Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

In Travelers Personal, the policyholder sued his insurer when it refused to pay for foundation movement despite proven plumbing leaks. As is common, the insurer refused to pay under the “natural causes” exclusion of the policy, claiming that the plumbing leaks had nothing to do with the insured’s home’s foundation movement. Citing precedent, the Court stated that “[i]t is essential that the insured produce evidence which will afford a reasonable basis for estimating the amount of damage or the proportionate part of damage caused by a risk covered by the insurance policy.” Id. at 849 (internal citations and quotations omitted). The Court continued, “[g]iven this, the specific issue for us to resolve here is whether the McClellands placed before the jury more than a scintilla of evidence segregating the damage caused by plumbing leaks versus the damage incurred by natural causes such that the evidence was legally sufficient to support the jury’s finding that eighty percent of the damages was attributable to the plumbing leaks.” Id. In support of his claim, the policyholder hired an expert to testify at trial, and the expert also provided a diagram illustrating all of the damaged areas he believed were attributable to the plumbing leaks.

Ruling in favor the policyholder, the Court found that “[a]lthough a plaintiff is not required to establish the amount of his damages with mathematical precision, there must be some reasonable basis upon which the jury’s findings rest.” Id. at 851. (internal quotations and citations omitted). The Court disagreed with Traveler’s argument that the Court should require the plaintiff to explicitly state which damage is solely attributable to the covered cause. Ultimately, the Court found that the policyholder “presented more than a scintilla of evidence providing a reasonably basis for which the jury could have found that eighty percent of the damage to the house was due to plumbing leaks.” Id. at 851-52.

So, if you ever have to file an insurance claim and the insurer’s agent tells you that you – as the policyholder – have to explicitly show which damage is solely attributable to the covered cause, tell him the Texas Court of Appeals of Houston disagreed with his position in Travelers Personal. That should set him straight.

I. The Burdens

Historically in Texas, the insured bore the burden to prove that the loss was excluded. See Lyons v. Millers Cas. Ins. Co. of Texas, 866 S.W. 2d 597 (Tex. 1993); Hardware Dealers Mut. Ins. Co. v. Berglund, 393 S.W. 2d 309 (Tex. 1965); Paulson v. Fire Ins. Exchange, 393 S.W. 2d 316 (Tex. 1965). However, this all changed in 1991 when the Texas Legislature enacted Article 21.58 of the Insurance Code, which now sets the required burden of proof and pleading under insurance contracts. Article 21.58 was codified into § 554.002 of the Insurance Code in 2003, and amended in 2005 to include health maintenance organizations.

Sec. 554.002. BURDEN OF PROOF AND PLEADING. In a suit to recover under an insurance or health maintenance organization contract, the insurer or health maintenance organization has the burden of proof as to any avoidance or affirmative defense that the Texas Rules of Civil Procedure require to be affirmatively pleaded. Language of exclusion in the contract or an exception to coverage claimed by the insurer or health maintenance organization constitutes an avoidance or an affirmative defense. (Emphasis added).

The plain reading of the statue puts the burden of proof and pleading for exclusions on the insurer, and Texas courts have consistently ruled accordingly. Central Mut. Ins. Co. v. KPE Firstplace Land, LLC, 271 S.W. 3d 454, 456 (Tex. App.- Tyler 2008);Lone Star Heat Treating Co., Ltd. v. Liberty Mut. Fire Ins. Co., 233 S.W. 3d 524, 526 (Tex. App.- Houston 2007); Crocker v. American Nat. General Ins. Co., 211 S.W. 3d 928, 931 (Tex. App.- Dallas 2007); Arrellano v. State Farm Fire and Cas. Co., 191 S.W. 3d 852, 856 (Tex. App.- Houston 2006). Should there be an exception to an exclusion, the burden will shift back on the insured to prove the exception to the exclusion. Telepak v. United Services Auto. Ass’n, 887 S.W. 2d 506 (Tex. App.- San Antonio 1994, writ denied).

