Restoration Industry Association (RIA) recently sent an email to members about the Florida decision to address overhead and profit. The email is listed below in full:

A ruling published by the Supreme Court of Florida earlier this month held that general contractors are entitled to overhead and profit charges under a replacement cost homeowner's policy.

In Trinidad v. Florida Peninsula insurance Company, the Supreme Court said,  "...we hold that an insurer's required payment under a replacement cost policy includes overhead and profit, where the insured is reasonably likely to need a general contractor for the repairs, because the insured would be required to pay costs for a general contractor's overhead and profit for the completion of repairs in the same way the insured would have to pay other replacement costs he or she is reasonably likely to incur in repairing the property..."

"Trinidad is clearly a step in the right direction for the restoration industry and homeowners in Florida," said Paul T. Zeniewicz, Esq., an attorney for Cohen Battisti - Attorneys at Law.  "The opinion affirms that overhead and profit are included in a covered loss when the homeowner is reasonably likely to need a general contractor for repairs.  The impact of this decision negates the prevailing opinion that incorrectly implied that overhead and profit were only recoverable when a general contractor employed three separate and distinct trades.  In short, the decision simply reinforces what we already knew... that contractors and vendors should be able to recover for overhead and profit costs under a replacement value policy.  We look forward to using the Trinidad opinion to bolster our position moving forward."  

The ruling also clearly outlines what is considered overhead and profit. "Specifically, overhead includes 'fixed costs to run the contractor's business, such as salaries, rent, utilities, and licenses,' and profit 'is the amount the contractor expects to earn for his services.'"

In addition, the ruling goes on to say that "because replacement cost insurance provides coverage based on the cost to repair or replace the damaged structure on the same premises, we conclude that overhead and profit necessarily must be included within the scope of a replacement cost policy where it is reasonably likely a general contractor would be needed for the repairs. Accordingly, overhead and profit are a necessary component of replacement costs, just as they are for actual cash value, because replacement cost insurance is intended to compensate the insured for what it would cost to repair or replace the damaged property.

Thus, we conclude that overhead and profit are included in the replacement cost of a covered loss when the insured is reasonably likely to need a general contractor for the repairs."

Reaction from those in the restoration industry was extremely positive.  "FINALLY!!  For those of us restoration contractors who are general contractors, we finally have a response to the inexperienced adjuster who says 'we don't pay overhead and profit.'  The answer is the "law" entitles us to it," said Rusty Amarante, CR, of BELFOR.

"This is great news for the restoration industry," said Harvey Cohen, Esq., of Cohen Battisti. "Florida leads the world in laws protecting property owners and the restoration industry."

The ruling went on to say that the "Third District's statutory construction analysis was flawed..." and that the Third District also "erred in its interpretation of the policy language because it relied on the wrong subsection of the policy."

There were two dissenting opinions from judges who said they would discharge the case for lack of jurisdiction.