Insurance Coverage in Concurrent Cause Cases: Florida Supreme Court Decides District Split in Favor of Coverage

Elizabeth B. Fata | Claims Journal | August 9, 2017

On December 1, 2016, the Florida Supreme Court held in an insurance coverage case 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.” This decision came on the heels of a recent district split in the state between Florida’s Second District Court of Appeal and Third District Court of Appeal. The split concerned which legal theory of recovery should apply when two or more perils converge to cause a loss, and at least one of the perils is excluded from coverage. The Third District, in Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988), applied the concurrent causation doctrine, which holds that insurance coverage may exist when there are concurrent causes of a loss and at least one cause is covered under the policy. In contrast, the Second District, in American Home Assurance Co. v. Sebo, 141 So. 3d 195 (Fla. 2d DCA 2013), the decision from which the appeal was taken to the Florida Supreme Court, directed application of the efficient proximate cause doctrine. This theory holds that when different perils contribute to a loss, the efficient cause — the one that set the other causes in motion — is the cause to which the loss is attributable. If that cause is covered under the policy, the insured is entitled to coverage for the entire loss. The Florida Supreme Court resolved this divergence of views in Sebo v. American Home Assurance Company, Case number SC14-897, in favor of the Third District’s reasoning and the concurrent cause doctrine.

In Sebo v. American Home Assurance Company, homeowner John Sebo suffered severe property damage, resulting in the ultimate loss of his home, after Hurricane Wilma struck the West Coast of Florida in October 2005. Sebo had purchased his then four-year-old home in Naples, Fla., in April of that same year. Sebo then obtained homeowner’s insurance from American Home Assurance Company (AHAC) and was issued a custom “all risks” policy providing $8,000,000 in coverage. Shortly after purchasing the home, Sebo’s property began experiencing significant water intrusion and related problems during rainstorms. It became clear that the house suffered from major design and construction defects. When Hurricane Wilma subsequently hit Naples, Sebo’s home was further damaged. The residence could not be repaired and was eventually demolished. When Sebo submitted his claim to AHAC, the company denied coverage for any damage other than mold damage. Sebo subsequently renewed his claim but that was denied as well.


Sebo brought suit against the sellers of the property, the architect of the property, the construction company that built the property, and AHAC. Sebo settled against the other defendants and the issue went to trial with AHAC alone on the insurance coverage issue. The trial court entered judgment against AHAC and awarded Sebo the full policy limits of $8,000,000.

On appeal, the Second District Court of Appeal found that there was “no dispute in this case that there was more than one cause of the loss,” — that is, defective construction, rain, and wind — but disagreed with the trial court’s application of the concurrent causation doctrine and reversed and remanded for application of the efficient proximate cause theory.

The Florida Supreme Court, in reviewing the Second District’s decision and the diverging theories, reiterated that “ambiguous exclusionary clauses are construed even more strictly against the insurer than coverage clauses,” and that in all-risk policies such as Sebo’s, the “construction is governed by the language of the exclusionary provisions.” The court then rejected the Second District’s decision and its reasoning and held that the concurrent cause doctrine applied.

The Second District, in remanding for application of the efficient proximate cause doctrine, had reasoned 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.” The court disagreed with this logic because AHAC had explicitly written other sections of Sebo’s policy to avoid applying the concurrent cause doctrine. Because the relevant exclusionary language did not explicitly avoid applying the doctrine, the court found that the plain language of the policy did not preclude recovery.

The court concluded that because there was “no reasonable way to distinguish the proximate cause of Sebo’s property loss … it would not be feasible to apply the [efficient proximate cause] doctrine because no efficient cause can be determined.” As such, “when two independent perils converge and no single cause can be considered the sole or proximate cause, it is appropriate to apply the concurring cause doctrine.”

This is a policyholder friendly decision as it is not uncommon for multiple perils to combine and simultaneously cause properly damage. The decision frees policyholders from having to prove that the primary cause of a loss was a covered peril in circumstances involving unrelated causes of loss. While this decision provides policyholders some benefit when concurrent causes converge, the decision does not prohibit the application of the efficient proximate cause doctrine when the causes of loss are not concurrent; that is, when it is possible to trace the damage back through a chain of events and pinpoint a single cause that set the chain into motion.

Given that both the concurring cause and efficient proximate cause doctrines can still apply under Florida law when multiple causes contribute to a loss depending upon the facts giving rise to a particular claim, insurers handling claims in Florida will have to carefully evaluate the specific fact pattern giving rise to the loss to consider which causation doctrine should be applied and how. Furthermore, the court, while briefly mentioning that AHAC did not employ anti-concurrent cause language in the relevant exclusion, did not squarely address how the case would have been resolved if such language had been employed.