Furthermore, Texas Rule of Civil Procedure 94 expressly requires that an insured shall never be required to allege the double negative that a loss is not within an exception.

In pleading to a preceding pleading, a party shall set forth affirmatively accord and satisfaction, arbitration and award, assumption of risk, contributory negligence, discharge in bankruptcy, duress, estoppel, failure of consideration, fraud, illegality, injury by fellow servant, laches, license, payment, release, res judicata, statute of frauds, statute of limitations, waiver, and any other matter constituting an avoidance or affirmative defense. Where the suit is on an insurance contract which insures against certain general hazards, but contains other provisions limiting such general liability, the party suing on such contract shall never be required to allege that the loss was not due to a risk or cause coming within any of the exceptions specified in the contract, nor shall the insurer be allowed to raise such issue unless it shall specifically allege that the loss was due to a risk or cause coming within a particular exception to the general liability; provided that nothing herein shall be construed to change the burden of proof on such issue as it now exists. (Emphasis added).

See also Venture Encoding Service, Inc. v. Atlantic Mut. Ins. Co., 107 S.W. 3d 729 (Tex. App.- Fort Worth 2003).

II. Concurrent Causation

Despite the apparent clarity of the statute and contemporary case law, some courts have held on to the traditional approach of requiring the insured to prove coverage exclusions, often when dealing with the complexities of concurrent causation. See Wallis v. United Services Auto. Ass'n, 2 S.W. 3d 300 (Tex. App.- San Antonio 1999). Some of this confusion may be attributable to the fact that the Texas Supreme Court published the case of Lyons v. Millers Cas. Ins. Co. of Texas in 1993, after the Texas Legislature enacted Article 21.58 (later § 554.002) in 1991. Although Lyons was published in 1993, that case resolved issues of law that arose when the case was heard at the appellate level in 1990, before Article 21.58 was law. This leaves the Lyons case in the same pre § 554.002 classification as the other cases that set the concurrent causation doctrine.

What is the concurrent causation doctrine? When two or more events combine to cause a loss, courts take different approaches to determine if the loss is covered under an insurance policy. Texas courts use the concurrent causation doctrine, which holds that as long as one of the causes was a covered cause of loss, the loss will be covered under the policy. In an all-risk policy, the insured would only need to prove a fortuitous loss, and the insurer would need to prove that all causes of loss are excluded under the policy. Unfortunately, coverage only gets you in the door; it doesn’t determine how much you will recover.

Many courts have been holding on to the traditional concurrent causation rules set forth in case law that predates § 554.002. Cases like Wallis almost without fail cite back to Lyons and other pre § 554.002 cases without giving any regard to the legislative intent set forth in § 554.002. Respectfully, these courts, like the one in Wallis, err in the reasoning that the doctrine of concurrent causation is not an affirmative defense or avoidance issue. On the contrary, § 554.002 expressly states that, “Language of exclusion … constitutes an avoidance or an affirmative defense.” Causation will either be (a) a covered cause of loss, or (b) an excluded cause of loss. To the extent that an insurer claims a particular cause of loss is excluded, the insurer is required by § 554.002 to prove that exclusion. In Wallis, despite the erroneous finding mentioned above, the court still determined whether the insured had met its burden of proving the loss was covered and that the insurer had proved its exclusions. At no point did the court ever expect the insured to plead and prove a double-negative -- that the exclusion did not apply. Other courts that have continued the traditional rule of requiring the insured to prove the double-negative, that a loss is not excluded, have also relied on pre § 554.002 cases to support that basis. See Travelers Personal Sec. Ins. Co. v. McClelland, 189 S.W. 3d 846 (Tex. App.- Houston 2006).

By relying on case law that predates Article 21.58 and § 554.002 and not giving due consideration to the Legislature’s clear intent to require that each party bear their own burden of proof, Texas judges have given the insurance companies an uneven playing field. There is no rational policy reason for giving insurance companies this advantage of requiring the insured to prove both coverage and lack of exceptions in concurrent causation cases, and now is the time to stop.

