Analysis and Interpretation by Michael A. Cassel
On September 3, 2014, the Second District Court of Appeals of the State of Florida (“2nd DCA”) released their decision in Price v. Castle Key Indemnity Company, Case No. 2D13-1809, 39 Fla. L. Weekly D1864e. The Price court dealt with issues regarding ambiguities contained within a policy provision excluding for damages caused by constant repeated seepage or leakage. Ultimately, the 2nd DCA held that the constant repeated seepage or leakage exclusionary provision may be ambiguous depending on the facts presented during litigation. As such, the 2nd DCA essentially held that summary judgment may not a proper course of action when relying upon the constant repeated seepage or leakage exclusionary provision as the applicability of seepage or leakage is an issue of material fact.
In Price, it was undisputed that 195,000 gallons of water flowed from a pipe going into the toilet located in an upstairs bathroom of the subject property. This prolonged incident occurred while Mr. Price was out of town on vacation for at least a month. Mr. Price argued that, based on the time period in which he was out of town, the water must have been flowing at a clip of over 6,000 gallons per day.
The insurer argued that the water loss claimed by the insured was excluded under a policy provision barring recovery for losses due to “[s]eepage, meaning continuous or repeated seepage or leakage over a period of weeks, months, or years, of water… from, within[,] or around any plumbing fixtures, including, but not limited to shower stalls, shower baths, tub installations, sinks[,] or other fixtures designed for the use of water or steam.” The lower court agreed with the insurer and granted summary judgment in the insurer’s favor.
2nd DCA Opinion
The 2nd DCA disagreed and reversed the lower court’s entry of final summary judgment ruling that questions raised by the insured as to the applicability of the constant repeated seepage or leakage exclusionary provision pertained to issues of material fact. The court went on to discuss whether contractual ambiguities exist in said provision. In discussing same, Price discussed, in line with prior decisions and established case law, that a contractual ambiguity could either be patent or latent. Real Estate Value Co. v. Carnival Corp., 92 So. 3d 255, (Fla. 3d DCA 2012). According to Real Estate Value Co. v. Carnival Corp., “patent ambiguities are on the face of the document, while latent ambiguities do not become clear until extrinsic evidence is introduced and requires parties to interpret the language in two or more possible ways.” Id. at 260.
The court in Mac-Gray Servs., Inc. v. Savannah Assocs. of Sarasota, LLC, discussed latent ambiguities in depth, stating, in pertinent part, as follows:
“A latent ambiguity… arises ‘where the language employed is clear and intelligible and suggests but a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings.”Ace Elec. Supply Co. v. Terra Nova Elec., Inc., 288 So. 2d 544, 547 (Fla. 1st DCA 1974). A latent ambiguity is thus brought to light when extraneous circumstances reveal “an insufficiency in the contract not apparent from the face of the document.” Hunt v. First Nat'l Bank, 381 So. 2d 1194, 1197 (Fla. 2d DCA 1980).
Mac-Gray Servs., Inc. v. Savannah Assocs. of Sarasota, LLC, 915 So. 2d 657, 659 (Fla. 2d DCA 2005).
The Price court held that the constant repeated seepage or leakage exclusionary provision was not ambiguous on its face; however, the facts agreed to by the parties raised issues of material fact not appropriate for summary judgment, e.g., the meaning of “seepage” and “leakage” in relation to the large amount of water that dispersed from the plumbing system and the question as to actual rate in which the water escaped. The insurer cited Hoey v. State Farm Florida Insurance Co., 988 So. 2d 99 (Fla. 4th DCA 2008), in support of its argument. In Hoey, however, the leak began gradually and increased over time. As such, the insured distinguished Hoey from the instant matter where the dispersal of water was a question of material fact.
This matter seems to be distinguishable from a majority of the cases where the insurer relies on the constant repeated seepage or leakage exclusionary provision as a basis for denial. Usually, said exclusionary provision relates to slow leaks causing rust and decay to plumbing fixtures in bathrooms and kitchens and not to almost 200,000 gallons of water escaping a plumbing system. As such, insurers will still likely be able to distinguish low level plumbing leaks from the leak described in Price. That being said, insurers should expect an influx of arguments asserting that reliance upon the constant repeated seepage or leakage exclusion in summary judgment is improper due to the latent ambiguities contained within said policy provision.