Civil Remedy Notice of Insurer Violations
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Filing Number:     783131
Filing Accepted:  9/17/2024
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Complainant
Last/Business Name *  
KEY STORAGE, LLC   First Name  
Street Address * 701 MYRICK STREET
City, State Zip * PENSACOLA, FL 32505
Email Address * KEYSTORAGE@YAHOO.COM
Complainant Type: * Insured
Insured
Last/Business Name*   KEY STORAGE, LLC   First Name  
Policy # * STF-ML-10000711-07 Claim #* 85-00642734
Attorney
Attorney is Applicable
Last Name* WARREN First Name * J. PHILLIP Initial
Street Address* 1700 W. MAIN ST., SUITE 100
City, State Zip* PENSACOLA , FL 32502
Email Address * PWARREN@TWWLAWFIRM.COM
Violation
Insurer Type *   Authorized Insurer Unauthorized Insurer
 
Insurer Name*   NOVA CASUALTY COMPANY
NAIC Company Code 42552
 
Name of individual responsible for violation (if any):* JAMES ODOR; KRISTINA GILLIS
Type of Insurance * Commercial Property & Casualty   
Reason for Notice *
Claim Delay
Claim Denial
Unsatisfactory Settlement Offer
Unfair Trade Practice
* Statutory provision(s) which the insurer allegedly violated.
 
624.155(1)(b)(1) Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests.
626.9541(1)(i)(2) A material misrepresentation made to an insured or any other person having an interest in the proceeds payable under such contract or policy, for the purpose and with the intent of effecting settlement of such claims, loss, or damage under such contract or policy on less favorable terms than those provided in, and contemplated by, such contract or policy.
626.9541(1)(i)(3)(a) Failing to adopt and implement standards for the proper investigation of claims.
626.9541(1)(i)(3)(b) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue.
626.9541(1)(i)(3)(c) Failing to acknowledge and act promptly upon communications with respect to claims.
626.9541(1)(i)(3)(d) Denying claims without conducting reasonable investigations based upon available information.
626.9541(1)(i)(3)(f) Failing to promptly provide a reasonable explanation in writing to the insured of the basis in the insurance policy, in relation to the facts or applicable law, for denial of a claim or for the offer of a compromise settlement.
* Specific policy language that is relevant to the violation.
Enter all words or phrases (one at a time) that should be used to filter.

A. Coverage We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss. 1. Covered Property Covered Property, as used in this Coverage Part, means the type of property described in this section, A.1., and limited in A.2., Property Not Covered, if a Limit of Insurance is shown in the Declarations for that type of property. a. Building, meaning the building or structure described in the Declarations, including: (1) Completed additions; (2) Fixtures, including outdoor fixtures; (3) Permanently installed: (a) Machinery and (b) Equipment; SELF-STORAGE PROPERTY PLUS ENDORSEMENT CAUSES OF LOSS – SPECIAL FORM CP1030 B. Exclusions (3) Electrical or magnetic injury, disturbance, or erasure of electronic recordings. But we will pay for direct loss or damage caused by lightning; 4. Loss Payment In the event of loss or damage covered by this Coverage Form, at our option, we will either: (1) Pay the value of lost or damaged property; (2) Pay the cost of repairing or replacing the lost or damaged property, subject to b. below; (3) Take all or any part of the property at an agreed or appraised value; or (4) Repair, rebuild or replace the property with other property of like kind and quality, subject to b. below. We will determine the value of lost or damaged property, or the cost of its repair or replacement, in accordance with the applicable terms of the Valuation Condition in this Coverage Form or any applicable provision which amends or supersedes the Valuation Condition. 7. Valuation We will determine the value of Covered Property in the event of loss or damage as follows: a. At actual cash value as of the time of loss or damage, except as provided in b., c., d. and e. below. This Civil Remedy Notice is also grounded in Nova Casualty Company’s statutory duty to act in good faith and deal fairly with its insured when handling claims.
 
* Facts and circumstances giving rise to the violation.
Enter all words or phrases (one at a time) that should be used to filter.

