Florida Supreme Court Rules: As Long As Policy Covers Any Cause, Homeowners Insurer Must Cover Loss With Concurrent Causes
American Home Assurance Co. v Sebo, Case number 2D11-4063
The Florida Supreme Court ruled on 12/01/2016 that insurance companies should not deny coverage for property damage just because it had more than one concurrent cause, as long as the policy covers one of the causes.
John Sebo sued AHAC after it denied his claim for damage to his luxury home caused by rain and Hurricane Wilma, based on the policy’s exclusion for faulty, inadequate or defective planning. Sebo’s homeowners insurance company, American Home Assurance Co. Inc., denied coverage for most of his claimed property damage in 2005. Sebo’s home in Naples, FL sustained water damage during summer rainstorms because of undisputed design and construction defects, and a few months later, Hurricane Wilma struck an additional blow. A Florida state jury ruled in favor of Sebo and awarded him $8 million.
In September 2013, though, Florida’s Second District Court of Appeal spurned precedent and reversed the award to Sebo, rejecting the concurrent cause doctrine detailed by the Third District Court of Appeal in its 1988 decision in the case of Wallach v. Rosenberg. That doctrine states that when there are multiple causes of loss and at least one is covered, the entire loss is covered.
American Home Assurance Co. argued that since Sebo’s all-risk policy specifically excluded damage caused by defective planning, the damage caused by a combination of defects, rain and wind was not covered under the policy. Florida’s Second District Court of Appeal agreed, using the “efficient proximate cause” doctrine that the Florida Supreme Court has previously applied to cases where one peril causes another, such as a fire caused by an explosion. The theory says the insurer can deny coverage if the primary, or “efficient,” cause is excluded under the policy.
The 1988 decision in Wallach v. Rosenberg issued by the Third District Court of Appeal relies on the competing “concurrent cause” doctrine, which says coverage may exist if an insured risk is one of the causes of the damage, even if it is not the primary cause. The Supreme Court adopted the Third DCA’s logic.
“There is no reasonable way to distinguish the proximate cause of Sebo’s property loss—the rain and construction defects acted in concert to create the destruction of Sebo’s home,” the Court wrote. “As such, it would not be feasible to apply the EPC doctrine because no efficient cause can be determined.”
The decision was called “extremely significant” by the homeowner’s attorney for any homeowner or business with an all-risk policy, because concurrent causes are so common in Florida. For instance, he said, both wind and water caused damage to homes in North Florida this year during Hurricane Matthew.
The Florida Supreme Court noted that Sebo’s insurance company did not explicitly avoid applying the concurrent cause doctrine in case of negligent design, whereas other parts of the policy did specify that the doctrine could not apply.
Insurance companies could react to the decision by including anti-concurrent-cause language in their policies, as many already do. But they might be disinclined to do so by the need to compete with other insurers for customers.
