Sebo v. Am. Home Assurance Co.

• Decision Date: 01 December 2016
• Docket Number: No. SC14–897.,SC14–897.
• Citation: 208 So.3d 694
• Parties: John Robert SEBO, etc., Petitioner, v. AMERICAN HOME ASSURANCE COMPANY, INC., Respondent.
• Court: Florida Supreme Court

208 So.3d 694

John Robert SEBO, etc., Petitioner,

v.AMERICAN HOME ASSURANCE COMPANY, INC., Respondent.

No. SC14–897.

Supreme Court of Florida.

Dec. 1, 2016.

Edward K. Cheffy, David Allan Zulian, and Debbie Sines Crockett of Cheffy Passidomo, P.A., Naples, FL; and Mark Andrew Boyle, Geoffrey Henry Gentile, Michael Wade Leonard, Amanda Kaye Anderson, Molly Ann Chafe Brockmeyer, Justin Michael Thomas, and Thomas Patrick Rechtin of Boyle, Gentile & Leonard, P.A., Fort Myers, FL, for Petitioner.

Anthony J. Russo, Scott J. Frank, Christopher M. Ramey, and Ezequiel Lugo of Butler Weihmuller Katz Craig LLP, Tampa, FL; Janet L. Brown and Susan B. Harwood of Boehm, Brown, Harwood, P.A., Maitland, FL; and Raoul G. Cantero, III, David P. Draigh, and Ryan Andrew Ulloa of White & Case LLP, Miami, FL, for Respondent.

Richard Hugh Lumpkin and Benjamin C. Hassebrock of Ver Ploeg & Lumpkin, P.A., Miami, FL; and George Alexander Vaka and Nancy Ann Lauten of Vaka Law Group, P.L., Tampa, FL, for Amicus Curiae United Policyholders.

Michael Jerome Higer and Colleen Alexis Maranges of Higer Lichter & Givner, LLP, Aventura, FL, for Amicus Curiae The Florida Association of Public Insurance Adjusters.

James Andrew McKee, Thomas Joseph Maida, and Benjamin James Grossman of Foley & Lardner LLP, Tallahassee, FL, for Amici Curiae Florida Insurance Council, Property Casualty Insurance Association of America, National Association of Mutual Insurance Companies, and American Insurance Association.

PERRY, J.

John Sebo seeks review of the decision of the Second District Court of Appeal in American Home Assurance Co. v. Sebo, 141 So.3d 195 (Fla. 2d DCA 2013), on the ground that it expressly and directly conflicts with a decision of the Third District Court of Appeal in Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3d DCA 1988), on a question of law. We have jurisdiction. See art. V, § 3(b)(3), Fla. Const. For the following reasons, we quash the decision in Sebo, and approve the rationale of the Third District in Wallach.

FACTS

The facts of this case are taken from the Second District Court of Appeal's opinion:

[John] Sebo purchased [a Naples, Florida] home in April 2005, when it was four years old. [American Home Assurance Company (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.

Sebo, 141 So.3d at 196–97.

On appeal, the Second District 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." Id. at 197. However, the court disagreed with the trial court's application of Wallach, 527 So.2d 1386, and, in fact, disagreed with the Third District's "determination that the concurrent causation doctrine should be applied in a case involving multiple perils and a first-party insurance policy." Sebo, 141 So.3d at 198. The court reversed and remanded for a new trial, "in which the causation of Sebo's loss is examined under the efficient proximate cause theory." Id. at 201.

Standard of Review

The issue presented is 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. To answer this question, this Court must determine the proper theory of recovery to apply, which is a pure question of law. Therefore, the review is de novo. Fayad v. Clarendon Nat'l Ins. Co., 899 So.2d 1082, 1085 (Fla.2005).

Additionally, the policy at issue in this case is an all-risk policy. We have stated that "[a]lthough the term ‘all-risk’ is afforded a broad, comprehensive meaning, an ‘all-risk’ policy is not an ‘all loss' policy, and this does not extend coverage for every conceivable loss." Id. at 1086 (citation omitted). Insurance contracts are construed in accordance with the plain language of the policy. Id. (citing Auto–Owners Ins. Co. v. Anderson, 756 So.2d 29, 33 (Fla.2000) ). However, if the language is susceptible to more than one reasonable interpretation and is therefore ambiguous, the policy will be strictly construed against the insurer and in favor of the insured. Id. "[A]mbiguous ‘exclusionary clauses are construed even more strictly against the insurer than coverage clauses.’ " Id. (quoting Anderson, 756 So.2d at 34 ). In short, in all-risk policies such as the one held by Sebo, construction is governed by the language of the exclusionary provisions.

DISCUSSION

We are confronted with determining the appropriate theory of recovery to apply when two or more perils converge to cause a loss and at least one of the perils is excluded from an insurance policy. When addressing this question, courts have developed competing theories on how to determine coverage: the efficient proximate cause and concurring cause doctrines. To begin our analysis, we first explain these doctrines. Then we discuss the Second District's decision below. 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. Accordingly, we quash the decision below.

Efficient Proximate Cause (EPC)

The EPC provides that where 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. Sabella v. Nat'l Union Fire Ins. Co., 59 Cal.2d 21, 27 Cal.Rptr. 689, 377 P.2d 889, 892 (1963) ; Fire Ass'n of Phila. v. Evansville Brewing Ass'n, 73 Fla. 904, 75 So. 196 (1917).

We applied the EPC in Evansville Brewing, where the coverage at issue provided under an all-loss fire policy excluded loss caused by an explosion. We explained, "[w]hile the insurer is not liable for a loss caused by an explosion which was not produced by a preceding fire, yet if the explosion is caused by fire during its progress in the building, the fire is the proximate cause of the loss, the explosion being a mere incident of the fire, and the insurer is liable." Evansville Brewing, 75 So. at 198. In Evansville Brewing, we contemplated a chain of events where one peril directly led to a subsequent peril. In finding that coverage existed under the policy, we drew the distinction between a covered peril setting into motion an uncovered peril and an uncovered peril setting into motion a covered peril. Coverage exists for the former but not the latter.

The EPC was explained by the California Supreme Court¹ in Sabella, where it reasoned, " ‘in determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause—the one that sets others in motion—is the cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster.’ " Sabella, 27 Cal.Rptr. 689, 377 P.2d at 895 (quoting 6 George J. Couch, Cyclopedia of Insurance Law § 1466, at 5303–04 (1930)). The California Supreme Court thus reasoned that a covered peril that convenes with an uncovered peril may still provide for coverage under a policy when the covered peril triggered the events that eventually led to the loss.

Concurrent Cause Doctrine (CCD)

The CCD provides that coverage may exist where an insured risk constitutes a concurrent cause of the loss even when it is not the prime or efficient cause. See Wallach, 527 So.2d 1386 ; State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal.3d 94, 109 Cal.Rptr. 811, 514 P.2d 123, 133 (1973).

The CCD originated with the California Supreme Court's decision in Partridge, where the court was presented with "a somewhat novel question of insurance coverage: when two negligent acts of an insured—one...