The policyholder, Key Storage, LLC (“Key Storage”), sustained losses to its property located at 13725 River Road, Pensacola, FL 32507 caused by and following a thunderstorm that brought an abundance of lightning to the property on or about July 28, 2024. Key Storage timely notified Nova Casualty Company (“Nova”) of the claim. From the outset of this claim, Nova has ignored or wrongfully dismissed evidence showing the full scope of covered damage caused by a lightning strike to the property and attempted to deny the damage and/or point to causes of loss that are excluded so Nova can avoid its obligation to pay this claim timely and in full. This conduct was in bad faith and has caused additional harms and losses to Key Storage over and above the amount owed under the policy of insurance. Key Storage provides rentable storage space for individuals and businesses in the Perdido Key and Pensacola area. It is under an obligation to provide climate-controlled units to its tenants. Immediately after the lightning strike, three air conditioning (AC) units at Key Storage that were working properly before the storm were not functional. Key Storage took the appropriate measures by engaging multiple reputable HVAC companies to inspect the units, diagnose the cause of the failures, and make repairs as necessary to keep its storage units functioning properly and prevent further damage to the property. Perdido Heating & Air (“Perdido Heating”) inspected on or about July 30, 2024, days after the lightning storm, and found all three AC units had been damaged due to a lightning strike/power surge. On one unit, Perdido found a non-working, tripped breaker in the panel, both capacitors in the condensing unit had blown up, the blower mower in the air handler had blown up, and the condensing unit was found to be dead shorted, i.e., mechanically seized, which can only occur due to lightning strike/power surge. Due to the damage caused by the lightning strike, this AC unit cannot be repaired, it must be replaced. On the other two units, Perdido Heating found both capacitors in each unit were blown. Perdido Heating replaced the capacitors in these two units and both began working after the repair. To be thorough, Key Storage retained a second local, reputable HVAC company—Air Design Systems, Inc. (“Air Design”)—to inspect its AC units and assess the cause of damage and provide an estimate for the cost of repairs. Just as Perdido Heating had found, Air Design also found all the capacitors in the three AC units had been damaged and the compressor and blower motor in the first unit was found faulty all due to a lightning strike/power surge. Thus, Key Storage obtained opinions from two independent HVAC companies who separately found the damage to all three units was caused by lightning, requiring replacement of the first unit and repair of the other two units. Key Storage submitted this evidence to Nova. The field adjuster Nova chose to send to the property did not present as a professional, qualified adjuster nor did he conduct a thorough, complete inspection that resulted in an accurate inspection report and assessment of the damage. Nova determined the damage to the AC unit requiring replacement was due to normal wear and tear and that the other two units were working properly and had not suffered any damage due to a lightning strike/power surge. As such, Nova informed Key Storage coverage was denied for all three AC units. This decision was cursory, unfounded, contrary to ample, obvious evidence at the property showing all capacitors in three different AC units failed simultaneously not due to normal wear and tear but, rather, an abundance of lightning that struck the property on or about July 28, 2024, causing all three AC units to simultaneously fail. Nova’s decision to wrongfully deny coverage based on inaccurate, unfounded findings at the property also constituted a material misrepresentation to its insured in violation of Fla. Stat. § 626.9541(1)(i)(2), a failure to adopt and implement standards for the proper investigation of claims in violation of Fla. Stat. § 626.9541(1)(i)(3)(a), a misrepresentation of facts in violation of Fla. Stat. § 626.9541(1)(i)(3)(b), a wrongful denial of this claim without conducting a reasonable investigation based on clear evidence at the property in violation of Fla. Stat. § 626.9541(1)(i)(3)(d), and a failure to provide a reasonable explanation for its denial of the claim in violation of Fla. Stat. § 626.9541(1)(i)(3)(f). This decision constituted an active effort by Nova to ignore or refute obvious evidence of covered damage and deny this claim outright so Nova could save money. Nova’s adjustment of the claim in this manner was in bad faith and shows an intent by Nova not to adjust this claim in the best interest of Key Storage as it is required by the policy and applicable Florida law but, rather, to adjust the claim in its own best interest to Key Storage’s detriment. In response to Nova’s wrongful denial of the claim, Key Storage again submitted the evidence from its two AC vendors—Perdido Heating and Air Design—establishing the cause of the damage to all three AC units was a lightning strike/power surge and providing the invoice for the cost it incurred in repairing