In the event of loss or damage covered under a homeowners replacement cost policy, Florida Statute 626.97441 mandates that carriers must consider paying for the matching of undamaged areas of the home, if necessary, to provide continuity and uniformity to that of the damaged property. This obligation is most notable in claims involving flooring, cabinetry, wall coverings, and roofing where only a small portion of the building material sustained direct physical damage while being part of a larger matching, continuous system. Typically, if identical components cannot be sourced during the investigation of a claim, matching costs are factored into the repair estimate and funded by the carrier up to the applicable Coverage A/B limit of insurance.
Florida insurers contend that the matching statute has been misused to inflate the loss payments of minor damage homeowners’ claims by stifling the carrier’s ability to facilitate repair in instances where a reasonable match could be identified.
A 2021 lawsuit filed against Florida’s Office of Insurance Regulation (OIR) lays out Olympus Insurance’s position in instituting a matching limitation. The lawsuit alleged that Olympus intended to set a limit on matching because it had historically paid out amounts for matching, specifically with tile and shingle roof repairs, that were not contemplated in the coverage and rates offered. The suit further asserts that without a reasonable limitation in place, significant “strain and burden” would be imposed on Olympus’ business.2
Olympus voluntarily dismissed the case in early 20223 and shortly thereafter, along with a host of other carriers, filed a matching limitation endorsement with the state for consideration.4
Gen Re reviewed one such endorsement approved by the OIR which limits matching for Coverages A and B to 1% of the Coverage A limit of liability.5 This means for a home with $500,000 in dwelling Coverage A, the endorsement would cap matching repairs to $5,000. According to the OIR’s website, as of September 2023, some 25 insurers have been authorized to institute a matching limitation endorsement.6
Opponents of the endorsement argue that the limitation is a heavy-handed overcorrection to an insurance market in crisis and will deprive policyholders of vital benefits owed under the policy’s replacement cost provision, requiring homeowners to pay out-of-pocket for matching materials that exceed the matching limit. Policyholder advocates point out that this may also cause homeowners to fall out of compliance with a lender's requirement to maintain a policy that insures the home up to its replacement cost. Meanwhile, opponents argue that carriers are enhancing their bottom lines.
Citizens Property Insurance, the Florida state-run insurer of last resort, has taken a different approach in drafting its endorsement. In a 2019 case, Glendys Vazquez v. Citizens Property Insurance Corporation, the Florida Third District Court of Appeals determined that matching repairs are not direct physical loss and are only required to be reimbursed by the carrier once that portion of the work is performed.7 The Citizens matching endorsement approved by the OIR in August 2022 follows the opinion of the court in Glendys Vazquez and requires the policyholder to first incur the cost for matching damaged and undamaged items that are included in the claim estimate before payment will be made for those items.8
With the broader introduction of the endorsements into Florida homeowners’ policies, litigation and new damage theories are likely. In the interim, we suggest that if a matching endorsement is being added to your policy packets, best practices and estimating guidelines should be reviewed and updated to comply with these newly established policy terms and conditions. Please reach out to us or your Gen Re Claims Executive with any questions.