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

Santa Rosa County determined that the damages to the home exceeded fifty percent of its value, so that the Mathises were required to apply for permits to repair and rebuild their home and new construction or repairs were required to be completed in accordance with current building code requirements. Because of the expense to rebuild to code and the existing structure was deemed unsafe, the Mathises were left with no choice but to demolish the home.

Mathis recovered the full $250,000, less the deductible, under their flood policy, and Florida Farm paid $102,000 for wind damages under the homeowners policy. The Mathises filed suit, arguing they were entitled to recover the full policy limits under Florida's Valued Policy Law (VPL), section 627.702(1), Florida Statutes (2004). Florida Farm argued: the Mathis home was not a total loss; even if it was, the loss was caused by flood; and allowing the Mathises to recover the limits of the wind insurance would constitute unjust enrichment. Notably, Florida Farm did not assert set-off as a defense.

On appeal, Florida Farm argued that the Mathises were impermissibly allowed a double recovery for their loss because they had been paid policy limits under their separate flood insurance policy. In response, the Mathises argued that the jury accepted their evidence that the wind damage caused a total loss or constructive total loss of their home, so that under Florida's VPL, they were entitled to recover their policy limits.

At trial, the court granted the Mathises’ motion in limine to prohibit Florida Farm from introducing any evidence of flood payments, though the court did allow evidence of flood damage. Mr. Mathis’ expert contractor testified that the cost to repair the wind damage above ten feet of the first floor was $325,548.10. Florida Farm argued that the house was not a total loss and that the second floor could have been repaired.

The jury returned a verdict answering “yes” to the question “[d]id the wind damages in this case amount to a constructive total loss of the property or to a total loss because the cost to repair exceeds the pre-loss market value of the building so that it is not economically feasible to repair the building.”

On appeal, Florida Farm argued that the trial court committed fundamental error in failing to set off the amount paid under the flood insurance policy against the damages awarded under the homeowners policy, because an award of damages which are not authorized by law is fundamental error. The Mathises argued set off is an affirmative defense that must be specifically pled, or it is waived.

The First District Court of Appeal rejected First Florida’s argument, noting that even if Florida Farm had properly raised the defense of set-off to the trial court below, there was no evidence in the record of an actual duplication of benefits. The Court distinguished Florida Farm Bureau Casualty Insurance Company v. Cox, 967 So. 2d 815 (Fla. 2007). Cox was limited in its holding “to only those cases in which a covered peril did not cause a total loss or constructive total loss.” Thus, Cox did not apply in this case. At trial below, the jury accepted the Mathises’ evidence that wind caused a total or a constructive total loss of their home.

The Court further explained that even if it accepted Florida Farm's argument that Cox required apportionment of cause when there is damage caused by both wind and flood, the record was not sufficient to decide this issue. There was no evidence in the record as to the amount of flood damage and the jury was not asked to allocate what portion of the damage was caused by flood. Moreover, there was no evidence in the record that supported Florida Farm's argument that it should be allowed to set off the full $250,000 payment made pursuant to the flood policy against payment of policy limits under the homeowners policy, as the evidence of the value of the property varied from $295,000 to $500,000.

Click here to read the entire slip opinion.

The damage was caused by water backing up through the sewer and subsequent flooding from Hurricane Ivan. The physical damages caused by each event were not able to be segregated. The insurance company denied the claim citing fairly common exclusionary language:

B. EXCLUSIONS

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
* * *

g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not.
(2) Mudslide or mudflow;
(3) Water that backs up or overflows from a sewer, drain or sump;
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows or other openings.

The endorsement purchased provided for the following:

II. Additional Coverages
The following Additional Coverages are added;
…
f. Back Up of Sewers and Drains
We will pay for loss or damage to Covered Property caused by a back up from a sewer or drain or an overflow from a sump within the building at the described premises.

The most we will pay for each location under this Additional Coverage is $ 5,000 for the sum of all expenses arising from back up or overflow during each 12 month period of the policy.

Exclusion B.1.9.(3) does not apply to this Additional Coverage

The Court pointed out the interpretation dispute between the parties:

Significantly, this language removes Exclusion B.1.g.(3) of the basic policy as a bar to coverage for damage caused by sewer and drain back-up and makes no effort to restate the language that bars coverage on the ground of concurrent causation by another excluded cause of loss. This omission fosters a measure of ambiguity unlikely to appear until the insured files a claim, confident in the notion that the endorsement he purchased rendered all aspects of the former exclusion void only to find that the insurer interprets his coverage far more narrowly. That ambiguity becomes evident upon consideration of Exclusion B.1.g.(3) in its entirety:

B. EXCLUSIONS

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
g. Water
* * *

(3) Water that backs up or overflows from a sewer, drain or sump;

 …Based on this language, the insured might reasonably conclude that the coverage he purchased eliminates both the specified limitation in subsection g.(3), concerning sewer and drain back-up, as well as the preliminary language in section B.1., concerning concurrent causation. Nevertheless, the insurer might concur only as to subsection g.(3) and, as Penn National did here, deny coverage on the basis of the concurrent cause language.

