Insured homeowners often face greater difficulty in receiving payouts from property damage insurance claims where the claims spring out of multiple perils. Situations may arise where homeowners experience damage to property stemming from a peril that is covered under his or her insurance policy, but further examination reveals that there may be more than one peril that caused the loss. The case below illustrates one approach that Florida courts have taken in handling these types of cases.
In American Home Assurance Co v. Sebo, a homeowner purchased a four-year-old house and obtained an all-risks insurance policy. The policy contained an exclusion for inadequate, faulty, or defective planning. Shortly after the owner bought the home, it began showing signs of water leaks during rainstorms and hurricanes. After several months, the homeowner filed an insurance claim for the water damage, and after investigating the claim, the insurer denied coverage for most of the losses. The company tendered $50,000 for mold coverage but indicated that the rest of the damages to the home, including damages to the windows and doors, were excluded.
The house degraded beyond the point of repair and was demolished. The homeowner filed suit against the sellers, the architect, and the construction company that built the house. She alleged that the architect and construction company negligently built and designed the home and that the sellers engaged in material fraud by failing to disclose the property’s defects. Additionally, the homeowner filed suit against the insurance company and sought for the court to declare that the homeowners’ insurance policy covered all the claimed damages. The case against the insurer went to trial, and the jury decided in the homeowner’s favor. The insurance company appealed.
Both parties in the suit agree that there were multiple causes for the damages in the claim. The homeowner argued that the insurance company must cover all of the losses under the legal doctrine of concurrent losses. Under this doctrine, when multiple perils act together to cause damage to property, and the policy covers at least one of those perils, then the entire value of the loss is covered.
In response, the insurer argued that the court should apply the efficient proximate cause doctrine. Under this doctrine, the judge or the jury has the task of determining which peril was the most responsible for the claimed losses. If the insurance policy covers that particular peril, then the loss is covered. However, if the policy excludes the most responsible cause of the loss, then the loss is not covered.
The Second District Court of Appeal of Florida sided with the insurer, reversed the lower court’s decision, and ordered the court to apply the efficient proximate cause doctrine instead of the doctrine of concurrent losses. The Court found that most of the states had used the efficient proximate cause doctrine in analyzing the issue of multi-peril losses.
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