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Florida Supreme Court Limits Coverage Exclusions - Opens Additional Recovery Opportunities

January 12, 2017 | Category: Subro News and Cases

On December 1, 2016 the Florida Supreme Court issued an opinion in Sebo v. American Home Assurance Co., Inc.,  2016 WL 7013859.  This decision will have a significant impact on both property claim adjustments and the scope of subrogation recoveries in Florida.  The plaintiff in Sebo purchased a multi-million dollar home in 2007.  American Home Assurance Company (“American Home”) provided the homeowner’s coverage under an all-risk manuscript policy.  Almost immediately after purchasing the property, Sebo began experiencing problems with the home including leaks and various other construction/design defects. Sebo initially sued the general contractor, architect and the sellers of the property. Sebo also submitted a claim to American Home seeking coverage for the damage. The carrier denied most of Sebo’s claim citing to several common policy exclusions including:

We do not cover any loss caused by faulty, inadequate or defective:

  1. Planning, zoning, development, surveying, siting;
  2. Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;
  3.  Materials used in repair, construction, renovation or remodeling; or …maintenance … of part or all of any property whether on or off the residence.

While some of Sebo’s damage was clearly excluded under the policy, some of the damage was caused by covered events, including Hurricane Wilma.  When American Home reaffirmed its coverage denial, Sebo added the carrier as a defendant, and went to trial against American Home on the issue of coverage. The jury found in favor of the plaintiff, and the Court determined the policy provided coverage for the entirety of Sebo’s claim.  After an intermediate level appeal, the case made its way to the Florida Supreme Court.


The Court examined two competing legal doctrines in order to choose “the appropriate theory of recovery … when two or more perils converge to cause a loss and at least one of the perils is excluded from an insurance policy.”  Id. at 2. The first doctrine is known as the Efficient Proximate Cause (EPC) theory.  Under the EPC, when several causes contribute to a loss, a court must determine what the efficient cause is, and coverage will be based upon that "efficient" cause. The other doctine is the Concurrent Cause Doctrine (CCD).  Under the CCD, as long as just one of the concurrent causes of loss is a covered cause, the policy will provide coverage, even if the other causes are more substantial, efficient, and are excluded.  After a detailed analysis of both theories, the Court adopted the CCD as the law in Florida and affirmed American Home's responsibility to pay for the entirety of Sebo's claim.  

The Court’s holding in Sebo is significant from both coverage and subrogation perspectives.  Carriers will obviously need to consider this opinion in making coverage decisions where the cause of damage may be attributable to several independent factors, some covered and some excluded.  On the subrogation side, if carriers must now provide coverage for losses which previously may have been excluded (i.e. due to faulty construction, repair etc.), subrogation professionals must be prepared to undertake and pursue general contractors, subcontractors, architects and other responsible parties in potentially complex and expensive construction litigation.

The Florida Supreme Court may have already set the stage for future subrogation claims in these types of losses when it stated as a basis for its decision: “Where 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.” Id. at 5. (Emphasis supplied). Now it’s up to the subrogation professional to recover those newly covered losses from the “negligent humans”.

The full text of the Florida Supreme Court Opinion can be found here: http://www.floridasupremecourt.org/decisions/2016/sc14-897.pdf