The resolution of this case in favor of policyholders should be an indicator to the insurance industry that they can expect to see an increase in claims, especially in the volatile environment of Florida where windstorms and similar occurrences are far from irregular. Policyholder and insurers alike will need to consider the implications this has on coverage of current contracts and how policies language will now be written moving forward in the wake of Sebo. Needless to say, as insurers adjust to this state of the law, similar coverage issues involving causation of loss will inevitably surface and the courts will have to address them at such time.

Claim Barred by Florida’s Construction Defect Statute of Repose? Maybe Not. Florida Court Says You Should Read the Construction Contract More Closely

Troy Vuurens | Butler Weihmuller Katz Craig | August 21, 2017

Claim professionals are often reminded that even the most meritorious claim is worthless if not filed within the applicable statute of limitations or statute of repose. In the world of construction defect claims, Florida law provides for a 10-year statute of repose. Under § 95.11(3)(c), the action must commence within 10 years after the date of actual possession by the owner, the date of the issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion or termination of the contract between the professional engineer, registered architect, or licensed contractor and his or her employer, whichever date is latest.

Not surprisingly, the parties do not always agree on the specific date that the countdown clock on the statute of repose commenced running. In a recent appellate decision, Florida’s 5th DCA reversed a trial court’s dismissal of a homeowner’s construction defect claim that was filed just beyond 10 years after the closing date on the property. See Busch v. Lennar Homes, LLC, 219 So.3d 93 (Fla. 5th DCA 2017).

In Busch, the defendant had taken the common position that the plaintiff’s claim was barred by the statute of repose because the Purchase and Sale Agreement, i.e. “the contract,” was completed on the date of the closing on the property, which was the latest date applicable under §95.11(3)(c). Therefore, argued the defendant, the claim expired exactly 10 years later and before the complaint was filed. The trial court agreed with the defendant and dismissed the claim upon determination that the contract was completed on the date of the closing, which commenced the running of the statute of repose.

The 5th DCA reversed on appeal and held that the trial court erred in finding that the contract was completed on the date of closing. The court held that a contract is not completed until both sides of a contract have been performed. The court pointed to the “inspection and punch-list clause” of the contract which stated: “Any remaining items that Seller has agreed to correct will be corrected by Seller at Seller’s sole cost and expense prior to closing or at Seller’s option within a reasonable time after closing.” In other words, the court found that the contract was not completed at the time of closing because there were remaining punch-list items that the Seller was obligated to correct. As such, the clock on the 10-year statute of repose did not start ticking until the contract was completed (i.e. when the Seller completed the punch-list items, post-closing).

In the context of residential construction, the closing date is generally the date when the statute of repose commences. It is typically the date on which the homeowner takes possession, final payment is made, and the contract is completed. However, the 5th DCA’s decision in Busch is a reminder that there are other factors to consider as well, including if there is a contractual obligation to complete any remaining work after the closing, such as punch-list items.

It is also worth noting that the defendant in Busch is a large production home builder who likely built thousands of homes with the same contract language. Other builders may have similar clauses incorporated into their contracts, too. The Busch case is an important new decision because of the sheer volume of homes that were likely built with this language. As such, it stands to reason that Florida practitioners engaged in residential construction defect litigation may begin to see these same issues arise in their cases, too. And in all cases where the statute of repose may become a critical issue, a careful analysis of the contract should be undertaken in order to identify similar language.

New Definition for Term “Completion” in Florida for Construction Defect Lawsuits

Neil Wilcove | Miller & Martin PLLC | August 14, 2017

For those that perform work in Florida, the Florida legislature updated the law pertaining to when construction defect lawsuits must be brought. While the Statute of Limitations for construction defect cases is four years, there was never really a set date on when the four years begins to run. Many cases in Florida are filed after the four-year statute of limitation as disputes erupt over when the statute of limitations actually begins to run. There is a Statute of Repose in Florida, which is ten years from the date of the latest to occur: actual possession by the owner, the date of the issuance of certificate of occupancy, the date of abandonment of the project if construction is not completed or the date the construction (or design) contract was completed or terminated.

Effective July 1, 2017, the definition for “completion of the contract” has been defined as “the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” While there will certainly be litigation over what the definition means, as people will fight over whether final performance has occurred or whether final payment has become due, at least the Florida legislature has decided to take on the issue.

No matter what state you perform work in, you need to be cognizant of the applicable statute of limitations and statute of repose (if there is one). These laws will impact contractual language on the front of the project and how you deal with claims on the back end. It will impact how long you should keep your project files, insurance policies and potential impacts on bonding capacity. In Florida, at least, depending on the type of work you perform, it could also determine whether the statute of repose applies to your work.

Down…But, Not Out!