In Nicolau, a homeowner filed a lawsuit against its insurer for foundation and other structural damage that resulted from a plumbing leak that introduced water into the clay subsoil. The insurer retained an expert, HAAG Engineering¸ to conduct a study on the homeowner’s claim. It was established in Nicolau that the insurer hired HAAG Engineering with the belief that HAAG Engineering generally believed that leaks beneath a house would not cause foundation movement. As expected, the HAAG engineer concluded that there was no damage near the leak, but evidence showed that his investigation was not thorough because: (1) he did not isolate the leak; (2) he failed to determine the leak’s severity; and (3) he did not take any soil samples. The HAAG report concluded that the plumbing leak had not caused the damage, and the insurer denied the claim based on the HAAG report.

The Texas Supreme Court stated that an insurer’s reliance upon an expert’s report alone will not necessarily shield the insurer from liability if there is evidence that the report was not objectively prepared or the insurer’s reliance was unreasonable. Overturning an intermediate appellate court decision, the Texas Supreme Court found that there was evidence to support the jury’s finding that the insurer denied the claim in bad faith because there was evidence from which the jury could infer that HAAG’s reports were not objectively prepared, that the insurer was aware of HAAG’s lack of objectivity, and that the insurer’s reliance on the reports was merely pretextual.

Nicolau reaffirmed the long-established idea that insurance companies cannot expect their experts’ reports alone to shield them from bad faith liability.

A recent case in Texas, David Lewis Builders, Inc. v. Mid-Continent Cas. Co., No. 09-21, 2010 WL 1286544 (N.D. Tex. April 1, 2010), illustrates the burdens of proof for insurance claims in Texas. In the opinion, the court stated that, “Texas law places the burden to prove the existence of insurance coverage under an insurance policy on the party claiming coverage.” In other words, for an insured to obtain coverage under the policy, the insured, not the insurer, must prove that certain damage is covered under the policy.

Assuming that the insured has sufficiently demonstrated that certain damage should be covered under the policy, what happens next? The Court in David Lewis Builders, Inc. elaborated further: “[a]n insurer has the burden to prove the applicability of a policy exclusion.” If the insurance carrier can show that an exclusion to the policy applies, “[t]he insured has the burden to prove the applicability of an exception to that exclusion.”

Texas courts have determined that there are three burdens of proof that the parties must bear with respect to an insurance claim:

1. The insured must demonstrate that damage should be covered under the policy;
2. The insurance company must show that an exclusion applies; and
3. The insured must show that an exception to the exclusion applies.

If you are keeping count, the insured has two burdens of proof to bear, whereas the insurance company only has one. So the next time your insurance company sends one of its adjusters to estimate the damage to your home or business, it would be good to keep in mind the different burdens of proof each party must bear under Texas law. 

Policyholder attorneys agreed to settle the cases, in part, because of a legal requirement that shifts the burden to plaintiffs to prove how much damage was caused by wind, since the destruction also could have been caused by water.

"At the end of the day it's going to be difficult," Mostyn said, noting attorneys were able to use models to show at least about 30 percent to 40 percent of damage was from wind. "I don't like the way the law is, but it is what it is." (emphasis added)

While Mostyn and I may have our differences regarding the slab claims in Galveston and Bolivar, I agree with his statement regarding Texas insurance law and the resolution of the claims in the manner we reached. I discussed this legal problem over a year ago in Causation Issues to Note in Texas Property Insurance Coverage Disputes-Part II.

Texas Courts apply antiquated insurance law which predates the development of the all-risk insurance policy. Texas insurance law fails to recognize the accompanying change in the burden of proof that is inherent in the all-risk policy. Every adjuster is taught--as basic insurance adjustment--that the insurer bears the burden to show the exclusion and amount of damage excluded from coverage under an all-risk policy. Indeed, most insurance claims departments teach their adjusters to "give the benefit of the doubt to their policyholder" in close situations.

