Hurricane Michael is making landfall in the panhandle of Florida as a wildly unexpected Category 4 hurricane. There will unquestionably be damage to structures caused by both storm surge/flood and wind. To the extent that one of the causes (e.g., storm surge/flood) is excluded and one cause (e.g., wind) is covered, this will inevitably lead to disputes over causation and the application of the concurrent causation doctrine.
Florida Has Adopted The “Concurrent Causation” Doctrine . . . Kind Of
In December of 2016, the Florida Supreme Court in Sebo v. American Home Assurance Co., 208 So. 3d 694 (Fla. 2016) formally adopted the concurrent causation doctrine as it relates to determination of coverage for damage caused by multiple perils under a first-party insurance policy. Under Florida’s version of the concurrent causation doctrine, if excluded and covered events combine to cause damage, then the loss is covered if at least one covered cause of loss contributed to the damage.In Sebo, the insured sought coverage for water damage that was caused when water entered the home as the result of construction defects. The home ultimately had to be demolished as a result of the water damage. Sebo’s insurer denied coverage for the majority of the claimed damage – including the demolition and rebuilding costs – on the basis of the policy’s construction defect exclusion, which stated:
8. Faulty, Inadequate or Defective Planning
We do not cover any loss caused by faulty, inadequate or defective:
a. Planning, zoning, development, surveying, siting;
b. Design, specifications, workmanship, repair, construction, renovation, remodeling, grading compaction;
c. Materials used in repair, construction, renovation or remodeling; or
of part or all of any property whether on or off the residence.
The Supreme Court found that the insured’s claimed damage combined in such a way that it was impossible to discern the proximate cause of the property loss – i.e., the rain and construction defects acted in concert to destroy the insured’s home. The court further concluded that it would not be feasible to apply the efficient proximate cause doctrine because, given the combined nature of the damage, no efficient cause could be determined. Ultimately, the court applied the rationale from Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988) and held that “where weather conditions combine with human negligence to cause a loss, it seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage.” Sebo, 208 So. 2d at 700, citing Wallach.
While the Sebo opinion may lead to the assumption that the efficient proximate cause doctrine is dead in Florida, some courts applying Sebo have seemingly limited the holding to those situations where no efficient proximate cause can be determined. See e.g., Jones v. Federated Nat'l Ins. Co., No., 235 So. 3d 936, (Fla. 4th DCA 2018). In Jones, the trial court’s instructions to the jury applied the efficient proximate cause doctrine. Id. at 939. On appeal, the Court of Appeals noted that Sebo’s holding hinged on the fact that it was impossible to determine if there was an efficient proximate cause of the loss. Id. Therefore, the court concluded that it was improper for the trial court to have applied the efficient proximate cause doctrine without first having the jury determine if they could determine an efficient proximate cause of the damage. Id. Only if the jury could not determine an efficient proximate cause would the concurrent causation doctrine be applied.
Based on this holding, it would appear that the efficient proximate cause doctrine may still be applied in Florida in cases where it is possible to determine an efficient proximate cause of the damage. Conversely, it appears that the concurrent causation doctrine will apply only if the causes combine in such a way that it is impossible to determine an efficient proximate cause.
Concurrent Causation And Florida’s Valued Policy Law
Causation also plays a role in the application of Florida’s Valued Policy law.In applying this law, Florida courts have concluded that the insurer is only liable for the limits of liability if the loss was caused solely by a covered peril. If a non-covered peril contributed, the Valued Policy law may not apply. See Florida Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2010). However, if the covered peril itself caused enough damage to constitute a total loss, then the fact that a non-covered peril also caused damage would not prevent application of the Valued Policy law. See Florida Farm Bureau Cas. Ins. Co. v. Mathis, 33 So. 3d 94, 98 (Fla. 1st DCA 2010).
In Florida, this application of the Valued Policy law can potentially result in an insured being able to recover the full limits of both its flood policy and its wind policy. In Citizens Property Insurance Corp. v. Hamilton, 43 So. 3d 746 (Fla. 1st DCA 2010), a Florida appellate court concluded that the trial court correctly barred evidence of the amount the insured received from its flood carrier in a trial to determine liability of the wind carrier for damages caused by wind. The court rejected the argument that the trial court should have applied the “total loss recovery” rule and limited the insured’s recovery to pre-loss value of the property. Id. at 755. The court reasoned that the two policies insured different perils, and that the premiums charged by the flood carrier accounted for the risk posed by flood losses and the premium charged by the wind carrier took into consideration the exposure to total losses under Florida’s Valued Policy law. Id.
In Citizens Property Insurance Corp. v. Ashe, 50 So. 3d 645 (Fla. 1st DCA 2010), the court recognized that while Cox, supra, applied the Valued Policy Law only where a covered peril caused the total loss, it did not prevent the insured from arguing that wind caused the total loss even where the insured had already recovered from its flood insurer for a total loss. Id. at 651-52. The court rejected the insurer’s argument that the insured would be receiving a windfall, by noting that the flood policy contained a subrogation clause. Id. at 652. While the court seemed to insinuate the flood carrier could seek to recoup its payment under this provision, it is unclear whether courts would recognize a flood carrier’s right to recover a wind carrier’s payments through subrogation. The Ashe court also rejected the argument that the “other insurance” clause of the wind policy would apply, noting that it would only have application if the other insurance covered the same perils. Id. at 650. Since the flood and wind policies covered different perils, that provision was not applicable. Id.
The Impact Of Anti-Concurrent Causation Language
While the application of anti-concurrent causation language has not been addressed by Florida courts, the District Court of Appeals in Sebo suggested that had there been anti-concurrent causation language in the policy at issue in that case, the outcome might have been different. Am. Home Assur. Co. v. Sebo, 141 So. 3d 195, 202 (Fla. 2nd DCA 2013), review granted, decision quashed sub nom. Sebo v. Am. Home Assurance Co., 208 So. 3d 694 (Fla. 2016). The Supreme Court in Sebo also found it significant that the insurer explicitly drafted sections of the policy to avoid applying the concurrent causation doctrine, but had failed to include anti-concurrent causation language in the construction defects exclusion. The court determined that this omission indicated an intent on the part of the insurer to apply the concurrent causation doctrine to construction defect claims. The court appeared to suggest .that to the extent anti-concurrent language is present, such language would be enforceable. Sebo, 208 So. 2d at 699. Although not specifically reaching a conclusion on the application of anti-concurrent causation language, it would appear that had the construction defect exclusion included such language, the court might have reached a different conclusion.
Causation is a critical issue in natural disaster-related insurance claims. An understanding of the policy language, the specific chain of events or circumstances leading to the loss, and the law in the relevant jurisdiction(s) is imperative to evaluating any claims arising from Hurricane Michael.
Posted by Anaysa Gallardo Stutzman and Jonathan MacBride
Posted by Anaysa Gallardo Stutzman and Jonathan MacBride