The Florida Supreme Court just issued its decision in Sebo v. American Home Assurance Co., Inc. in which the Court addressed a perceived conflict between the Second and Third District Courts of Appeal on when “coverage exists when multiple perils combined to create a loss and at least one of the perils is excluded under the policy”. See American Home Assurance Co. v. Sebo, 141 So.3d 195 (Fla. 2nd DCA 2013) and Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3rd DCA 1988). This recent decision will have a significant effect in handling of property claims.
Wallach was a prominent ruling on the issue of coverage in a concurrent causation situation. In Wallach, a sea wall collapsed at the insured property following a rainstorm, and it was determined that earth movement was a contributing cause of that loss. The Third District Court of Appeals applied the concurrent cause doctrine, finding coverage. The Wallach court stated that “[w]hen multiple perils act in concert to cause a loss, and at least one of the perils is insured and is a concurrent cause of the loss, even if not the prime or efficient cause, the loss is covered.” That court concluded that “where an insured risk and an excluded risk jointly caused the loss, coverage was available.”
In the Sebo claim, the insured property was also damaged by both covered and excluded perils, and the Second District Court of Appeals found that “[t]here is no dispute in this case that there was more than one cause of the loss, including defective construction, rain and wind.” A significant difference from the Wallach case was that there had been ongoing water intrusion problems from design and construction defects that were not reported to the insurer until a couple months after the house was damaged further by Hurricane Wilma in October 2005. American Home did respond but denied coverage for most of the claimed losses, but did extend the $50,000 mold coverage under the policy. Because repairs could not effectively be made, the house was eventually demolished. Sebo initially sued the architect and builder for the house, and the sellers for failure to disclose defects, but then added American Home as a defendant seeking coverage for the loss of the residence.
The Second District in Sebo recognized that “[w]here there is a concurrence of different perils, the efficient cause – the one that set the other in motion – is the cause to which the loss is attributable.” In effect, that Court applied the efficient proximate cause doctrine holding that “[i]f the efficient proximate cause of the loss is a covered peril, the losses are covered; if it is an excluded peril, the losses are not covered.” The Second District reasoned that “a covered peril can usually be found somewhere in the chain of causation, and to apply the concurrent causation analysis would effectively nullify all exclusions in an all-risk policy” as it remanded the case for a new trial in which the cause of loss “is examined under the efficient proximate cause theory.”
The Florida Supreme Court, in reviewing the perceived conflict, framed the issue presented to it as “whether coverage exists under Sebo’s all-risk policy when multiple perils combined to create a loss and at least one of the perils is excluded by the terms of the policy.” In reconciling the two earlier rulings, it decided to quash the ruling of the Second District in the underlying Sebo case, and approve Wallach. The Court stated:
We conclude that when independent perils converge and no single cause can be considered the sole or proximate cause, it is appropriate to apply the concurring cause doctrine.
The Supreme Court preceded its analysis in the Sebo claim with the statement that “in all risk policies such as the one held by Sebo, construction is governed by the language of the exclusionary provisions.” It followed that by its explanation of the distinction between the efficient proximate cause and the concurring cause doctrines; and the conclusion that, when independent perils converge and no single cause can be considered the sole or proximate cause [of the loss], it is appropriate to apply the concurring cause doctrine. In quashing the decision of the Second District in Sebo, the Court stated that there “the rain and construction defects acted in concert to create the destruction of [the] home”…as such, it would not be feasible to apply the efficient proximate cause doctrine because no efficient cause can be determined”. The Supreme Court held that “because [the insurer] did not explicitly avoid applying the [concurrent cause doctrine], we find that the plain language of the policy does not preclude recovery in this case”.
The rationale of the Court is clear that the efficient proximate cause doctrine cannot apply where there are multiple perils acting in concert which preclude a finder of fact from distinguishing which of the multiple perils triggered, ort served as, the primary cause of loss. That rationale is not applicable to loss situations where different perils occur separately, or act independent of one another. This is important in cases where a non-covered peril triggers a subsequent excluded cause that damages the property. One example may be where you have a fire that causes an explosion from the heat or flame igniting a fuel tank, where the fire will be the efficient proximate cause and all damage will be covered, where the explosion separately may have been excluded from coverage.
This recent ruling may give rise to problem for insurers in claims such as for tile debonding, that be due to installation deficiencies not discovered, but are manifest when a water leak or intrusion occurs. In such claims, where it cannot be ruled out that the water was a contributing factor to the debonding, or a fact finder cannot attribute the cause of loss to an excluded peril, the concurrent cause doctrine may well be found to afford coverage if there is no evidence the loss occurred separately from the water intrusion event.
The Supreme Court has declined jurisdiction over several other recent decisions discussing the doctrines of efficient proximate cause and concurrent causation.