By Ted Babbit
Published May 2017
Sebo v American Home Assurance Co., 41 Fla. L. Weekly S582 (Fla. 2016) answers the question of what coverage exists in a homeowner’s policy when there are damages caused by multiple perils, some of which are excluded from coverage and some of which are not. This case came before the Supreme Court on the basis of a conflict in American Home Assurance Co. v Sebo, 141 So. 3rd 195 (Fla. 2nd DCA 2013) and Wallach v Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988).
The underlying facts of Sebo were that the insured purchased a home in Naples, Florida, and had it insured by the defendant insurance company under an “all risk” policy. The home was valued at $8 million. Shortly after taking residence, the home literally began to fall apart with major water leaks caused by serious design and construction defects. After rain caused serious damage, Hurricane Wilma struck the home and further damaged it. Insurance coverage excluded coverage for negligent design and construction but included coverage for hurricane damage.
The Second District reversed the jury finding of insurance coverage by applying the Efficient Proximate Cause (EPC) theory. The EPC analysis holds that where there is a concurrence of different perils, the efficient cause, that is the one that set the others in motion, is the cause to which the loss is attributable. Thus, the Second District concluded that because the construction defects were excluded under the policy and those defects set in motion the eventual loss during the hurricane, no coverage existed.
In Wallach, supra, the Third District applied the concurrent cause doctrine (CCD) to find coverage where a sea wall collapsed and led to a portion of the insured’s sea wall crumbling. The policy contained an exclusion for loss resulting from earth movement or water damage. The concurrent cause doctrine provides coverage where there is a combination of insured and uninsured risk but the insured risk is a concurrent cause of the loss even if it is not the prime or efficient cause.
In Sebo, the Supreme Court concluded that there was no dispute but that the rain water caused by defective construction combined with the hurricane winds caused the damage to the insured’s property. The Court found that where there is a concert of causes, it is not feasible to apply the EPC Doctrine because there really is no efficient cause that can be determined.
Also not in dispute is that the rainwater and
hurricane winds combined with the defective
construction to cause the damage to Sebo’s
property. As in Partridge, there is no
reasonable way to distinguish the proximate
cause of Sebo’s property loss – the rain and
construction defects acted in concert to create
the destruction of Sebo’s home. As such,
it would not be feasible to apply the EPC
doctrine because no efficient cause can be
determined. As stated in Wallach, “[w]here
weather perils combine with human negligence
to cause a loss, it seems logical and
reasonable to find the loss covered by an
all-risk policy even if one of the causes is
excluded from coverage.” Wallach, 527 So. 2d
at 1388. Furthermore, we disagree with the
Second District’s statement that the CCD
nullifies all exclusionary language and
note that AHAC explicitly wrote other sections
of Sebo’s policy to avoid applying the CCD.
Because AHAC did not explicitly avoid applying
the CCD, we find that the plain language of
the policy does not preclude recovery in this
While this Court quashed the Second District’s opinion thereby nullifying its application of EPC in this case, it remains to be seen as to whether a homeowner carrier could write its policy so that only CCD rather than EPC can be utilized in analyzing loss.
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