Anaysa Gallardo Stutzman | Zelle LLP | July 7, 2017

Assignment of benefits (“AOB”) have become a double-edge sword for the consuming public.  While the public policy reasoning for their creation, to allow the insured to obtain immediate, necessary assistance in meeting their mitigation obligation and getting back to pre-loss condition, remains sound, the increased level of abuse has proven to be public enemy number one.  The Florida Office of the Insurance Consumer Advocate (“ICA”) reports that the abuse of AOBs “allows unscrupulous contractors to overinflate or submit improper claims, causing legal battles between the contractor and the insurance company, with the consumer left out of the picture.”  As a result, the ICA continues to monitor the effects of AOB abuse and report on the collected data to assist in proactive resolution of practices that may adversely affect consumers. The collected data bolsters the need for proposed solutions, such as the legislative attempts to invoke reforms.

The Florida Legislature (urged by Florida court decisions) has worked on legislation designed to combat systemic AOB abuse.  Unfortunately, for the second year in a row, these legislative efforts have failed. While the immediate battle has been lost, that momentum to win the war has grown stronger.
In 2016, several pieces of legislation were proposed to address relevant AOB issues.
Similar legislative efforts were launched in 2017 to combat AOB abuse.
Senate Bill 1038, filed February 17, 2017, addressed assignment of property insurance benefits by prohibiting certain awards of attorney fees to certain persons or entities in suits based on claims arising under property insurance policies and requiring specific conditions before finding that an assignment agreement is valid. Senate Bill 1038 died in the Committee on Banking and Insurance on May 5, 2017.
Senate Bill 1150, filed February 22, 2017, related to regulation of water damage restoration.  It defined the terms “professional water damage restorer” and “water damage restoration” such that the Department of Business and Professional Regulation would be required to license applicants who are qualified to practice water damage restoration and specify the qualifications for licensure.  Senate Bill 1150 was withdrawn from further consideration on May 1, 2017.
Senate Bill 1218, filed February 24, 2017, addressed property repair, creating within the Department of Business and Professional Regulation the water damage restoration services licensing program that would provide examination requirements for applicants for professional water damage restorer licensure. It would also require the department to license qualified applicants who meet and maintain specified requirements, including requiring professional water damage restorers to maintain specified insurance coverage. Senate Bill 1218 died on May 5, 2017 in the Committee on Regulated Industries.
House Bill 1421, filed March 7, 2017, addressed property insurance assignment agreements by providing requirements and limitations of assignments, establishing a burden of proof, providing for an award of reasonable attorney fees for certain claims arising under assignment agreements, setting forth specific notice and reporting requirements, and confirming that certain residential property insurance policies may not prohibit assignment of post-loss benefits. House Bill 1421 died in Committee on Banking and Insurance on May 5, 2017.
While the outcome of the May 5, 2017, massacre of AOB regulatory bills may be disheartening as it marks the second consecutive legislative year that AOB reform measures failed, there is a glimmer of hope.  When the Florida House of Representatives passed HB 1421 (by a vote of 91 to 26), Commissioner David Altmaier issued the following statement:
I applaud the Florida House of Representatives for their favorable vote on HB 1421 today, and I am especially grateful to Representative James Grant, the bill sponsor, and Representative Rene Plasencia, the prime co-sponsor. This legislation makes significant progress in protecting Florida consumers from homeowners insurance rate increases fueled by rising litigation costs associated with an Assignment of Benefits (AOB). We appreciate the support and efforts of the entire Florida Legislature as they considered this legislative priority of the Office of Insurance Regulation during the 2017 Session.
The takeaway from the past two legislative sessions ought to be that while the battle has been lost, there has been forward progress.  Several years ago, the AOB war was waged in courthouses.  Judges recognized the long-standing tradition and public-policy basis for allowing insureds to assign their indemnity benefits to expedite remediation, so they called upon lawmakers to take action.  While the recent two years of effort have not been successful, those efforts reveal the existence of an advancing campaign against AOB abuse.

Two Different Approaches to the Assignment of Benefits Issue

Sean Shaw | Property Insurance Coverage Law Blog | July 18, 2017

Assignment of Benefits (“AOBs”) has been an issue in the property insurance realm for several years. In fact, the Florida Legislature made a hard push to address the issue during the 2017 Session but was unable to do so. The two main AOB bills that gained traction last Session dealt with the issue in slightly different ways. SB 1218 was sponsored by Senator Gary Farmer. I have set forth the summary staff analysis below:

CS/SB 1218 creates new requirements for assignment of post-loss benefits from personal residential, commercial residential, and commercial property insurance policies. The bill places various requirements and restrictions on assignments of post-loss benefits in personal residential, commercial residential, and commercial property insurance policies. The bill does not allow such policies to prohibit the post-loss assignment of benefits. It provides, however, that an agreement to assign post-loss benefits is not valid unless the agreement:

-Is in writing between the policyholder and assignee and is delivered to the insurer under specified time requirements;

-Is limited to claims for work performed by the assignee for damages claimed to be covered;

-Allows the policyholder to unilaterally rescind the assignment of post-loss benefits to a vendor within 5 days of execution of the agreement; and

-Contains an accurate and up-to-date statement of the scope of work to be performed.

