June 2018 Newsletter

Your board of directors has diligently met with the association’s
insurance agent. After many meetings and protracted
negotiations, the association purchases an “all-risk”
insurance policy. Not too long after, the association’s clubhouse
is damaged by hurricane force winds, water intrusion,
and possibly some faulty construction, too. Will the damage
be covered by the association’s insurer? This is what was
recently addressed on December 1, 2016 by the Supreme
Court of Florida in Sebo v. American Home Assurance
Company, Inc.
Sebo purchased a home in Naples, Florida in April,
2005, when it was four years old. He insured it for over
$8,000,000.00 with an “all-risk” insurance policy which
was specifically created for his residence. Shortly after he
bought the home, major water leaks caused by rainstorms
occurred and were reported to the property manager. Soon
it was apparent that the house suffered from major design
and construction defects. In fact, after one rainstorm “paint
along the windows just fell off the wall.” The residence
could not be repaired and was eventually torn down. On
two separate occasions, Sebo filed claims which were
denied, except for coverage in the amount of $50,000.00
for mold damage.
After a jury trial, the jurors found in favor of Sebo, and
the trial court entered a judgment against American Home
Assurance Company, Inc. However, the appellate court disagreed
with the trial court and reversed and remanded for
a new trial. The appellate court’s disagreement with the trial
court had to do with how the court should examine the
causation of loss. Due to a difference in rulings from different
appellate courts, the matter was decided by the Supreme
Court of Florida.
The main issue examined is when there are multiple
perils combined to create a loss and where at least one of
the perils is excluded by the terms of the policy, must the
insurer provide coverage under an “all-risk” policy? Should
“All-Risk” Insurance
Policies Are Not Always
What They Appear To Be
by Jeffrey A. Rembaum, Esq.
Kaye Bender Rembaum
the court have applied the “Efficient Proximate Cause”
theory, which provides that where there is a concurrence of
different causes, the one that set the others in motion (the
“efficient cause”) is the cause to which the loss is to be
attributed, or should the court have applied the “Concurrent
Cause Doctrine,” which provides that coverage may exist
where an insured risk constitutes a concurrent cause of the
loss even when the non-excluded cause is not the prime or
efficient cause of the peril?
In this case, Sebo argued that his insurer was required
to cover all losses under the “Concurrent Cause Doctrine.”
In making its determination, the Court noted that both rainwater
and hurricane winds combined with the defective
construction which caused the damage to Sebo’s property.
Ultimately, in reliance on and quoting an earlier case, the
Court found that “[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.”
Ultimately, the Court found that because the insurer did not
explicitly avoid applying the “Concurrent Cause Doctrine,”
the Court found that the plain language of the insurance
policy did not preclude Sebo’s coverage under his “all-risk”
policy.
The ever important “take away” from this case is that if
your association has a policy that excludes the “Concurrent
Cause Doctrine,” then in the event there are multiple perils
that caused the casualty and one of the perils is excluded
from coverage, then the association’s insurance company
may, in fact, be able to deny coverage based on the singular
exclusion, notwithstanding the coverage which may have
been available for the other perils had the excluded peril not
been part of the casualty causing event.
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