Ruling for the policyholder, the court noted the unfairness of applying the subject exclusion in this case:

In view of the evident linguistic joust between these controlling provisions of Penn National's policy, we find a significant indicator of the parties' intent--and the insured's expectations--in the fact that the insured paid an added premium for the coverage the Penn Pac Endorsement purports to unlock because the basic policy, in which the concurrent cause language appears, would otherwise exclude coverage. Thus, the insured purchased additional coverage ostensibly to make up for deficiencies in the basic policy only to find its claim denied not by virtue of any limitation on the coverage it bought but because ancillary language in the basic policy barred coverage for another excluded loss. Such a result strikes us as a variant of the "sleight of hand" we rejected in Betz, allowing an insurer to create the appearance of coverage using an amendatory endorsement tailored to cover a stated risk only to deny coverage when that risk comes to fruition by citing language not suggested by the endorsement…. Given that the concurrent causes of loss, flooding and sewer and drain back-up, were ineluctably linked by the effect of a hurricane on the municipal drainage system, we find this point particularly salient. No insured would purchase extra coverage for an added premium in the expectation that its claim under that coverage would be denied because the covered cause of loss, i.e., sewer and drain back-up, was itself caused by an excluded cause of loss, i.e. flood, when the two would naturally occur together. Nevertheless, the interpretation Penn National urges would validate just such an unseemly result and in so doing undermine the reasonable expectations of the insured.

The decision is very important for policyholder attorneys when attempting to avoid the effect of the anticoncurrent clause if the policy has an endorsement because the court specifically distinguishes this situation from cases where the clause concerns only coverage within the basic policy:

Unlike the courts of other jurisdictions on whose holdings Penn National relies, we have found the Endorsement and Exclusion provisions ambiguous to the extent that they fail to provide a clear indication of the continuing role of the concurrent causation language of Exclusion section B.1. after the insured's purchase of the extra cost Endorsement. Indeed, our construction, based on the express language of the Penn Pac Endorsement, finds little basis for the continued viability of the concurrent cause exclusion to sewer and drain back-up under the policy. By contrast, in each of the cases Penn National cites, Brief for Appellant at 22-33, the respective courts upheld concurrent cause provisions. See Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419 (5th Cir. 2007); Noran Neurological Clinic, P.A. v. Travelers Indem. Co., 229 F.3d 707 (8th Cir. 2000); Front Row Theatre, Inc. v. American Mfrs. Mut. Ins. Co., 18 F.3d 1343 (6th Cir. 1994); [**29] Assurance Co. of Am., Inc. v. Jay-Mar, Inc., 38 F.Supp.2d 349 (D. N.J. 1999); Executive Corners Office Building v. Maryland Ins. Co., 1999 U.S. Dist. LEXIS 23444 (D. N.D. 1999); B&W Heat Treating Co. v. Hartford Fire Ins. Co., 23 A.D.3d 1102, 803 N.Y.S.2d 870, 2005 N.Y. App. Div. LEXIS 12729 (App. Div. 2005). Nevertheless, to the extent these decisions apply different language in differently structured policies, every one is distinguishable.

Of controlling significance is the fact that in every such case, without exception, the respective courts interpreted concurrent cause exclusions as they appeared in the insurers' basic policies, determining only whether a cause of loss otherwise covered by the basic policy was excluded from coverage when it occurred concurrently with a cause of loss excluded in the basic policy. None of those cases addresses the modifying language of an extra-cost endorsement on the language of the basic policy, the ambiguity that it created or the reasonable expectations of an insured in light of that ambiguity. Thus, those courts did not confront the linguistic interplay we address here. Consequently, they were able to find the language of the concurrent cause exclusion unambiguous as it applied to claims made under the basic policy. Given the language they considered and the circumstances to which they applied it, we might well have reached the same conclusions. Nevertheless, those scenarios are not before us. Accordingly, we do not find these cases Penn National cites apposite to our disposition.

This case is useful for policyholders seeking coverage when they have purchased additional coverage through endorsements but the insurer is trying to apply basic form exclusions.