The bill provides that an assignee:

-Must provide the policyholder with accurate and up-to date revised statements of the scope of work to be performed as supplemental or additional repairs are required;

-Must guarantee to the policyholder that the work performed conforms to current and accepted industry standards;

-May not charge the policyholder more than the applicable deductible contained in the policy unless the policyholder opts for additional work at the policyholder’s own expense;

-May not charge the policyholder directly, except for additional work not covered under the policy; and

-May not pay referral fees totaling more than $750 in connection with the assignment.

The bill creates a regulatory system for professional water damage restorers similar to the regulatory system for mold assessors. It prohibits unlicensed persons from practicing water damage restoration and requires assignees of water damage claims to be licensed. It requires the Department of Business and Professional Regulation (DBPR) to license professional water damage restorers if they are of good moral character, have passed an appropriate examination, and meet certain education requirements. The bill provides for fees, disciplinary rules, continuing education requirements, and insurance requirements for professional water damage restorers.

The bill provides that attorney fees and costs paid by a property insurer pursuant to s. 627.428, F.S., may not be included in a property insurer’s rate base and may not be used to justify a rate or rate change.

The bill creates new reporting requirements for insurers and claimant attorneys relating to claims in which an assignment of benefits is obtained.

The entire bill language, full staff analyses and bill history can be found here.

HB 1421 was sponsored by Representatives Jamie Grant and Rene Plasencia. The summary staff analysis is as follows:

Current statute provides that an insurance policy may be assignable, or not assignable, as provided by its terms. Florida courts have held that an insurance policy may prohibit a pre-loss assignment of benefits; however, the courts have also held that an insurance policy may not prohibit a post-loss assignment. The bill codifies the case law that bars a residential property insurance policy from restricting the assignment of post-loss benefits.

In addition, the bill defines “assignment agreement” and establishes requirements related to the execution, validity, effect, and enforcement of an assignment agreement. Specifically, the bill requires a written agreement, a 7-day period within which the policyholder may rescind the agreement, an estimate of services, notice to the insurer when an assignment agreement has been executed, and notice to the policyholder regarding the legal implications of an assignment agreement. The bill prohibits specified fees in connection with an assignment agreement and prohibits an assignment agreement from altering a policy provision related to managed repair. The bill transfers certain duties of the insurance contract to the assignee which must be carried out before a lawsuit may be filed and duties that shift the burden to the assignee to prove why failure to carry out the duties has not limited the insurer’s ability to perform under the contract. The bill also limits an assignee’s ability to recover certain costs directly from the policyholder. The new requirements apply to assignment agreements executed after July 1, 2017.

If an assignee intends to file suit against an insurer to enforce an assignment agreement, the bill requires that the assignee give the insurer prior notice. Notice must be served at least 10 business days before filing suit, but may not be filed before the insurer has made a determination of coverage according to the timeframes and requirements of current law. Both parties must exchange specific information related to the claim, including the assignee’s presuit settlement demand and the insurer’s presuit settlement offer. If the parties fail to settle and litigation results in a judgment, the bill provides the exclusive means for either party to recover attorney fees, other than fees awarded as a sanction. The bill allows an award of attorney fees based on how much the litigation improved the amount that otherwise could have been obtained during settlement negotiations. The bill defines the difference between the insurer’s offer and the assignor’s demand as “the disputed amount.” Fees are then awarded as follows:

-If the difference between the judgment and the settlement offer is less than 25 percent of the disputed amount, then the insurer is entitled to attorney fees.

-If the difference between the judgment and the settlement offer is at least 25 percent but less than 50 percent of the disputed amount, neither party is entitled to fees.

-If the difference between the judgment and the settlement offer is at least 50 percent of the disputed amount, the vendor receives attorney fees.

The Office of Insurance Regulation is directed to require each insurer to report by January 30, 2020, and each year thereafter, specified data on claims paid in the prior year pursuant to an assignment agreement.

The bill does not have a fiscal impact on the state or on local governments. It will have an indeterminate fiscal impact on the private sector.

The bill provides an effective date of July 1, 2017.

The entire bill language, full staff analyses and bill history can be found here.

At the risk of oversimplifying, HB 1421 addressed the AOB issue from the lawsuit perspective whereas SB 1218 addressed it from a regulatory standpoint. I have maintained that there needs to be some sort of AOB reform and that this issue will be addressed during the 2018 Session. In my opinion, SB 1218 is closer to the mark than HB 1421, but both have their good parts. Hopefully, the Legislature will come up with a fair and balanced solution that attacks the bad actors, protects consumers, and preserves the ability of a policyholder to execute an AOB under the right conditions.