the two units as well as an estimate for replacement of the third unit. Nova has not given this evidence meaningful consideration by altering its coverage decision and making timely payment on the claim. Overall, Nova’s dilatory and unacceptable adjustment of this claim in this manner shows Nova has failed to implement and follow adequate guidelines for the proper investigation to evaluate claims and the appropriate training and supervision of its employees and adjusters resulting in the statutory violations identified in this Civil Remedy Notice above. In addition, in the weeks following the storm, despite repeated efforts by Key Storage to obtain an update on the claim and payment for the estimates and invoices Key Storage submitted to Nova for repairs, Key Storage’s inquiries and messages often went unanswered and/or ignored, for weeks. This occurred during a time when Key Storage was stressed, worried, and anxious to get repairs underway so it could restore the integrity of its property and continue providing the necessary climate-controlled storage units that are vital to its business. Specifically, desk adjuster, James Odor, promised to send Key Storage a copy of its field adjuster’s inspection report over a month ago and this has yet to occur. Nova has also not timely communicated regarding reconsideration of its coverage decision. Nova’s willful or careless failure to respond timely to communications, emails, and inquiries from its insured violated both its duty under the policy to timely adjust this claim and its duty under Fla. Stat. § 626.9541(1)(i)(3)(c) to acknowledge and act promptly upon communications with respect to claims. Nova’s failure and/or refusal to settle the insurance claim when under all circumstances it could have and should have done so had it acted fairly and honestly towards Key Storage is wrongful conduct. As a result of Nova’s wrongful conduct, Key Storage was and still is forced to expend out of pocket monies to submit its insurance claim, e.g., engaging reputable local HVAC companies to conduct repairs and prepare evidence proving the damage was caused by a lightning strike/power surge, as well as legal counsel to file this Civil Remedy Notice in hopes of finally forcing Nova to honor its obligations under the insurance policy to pay the entirety of the insurance proceeds due and owing to Key Storage. Nova is obligated to Key Storage to tender all insurance proceeds owing and due so that the necessary repairs can commence and Key Storage’s property can be restored to its pre-loss condition. It is clear from Nova’s failure to issue the benefits owed and its intentional attempt to avoid its full obligations to Key Storage, that Nova has engaged in a pattern of fraudulent and dilatory tactics to the prejudice and harm of Key Storage. To cure the defects outlined in this Civil Remedy Notice, Nova must: (1) Immediately tender all undisputed insurance proceeds to Key Storage with statutory interest owed; (2) Act fairly and honestly towards Key Storage and with due regard for its interest in attempting to settle this claim; (3) Immediately tender all insurance monies due and owing to Key Storage with statutory interest; and (4) Pay Key Storage the fair value of its insurance claim. Nova Casualty Company’s address is 440 Lincoln Street, Worcester, MA 01653.
Comments
User Id Date Added Comment
kgillis@hanover.com 10-09-2024 The policyholder, KEYSTORAGE, LLC, has raised concerns relative to the handling of their property claim filed on July 30, 2024, with a reported date of loss of July 28, 2024. The adjustment and investigation into the claim involved obtaining statements from the policy holder, inspections of the premises, and reviewing documentation. The policyholder reported lightning damages to three AC units on premises. The policy holder reported that two of the three units were already repaired. An inspection was completed by HVACi on August 1, 2024. HVACi reported: "Systems 001 and 002 The findings of our onsite investigation indicate that the systems were repaired prior to our investigation. The capacitors were replaced by others prior to our inspection. We attempted to inspect the original components that were replaced and suspected of damages, however, these components were not available for our evaluation and documentation. The HVAC Systems have not failed due to a high voltage surge, lightning, or similar event. Both units were operational at the time of the inspection. Amp draws of the compressors, fan motors, and blower motors were observed. Based on the information collected during the HVAC assessment, it is the opinion of HVACi that 2 HVAC Systems were Non-Damaged at the time of the study. System 003 The findings of the onsite investigation discovered a failed compressor, capacitor, fan motor, blower motor, and transformer. The compressor was shorted to ground, and its winding resistances were not within their typical range. The capacitor was bulged and its wiring showed resistive heating, which contributed to the compressor's failure. The resistance readings of the fan motor and blower were not within their typical range and the transformer's primary coil was weak. All other components measured within an optimal range. Based on the