I have a client who is a judge. He, his wife and two little girls literally lost everything in Hurricane Ivan in September, 2004. Their windstorm insurance carrier, Vanguard Fire & Casualty Insurance Company, denied coverage entirely, contending that not a single shingle was blown from the roof, not a window broken by wind in this Category 5 storm, dubbed “Ivan the Terrible.” The coverage denial was apparently based on “word of mouth” that a 15-foot wave had allegedly swept the home away prior to any wind damage occurring. The insurance company failed to hire an engineer or meteorologist to confirm this rumor. While my clients were lucky enough to have their flood insurer tender policy limits, like many, they were woefully underinsured and needed help from their wind carrier.

When FIGA took over the claim in 2007, it was the perfect opportunity to make things right. Instead, FIGA has compounded the misery. Initially, FIGA continued the denial of coverage. Then, last year, FIGA revealed for the first time a January 2007 engineering report acknowledging the home had in fact sustained wind damage before the storm surge came. After that, FIGA changed its tune, admitted coverage, and tendered a small sum based on its expert’s opinion. In keeping with the quality of “service” on this claim, FIGA’s expert has never been to the site and based his opinions on photos of nearby homes. On the other hand, the insureds received an opinion from an engineer who walked the site, inspected an adjacent building, and concluded that the home was severely damaged before the storm surge hit.

Nevertheless, I figured—this is our opportunity to work toward a fair resolution of this claim. The insurance policy provides for an alternative dispute resolution process to quickly and economically dispense with disagreements over the amount of loss—appraisal. I thought, surely an entity funded by assessments on the insurance consumers of this State will want to wrap this up as soon as possible. How wrong I was. Indeed, FIGA’s lawyer has advised me that we can expect this case to be going on for a very long time. FIGA contested appraisal and lost. Then sought to stay appraisal while it appealed—and lost. Now FIGA is seeking a second bite at the apple asking the appellate court to instruct the trial judge to stay the appraisal. Even if the appraisal is allowed to proceed, FIGA tells me the award will not be paid and I can expect more litigation.

What is going on here? I spoke with a lawyer in the Panhandle last week about possibly serving on our appraisal panel. He had a conflict because he has two claims pending with FIGA and can’t even get them to call him back. In another case of mine, FIGA has agreed to go to appraisal, but only if the insured signs a release of all claims upon payment of the appraisal award!

With more and more small companies taking over Citizens policies, there is a real danger these insureds could end up with FIGA in the event of another busy hurricane season. Anyone have ideas on how to fix this? After all, you and I are footing the bill . . .

- Kristi Demers-Crowell

(Kristi Demers-Crowell is an attorney in the Tampa office of Merlin Law Group and is licensed to practice in Florida and Texas)

An interview conducted by Ms. Debi Iacovelli in 1991 with Dr. Robert Simpson revealed the co-author’s thoughts on the hurricane scale carrying his name. In the interview, Dr. Simpson stated that “It's [the Saffir-Simpson Scale] been misinterpreted, misused in a lot of places.” He also added “The scale as devised, expresses what the extreme conditions can be expected from a hurricane of a certain type and a certain category.”

This means with a Category 3 hurricane the extreme level of damage and destruction should be “[s]ome structural damage to small residences and utility buildings with a minor amount of curtain-wall failures. Mobile homes are destroyed.” Yet time and time again, post storm observations prove that a Category 3 hurricane is capable of causing extensive and widespread damages to structures.

Hurricane Ivan (2004) was listed as a Category 3 hurricane, yet the level of damage and destruction equaled a Category 5 on the Saffir-Simpson Scale. In fact, if you read the expected level of damage for a Category 5 hurricane, it states that “Massive evacuation of residential areas may be required.” Obviously the Saffir-Simpson Scale infers that massive evacuation isn’t necessary for any hurricane below a Category 5. Tell that to the people that died in Hurricane Katrina (2005) and it was listed as a Category 3 hurricane.

Another factor on why the Saffir-Simpson Scale should not be used is the differences between it and the Beaufort Wind Scale. The Beaufort Wind Scale is still used extensively throughout the world and has been accepted by the World Meteorological Organization and the National Weather Service. The Beaufort Wind Scale is contained in the Federal Meteorological Handbook Number 1, Surface Weather Observations, considered the “bible” for surface observations.

Time and time again, we see that the Beaufort Wind Scale (BWS) is more accurate than the Saffir-Simpson Scale. The BWS lists winds from 55 to 63 miles per hour capable of uprooting trees and causing considerable structural damage.” Conversely, the Saffir-Simpson Scale states that winds must be stronger than 96 miles per hour to uproot trees and stronger than 110 miles per hour to cause considerable structural damages. Why the disconnect?

