Analysis and Interpretation by Michael A. Cassel
On January 18, 2017, the Florida Third District Court of Appeals released their decision in Homeowners Choice Property & Casualty, etc., v. Miguel Maspons, et al., Case No. 3D14-1310, 2017 Fla. App. LEXIS 451 (3rd DCA 2017) (hereinafter “Maspons”). The Maspons opinion discusses the application of an “ensuing loss” provision providing coverage for the cost to tear out and replace a concrete slab in order to access a defective plumbing system.
Like many South Florida homeowners, Miguel and Annette Maspons lived in a property constructed in the 1950s built on a poured concrete slab with cast iron sanitary lines running beneath same. In December 2010, the Maspons observed issues in their kitchen which led them to hire a plumber who, in turn, determined that there was a break/failure in the cast iron drian line under the kitchen floor. The Maspons hired a public adjuster who filed a claim on their behalf with Homeowners Choice Property & Casualty Insurance Company (hereinafter “HCIC”). HCIC also retained a plumber who was able to verify the same break/failure in the sub-slab drain line.
The Maspons’ policy specifically excluded damages caused by “[w]ear and tear, marring, [and] deterioration”; however, the same policy provision contained an “ensuing loss” provision which provided as follows:
If any of these cause water damage, not otherwise excluded, from a plumbing, heating, air conditioning or automatic fire protection sprinkler system or household appliance, we cover loss caused by the water including the cost of tearing out and replacing any part of the building necessary to repair the system or appliance. We do not cover loss to the system or appliance from which this water escaped.
Maspons at 4-5. The Maspons’ claim was ostensibly denied due to the lack of allegations and/or evidence that the broken drain pipe caused any ensuing water damage. In fact, during her deposition, Ms. Maspon stated that she would not “know what other damages there are until the broken pipe is dug up.” The trial court ultimately ruled that there was no coverage for the repair of the pipe itself but found that HCIC was responsible for the cost of tearing out and replacing the broken pipe including the cost of the repairs to the concrete slab.
3rd DCA Opinion
Upon review, the 3rd DCA opined that the trial court incorrectly applied the “ensuing loss” provision to afford coverage. In line with existing precedent, the 3rd DCA held that an insured must prove “(1) that the property harmed or damaged falls within the ‘insuring clause’ of the policy, and (2) the loss claimed falls within a second, ‘covered perils’ provision contained in each policy. Maspons at 3 citing to Couch on Insurance § 148:2 (3d ed. 2013). While the first prong of the coverage analysis was easily established, the Court determined that, because the record was devoid of any allegation of ensuing water damages, the “ensuing loss” clause was not triggered and, therefore, the second necessary prong could not be satisfied.
It must be noted that “[a]t the time of the summary judgment proceeding, the slab had not been opened. There was no evidence that the water exiting the pipe had caused any damage to its surroundings…” Maspons at 6. As such, the Court reasoned that dismissal was proper under its coverage analysis; however, the Court further rationalized that it was possible that evidence of water damage may appear during the performance of the work alleged as necessary and, as such, the insureds may present any ensuing damage caused by water for the HCIC’s consideration. Thus, there is still a possibility that coverage can be triggered if water damaged building material is discovered during the renovations to the insured property.
Analysis, Impact, and Effect
The sub-slab pipe break seems to be an all too common fact pattern in insurance claims filed in the State of Florida. Because these claims usually involve some kind of tile flooring, the scope of the claims typically include a large amount of money sought to fully replace the unaffected remainder of the flooring demolished in order to access the concrete slab to allow for matching. See Fla. Stat. § 626.9744 (2016). As such, sub-slab pipe break claims tend to be extremely costly for insurance companies and, more likely than not, end up in litigation due to disagreements involving scope and pricing. On the surface, it seems as though the Maspons opinion may help to alleviate some of the exposure facing insurers.
The greatest impact provided by the Maspons opinion will be its influence on claims where the trenching has been completed prior to notice being provided to the insurer. Most, if not all, insurance policies in Florida require the insured to provide “prompt” or “immediate” notice and show the damaged property. Obviously, if there is apparent water damage caused by a sub-slab defect, coverage will likely be triggered in favor of the insured; however; if an insured reports a sub-slab leak after the access trench has been dug and the allegedly affected building materials have been discarded, it may cause prejudice to the insurer’s investigation due to the delay in reporting and the failure to show the water damaged property. Typically, “[a] material breach of an insured's duty to comply with a policy's condition precedent relieves the insurer of its obligations under the contract.” Starling v. Allstate Floridian Ins. Co., 956 So. 2d 511, 513 (Fla. 5th DCA 2007). Additionally, total failure to comply with a policy provision amounts to a breach of the policy precluding recovery. Haiman v. Federal Insurance Co., 798 So.2d 811 (Fla. 4th DCA 2001). See also Starling v. Allstate, supra. “If, however, the insured cooperates to some degree or provides an explanation for its noncompliance, a fact question is presented for resolution by a jury.” Id. at 812 (quoting Diamonds & Denims, Inc. v. First of Georgia Ins. Co., 417 S.E.2d 440, 441–42 (Ga.Ct.App.1992)). While it is more likely that an insurer will be able to obtain a jury instruction providing a rebuttable presumption of prejudice, if no water damaged materials were provided during the insurer’s inspection and no evidence was provided in an attempt to cure the prejudice sustained, it may be possible to obtain an order granting final summary judgment precluding coverage. See LoBello v. State Farm Fla. Ins. Co., 152 So. 3d 595 (2nd DCA 2014).
It is possible that issues will be raised alleging contradictory Florida precedent which went undiscussed in the Maspons opinion. In Widdows v. State Farm, it was determined that an abnormality in a pipe was considered a “loss” triggering coverage and it was not necessary that any ensuing damages resulted from the defect. Widdows v. State Farm Fla. Ins. Co., 920 so. 2d 149 (Fla. 5th DCA 2006). While the Widdows opinion has been relied upon by the Plaintiff’s bar to show that the defect itself is enough to trigger coverage, the true impact of the Widdows court was the reiteration that it is the insurer’s burden to prove its exclusion applies and, therefore, the . See also State Farm Mut. Auto Ins. Co. v. Pridgen, 498 So. 2d 1245 (Fla. 1986). In viewing Widdows and Maspons together, it appears as though it is more so a complete outline of the burdens to establish or refute coverage for both the insured and the insurer and not inconsistent conclusions as a matter of law.