The Fifth District Court of Appeals dealt with consolidated disputes between State Farm and its insureds regarding the issue of when the insurer was obligated to pay for subsurface sinkhole repairs covered under the insureds' homeowners policy. State Farm relied on 627.707(5)(b), Florida Statutes (2007) in arguing that it could withhold funds for paying for subsurface repairs until the insureds entered into contracts for the performance of the repairs on the property. Specifically 627.707(5)(b) states:

(b) The insurer may limit its payment to the actual cash value of the sinkhole loss, not including underpinning or grouting or any other repair technique performed below the existing foundation of the building, until the policyholder enters into a contract for the performance of building stabilization or foundation repairs. After the policyholder enters into the contract, the insurer shall pay the amounts necessary to begin and perform such repairs as the work is performed and the expenses are incurred. The insurer may not require the policyholder to advance payment for such repairs. . . . (Emphasis added.)

The insureds however argued that they were entitled to payment based on the policy language and not the statute, claiming that they were entitled to payment within sixty days after the amount of the loss was resolved by appraisal. The policy language specifically stated:

SECTION I - CONDITIONS

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10. Loss Payment. We will adjust losses with you. We will pay you unless some other person is named in the policy or is legally entitled to receive payment. Losses will be payable:

a. 20 days after we receive your proof of loss and reach agreement with you; or

b. 60 days after we receive your proof of loss and:

(1) there is an entry of final judgment; or

(2) there is a filing of an appraisal award with us.

The 5th DCA agreed with the insureds that they were entitled to payment based on the policy language. In reviewing the consolidated cases, State Farm had issued checks for above ground damages while refusing to tender payment for subsurface sinkhole damage, waiting for the repair contracts to be executed. The Court noted that the appraisal awards in each case separately listed the amount of above ground damages and subsurface damages.

In making its ruling, the Court looked at both the policy language and 627.707(5)(b), holding that the statutory language was permissive, not mandatory. As the Court stated that the language was permissive, the policy's language requiring payment within sixty days of the appraisal award, was not in conflict with the statute and thus the language in the policy was binding on each party, requiring payment of subsurface sinkhole repairs within sixty days.

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