TALLAHASSEE — The Florida Supreme Court recently used concurrent-cause doctrine, rather than the efficient proximate-cause doctrine, in determining the coverage of an all-risk property-insurance policy.
The court ruled in favor of the policyholder and came to its decision in the case Sebo v. American Home Assurance Co. Inc..
The plaintiff, John Sebo, wanted a review of the determination by the 2nd District Court of Appeals that sided with the insurer, American Home Assurance Co. Inc. The court denied coverage to Sebo on his $8 million homeowner's insurance policy.
The Sebo case concerned a private, high-ticket residence in Naples, Florida. The property first experienced water damage during rainstorms that were caused by construction defects. Then, in 2005, Hurricane Wilma hit, and more property and wind damage was incurred.
The water damage because of defects was denied by the homeowner's insurance policy. The homeowner decided to file suit against their insurer.
“The insurer relied on exclusionary language in the insured’s policy,” Perry Goodman, an attorney with Lewis Brisbois Bisgaard and Smith LLP, told The Florida Record. “However, the court determined if you have independent perils and one is covered and the other is excluded, they converge to cause a single loss. The policy must then provide coverage under the concurrent-cause doctrine, and this is what the court applied.”
The Florida Supreme Court upheld a ruling that was previously adopted in Wallach v. Rosenberg, a case heard in 1988, which stated if one cause is not the efficient cause among multiple causes, the two causes must be deemed equal.
“That’s basically what the case found,” Goodman said. “And that is where the concurrent-cause doctrine comes into play.”
The concurrent-cause doctrine is used when there are two combined defects, or multiple causes, causing a single peril. If one peril is covered under a homeowner’s insurance policy, the other must be covered, as well.
The court determined that the efficient-proximate cause could not be used in the Sebo case. It was decided that, when defects in the structure of the home and hurricane damage converge, the main reason for the cause of damage could not be found. Therefore, the efficient-proximate cause could not be determined.
“The concurrent-cause doctrine, rather than the efficient-proximate cause, was the appropriate method in this determination,” Goodman said. “Because the causes were concurrent, the loss must be covered.”
The Florida Supreme Court found indisputable evidence that Sebo’s homeowner's insurance policy included both structural defects caused by rainwater damage and hurricane-wind damage combined to cause property damage.
Therefore, the efficient proximate-cause doctrine could not be used and the concurrent-cause doctrine came into play.
“This could change the way insurance companies look at the language of a policy,” Goodman said.
Originally, the insurer paid only $50,000 in mold damage through the homeowner's multiple risk policy. In the end, the home could not be repaired and was demolished.