Florida Supreme Court Issues Important First Party Insurance Claim Ruling Approving Concurring Cause Doctrine
The Florida Supreme Court has recently issued an important First Party Insurance Claim ruling approving the Concurrent Cause Doctrine where when two or more perils converge to cause a loss and at least one of the perils is excluded from an insurance policy, if no single cause can be considered the sole or proximate cause. On first blush, it would seem that the Sebo opinion is a significant victory for insureds because the Concurrent Cause Doctrine would favor insurance coverage where multiple perils converge to cause a loss. Nevertheless, because the Court’s holding turned on the fact that the insurance policy did not expressly exclude the application of CCD in the “property” section of the policy, it is likely that the victory will be short-lived with insurance policy changes universally excluding the application of the CCD under these circumstances.
The facts of the case are neither unusual nor unique. The Plaintiff Sebo purchased a four-year-old home. American Home Assurance Company (AHAC)] provided homeowners insurance policy, which insured against “all risks”. Shortly after Sebo bought the residence, water began to intrude during rainstorms. It soon became clear that the house suffered from major design and construction defects. AHAC investigated the claim and denied coverage for most of the claimed losses. The residence could not be repaired and was eventually demolished. Sebo filed suit against the sellers of the property, the architect who designed the residence, and the construction company that built it. He alleged that the home had been negligently designed and constructed and that the sellers had fraudulently failed to disclose the defects in the property. Sebo also added AHAC as a defendant seeking a declaration that the policy provided coverage for his damages. After Sebo settled his claims against most of the other defendants, the trial proceeded only on his declaratory action against AHAC. The jurors found in favor of Sebo, and the court eventually entered judgment against AHAC.
On appeal, the Second District reversed and remanded for a new trial, “in which the causation of Sebo’s loss is examined under the efficient proximate cause theory.” (EPC). Sebo, 141 So.3d at 201. The EPC provides that where there is a concurrence of different perils, the efficient cause—the one that set the other in motion—is the cause to which the loss is attributable. Sabella v. Nat’l Union Fire Ins. Co., 377 P.2d 889, 892 (Cal.1963); Fire Ass’n of Phila. v. Evansville Brewing Ass’n, 75 So. 196 (Fla.1917). Conversely, the Concurrent Cause Doctrine (CCD) provides that coverage may exist where an insured risk constitutes a concurrent cause of the loss even when it is not the prime or efficient cause. See Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3d DCA 1988); State Farm Mut. Auto. Ins. Co. v. Partridge, 514 P.2d 123, 133 (Cal.1973).
In determining that the CCD should apply to afford Sebo coverage, the Florida Supreme Court reasoned that “[b]ecause AHAC did not explicitly avoid applying the CCD, we find that the plain language of the policy does not preclude recovery in this case.” Thus, while it appears that both doctrines – the EPC and the CCD remain viable in Florida, depending upon the causation scenario, it is likely that revisions to insurance policy exclusions will effectively relegate future similar disputes to the conundrum for the fact-finder of how to determine the covered peril was the efficient cause of the loss when no single cause can truly be considered the sole or proximate cause. The insurance commission should carefully review this issue to determine whether and to what extent policy exclusions excluding the application of the CCD should be permissible and enforceable.