Am. Home Assurance Co. v. Sebo
| Decision Date | 03 April 2014 |
| Docket Number | No. 2D11–4063.,2D11–4063. |
| Parties | AMERICAN HOME ASSURANCE CO., INC., Appellant/Cross–Appellee, v. John Robert SEBO, individually and as Trustee under Revocable Trust Agreement of John Robert Sebo dated November 4, 2004, Appellee/Cross–Appellant, and Paul A. Jacobsen, individually and Sarah T. Jacobsen, individually, Appellees. |
| Court | Florida District Court of Appeals |
OPINION TEXT STARTS HERE
Anthony J. Russo, Scott J. Frank, and Ezequiel Lugo of Butler Pappas Weihmuller Katz Craig LLP, Tampa; and Janet L. Brown and Susan B. Harwood of Boehm, Brown, Fischer, Harwood, Kelly & Scheihing, P.A., Maitland, for Appellant/Cross–Appellee American Home Assurance Co., Inc.
David A. Zulian and Edward K. Cheffy of Cheffy Passidomo, P.A., Naples; and Mark A. Boyle, Geoffrey H. Gentile, Michael W. Leonard, Debbie Sines Crockett, and Amanda K. Anderson of Boyle, Gentile, Leonard & Crockett, P.A., Fort Myers, for Appellee/Cross–Appellant John Robert Sebo.
No appearance for Appellees Paul A. Jacobsen and Sarah T. Jacobsen.
John Sebo purchased property insurance for his home in Naples, Florida, from American Home Assurance Company (AHAC). After the home was substantially damaged by rain and a hurricane, AHAC denied Sebo's claim for the damages based on several coverage exclusions. Sebo filed a declaratory action seeking coverage and a jury found in his favor. The circuit court entered a judgment for more than $8,000,000. As we will explain in detail, we agree with AHAC that a new trial is required. We reverse and remand for proceedings consistent with this opinion.
Sebo purchased the home in April 2005, when it was four years old. AHAC provided homeowners insurance as of the date of the purchase. The policy, which insured against “all risks,” was issued through a private client group and was referred to as a manuscript policy. It was not a standard form but instead was created specifically for the Sebo residence. The house and other permanent structures were insured for over $8,000,000. The policy also provided additional coverage for loss of use of the home.
Shortly after Sebo bought the residence, water began to intrude during rainstorms. Major water leaks were reported to Sebo's property manager as early as May 31, 2005. She prepared a list of problems: leaks in the main house at the foyer, the living room, dining room, piano room, exercise room, master bathroom, and upstairs bathroom. By June 22, 2005, the property manager advised Sebo of these leaks in writing. It became clear that the house suffered from major design and construction defects. After an August rain, paint along the windows just fell off the wall. In October 2005, Hurricane Wilma struck Naples and further damaged the Sebo residence.
Sebo did not report the water intrusion and other damages to AHAC until December 30, 2005. AHAC investigated the claim, and in April 2006 it denied coverage for most of the claimed losses. The policy provided $50,000 in coverage for mold, and AHAC tendered that amount to Sebo but stated that “the balance of the damages to the house, including any window, door, and other repairs, is not covered.” In May 2008, Sebo renewed his claim and sent more information about the damages to AHAC, but AHAC again denied the claim except for the $50,000 in mold damages.
The residence could not be repaired and was eventually demolished. In January 2007, Sebo filed suit against a number of defendants, including the sellers of the property, the architect who designed the residence, and the construction company that built it. He alleged that the home had been negligently designed and constructed and that the sellers had fraudulently failed to disclose the defects in the property. Sebo eventually amended his complaint in November 2009, adding AHAC as a defendant and seeking a declaration that the policy provided coverage for his damages. After Sebo settled his claims against a majority of all other defendants, the trial proceeded only on his declaratory action against AHAC. The jurors found in favor of Sebo, and the court eventually entered judgment against AHAC.
