Pinzon v. First Liberty Ins. Corp., Case No. 5:12-cv-636-Oc-10PRL

• Decision Date: 30 September 2013
• Docket Number: Case No. 5:12-cv-636-Oc-10PRL
• Parties: JUAN PINZON and JAQUELINE ESPITIA, PlaintiffS, v. THE FIRST LIBERTY INSURANCE CORPORATION, Defendant.
• Court: U.S. District Court — Middle District of Florida

JUAN PINZON and JAQUELINE ESPITIA, PlaintiffS, v. THE FIRST LIBERTY INSURANCE CORPORATION, Defendant.

Case No. 5:12-cv-636-Oc-10PRL

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA OCALA DIVISION

DONE and ORDERED: September 30, 2013

ORDER

This is an action for breach of contract arising out of a homeowners insurance policy issued by the Defendant The First Liberty Insurance Corporation ("First Liberty") to Plaintiffs Juan Pinzon and Jaqueline Espitia (the "Insureds"). The Insureds contend that their property suffered damages consistent with sinkhole activity, that such damage is a covered loss under the policy, and that First Liberty has refused to pay benefits for the loss as required by the policy.

The Insureds originally filed their Complaint in state court in Marion County, Florida (Doc. 2). First Liberty removed the case to this Court pursuant to 28 U.S.C. §§ 1332 and 1441(a) (Doc. 1), and subsequently filed a counterclaim for declaratory judgment (Doc. 4). First Liberty seeks a declaration that the terms of the insurance policy do not cover any of the damages claimed by the Insureds.

First Liberty has filed a Motion for Summary Judgment on its Counterclaim (Doc. 15), to which the Insureds have filed a timely response in opposition (Doc. 17). The issue presented by the motion is whether the Court should apply the statutory definition of "structural damage" contained in Fla. Stat. § 627.706(2)(k) (2011) to the term "structural damage" as it is used in the insurance policy. There appears to be no dispute that Florida law governs the interpretation and enforcement of the insurance policy.

Upon due consideration, the Court concludes that First Liberty's motion is due to be Granted.

Undisputed Material Facts

I. The Policy

The Insureds are owners of a residence located at 3521 Northeast 28th Terrace, Ocala, Marion County, Florida, 34479. First Liberty issued a homeowners insurance policy, number H36-28-742815-401-0 (the "Policy") to the Insureds, with an effective term of June 9, 2011 through June 9, 2012. The Policy provides coverage for, among other things, Sinkhole Losses as follows (Doc. 15-1, p. 30):

SECTION I - PERILS INSURED AGAINST

The following perils are added:

Sinkhole Loss

a. Sinkhole Loss means structural damage to the building, including the foundation, caused by sinkhole activity.

Contents coverage shall apply only if there is structural damage to the building caused by sinkhole activity.

(1) We will pay to stabilize the land and building and repair the foundation in accordance with the recommendations of a professional engineer and in consultation with you.

b. 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 limestone or similar rock formation.

The SECTION I - Earth Movement exclusion does not apply to this peril.

The Policy nowhere defines the term "structural damage," and does not reference any statutory or other external definitions of the term.

II. The Claim

On January 9, 2012, the Insureds made a claim for sinkhole loss for damage to their home. They listed a date of loss of November 1, 2011. As required by the Florida Insurance Code, Fla. Stat. Ch. 627, First Liberty retained a professional engineer, Florida Geotechnical Engineering ("FGE"), to inspect the Insureds' property and home, conduct a structural evaluation, test for a sinkhole on the property, and prepare a report verifying both whether any structural damage occurred, and if so, whether the structural damage was caused by sinkhole activity. Fla. Stat. §§ 627.7072-627.7073. FGE issued a report concluding that:

Based on the investigation results and data presented herein and in our professional opinion, none of the damage at the Pinzon & Espitia residence are structural damage as defined by the Florida Statutes. The damages are the result of minor differential settlement, the expansion and contraction of building materials, and normal shrinkage of cementitious building materials. (Doc. 15, p. 2).

Based on FGE's report, First Liberty denied the Insureds' claim both on the basis that the Policy does not cover damage for settling, bulging, or expansion of the property and building materials, and because there was no indication of any structural damage to their home. This lawsuit followed.