The Texas legislature tried to fix this problem over a decade ago, and in Wallis v. United Servs. Auto. Ass'n, 2 S.W.3d 300, 303-304 (Tex. App. San Antonio 1999), the policyholders made the same argument I would make today:

The Wallises contend that the insured's burden to segregate damages has been legislatively overruled by article 21.58 of the Texas Insurance Code. Pursuant to article 21.58, USAA had the burden to establish what part of the Wallises' damage was caused by an excluded peril.

Unfortunately, they lost. The Texas jurists are seemingly intent on applying reasoning that involves named-peril policies without noticing that the insurance industry changed its product more than sixty years ago. The changes were made, in part, to avoid this legal causation problem. It is as if the Texas insurance causation law is stuck in a place that used to exist a long time ago and refuses to change. It makes me think of a movie:
 

In all areas of law, it is important to understand parties’ respective burdens of proof. Understanding and correctly applying the burdens of proof is particularly important in first party property insurance. At times, insurance carriers misconstrue the burdens of proof, usually to their advantage.

The typical Florida insurance policy obligates the policyholder to produce documents and information requested by the insurance carrier and may contain a provision requiring the policyholder to cooperate with the insurer in its investigation of the claim. The cooperation requirement is intended to help the insurance carrier to determine liability once notice of a claim has been given and to protect the insurance carrier from fraudulent claims.

The Florida Supreme Court has explained that a different presumption applies to a policy cooperation clause because a failure to cooperate defense “sometimes relieves an insurer of liability. . . .[a] failure to cooperate is a condition subsequent and it is proper to place the burden of showing [substantial] prejudice on the insurer.”

Where an insured cooperates to some degree with document production, but the insurance carrier denies the claim because every single document was not produced, the issue of whether there has been a material breach of the insurance policy that would relieve the insurance carrier of its payment obligation is a question of fact for a jury. Schnagel v. State Farm Mutual Automobile Ins. Co., 843 So.2d 1037 (Fla. 4th DCA 2003); Haiman v. Fed. Ins. Co., 798 So.2d 811 (Fla. 4th DCA 2001).

It is important to note the difference between these presumptions for policyholders in Florida, particularly given insurance carriers’ aggressive approach in defending hurricane and other claims, based on a failure to cooperate defense. Insurance carriers argue the failure to cooperate almost as an absolute defense to claims, citing a policyholder’s failure to produce every single item of information and documentation. As Chip Merlin and Corey Harris have previously noted in their posts Cooperation Clause Does Not Require Policyholder’s Slavish Obedience and The Limits Of An Insured’s Obligations To Cooperate, if a policyholder cannot produce every single document requested by the insurance carrier, but they comply to the extent possible, it is unreasonable for the insurance carrier to continue to hold open the policy post-loss conditions and demand the documents that the policyholder is unable produce. The claims handling process must go on. Particularly where policyholders are in substantial compliance with the insurer’s requests, the insurer has a high burden under Florida law. Policyholders should not be strong-armed by insurance carriers that misconstrue their burden of proof and treat a failure to cooperate defense as an absolute bar to recovery.

In the event of a sinkhole, insurance companies typically rely on the "settlement of loose, sandy soils" and "concrete shrinkage and bulging" exclusions in denying coverage. In order to prevail, the insurance company must prove that the excluded event; i.e. the settlement of loose, sandy soils and/or the shrinking or bulging of materials caused ALL of the damage to a residence.

Even if sinkhole activity is not affirmatively found in the SPT borings that are done on the property, if sinkhole activity cannot be ruled out as a cause OR contributing cause of all OR part of the damage, there is coverage for the loss. Simply stated, if sinkhole cannot be ruled out as one of the possible causes contributing to some of the damage to the house, there is coverage.

All a homeowner has to prove at trial is that there was a loss to the property during the policy period and that there was resulting damage. The homeowner does not have to prove that there is coverage; i.e. prove that there is a sinkhole on the property. Rather, the carrier has to prove that sinkhole can be ruled out completely even as a possible contributing cause to some of the damage. If the carrier cannot meet it's burden, there is coverage under the policy for the loss.