The policy covered “all risks of physical loss or damage to your house, contents, and other permanent structures unless an exclusion applies” resulting from “occurrences.” As it relates to this case, “occurrence” was defined as “[a] loss or an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which occurs during the Policy Period and results in personal injury or property damages.” AHAC denied coverage for most of Sebo's losses based primarily on the policy's exclusion for 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.
Although many of the exclusions in the policy provided coverage for ensuing damages,1 the above-quoted exclusion did not. Pertinent here, the policy did provide $50,000 in coverage for ensuing damages caused by fungi, wet or dry rot, or bacteria, as long as the damages resulted from a covered peril. Rain was a covered peril. As mentioned, AHAC offered Sebo this $50,000 to settle his claims. Sebo refused to settle.
Sebo's complaint against AHAC was for declaratory relief. It stated:
This Count is being plead[ed] as an alternative to the Counts plead[ed] against the other Defendants arising out of the latent construction defects discovered at the property, in substantial part, because certain of the Defendants have alleged in their affirmative defenses that the damages to the Property were caused by weather-related problems, including but not limited to Hurricane Wilma. Alternatively, this action is limited to the damages to the Property and the insured caused by weather-related problems, including but not limited to Hurricane Wilma, not caused solely by construction defects.
There is no dispute in this case that there was more than one cause of the loss, including defective construction, rain, and wind. In late 2010, AHAC and Sebo filed cross-motions for summary judgment on the issue of whether the policy covered Sebo's damages. Sebo asserted AHAC was required to cover all its losses under the concurrent causation doctrine, which was applied in Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3d DCA 1988). Under that doctrine, when 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 the efficient cause, the loss is covered. See id. at 1387–88. Thus, the Wallach court held “[w]here weather perils 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.” Id. at 1388. In this case, defective construction, the basis of Sebo's suit against the codefendants, was excluded from coverage, but weather-related damages, such as rain, were covered perils.
A prominent insurance treatise explains the concurrent causation rule:
[T]he concurrent cause rule takes the approach that coverage should be permitted whenever two or more causes do appreciably contribute to the loss, and at least one of the causes is a risk which is covered under the terms of the policy. Some jurisdictions limit the application of the concurrent cause rule by requiring that the concurring causes be independent of each other in order for the rule to apply.
Steven Plitt, Daniel Maldonado & Joshua D. Rogers, Couch on Insurance § 101.55 (3d ed.2012) (footnote omitted). Indeed, Wallach requires that the causes be independent. 527 So.2d at 1388. AHAC contends that the perils at play in this case were dependent and that therefore the circuit court erred in ruling that the concurrent causation doctrine applied. We do not address this issue because, as we will explain, we disagree with Wallach's determination that the concurrent causation doctrine should be applied in a case involving multiple perils and a first-party insurance policy.
The concurrent causation doctrine is one of two prevailing theories employed to decide what coverage is afforded under these circumstances. The other one is the efficient proximate cause doctrine. Under it, the finder of fact, usually the jury, determines which peril was the most substantial or responsible factor in the loss. If the policy insures against that peril, coverage is provided. If the policy excludes that peril, there is no coverage. 2
Although the efficient proximate cause doctrine has long existed in some form, its contemporary genesis is widely attributed to the California Supreme Court's decision in Sabella v. Wisler, 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889 (1963). Wisler negligently built a home and negligently installed its sewer line on improperly compacted fill land. Four years after he sold the home to the Sabellas, the sewer line began to leak and infiltrate the unstable land beneath the foundation. The house settled but did not collapse. Id. at 892. The Sabellas sought coverage under a homeowners' policy that insured against “all risks of physical loss” but excluded loss caused by “settling, cracking, shrinkage, or expansion of pavements, foundations, walls, floors, or ceilings; unless loss by ... collapse of buildings ensues.” Id. at 891–92. The insurer denied coverage for the Sabellas' losses based on this exclusion. The California Supreme Court found as a matter of law that an insured peril, negligence in the installation of the sewer pipe, was the predominating or moving efficient cause of the loss. Id. at...
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