Omega Ins. Co. v. Wallace, Case No. 2D16-449.

• Decision Date: 16 August 2017
• Docket Number: Case No. 2D16-449.
• Citation: 224 So.3d 864
• Parties: OMEGA INSURANCE COMPANY, Appellant, v. William WALLACE and Joan Wallace, husband and wife, Appellees.
• Court: Florida District Court of Appeals

224 So.3d 864

OMEGA INSURANCE COMPANY, Appellant,

v.William WALLACE and Joan Wallace, husband and wife, Appellees.

Case No. 2D16-449.

District Court of Appeal of Florida, Second District.

Opinion filed August 16, 2017

Scot E. Samis of Traub Lieberman Straus & Shrewsberry, LLP, St. Petersburg, for Appellant.

Richard N. Asfar and George A. Vaka of Vaka Law Group, P.L., Tampa and Richard T. Heiden of Richard T. Heiden, P.A., Clearwater, for Appellees.

SILBERMAN, Judge.

Omega Insurance Company seeks review of a final judgment awarding William and Joan Wallace just over $200,000 for subsurface remediation in their sinkhole action. The final judgment was based on a directed verdict entered after the trial court refused to consider the testimony of Omega's expert engineers and the neutral evaluator regarding the proper method of subsurface repair. We conclude that the proper method of subsurface repair is a jury question and reverse.

This appeal arises from a sinkhole insurance claim under a policy issued by Omega to the Wallaces in August 2010. Much of the argument on appeal, as in the trial court, concerns expert testimony and the proper definition of certain terms used in the Omega policy. The policy contains a sinkhole loss coverage endorsement which provides, in pertinent part, as follows:

B. COVERAGE

We insure for direct physical loss to property covered under Section I caused by a Sinkhole Loss, including the costs incurred to:

1. Stabilize the land and building; and

2. Repair the foundation;

In accordance with the recommendations of the professional engineer who verifies the presence of a Sinkhole Loss in compliance with Florida sinkhole testing standards and in consultation with you.

(Emphasis added.) It also provides the following definitions:

"Sinkhole Activity" means settlement or systematic weakening of the earth supporting such property only when such settlement or systematic weakening results from movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation.

"Sinkhole Loss" means structural damage to the building, including the foundation, caused by Sinkhole Activity. Personal property coverage shall apply only if there is structural damage to the building caused by Sinkhole Activity.

(Emphasis added.) The endorsement thus provides coverage for direct physical loss to covered property due to a "Sinkhole Loss" as defined in the policy. While the policy defines "Sinkhole Loss" as "structural damage to the building, including the foundation," it does not define the term "structural damage."¹

After an initial flurry of expert reports, Omega agreed that there was a sinkhole loss and extended coverage. As is often the case with sinkhole claims, the dispute between the parties mainly concerned the proper method of subsurface repair. Omega retained an engineering firm that recommended compaction grouting to stabilize the subsurface soil and to remediate the sinkhole conditions. The Wallaces obtained a subsurface repair protocol from another engineering firm that recommended underpinning in addition to compaction grouting. Omega then requested neutral evaluation,² and the neutral evaluator concluded that there was no need for underpinning in addition to compaction grouting.

Despite the neutral evaluator's recommendation, the Wallaces submitted a contract for subsurface repair including compaction grouting and underpinning. When Omega refused to pay, the Wallaces sued Omega for breach of contract. In count four of the operative complaint, the Wallaces alleged that Omega breached the policy by refusing to make payment on the repair contract.

At trial, the Wallaces offered the expert testimony of engineer Sonny Gulati of Florida Testing and Environmental, Inc. ("FTE"). Gulati concluded that there had been structural damage to the building and foundation of the Wallace residence constituting a "Sinkhole Loss" as defined by the policy. Gulati applied the engineering definition of "structural damage," which required that the load-carrying capability of the foundation be compromised. He concluded that the remediation should include both compaction grouting and underpinning.

Omega offered the expert testimony of two engineers from SDII Global Corporation and the neutral evaluator. While the neutral evaluator concluded there was damage to the structure, he was not asked to give an opinion on whether there was a "Sinkhole Loss" as defined by the policy. The SDII engineers concluded there was a "Sinkhole Loss," but they applied the definition of structural damage that was used by the insurance industry and some courts.³ This definition of structural damage only required damage to the structure rather than compromise of the load-carrying capability of the foundation. The SDII engineers and the neutral evaluator also characterized the damage as "cosmetic" because it could be repaired without repairing the foundation or load-bearing portions of the structure. They agreed with Gulati that compaction grouting was necessary for remediation, but they did not believe the damage was significant enough to require underpinning.

At the close of Omega's case, the Wallaces moved for a directed verdict on count four of the amended complaint, arguing that Gulati's opinion established the method of subsurface repair as a matter of law. According to the Wallaces, the policy contained language requiring that any subsurface repair protocol be recommended by a "professional engineer who verifies the presence of a Sinkhole Loss." They asserted that their expert, Gulati, was the only professional engineer who verified that there was a "Sinkhole Loss" using what they claimed to be the proper definition of structural damage, which was the engineering definition.

Omega's counsel responded that the defense experts also found a "Sinkhole Loss" for which the policy provides coverage. Counsel maintained that in light of the conflicting expert testimony as to the proper method of repair, that issue was appropriate for resolution by the jury. Counsel added that under the Wallaces' strained interpretation of the policy, Gulati's opinion testimony on behalf of the Wallaces could not even be considered. According to counsel, the policy contained language requiring that any subsurface repair protocol be prepared "in compliance with Florida sinkhole testing standards." Counsel asserted that Gulati's protocol could not have met this standard because he did not perform any testing at the Wallace residence. Counsel stated that if the court were inclined to grant the Wallaces' motion for directed verdict, then Omega should be permitted to amend its pleadings to deny coverage. Counsel reiterated that was not the preferred option as "we want to fix the house."

The trial court granted the Wallaces a directed verdict on count four and denied Omega's motion to amend the pleadings. The court ultimately entered a final judgment awarding the Wallaces $207,628.96 (the full amount of the policy plus prejudgment interest). The court denied Omega's motions for rehearing and new trial and Omega's renewed motion to require a contract for repair as a condition of subsurface repair benefits.⁴

On appeal, Omega asserts that the trial court erred in granting the Wallaces' motion for directed verdict, denying its request to amend its pleadings, and denying its motion to require a...