The Legislative History of Florida's Sinkhole Statute

From 1981 through 2004, Fla. Stat. § 627.706(1) required that insurers make coverage available for sinkhole loss. Bay Farms Corp. v. Great American Alliance Ins. Co., 835 F. Supp. 2d 1227, 1230-33 (M.D. Fla. 2011) (citing Fla. Stat. § 627.706). During that time, the definition of "sinkhole loss" incorporated the definition of "sinkhole" and meant "actual physical damage to the property covered arising out of or caused by sudden settlement or collapse of the earth supporting such property only when such settlement or collapse results from subterranean voids created by the action of water on a limestone or similar rock formation." Id.; Fla. Stat. § 627.706(3). Additionally, the statute contained a separate definition of the term "loss" as "structural damage to the building." Id.; Fla. Stat. § 627.706(2).

In 2005, the Florida Legislature redefined a "sinkhole loss" as "structural damage to the building, including the foundation, caused by sinkhole activity." Bay Farms, 835F. Supp. 2d at 1230; 2005 Fla. Sess. Law. Serv. Ch. 2005-111, § 17. The 2005 definition incorporated the previous definition of the term "loss" and that term was removed from the statute. Bay Farms, 835 F. Supp. 2d at 1230. The 2005 version also added definitions for other terms such as "sinkhole" and "sinkhole activity." Id. A separate definition for the term "structural damage" was not included. Id.

In 2011, the Legislature, for the first time, adopted a five-part definition of "structural damage" to be applied when interpreting insurance policies providing coverage for sinkhole losses. See 2011 Fla. Sess. Law. Serv. Ch. 2011-39, § 22. The 2011 Amendment went into effect on May 17, 2011, pursuant to the Enabling Act. As amended, § 627.706 provides:

(2) As used in ss. 627-706-627-7074 and as used in connection with any policy providing coverage for catastrophic ground cover collapse or for sinkhole losses, the term:

(j) "Sinkhole loss" means structural damage to the covered building, including the foundation, caused by sinkhole activity. Contents coverage and additional living expenses apply only if there is structural damage to the covered building caused by sinkhole activity.

(k) "Structural damage" means a covered building, regardless of the date of its construction, has experienced the following:

1. Interior floor displacement or deflection in excess of acceptable variances as defined in ACI 117-90 or the Florida Building Code, which results in settlement-related damage to the interior such that the interior building structure or members become unfit for service or represents a safety hazard as defined within the Florida Building Code;

2. Foundation displacement or deflection in excess of acceptable variances as defined in ACI 318-95 or the FloridaBuilding Code, which results in settlement-related damage to the primary structural members or primary structural systems that prevents those members or systems from supporting the loads and forces they were designed to support to the extent that stresses in those primary structural members or primary structural systems exceeds one and one-third the nominal strength allowed under the Florida Building Code for new buildings of similar structure, purpose, or location;

3. Damage that results in listing, leaning, or buckling of the exterior load-bearing walls or other vertical primary structural members to such an extent that a plumb line passing through the center of gravity does not fall inside the middle one-third of the base as defined within the Florida Building Code;

4. Damage that results in the building, or any portion of the building containing primary structural members or primary structural systems, being significantly likely to imminently collapse because of the movement or instability of the ground within the influence zone of the supporting ground within the sheer plane necessary for the purpose of supporting such building as defined within the Florida Building Code; or

5. Damage occurring on or after October 15, 2005, that qualifies as "substantial structural damage" as defined in the Florida Building Code.

The 2011 Amendment indirectly modified the definition of "sinkhole loss" by adding a new and highly technical definition for the previously undefined term "structural damage." This amendment attempts to resolve the legislature's "concern [ ] about the impact the growing number and the severity of sinkhole insurance claims had on Citizens Property Insurance Corporation and the private insurance market." Gonzalez v. Liberty Mutual Fire Ins. Co., No. 8:12-cv-2549-T-23EAJ, 2013 WL 5183810 at *8 (M.D. Fla. Sept. 3, 2013) (quoting Bay Farms, 835 F. Supp. 2d at 1232).In other words, the Florida Legislature sought to reduce the number of sinkhole loss claims by narrowly defining the term "structural damage."

Summary Judgment Standard of Review

Pursuant to Federal Rule of Civil Procedure 56(a), "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." In applying this standard, the Court must examine the materials on file and the record evidence "in the light most favorable to the nonmoving party." Samples on Behalf of Samples v. Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988). When faced with a "properly supported motion for summary judgment [the nonmoving party] must come forward with specific factual evidence, presenting more than mere...