Here are sample jury instructions (click on the image to view):

Coverage is provided on a storage facility under the CP 10 20 06 95 cause of loss form. Two of the units were rented by an individual who became delinquent, so the insured padlocked the units. After a couple of months, the insured learned the tenant had moved and could not be located. The insured cut off thee locks and entered the units to discover food containers, appliances, and trash abandoned by the tenant. Grease had spilled (or been poured) on the concrete floor. This grease ran into two other units. As this is named peril coverage, we do not believe there is coverage. However, the insured is arguing that the damage is the result of vandalism. The tenant had not been in the units for several months as they had been padlocked and there had been no tampering of the locks prior to entry. There is no way to verify if the tenant poured the grease on the floor, however, there was no other evidence of malicious damage to indicate it was an intentional act. Is the loss excluded?

The answer provided is sound assuming that proof of how the loss occurred cannot be found:

It is our opinion that the insured would have to prove that the loss was intentionally caused, which does not sound like a possibility. Without evidence showing this was an intentional act, it could not be considered a vandalism loss.

The important point has to do with burdens of proof which often become play when the loss is discovered and the cause uncertain. The general rule is that all risk is afforded so long as there is damage within the policy term and the burden is on the insurer to prove that the damage falls within an exclusion. If the coverage is under a named peril basis, the proof of the peril causing the damage is upon the insured.

Regarding exclusions in all risk policies, insurers sometimes wrongly give exclusionary language too broad an interpretation. In an excellent post on the Tennessee Insurance Litigation Blog, Rules of Interpretation for Insurance Policies, Brandon McWherter noted:

Exclusionary clauses are to be strictly construed against the insurer when drafted by the insurer. Palmer v. State Farm Mut. Auto. Ins. Co., 614 S.W.2d 788, 789 (Tenn. 1981).
...

In Tennessee, exceptions, exclusions, and limitations in insurance policies must be construed against the insurance company and in favor of the insured. Allstate Ins. Co. v. Watts, 811 S.W.2d 883, 886 (Tenn. 1991). The entire policy, however, including insuring clauses and exceptions thereto, must be read as a whole. Am. Sav. & Loan Ass'n v. Lawyers Title Ins. Corp., 793 F.2d 780, 782 (6th Cir. 1986). Further, exceptions should not be construed so narrowly as to defeat their evident purpose. Standard Fire Ins. Co. v. Chester-O'Donley & Assocs., Inc., 972 S.W.2d 1, 8 (Tenn. Ct. App. 1998).

In Ensuing or Resulting Loss, and the Burden of Proving Causation Explained Simply, I quoted a speaker who provided a fairly simple rule for the factual and legal burden of the policyholder in a typical all risk situation:

An insured seeking to recover under an "all risks" insurance policy merely has the burden of proving only that direct physical loss or damage occurred to covered property while the policy was in force. Once the insured establishes a loss apparently within the terms of an "all risks" policy, the burden shifts to the insurer to prove that the loss arose from a cause which is excluded. The insured is not required to disprove any excluded cause of loss.
...

Exclusion clauses are generally considered contrary to the fundamental protective purpose of insurance. Thus, the courts give a strict interpretation to exclusion clauses, as opposed to the liberal interpretation afforded coverage protections.

For all my Texas friends that are crying their eyes out after losing to Alabama in the BCS Championship, I would like to warn that Texas has a slightly different view of burdens of proof even in an all risk situation, as I noted in, Causation Issues to Note in Texas Property Insurance Coverage Disputes-Part II.

Here are some of the Briefs:

• Corban Initial brief
• Amicus brief filed on behalf of United Policyholders by the Merlin Law Group (You do not want to miss my prose)
• USAA Answer brief
• Corban Reply brief
• Amicus brief of Allstate Insurance Company in support of USAA
• Amicus brief of Jim Hood, Attorney General of the State of Mississippi
• Amicus brief of Nationwide Insurance in support of USAA
• Amicus brief of NAMIC and State Farm in support of USAA

Corban raises the most important issues regarding causation and burdens of proof which have been at issue in the Mississippi Katrina cases. Finally, the highest Court in this fair state will hear the issues so important to its citizens. It will be a landmark decision no matter how it is decided.

