The courts have historically grappled with the controlling rule of law in cases involving multiple causes of loss in the property insurance coverage context. The majority of jurisdictions typically employ the doctrine of efficient proximate cause: coverage is afforded if the predominant cause of loss is a covered cause of loss. The minority of jurisdictions, on the other hand, typically follow the doctrine of concurrent causation: coverage is afforded when the covered cause of loss contributes in a meaningful way to the insured’s loss.
In American Home Assurance Co., Inc., v. John Robert Sebo, et. al, 2013 Fla. App. LEXIS 14799, (Fla. 2d DCA, September 18, 2013), the Court disagreed with the 3rd DCA and adopted the efficient proximate cause analysis. The facts of the case involve an April 2005 purchase of a home located in Naples, Florida. In the months following the purchase, significant water leaks were discovered in the home due to major design and construction defects. In October 2005, Hurricane Wilma struck Naples and further damaged the residence. The insured sought insurance coverage for the water intrusion and related damages from its property insurer, American Home Assurance Co, Inc. (“AHAC”) in late December 2005. AHAC investigated and denied the claim, except for a $50,000.00 mold damage payment.
After demolishing the residence, the insured filed suit in January 2007 alleging negligent design and construction against multiple parties, including the architect who designed the residence and the construction company that built it. In November 2009, the insured amended his Complaint to add AHAC as a defendant seeking a declaratory judgment that his property policy provided coverage for his damages. The trial court applied the concurrent causation doctrine, relying upon Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3d DCA 1988), and the jury ruled in favor of the insured.
Upon review, this Court, the 2nd DCA, recognized that as a factual matter the parties agreed that there was more than one cause of loss, including defective construction, rain, and wind. The Court analyzed the two doctrines, efficient proximate cause and concurrent cause, and rejected Wallach’s determination that the concurrent causation doctrine should be applied in a case involving multiple perils and a first-party insurance policy. Relying in large part upon the California Supreme Court analysis in Garvey v. State Farm Fire & Casualty Co., 48 Cal. 3d 395, 770 P.2d 704 (Cal. 1989), which opinion issued after the Wallach decision, the Court emphasized the important distinctions between property loss coverage and tort liability coverage. More specifically, as expressed by the Court:
“…as the Garvey court stated, an insured’s reasonable expectations of coverage under the policy ‘cannot reasonably include an expectation of coverage…in which the efficient proximate cause of the loss is an activity expressly excluded under the policy’ “ (emphasis in original)
The court noted the “sparse background of precedents” by the Florida courts in the first-party homeowner’s context and that the majority of states have adopted the efficient proximate cause theory for analyzing this issue. The 2nd DCA concluded that the coverage analysis in first-party claims, the subject of a contract between parties, should be decided on the basis of the contract: if the efficient proximate cause of the loss is a covered peril, the losses are covered; if it is an excluded peril, the losses are not covered.
The Court briefly addressed anti-concurrent cause clauses in the policy. This policy language was developed by insurers in an effort to avoid coverage for uninsured perils under either the efficient proximate cause theory or the concurrent causation theory. The Court ultimately determined that AHAC’s defective work exclusion, based upon a specific construction of that anti-concurrent language, did not exclude losses arising from concurrent causes.
The 2nd DCA’s opinion could lead to Florida joining the majority of jurisdictions which apply the efficient proximate cause doctrine in the first-party property context. Because there is a disagreement (i.e., efficient proximate cause or concurrent causation) between the 3rd and 2nd DCA’s, this issue may be reviewed by the Florida Supreme Court.