loss-settlement provision provides that for covered loss to dwelling and other structures, Defendant “will pay no more than the actual cash value of the damage until actual repair or replacement is complete.” (Doc. 56-1 at 49). In other words, Defendant first pays the ACV and then pays the repair/replacement costs as they are incurred. This Policy provision matches the requirement in Fla. Stat. § 627.7011(3)(a).2 Consistent with the Policy and § 627.7011(3)(a), “courts have almost uniformly held that an insurance company’s liability for replacement cost does not arise until the repair or replacement has been completed.” Ceballo v. Citizens Prop. Ins., 967 So. 2d 811, 815 (Fla. 2007); see also CMR Constr. & Roofing, LLC v. Empire Indem. Ins., 843 F. App’x 189, 192 (11th Cir. 2021). So Defendant argues that because Plaintiffs have submitted

In response, Plaintiffs do not argue that they have conducted repairs.

Instead, they argue that they did not need to incur the repair or replacement costs to collect RCV (despite the Policy’s plain language) because Defendant denied their claim. In support, they rely on Citizens Property Insurance v. Tio, 304 So. 3d 1278 (Fla. Dist. Ct. App. 2020). There, Citizens argued to the trial court that the plaintiff was not entitled to consideration of RCV damages because he had not undertaken any repairs to the subject property. Id. at 1279.

The trial court disagreed, and a jury awarded the plaintiff RCV damages. Id. Affirming the trial court’s decision, Florida’s Third District Court of Appeal was unpersuaded by Citizens’ “rather creative, though unavailing argument that, when an insurer wrongfully denies coverage of a claim—causing its insured to file suit against the insurer for breaching the insurance contract— section 627.7011(3) limits the breach of contract damages a jury may award, as if the insurer had not breached the insurer contract.” Id. at 1280. The Tio court found that § 627.7011(3) “does not operate as a limitation on a policyholder’s remedies for an insurer’s breach of an insurance contract.” Id. Citing Tio, Plaintiffs insist that, because Defendant denied their claim and has issued no payment, it is entitled to RCV damages despite their failure to first undertake repairs.

No doubt Tio is on point. But more recently, Florida’s Fourth District Court of Appeal issued an opinion in direct conflict with Tio. See Universal Prop. & Cas. Ins. v. Qureshi, 396 So. 3d 564 (Fla. Dist. Ct. App. 2024).

Certifying a conflict with Tio, the Qureshi court sided with the courts that “have almost uniformly held that an insurance company’s liability for replacement cost does not arise until the repair or replacement has been completed.” Id. at 567 (citing Cabello, 967 So. 2d at 815). So, in the Qureshi court’s view, the fact that the insurer denied the insured’s claim does not relieve the insured of its obligation to incur the repair or replacement costs before the insurer will pay such costs.

The Court finds Qureshi more persuasive than Tio.3 As noted, courts almost uniformly hold that an insurance company’s liability for replacement cost does not arise until the repair or replacement has been completed. Tio is an outlier. And apart from any legal authority, the plain language of the Policy requires Plaintiffs to incur the repair or replacement costs before Defendant

B. Plaintiffs cannot recover contents damages.

Pre-suit, Plaintiffs submitted to Defendant an inventory list identifying eleven damaged personal items with a replacement cost totaling $8,950. (Doc.

56-1 at 147; Doc. 60-1 at 14). The list was initially unaccompanied by any supporting receipts or invoices. After Plaintiffs initiated litigation, they submitted five Amazon receipts for various items totaling $1,973.53, a credit card statement showing a $483.45 purchase from Char Broil LLC, and a Lowe’s credit card statement showing a $4,262.45 balance. (Doc. 60-1 at 15–21).

Defendant argues that Plaintiffs cannot recover for such contents because the purported damages are unsupported by invoices and are thus speculative. Alternatively, Defendant argues Plaintiffs are limited to the ACV of such items. Plaintiffs respond that the submitted inventory list is sufficient because nothing in the Policy requires them to submit invoices before payment, and their damages are not speculative.

The Policy explains that personal property is settled “at actual cash value at the time of loss but not more than the amount required to repair or replace.” (Doc. 56-1 at 48). So Defendant is obligated to pay Plaintiffs only the ACV for damaged personal property.6 ACV is RCV minus depreciation. Thus, for Plaintiffs “to properly request the ACV of their personal property they had to provide [Defendant] with the RCV of the items and the appropriate allocated depreciation for that item.” Homeowners Choice Prop. & Cas. Ins. v. Clark, No. 1D2023-1622, 2025 WL 850677, at *6 (Fla. Dist. Ct. App. Mar. 19, 2025). Here, Plaintiffs fail to do so.