Florida follows the nearly unanimous view that all-risk insurance policies provide very broad coverage and all that needs to be shown is a physical loss during the policy period. Indeed, some may suggest that the Florida cases only require a "physical loss" and, to deny coverage, the insurer must also prove the loss occurred outside the policy period. Florida sinkhole cases and broken pipe under structure cases highlight these causation issues.

Sinkholes can appear overnight or move slower than we would appreciate during our lifetime. Was a small "settlement" crack in the driveway noticed ten years ago the result of a sinkhole or was it just an isolated crack caused by concrete settlement or even a heavy car? Some insurance adjusters in Florida will do everything they can to try to link those minor cracks to the possibility that the sinkhole or pipe loss occurred at some time when the insurance company was not on the hook. And, since the pipe that broke under the structure cannot be seen, how does the policyholder really know that the pipe was not installed that way by the contractor? Without creative insurance company adjusters looking to raise these factual questions to deny coverage, policyholders would not need legal counsel, like me, writing how their cases end up getting denied and warning them to be careful and accurate about facts said to an adjuster.

The language found in Hudson v. Prudential Property & Casualty Ins. Co., 450 So. 2d 565, 568 (Fla. Dist. Ct. App. 2d Dist. 1984), is pretty standard of these type of cases: 

"To determine the burden of proof on the parties, we must examine the policy...the policy is not a specific peril policy, such as a policy of fire and lightning insurance, where the policy insures only against certain named risks. Rather, the policy insured against "all risks" except as otherwise excluded. Recovery under such an "all risks" policy generally extends to all losses not resulting from misconduct or fraud unless the policy contains a specific provision expressly excluding the loss from coverage. Phoenix Insurance Co. v. Branch, 234 So.2d 396 (Fla. 4th DCA 1970); 13A G. Couch, Cyclopedia of Insurance Law 2d § 48:141 (rev. ed. 1982).

As already noted, sinkhole coverage was provided for the Hudsons by virtue of the mandatory endorsement to the policy. That endorsement did not change the "all risks" nature of the underlying policy; it merely narrowed the earth sinking exclusion. See Strubble v. United Services Automobile Ass'n, 35 Cal.App.3d 498, 505 n. 6, 110 Cal.Rptr. 828, 832 n. 6 (1973). This harmonizes with the law in Florida that insurance coverage must be construed broadly and its exclusions narrowly. Demshar v. AAACon Auto Transport, Inc., 337 So.2d 963, 965 (Fla. 1976); National Merchandise Co. v. United Service Automobile Ass'n, 400 So.2d 526, 532 (Fla. 1st DCA 1981).

Applying these principles...the general rule of evidence is that a plaintiff seeking to recover under an "all risks" policy has the burden of proving that, while the policy was in force, a loss occurred to the insured's property. Egan v. Washington General Insurance Corp., 240 So.2d 875 (Fla. 4th DCA 1970); Phoenix Insurance. Once the insured establishes a loss apparently within the terms of an "all risks" policy, the burden shifts to the insurer to prove that the loss arose from a cause which is excepted. Phoenix Insurance; Jewelers Mutual Insurance Co. v. Balogh, 272 F.2d 889 (5th Cir. 1959). The plaintiff is not required to disprove any excepted causes. Stonewall Insurance Co. v. Emerald Fisheries, Inc., 388 So.2d 1089 (Fla. 3d DCA 1980).

