In the latest of a string of recent decisions adverse to insurers, the Florida Supreme Court held that, where a residential property incurs damage due to the cumulative or combined effects of multiple “concurrent” causes, any of which a homeowners policy covers, the insurer must pay the entire loss even if its policy expressly excludes the other causes. Sebo v. Amer. Home Assurance Co., No. SC14-897 (Dec. 1, 2016). The same rule will presumably be applied to other property lines and by analogy to liability policies also.

A homeowner’s luxury home was insured for over $8 million under a manuscript “all risk” policy with various exclusions. The exclusion for loss due to “design, specifications, workmanship, repair, construction” and materials so used became crucial to the dispute. Soon after purchase, the house suffered numerous rainstorm leaks; a few months later, a hurricane damaged it more; and eventually it was demolished. The policy covered rain damage. Neither the Supreme Court nor intermediate appellate opinion state whether it covered windstorm, but that seems likely. After the insured settled litigation against the seller, architect, and builder, he prevailed at trial in a declaratory action against the insurer, which had denied coverage beyond $50,000 for mold.

The case reached the Supreme Court due to conflict between the court of appeals ruling, which directed retrial applying an “efficient proximate cause” standard, and a 1988 decision by another lower court instead adopting a “concurrent cause” approach. Under the efficient cause standard, if any cause or peril is covered, but others are not, the factfinder must determine which cause is “the most substantial or responsible.” When causes are “concurrent,” the insurer is liable for the entire loss if its policy covers at least one cause. Emphasizing it was undisputed that here “there was more than one cause of the loss, including defective construction, rain, and wind,” the court approved the concurrent cause rule, quoting a passage in the 1988 decision calling that “logical and reasonable” when “weather perils combine with human negligence to cause a loss.” In practical effect, the court read the exclusion for loss due to faulty design or construction as if it would apply only if the loss were due solely to such causes.

Although the concurrent cause rule is now Florida law absent legislative change, the decision leaves insurers three lines of defense where multiple causes, some not covered, contribute to a loss. First, the court appears to preserve a version of the proximate rule if losses result from a chain of sequential events involving covered and uncovered causes or perils. There is no coverage if “an uncovered peril set[s] into motion a covered peril;” conversely, an insurer must pay if “a covered peril set[s] into motion an uncovered peril.” Disputed lay and expert testimony about chains of events and distinct effects of different ‘links’ of a chain can readily be imagined. Still, how easily sequential causal chains are distinguished from “concurrent” causes can be doubted: in Sebo, any design and construction defects surely occurred before the rain and wind damage, but the court viewed all those causes as concurrent because “independent.”

Second, both the Supreme Court and intermediate appellate court noted that the policy exclusion (for pollution) had an explicit anti-concurrent-cause provision, unlike the exclusion for design and construction defects. Although enforceability of such provisions remains uncertain in Florida, insurers may want to use them more often, assuming regulators so allow. Third, the court held that, in determining the dollar amount of the insurer’s coverage liability on remand, the trial court should “consider the amount of settlements” the insured obtained from others “as a post-judgment offset.” On the other hand, although not mentioned by either reviewing court, having prevailed on the coverage dispute, under Florida law the insured will likely recover its legal fees and costs from the insurer as well.