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Homeowner insurance ruling a game-changer in Florida


A recent ruling by the Florida Supreme Court could change the way insurers pay damages in the Sunshine State in both commercial lines and homeowner policies.

The court ruled on Dec. 1 in Sebo v. American Home Assurance Co. in favor of Naples, Florida, homeowner John Sebo, who suffered severe property damage that ultimately resulted in the loss of his home, after Hurricane Wilma struck in October 2005. 

According to court records, Mr. Sebo had bought his home in April 2005 and obtained homeowner’s insurance from AHAC, a unit of American International Group Inc. A short time later, the house suffered serious water intrusion problems during rainstorms, revealing that the structure had major design and construction defects. The home suffered additional damage during Hurricane Wilma and was eventually demolished.

In January 2007, Mr. Sebo filed suit against a number of defendants, according to court records, and amended his complaint in November 2009 adding AHAC as a defendant and seeking a declaration that the policy provided coverage for his damages. A jury found in favor of Mr. Sebo, and the court eventually entered a judgment against AHAC. 

AHAC denied Mr. Sebo’s claim for any coverage other than mold damage and filed an appeal in August 2011 with the Florida 2nd District Court of Appeals in Lakeland. 

At issue was the application of either the efficient proximate cause doctrine or the concurrent cause doctrine in awarding damages.

The efficient proximate cause doctrine states that when a loss is caused by a combination of a covered risk and a specifically excluded risk, the loss is covered only if the covered risk was the most substantial or responsible factor in the loss. 

The concurrent cause doctrine states that when a property loss can be attributed to multiple independent perils, one or more of which is covered and one or more of which is excluded, the loss will be covered. 

The 2nd District reversed the lower court ruling, stating that “a covered peril can usually be found somewhere in the chain of causation, and to apply the concurrent causation analysis would effectively nullify all exclusions in an all-risk policy,” according to court records.

The 2nd District remanded the case for a new trial, “in which the causation of Sebo’s loss is examined under the efficient proximate cause theory.” 

"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" the Supreme Court said in its ruling.

A spokeman for AIG declined to comment on the case.

“It’s probably one of the most significant cases in the insurance area in the last 25 years,” Michael Higer, a Miami-based partner with Berger Singerman L.L.P., said Thursday regarding the decision. “It will have long-lasting effects.” 

“Obviously the efficient cause doctrine is very pro-insurer, and concurrent is much more favorable to the policyholder,” said Mr. Higer, who had filed an amicus curiae brief in the case on behalf of the Florida Association of Public Insurance Adjusters.

However, insurance companies can still write around the ruling, he said. 

An analysis by the New York-based law firm Reed Smith L.L.P. warned that “insurers in Florida will look to insert (anti-concurrent causation language) language into new and renewal policies to avoid the effect of the Sebo ruling.”

“For this reason, policyholders in Florida and elsewhere should embrace the favorable Sebo ruling while avoiding any efforts by insurers to include anti-concurrent causation language in policies in an attempt to undercut Florida law,” the analysis said.