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
d.
Maintenance;
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