information collected during the HVAC assessment, it is the opinion of HVAC Investigators that the cause of loss to the HVAC system is Wear and Tear. There were no signs of arcing, heat-related damage, or other visual evidence to indicate that the system failed due to a high voltage surge, lightning, or similar event." The policyholder has provided documentation from Perdido Heating & Air and Air Design Systems, Inc. This information was provided to HVACi for an additional review. HVACi completed their additional review on August 20, 2024 and reported: "System 001 and 002 had repairs made prior to our assessment and were functioning properly. Because repairs were made before our inspection and the old items were not onsite for us to inspect we cannot attribute a cause of damage to them in our final report. System 003 was found to have a bulging capacitor, a damaged fan motor, and a compressor that was shorted to ground. First, I want to address the bulged capacitor. A failing electrolytic capacitor generates hydrogen gas as the electrolyte solution begins breaking down inside the capacitor. This causes a build-up of internal gas pressure which swells the case. A swelling/bulging capacitor is not caused by a high voltage surge, but rather a thermal stress induced failure that occurs over a period of time. Further, shorted motor windings within a compressor indicate a lack of IR, or insulation resistance, resulting in applied current escaping the wiring circuit. Eventually, the bare wire will make contact with the body of the compressor, literally causing the current to short circuit and escape to ground. This is not caused by a one time/sudden event (such as a lightning strike, or overcurrent), but occurs over time. Lastly, resistive heating was found at the wiring which contributed to the failure of these items. Resistive, or Joule heating counter-indicates a one time, or sudden event. Loose, or corroded connections result in reduced contact area between conductors, resulting in voltage loss across these connections. This also causes all components downstream from this poor connection (such as a compressor) to operate outside of manufacturer specifications, which exacerbates normal wear over time. The lost voltage is converted to heat, known as a high-resistance connection. This is one of the most commonly misdiagnosed dynamics in the HVAC industry, and can be an enigma to someone who is not well versed in HVAC forensic techniques. At this time, all information has been reviewed and we stand behind our final report as it stands." We have reviewed the information provided by the policyholder and adjusted the claim in accordance with the policy. As systems 001 and 002 were repaired prior to notifying us of the loss, our ability to investigation and determine the cause of loss was impeded. The Building and Personal Property Coverage Form CP 0010 0607 states: “E. Loss Conditions The following conditions apply in addition to the Common Policy Conditions and the Commercial Property Conditions. 3. Duties In The Event Of Loss Or Damage a. You must see that the following are done in the event of loss or damage to Covered Property: … (6) As often as may be reasonably required, permit us to inspect the property proving the loss or damage and examine your books and records. Also permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records.” As we were not provided the opportunity to inspect the damaged property, our ability to determine if the damaged was due to a covered cause of loss was impeded. As such, we are unable to provide coverage for systems 001 and 002. With regards to system 003. Our investigation confirmed the unit failed due to wear and tear. The Building and Personal Property Coverage Form CP 0010 0607 states: “B. Exclusions 2. We will not pay for loss or damage caused by or resulting from any of the following: a. Artificially generated electrical, magnetic or electromagnetic energy that damages, dis-turbs, disrupts or otherwise interferes with any: (1) Electrical or electronic wire, device, appliance, system or network; or (2) Device, appliance, system or network utilizing cellular or satellite technology. For the purpose of this exclusion, electrical, magnetic or electromagnetic energy includes but is not limited to: (a) Electrical current, including arcing; (b) Electrical charge produced or con-ducted by a magnetic or electromagnetic field; (c) Pulse of electromagnetic energy; or (d) Electromagnetic waves or micro-waves. But if fire results, we will pay for the loss or damage caused by that fire. ... d. (1) Wear and tear; (2) Rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself; ... (6) Mechanical breakdown, including rupture or bursting caused by centrifugal force. But if mechanical breakdown results in elevator collision, we will pay for the loss or damage caused by that elevator collision." As the policy excludes loss due to wear and tear, we are unable to provide coverage for system 0003.
Acknowledgement
* The submitter hereby states that this notice is given in order to perfect the rights of the person(s) damaged to pursue civil remedies authorized by Section 624.155, Florida Statutes.

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DFS-10-363
Rev. 10/14/2008