Hegel v. First Liberty Ins. Corp.
| Decision Date | 27 February 2015 |
| Docket Number | No. 14–10549.,14–10549. |
| Citation | 778 F.3d 1214 |
| Parties | Severin HEGEL and Stephanie Hegel, Plaintiffs–Appellees, v. The FIRST LIBERTY INSURANCE CORPORATION, Defendant–Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
George A. Vaka, Nancy A. Lauten, Vaka Law Group, PL, Barbara M. Hernando, Alan S. Marshall, John E. Thomas, Matthew L. Wilson, Marshall Thomas Burnett, PL, Tampa, FL, Kenneth C. Thomas, Jr., Marshall Thomas Burnett, PL, Land O'Lakes, FL, for Plaintiffs–Appellees.
Carol M. Rooney, John Vincent Garaffa, Melissa D. Johnson, Jared M. Krukar, Jason M. Seitz, Butler Pappas Weihmuller Katz Craig, LLP, Tampa, FL, for Defendant–Appellant.
Appeal from the United States District Court for the Middle District of Florida. D.C. Docket No. 8:12–cv–01161–EAK–MAP.
Before ED CARNES, Chief Judge, COX and GILMAN,* Circuit Judges.
This case involves an insurance-coverage dispute that began in 2011 between Severin and Stephanie Hegel (the Hegels) and The First Liberty Insurance Corporation (First Liberty). The Hegels claim that First Liberty improperly denied their claim for a “sinkhole loss,” defined under their homeowner's insurance policy as “structural damage to the building, including the foundation, caused by sinkhole activity.” First Liberty argues that the damage to the Hegels' residence does not qualify as “structural damage,” a term that was not defined in either the policy or the version of the Florida sinkhole-insurance statute applicable to their claim. In February 2014, the district court granted summary judgment for the Hegels, finding that “structural damage” meant any “damage to the structure” and awarding them $166,518.17 in damages. First Liberty timely appealed.
For the reasons set forth below, we REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.
The Hegels had a homeowner's insurance policy with First Liberty for their Spring Hills, Florida residence, effective October 5, 2010. This policy insured against “Sinkhole Loss” as an exception to the policy's exclusion for damage caused by earth movement. Under the policy, “Sinkhole Loss means structural damage to the building, including the foundation, caused by sinkhole activity.” (Emphasis added.) The policy, however, did not define the term “structural damage.”
The version of the Florida statute governing sinkhole insurance that was in effect in 2010 contained the same definition of “sinkhole loss” as the policy did, but similarly failed to define the term “structural damage.” See Fla. Stats. § 627.706(2)(c) (2005). Prior to the statute being substantially amended in 2005, however, the term “sinkhole loss” was defined as “actual physical damage to the property covered arising out of or caused by sudden settlement or collapse of the earth supporting such property.” Fla. Stats. § 627.706(3) (1981) (emphasis added).
The Florida Building Code (2004), on the other hand, defined “structural” as it relates to buildings:
For purposes of this code, “structural” shall mean any part, material or assembly of a building or structure which affects the safety of such building or structure and/or which supports any dead or designed live load and the removal of which part, material or assembly could cause, or be expected to cause, all or any portion to collapse or fail.
Fla. Bldg.Code, Existing Buildings § 202 (2004). And a May 17, 2011 amendment to Florida Statutes § 627.706 eventually provided a detailed, technical definition of “structural damage,” itself referencing the Florida Building Code:
Fla. Stats. § 627.706(2)(k) (2011).
The Hegels allege that, on March 1, 2011, they “discovered damage to their home, including, but not limited to, progressive physical damage to the walls and floors of the residence.” They subsequently submitted a claim for their damages to First Liberty under their homeowner's policy.
First Liberty retained Structural Engineering and Inspections, Inc. (SEI) to investigate the claim in September 2011. SEI concluded in a report that the Hegels' residence “DOES NOT MEET the criteria for Structural Damage as defined by Florida Statutes § 627.706 [2011].” (Emphases in original.) The SEI report noted some cracking and other issues, but determined that nothing rose to the level of “structural damage” as defined in the 2011 version of the statute. In addition, SEI listed several possible causes for the observed damage that were unrelated to sinkholes, including differential settlements and ordinary concrete shrinkage.
First Liberty accordingly denied the Hegels' claim in October 2011, stating that their residence “ha[d] not sustained structural damage to the building or foundation” and that the damage was “related to normal concrete shrinkage, differential settlement, and improper embedment of [the] foundation.”
In November 2011, the Hegels requested a neutral evaluation by a public adjuster. Kevin Scott, the neutral evaluator engaged for the claim, issued a report in July 2012. He noted that if the sinkhole claim was made under a policy with an effective date before May 17, 2011, then the 2011 definition of “structural damage” set forth in Florida Statutes § 627.706 would not apply. His report concluded that the damage to the Hegels' residence was “the result of a combination of factors, including sinkhole activity,” but that “the observed distresses to the house can primarily be attributed to minor differential settlement of the structure and normal shrinkage/drying characteristics of the masonry materials.” Ultimately, Scott recommended subsurface grouting, at an estimated cost of $105,075, to remediate the sinkhole activity. He did not, however, apply any particular definition of “structural damage” to his evaluation, finding only that “[t]here was physical damage that resulted from settlement.”
The Hegels subsequently hired Central Florida Testing Laboratories, Inc. (CFTL) to review the findings and recommendations of SEI and the neutral evaluator, and to conduct additional testing. CFTL, in a report issued in March 2013, found damage consisting of “widespread, minor cracking to both the exterior and interior of the home.” Like the neutral evaluator, CFTL determined that sinkhole activity was a contributing cause of the damage. To fully remediate the effects of the sinkhole activity, the report recommended shallow chemical grouting in addition to the deep compaction grouting program proposed by the neutral evaluator, and estimated the total cost at $145,775. The Hegels next retained Champion Foundation Repair to prepare a bid based on CFTL's recommended remediation plan, with the bid coming in at $141,180. Finally, the Hegels retained Triad Consulting Group (Triad) to estimate the cost of repairing cosmetic damages. Triad's bid totaled $20,743.17.
In April 2012, before the neutral evaluator had completed his report, the Hegels filed suit against First Liberty for breach of contract in the Fifth Judicial Circuit Court in and for Hernando County, Florida. First Liberty removed the case the following month to the United States District Court for the Middle District of Florida based on diversity of citizenship. It also filed an unopposed motion to stay the litigation until the neutral evaluation was completed. The case was reopened in September 2012, after which First Liberty filed a counterclaim for a declaratory judgment that the Hegels' claimed damage falls outside the scope of the homeowner's insurance policy.
The two parties next filed competing motions for summary judgment. First Liberty submitted that its counterclaim was a pure question of contract law and that there were no genuine disputes of material fact. It argued that the May 17, 2011 amendment to the definition of “structural damage” in Florida Statutes § 627.706 should be incorporated into the contractual definition of the term, and that the term could not...
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