I have a couple of other cases I want to write about, but it is not often that the Florida Supreme Court hands down an important insurance law decision, so those other cases will have to wait. Yesterday, in Sebo v. American Home Assurance Co., Case No. SC 14-897 (Fla. Dec. 1, 2016), the Florida Supreme Court ruled that a property insurance claim is covered so long as any cause that contributed to the loss is covered. This is known as the concurrent cause doctrine, which creates a favorable legal presumption for policyholders.
The Florida Supreme Court reversed the lower court’s use of the efficient proximate cause doctrine, which requires the covered cause to be the immediate cause that sets the others in motion. In doing so, the Florida Supreme Court reaffirmed decades of precedent in Florida following the leading appellate decision on the subject, Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988).
This causation rule is critically important in first-party property insurance disputes because it is often impossible to determine the extent to which one cause of loss predominates over another. A classic example occurs when a home is destroyed in a hurricane. If the homeowner has windstorm insurance but not flood insurance, the question is whether the home was damaged by wind or water. Under the concurrent cause doctrine, if both causes contributed to the loss of the home then the windstorm insurer must cover the damage. Under the efficient proximate cause doctrine, the policyholder would not be covered unless it could prove that wind was the predominate cause of the damage.
In the Sebo case, both sides agreed that the home was damaged by a combination of defective construction (not covered) and rainstorms, including Hurricane Wilma (covered). Both the covered and uncovered causes of loss contributed to the home being declared a total loss, and there was insufficient evidence of which cause was the predominate cause. After a jury ruled in favor of the policyholder, the appellate court ruled that a new trial was necessary to determine what was the efficient proximate cause of the loss.
The Florida Supreme Court held that a new trial was not necessary, since it was already proven that a covered cause of loss contributed to the damage. That was enough to make the claim a covered loss, regardless of the extent to which the defective construction contributed to the loss.
The Florida Supreme Court’s decision was the correct decision, as it reaffirmed that the concurrent cause doctrine continues to apply in Florida, as it does in most jurisdictions. Policyholders who pay for “all risk” coverage should receive the benefit of that coverage when they suffer a loss due to a covered cause, regardless of whether there is some other cause that is excluded by the policy.
Policyholders need to be aware that some policies contain Anti-Concurrent Cause clauses that displace the concurrent cause doctrine with the efficient proximate cause rule that the Florida Supreme Court rejected. Unfortunately, many state regulators, including the Florida Office of Insurance Regulation, have allowed insurers to restrict coverage by adding this clause to homeowners and other property policies in Florida. Many other states have rejected such efforts by the insurance industry, and the fight continues in legislatures and regulators’ offices throughout the country.
We can expect to see the insurance industry increase their lobbying efforts in Florida to get more favorable language approved for use in insurance policies, to attempt to nullify by contract what they have been unable to accomplish in court. Hopefully state legislators and regulators will resist such efforts, and recognize the need to ensure that policyholders continue to receive the “all risk” coverage they pay for.
Policyholders should not rely on the folks in Tallahassee to look out for their interests. Anti-Concurrent Cause endorsements are already lurking in some property policies in Florida. Policyholders need to be vigilant in telling their brokers to reject property insurance policies that contain Anti-Concurrent Cause provisions, even if it means paying higher premiums. The extra protection is well worth it.