by Glenn A. Jacobson, Esq & Mark I. Binsky, Esq

In the aftermath of Hurricane Harvey, property claims professionals are or shortly will be overwhelmed with building claims arising from Hurricane Irma. In many instances, it will be difficult to determine whether the damages are covered or excluded under Florida law. As we saw with the many claims we handled for our clients after Superstorm Sandy, causation is often not only factually challenging but legally daunting, as well. In our continuing efforts to be of service to claims professionals, we have put together this short primer on legal coverage issues for the State of Florida. We anticipate that this will be helpful for both experienced and not-so-experienced claim handlers faced with the time pressures of adjusting and investigating Hurricane Irma claims. Of course, we are ready to field your questions and provide assistance and support with any legal questions you may have regarding any property claims you are working on.

THE “EPC” RULE, THE “CCD” DOCTRINE AND THE FLORIDA VALUED POLICY LAW – WHAT DOES IT ALL MEAN? –

The leading case on building damage causation in Florida is Sebo v. American Home Assurance Co., Inc., 208 So.3d 694 (2016) decided by Florida’s Supreme Court. The decision notes two important rules for analyzing coverage where the policy does NOT include an anti-concurrent cause clause with regard to excluded perils. (In fact, in Sebo, the policy was a manuscript policy, subjecting it to closer scrutiny by the court.)

1. Efficient Proximate Cause (“EPC”) Rule: Where perils act in a series, one after the other, the one that sets the others in motion is the cause to which the loss is attributable. If that peril is excluded, there is no coverage even if the subsequent peril is covered.
Example 1.A.: Where, under a typical all risk commercial or residential policy, storm surge first damages the insured building by pushing it off its foundation and later wind exacerbates that damage because of the increased vulnerability of the structure, there will be no coverage because the storm surge damage, excluded by the typical policy, is the EPC.

Conversely, if the original peril is covered but those that follow are not, coverage will still be found even if the excluded peril is the more immediate cause of the damage.

Example 1.B.: Where wind causes damage to the insured building by blowing openings in its exterior walls (a covered peril under the typical all risk policy) and storm surge (not covered) thereafter exacerbates those openings and causes other damage to interior walls, there will be coverage because the wind is the EPC.

On the other hand, when there are two different damage events caused separately by two different perils, we believe the EPC analysis will not apply.

Example 1.C.: Where storm surge (an excluded peril) damages the interior walls on the first floor of the insured premises and, later, wind causes a breach in the roof which allows rain water to damage the interior walls of the second floor of the building (an exception to the exclusion for damage due to rain), these two events are separate and distinct and can be evaluated differently, with no coverage for the first floor damage but coverage for damage to the second floor.

2.Concurrent Cause Doctrine (“CCD”): This is the second approach noted by the Sebo case. Under CCD if the damage is caused by two perils acting together (that is to say “concurrently”) and one is excluded but the other is covered, there is coverage, but only where the perils truly act together. Thus, CCD only applies where no single peril can be seen as the sole or proximate cause.

Example 2.A.: Where wind (covered peril) and storm surge (excluded peril) act together at the same time to push the building off its foundation, there is coverage.

Example 2.B.: There is coverage where wind opens a breach in the roof of an insured ranch style home and rain enters to damage the interior walls (a covered peril) and, at the same time, flood waters enter the premises and damage the interior walls (excluded peril).

Example 2.C.: Where the field adjuster deployed to inspect a pile of rubble that was a building before the storm is told by witnesses that the structure failed as both the storm surge (excluded) and wind (covered) converged, there will be coverage.

Nevertheless, in situations where the insurer’s engineer can isolate the cause of the damage and is able to opine that storm surge (excluded peril) and not wind (covered peril) damaged the structure, then denial of the claim is justified because neither the EPC analysis nor the CCD doctrine applies. However, under those circumstances the insured or her representatives, will, in all likelihood, retain an engineer to opine that the storm surge and wind acted concurrently (which, under CCD, results in coverage). This dispute between the experts gives rise to a question of fact for a jury to decide and may expose the insurer to allegations of “unfair claims practices” and/or “bad faith.”

3.Anti-Concurrent Cause Provision: To this point, we have been discussing situations where there is no anti-concurrent cause provision in the policy. However, it is our experience that, there are anti-concurrent cause provisions in most form policies, with regard to some excluded perils and where the anti-concurrent cause provision exists, Florida courts will enforce it. Liberty Mut. Fire Ins. Co. v. Martinez, 157 So.3d 486 (5th Dist. 2015) (in footnote 1) and Paulucci v. Liberty Mut. Fire Ins. Co., 190 F.Supp.2d 1312 (M.D. Fla. 2002); see, State Farm Fire and Cas. Co. v. Castillo, 829 So.2d 242 (3d Dist. 2002) and State Farm Fire and Cas. Co. v. Metropolitan Dade County, 639 So.2d 63 (3d Dist. 1994).

Example 3.A.: Storm surge (excluded) and wind (covered) act concurrently to cause damage to an insured structure. The all-risk policy contains the usual water exclusion which is preceded by an introductory anti concurrent cause provision. Although the two perils acted concurrently, the CCD will not apply to provide coverage and the anti-concurrent cause clause be enforced to extinguish coverage.

4. The Florida “VPL”: It is also important for claim handlers to be aware of the portions of Florida’s “Valued Policy Law” (F.S.A. section 627.702) relating to causation. In sum and substance, sub-section (1)(a) of the law provides that, in the event of a total loss of any building, structure, mobile home or manufactured building (the last two things being defined in other, different statutes) the insurer’s liability for such loss, if caused by a covered peril, will be the face amount of the policy (as long as the insured did not engage in fraud and did not increase the risk without the insurer’s consent).

On the other hand, sub-section (1)(b) of the statute explicitly notes that the statute is not meant to deprive an insurer of any policy defenses or to create additional coverage under the policy or to require an insurer to cover excluded perils. Sub-section (1)(b) of the statute goes on to say that, when a loss is caused in part by a covered peril and in part by a non-covered peril the total loss payment provisions of sub-section (1)(a) of the statute do not apply. In such circumstances, the insurer’s liability under the statute is limited to the amount of the loss caused by the covered peril. However, if the covered cause of loss “would have caused the total loss,” the insurer must pay the face amount of the policy, just as sub-section (1)(a) of the statute requires.

Example 4.A.: Wind (covered) and flood (excluded) cause damage to a house resulting in a total loss. If the insurer can isolate the wind damage and show that it was limited to a certain dollar amount below the face value of the policy, then the insurer will be liable only for that amount, not for the face value of the policy. Florida Farm Bureau Cas. Ins. Co. v. Cox, 967 So.2d 815 (2007)

The foregoing is just a general overview of the legal principals governing causation under all risk property policies in Florida. It cannot and is not designed to address all of the many complications that arise when analyzing storm losses for coverage. Where the claim is too complex to fit neatly into one of the categories we have delineated, we suggest you confer with legal counsel for a formal coverage opinion. We look forward to working with you.

For further information or any questions please contact:
Glenn A.Jacobson, Esq, gjacobson@agfjlaw.com
Mark I. Binsky, Esq, mbinksy@agfjlaw.com

Attorneys
Glenn A. Jacobson
Mark Ian Binsky

Practice Areas
First-Party and Third-Party Property Defense