As state legislatures enact statutory amendments, courts are frequently tasked with deciding whether those amendments are to be applied retroactively. In one such case, the United States District Court for the Middle District of Florida was tasked with deciding whether a 2011 amendment to Florida’s sinkhole insurance statute, Fla. Stat. §627.706(2)(k)(2011) (hereinafter the “Statute”), should be applied retroactively.

In Zawadaki v. Liberty Mutual Fire Insurance Company, Case No. 8:12-cv-950-T-30MAP, 2012 U.S. Dist. LEXIS 119600 (M.D. Fla. Aug. 23, 2012), an insured contended that his property suffered damage consistent with sinkhole activity on or about July 14, 2011. The policy provided coverage for “Sinkhole Loss,” which the policy defined as “structural damage to the building…caused by sinkhole activity…” The policy further defined “sinkhole activity” as “settlement or systematic weakening of the earth supporting such property only when such settlement or systematic weakening results from movement or raveling of soils, sediments, or rock materials into subterranean voids created by the effect of water on a limestone or similar rock formation.” The policy did not further define structural damage.

In October 2011, Liberty Mutual denied coverage for the insured’s loss after its expert opined, among other things, that the property did not exhibit “structural damage” as defined by the Statute. The issue before the court was whether the 2011 amendment to the Statute, in which a new statutory definition of “structural damage” was added, should be applied retroactively to the insurance policy at issue. The policy was issued before the statute became effective, but the loss occurred after the statute became effective.

Liberty Mutual moved for summary judgment, relying on the statutory definition of “structural damage.” The court concluded that retroactive application of the statutory definition of “structural damage” to a policy issued before the statute took effect would improperly impair the insured’s contractual rights under the policy. In support of its conclusion, the court noted that the policy did not define “structural damage,” and it did not purport to incorporate by reference any existing statutory definitions, nor did the policy include language expressly making changes to statutory definitions retroactively applicable to claims arising under the policy. The 2011 statutory amendment that defined “structural damage” for the first time went into effect on May 17, 2011, pursuant to the state’s Enabling Act. The amended Statute listed specifically what constitutes “structural damage,” including, in pertinent part, the following:

  • Interior floor displacement or deflection in excess of acceptable variances…
  • Foundation displacement or deflection in excess of acceptable variances…
  • Damage that results in listing, leaning or buckling of the exterior load-bearing walls or other vertical primary structural members….
  • Damage that results in the building, or any portion thereof containing primary structural members or primary structural systems, being significantly likely to imminently collapse….

The full definitions can be found at Fla. Stat. §627.706(2)(k) (2012). The court concluded that the insurer’s motion for summary judgment must be denied for the following reasons:

  • Relying on, and quoting, the decision of Bay Farms Corp. v. Great American Alliance Ins. Co., 835 F. Supp. 2d 1227 (M.D. Fla. 2011), neither the Enabling Act nor the Statute’s legislative history provided clear evidence of legislative intent in favor of retroactive application of the 2011 amendment;
  • Even if the legislature intended retroactive application of the 2011 amendment, the 2011 Amendment would result in an “immediate diminution” in the value of the policy to the insured, which the Florida Supreme Court has recognized as being “repugnant” to the Florida Constitution;
  • A state court similarly refused to retroactively apply the 2011 amendment. Jackson v. USAA Casualty Ins. Co., No. 10-13586 (Fla. 13th Jud. Cir. July 5, 2011); and
  • The definition of “structural damage” should be read according to its plain meaning as the court recently held in Ayres v. USAA Casualty Ins. Co., Docket No. 8:11-cv-816-T-24 TGW, 2012 U.S. Dist. LEXIS 45932 (M.D. Fla. 2012), in which the court held that “structural damage” is defined as “damage to the structure.”

After concluding that the 2011 amendment does not apply retroactively, the court denied the insurer’s motion for summary judgment because the various expert opinions demonstrated that there was a genuine issue of material fact as to whether structural damage was present at the property.

Many statutory amendments will indicate whether or not they are to be applied retroactively. However, when no such language is included in an amendment, it is necessary to analyze state law and the legislative history of a statute in order to determine whether retroactive application is appropriate. Even if a statute states that it is applicable retroactively, there can be constitutional questions about whether retroactive application of the statute comports with state and federal constitutional provisions. Therefore, it is always important to consult with counsel so that the law of the applicable jurisdiction can be thoroughly researched.