Plaintiffs fail to establish the ACV of their damaged contents. The inventory list simply lists the damaged items and the cost to replace each item.

In fact, the line designated for depreciation is marked 0% for each item. (Doc.

60-1 at 14). The credit-card statement showing a $483.45 purchase from Char Broil LLC is also useless as it does not indicate what item was purchased. The same is true for the Lowe’s credit card balance sheet. While the Amazon receipts are itemized, these receipts only establish the replacement cost of the purchased items. Put simply, there is no evidence in the record of the ACV for

Defendant argues Plaintiffs cannot show it breached the Policy because their ACV estimate is speculative. When an insurer claims the insured’s ACV payment is inadequate, § 627.7011(3)(a) places the initial burden on the insurer to show that it paid “at least the actual cash value of the insured loss.”

Clark, 2025 WL 850677, at *10. “But once the insurer provides an ACV estimate and pays that sum, the burden shifts to the insured to demonstrate that the payment did not reflect the fully insured loss.” Id. Defendant argues Plaintiffs have not met their burden of showing its ACV determination was inadequate because their ACV estimate is speculative.

Rene Espinosa prepared Plaintiffs’ estimate. The revised estimate includes a $180,773.75 ACV and a $181,544.94 RCV. (Doc. 65-1 at 88–177).

The difference between the two figures is a mere $771.19. Thus, for the entire dwelling, Espinosa identified only $771.19 in depreciation. And the only Plaintiffs focus a great deal on the fact Defendant apparently authorized a check for Plaintiffs’ contents damages (in an apparent approval of such damages) but never sent it. (Doc. 84 at 20). The Court fails to see the relevance of this point. They also broadly assert, without any support, that Defendant “waived greater detailed payment proof by not requesting such—ever.” (Id. at 21). Given the argument is undeveloped, the Court disregards it. depreciation identified is for paint and sealant in the various rooms in the house. This nominal depreciation in the estimate means that, except for paint, the ACV and RCV are identical.8 Courts have found that when ACV and RCV in an estimate are identical, the estimate is really one for RCV, not ACV, because it did not account for depreciation. See Metal Prods. Co., LLC v. Ohio Sec. Ins., No. 5:19-CV489- TKW-MJF, 2021 WL 1345525, at *2 (N.D. Fla. Apr. 12, 2021), aff’d, No. 21- 11612, 2022 WL 104618 (11th Cir. Jan. 11, 2022) (explaining that, although the plaintiff’s estimate included a column titled ACV, “it is undisputed that those amounts were not ACVs because they are the same as the corresponding amounts in the RCV column and the . . . estimate did not include any amounts for depreciation”). And without an ACV estimate, a jury cannot reasonably conclude “that the ACV of the covered loss exceeds the amounts already paid by Defendant.” Id.; see also Salazar, 388 So. 3d at 118 (holding that because the homeowner never submitted evidence of ACV, the jury could not parse the RCV estimate to determine ACV “without improper guessing and speculation”).9

Defendant also attempts to discredit Espinosa’s estimate by attacking his methodology. For instance, Defendant notes that Espinosa could not explain how he calculated depreciation, he did not know the property’s age or the date of renovations, and the estimate includes other unrecoverable expenses. (Doc. 62 at 21–22). But these attacks are better served for a Daubert whether the insurer’s initial ACV payment was adequate. Here, Plaintiffs arguably did not submit an ACV estimate (because their ACV and RCV estimates are practically identical).

So Siegel and Vazquez are not inconsistent with Metal Prods. Co. and Salazar. motion (which Defendant did not file) or cross-examination. Because a fact question exists, the Court denies summary judgment on this ground.

D. The Policy’s water-damage exclusion does not bar coverage for Plaintiffs’ damaged pavers.

Plaintiffs seek coverage for damages to a handful of pavers on their back patio. It is unclear exactly how the pavers were damaged. Plaintiffs’ engineer John McHugh explained that the damage occurred when rainwater flowing from a missing gutter downspout pooled on top of the pavers resulting in their displacement. (Doc. 59-1 at 141:15–142:17). Plaintiffs characterize it differently in their response, arguing that the force of the rainwater gushing from the broken gutter caused the pavers’ displacement. (Doc. 84 at 23).