As the parties point out, there was a direct conflict in the evidence as to the cause of the damage to the Hudsons' home. Thus, the trial court's allocation of the burden of proof on the issue of Prudential's liability became of critical importance. Since Prudential's defense was based on an exclusion to the policy, the court's instructions had the effect of improperly placing the burden on the Hudsons to prove that their home was damaged by a sinkhole. Consequently, the jury was apparently under the mistaken impression that the Hudsons, as plaintiffs, had to "tip the scales" to prove that sinkhole activity caused the damage." (emphasis added to highlight the general principals of causation proof in Florida) 

The following damaged pipe case, Widdows v. State Farm Fla. Ins. Co., 920 So. 2d 149, 150-151 (Fla. Dist. Ct. App. 5th Dist. 2006), is an amusing example of how little proof of damage is needed under an all risk insurance policy by the policyholder and how the insurer has the burden to prove that the loss is entirely excluded. I know the attorneys on either side of the case and a little about the facts of the case not recited in the court's opinion. The facts in dispute and language of the court should be read closely:

"The issue in this case is whether Appellee has an obligation to repair a plumbing abnormality under a provision in the insurance policy that covers "accidental direct physical loss" to the property. The evidence established that Appellant called a plumber to repair a backed-up toilet. During his investigation of the cause of the problem, the plumber discovered that the drain pipe connecting the toilet to the sewer pipe had become "backpitched," thereby impeding the flow of water. Because the pipe was beneath the slab and had not been excavated at the time of trial, the plumber could not determine the exact cause of the abnormality. Among the possible causes advanced by the plumber, however, were settlement under the pipe, erosion or a sinkhole. The plumber concluded that the condition was neither a construction defect nor the result of erosion caused by a leak in the plumbing system.

At the conclusion of Plaintiff's case, the trial judge granted an involuntary dismissal for two reasons: First, because there was no evidence of damage from the obstructed toilet, the court concluded that there was not a "physical loss" to the property. Second, the court concluded that, even if a "physical loss" were sufficiently proven, the policy exclusion for earth movement applied. We disagree with both conclusions.

As to the issue of whether evidence was adduced of a "physical loss," we conclude that the abnormality in the pipe itself was such a "loss." Under the language of the policy, it was not necessary for Appellant to establish any resulting damage from this condition. n1

The second basis for the involuntary dismissal, the earth movement exclusion, was likewise erroneous at this juncture of the trial because the burden of proof was on Appellee to establish that the exclusion applied. State Farm Mut. Auto Ins. Co. v. Pridgen, 498 So. 2d 1245 (Fla. 1986). The evidence adduced by Appellant offered several possible causes for the backpitched pipe, not all of which would have been excluded under the earth movement provision. Because the burden was on Appellee to establish that the exclusion applied, the dismissal was premature.

FOOTNOTES

n1 On appeal, Appellee argues that insufficient proof was adduced to show that the loss was "accidental," in that no testimony was offered to show that the condition was sudden and unexpected. See Braley v. American Home Assurance Co., 354 So. 2d 904, 905 (Fla. 2d DCA 1978) ("accident" is "[a]n event which takes place without one's foresight or expectation; an undesigned, sudden and unexpected event"). Although not the basis on which the trial court ruled, Appellee did briefly advance this argument below. Nevertheless, we decline to affirm the trial court on this basis. We think that the reasonable inferences from the evidence on this point are sufficient to overcome involuntary dismissal." (emphasis added)

Importantly, the policyholders only had to prove a "backpitched" pipe with some explanation of a "possible cause" which was not excluded. The pipe had not even been examined by the policyholder's causation expert--a plumber--at the time of trial.

This minimal proof burden on the policyholder in Florida is not the same as found in Texas caselaw. These two Florida cases emphasize what adjusters are taught in their training manuals and in basic adjusting courses. It is the majority rule followed in the United States. Indeed, the vast majority of insurance companies have a requirement that the policyholder get the benefit of the doubt in these causation cases. In cases where we are retained before the coverage decision, we see instances where supervisors apply that standard, pay the policyholder, close the file and move on.

Unfortunately, that has not been happening too often in the Lone Star state since last September. Tomorrow, I'll explore reasons why some case decisions may be causing this and offer suggestions as to what Texas policyholders need to do about it.