It is my personal experience with Hurricanes Erin, Opal (1995), Danny (1997), Ivan (2004), Dennis, Katrina and Rita (2005), that trees were uprooted with regularity when the sustained winds were below 90 miles per hour. During Hurricane Opal, I stood outside the weather station at Eglin AFB, Florida (I was the instructor-meteorologist in an Air Force position) and the winds were consistently sustained below 90 miles an hour for the majority of the storm, yet I witnessed large trees uprooted and blown down streets, concrete block buildings torn apart and large roofs ripped from structures creating massive amounts of flying debris. Hurricane Opal was categorized as a Category 3 hurricane, but the destruction level was likened to a Category 5 storm.

The Saffir-Simpson Scale does not take into account the speed of movement or storm size to categorize a hurricane. If a structure endures hours and hours of battering from winds between 75 to 90 miles an hour, it will still suffer extensive damages. The Saffir-Simpson Scale has no explanation for such elements such as wind shear, ground turbulence, microbursts and vortices.

Everyone becomes fixated on the highest wind speed and associated storm surge, yet the Saffir-Simpson Scale makes no provision for length of time a structure is affected by hurricane force winds.

I like to use the following analogy for hurricane damage. A house endures hours and hours of hurricane force winds and all the associated “forgotten” elements such as wind force, wind shear, ground turbulence and other forces. After several hours, the house is destroyed, but with the area evacuated no one witnesses the destruction. The storm surge arrives hours later and sweeps away the debris from the destroyed home. After the hurricane, folks come back and see the flooding and standing water and assume all damages were created by the storm surge.

Even when there are eyewitnesses to the destruction, records indicate storm surge as the factor in destruction of properties.

When Hurricane Katrina hit the Mississippi coast line, the central pressure fit into Category 4, the storm surge was a Category 5 element, yet the winds were only estimated as Category 3? There is a definite disconnect.

Of course, we are limited in what elements are accurately measured because less than 1% of the affected area in Hurricane Katrina had any type of reliable weather measuring equipment. The sparseness of meteorological data only fuels the ongoing battle of what element caused the initial and primary data: the wind or the water.

The Saffir-Simpson Scale was developed in the 1960’s when meteorological radars still depicted large black blobs on the radar screen instead of the color-diversified images from NEXRAD. In the 1960’s we had limited knowledge of hurricane dynamics and today we have the technology to measure a variety of storm elements.

Some scientists say it makes little sense to hew to an older warning scale that doesn't take into account the wealth of hurricane data collected.

Among them is Mark Powell, an atmospheric scientist for the National Oceanic and Atmospheric Administration's hurricane research division. Powell has developed a system of measuring a storm's potential destructiveness that he calls integrated kinetic energy. The technique essentially sums the strength of a storm's winds and the size of the wind field. (Houston Chronicle, November 29, 2008).

During my years as a meteorologist, I was taught that research results arrived only after years of analysis and collected data, yet there is no archive of what data was used to generate the Saffir-Simpson categories. What was the thinking of the authors of the scale when they determined the different categories and the expected levels of damage? Why aren’t these inconsistencies corrected by the development of a more factual scale?

The people who work at the National Hurricane Center and National Weather Service are over-worked and under-funded, yet the American public expects miracles each and every time a hurricane closes in on the United States. When a hurricane warning is issued, the public becomes convinced that the level of damage associated with the current hurricane is what can be expected. This just isn’t true!

It is a shame that the United States doesn’t have a better system of collecting meteorological data to provide better resolution for numerical models in forecasting hurricanes. It’s a shame that the Saffir-Simpson Scale is used blindly by various agencies to rationalize their decisions in wake of a hurricane.

The overblown damage expectations and associated wind speeds in the Saffir-Simpson Scale are extravagant. When Hurricane Ike made landfall in Texas it was classified as a Category 2 hurricane with sustained wind speeds of 110 miles per hour. I can not believe that the hurricane and associated properties understood what was expected of them. Do you think any structure realizes that one more mile per hour of speed would be a Category 3 hurricane and then it was permissible to show signs of minor damage?

We must wake up to the fact that many of our popular meteorological beliefs have no substance or real support. One of favorites is the “belief” that storm surges cause the most damage and deaths in a hurricane. Where is this supported by real numbers? Does any agency (FEMA, NWS, Census Bureau) actually count the number of deaths from wind versus surge? The answer is NO!

Many of our “beliefs” are carryovers from the past when all the deaths were lumped into the category of “storm surge related”. I will back off from my rants if any agency can provide me with a list of hurricane related deaths (along any coastline) that is categorized for wind-related versus surge-related deaths.

In summary, our entire system of categorizing hurricanes with the Saffir-Simpson Scale is misleading and inaccurate. I am sure that a better system for categorizing hurricanes can be developed, but can this effort withstand the politics of such a venture? You can be sure that before another system replaces the Saffir-Simpson Scale, the political battles within and outside the meteorological community will add years before the public has a new method to confront the dangers of hurricane landfalls.

--Rocco Calaci