Either way, the Policy does not cover loss caused by “water damage,” which is defined as “flood, surface water, waves, overflow of a body of water, or spray from any of these, whether or not driven by wind[.]” (Doc. 56-1 at 46–47).

Defendant argues the rainwater from the gutter constituted “surface water,” so coverage for the pavers is excluded.

The Policy does not define “surface water.” However, Florida courts have defined surface water as water “which is derived from falling rain or melting snow, or which rises to the surface in springs, and is diffused over the surface of the ground, while it remains in such diffused state of condition.”

Schwartzben v. Nat’l Fire & Marine Ins. Co., No. 22-20755-CIV, 2023 WL 3600604, at *3 (S.D. Fla. May 4, 2023) (citing McCorkle v. Penn Mut. Fire Ins. Co., 213 So. 2d 272, 273 (Fla. Dist. Ct. App. 1968)). And surface water “follow[s] no defined course or channel.” Flamingo S. Beach I Condo. Ass’n, Inc. v. Selective Ins. Co. of Se., 492 F. App’x 16, 20 (11th Cir. 2012) (citations omitted).

Based on this definition, the Court finds the rainwater that damaged Plaintiffs’ pavers was not “surface water.”

Although the exact manner in which the pavers were displaced is unclear (from pooling rainwater or from the flowing rainwater’s force), it appears undisputed that rainwater discharged from the broken gutter caused the pavers’ displacement. Because the rainwater collected in the gutter, which is a “defined channel,” causing the rainwater to divert and concentrate in the distinct area of the pavers, the water was not “surface water” when it contacted the pavers. In other words, but-for the gutters artificially diverting the rainwater, the rainwater would not have accumulated on the damaged pavers.

Indeed, some courts have found that artificial channels that divert and concentrate the flow of surface water—such as gutters—can convert surface water into something else. See Ridgewood Grp., LLC v. Millers Cap. Ins. Co., No. 1138 EDA 2016, 2017 WL 781620, at *3 (Pa. Super. Ct. Feb. 28, 2017) (citing Heller v. Fire Ins. Exch., a Div. of Farmers Ins. Grp., 800 P.2d 1006, 1009 (Col. 1990)). The Court finds these cases persuasive. Thus, the damage to the pavers was not caused by “surface water” and does not fall within the Policy’s water-damage exclusion.

E. Whether the rainwater limitation applies is a factual question for the jury.

Finally, Defendant argues that damage to the interior of Plaintiffs’ home is precluded by the Policy’s rainwater limitation. A Policy endorsement provides that coverage for loss caused by a hurricane includes loss to the inside of a building “[i]f the direct force of the windstorm damages the building, causing an opening in a roof or wall and the rain, snow, sleep, hail, sand or dust enters through this opening.” (Doc. 56-1 at 78). In short, the Policy only provides coverage to the interior of the home if the property’s exterior first sustains windstorm damage that allows the water intrusion.

Defendant concedes that Plaintiffs’ engineer, McHugh, identified a storm-created opening in the master bedroom that allowed water to enter the home, causing damage. (Doc. 62 at 5, 24). Nevertheless, it argues Plaintiffs have not shown the rainwater limitation applies by attacking McHugh’s methodology. For instance, Defendant argues McHugh did not identify areas of moisture in the attic correlating to the water damage, did not view the underlayment to identify any openings, did not rule out other potential causes, and confirmed there was no ceiling damage around the water damage. (Doc.

62 at 24). Defendant also broadly notes that Plaintiffs did not initially report any interior water intrusion or damage, and that Mr. Pauly described the damage as “nail marks” rather than water damage and was unsure when he first noticed such marks. (Id.). These are all great points for cross examination, not summary judgment. So the Court denies summary judgment on this issue.

Accordingly, it is now ORDERED: Defendant’s Motion for Summary Judgment (Doc. 62) is GRANTED in part and DENIED in part: 1. To the extent Plaintiffs have not incurred repair or replacement costs, they are limited to ACV damages.

2. Plaintiffs cannot recover contents damages.

3. Whether Defendant breached the Policy is a factual question for the jury.

4. The Policy’s water-damage exclusion does not bar coverage for Plaintiffs’ damaged pavers.

5. Whether the rainwater limitation applies is a factual question for the jury.

6. The Court will set a status conference by separate notice to discuss how this case will proceed.

DONE and ORDERED in Fort Myers, Florida on June 13, 2025.

tit WOblatet he UNITED STATES DISTRICT JUDGE Copies: All Parties of Record