In Sebo v. American Home Assurance Co., Case No. SC140897 (Fla. Dec. 1, 2016), the Florida Supreme Court ruled 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.
The opinion reverses a Second District Court of Appeal decision that instructed courts to determine the primary cause of damage and rule that an insurance claim could be denied if that primary cause was not covered by the policy. The Second DCA decision conflicted with a Miami appellate court ruling that had been the law since 1988. 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 Florida Supreme Court opinion affirmed the Third DCA's logic.
Sebo's homeowners insurance company, American Home Assurance Co. Inc., denied coverage for most of his claimed property damage in 2005. Sebo's Naples home experienced water damage during summer rainstorms because of undisputed design and construction defects, and a few months later, Hurricane Wilma struck an additional blow.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.
The Second DCA 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 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.
The decision has been defined as extremely significant for any homeowner or business with an all-risk policy because concurrent causes are frequently found in Florida. For example, both wind and water caused damage to homes in North Florida during Hurricane Matthew. However, insurance companies could react to the decision by including anti-concurrent-cause language in their policies, as many already do.
Readers routinely involved in marine insurance claims will want to note that the test for coverage in such claims is the efficient proximate cause doctrine. Therefore, this case, while being considered significant, can be distinguished by the fact that it is not a marine insurance policy. However, this case will likely spur marine insureds to urge the extension of the holding in Sebo to marine insurance cases.
If you are interested in receiving a copy of this decision or wish to contact me, you may do so by writing to me via this blog or by email at blog@miamimaritimelaw.co.