In Rabbit Hill Homeowners Assoc., Inc. v. Cory, The First District Court of appeal recognized that in certain circumstances, a party's failure to plead entitlement to attorney's fees is not always fatal.

The Court held there can be a waiver of the waiver of fees.

The First DCA noted "the record contains competent substantial evidence to support the trial court's finding that the appellant recognized and acquiesced to appellees' claim for attorney's fees and, accordingly, waived its right to insist that the claim be set forth in a pleading."

On March 27, 2008 the Florida Supreme Court quashed three more First DCA "Valued Policy Law" cases which had been decided pursuant to Mierzwa v. Florida Windstorm Underwriting Ass'n, 877 So. 2d 774 (Fla. 4th DCA 2004).  The Mierzwa court had interpreted the VPL in such a way that a total loss required payment of the policy’s face amount, regardless of liability and causation: “[T]he VPL provides that any liability of a casualty insurer where a covered peril is involved in a total loss must be for the face amount rather than pro rata with other coverages.” Id. at 776.  

Soon after, a legislative fix followed.  Then, 2007, the Florida Supreme Court stepped in and expressly disapproved of Mierzwa’s interpretation of the VPL.  In Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2007), the supreme court held the prior version of the VPL was intended only to set the valuation of the insured property.  The court also determined that the VPL did not intend for an insurer to pay for the total loss if a covered peril caused part of the total loss. 

In Citizens Property Insurance Corp. v. Dancy, Citizens Property Insurance Corp. v. Ueberschaer, and State Farm Florida Insurance Company v. Ondis, the First DCA had determined the VPL required a carrier to pay the face amount of the policy when the structure was deemed a total loss, but the damage was caused in part by a covered peril and in part by an excluded peril.  The supreme court referenced its recent decision in Cox, and quashed the First Districts opinions and remanded the cases for reconsideration in light of Cox. 

The Martin County Circuit Court recently decided that an insurer did not waive the "binding appraisal" provision of its policy by disputing coverage and by not requiring appraisal until after suit was filed.  Further, although the claim involved a hurricane claim, the court determined that waiver under Section 627.7015 did not apply, since the policy at issue was surplus lines insurance (technically, an "insurance company was not involved--the coverage was provided by underwriters at Lloyds).

The Order was issued in Banat Investment Corporation v. Certain Interested Underwriters at Lloyd's, in the Circuit Court, 19th Judicial Circuit in and for Martin County, Case No. 432007CA191, on January 11, 2008.

The insured was the owner of an apartment complex in Martin County, Florida.   In exchange for premiums paid by the insured, underwriters at Lloyds issued policies of commercial property insurance covering the complex. After successive hurricanes caused damages, the insured filed suit because it could not reach an agreement with the insurer on the amount of damages related to the second hurricane.  After service, and without filing an answer to the complaint, the insurer demanded an appraisal, as provided for in the policies of insurance.

In response to the demand, the insured claimed appraisal was not appropriate because: the insurer waived appraisal because the insurer repudiate the contract (relieving the insured of all obligations under the policy, including appraisal); the action involves coverage disputes, which were for the court to decide; the insurer's delay in requesting an appraisal amounted to a waiver; appraisal was impractical because substantial repairs had been made; the insured was prejudiced by the delay in demanding appraisal because suit was already filed; and appraisal was barred by application of Florida Statute section 627.7015 since the insured failed to promptly inform the insured of the option to mediate the loss under that statute.

The court found the insurer did not repudiate the insurance contract because it had partially satisfied the claim under the insurance policy (and in fact paid the undisputed portion of the claim).  The court also noted the dispute involved the "dollar value of covered losses," an issue appropriate for appraisal.  The court found none of the insurer's activities were inconsistent with a demand for appraisal, since it didn't even answer the complaint but instead demanded appraisal.

A significant factor in the opinion is based upon the defendant's status as an "insurer."  Lloyds is comprised of members of a regulated market known as the "London Market," in which individuals offer their personal capital to underwrite insurance risks in exchange for a premium. Specifically, the court noted Lloyds sells only "surplus lines" insurance coverage, a type of insurance which insures risks which are not commonly insurable in the primary commercial market.

Normally, we see that an insurer's failure to comply with Florida Statute Section 627.7015 bars enforcement of the appraisal provision when the insurer fails to notify the insured under the statute.  However, in this case, the court noted that Florida Statute section 627.021(2)(e) specifically states that chapter 627 does not apply to surplus lines insurance.  Additionally, in this case, the Florida Department of Insurance (which is responsible for implementing the mediation program under Florida Statute section 627.7015), advised the court via affidavit and memorandum in evidence, that surplus lines insurers are exempt from the requirements of that statute, but may participate in the program voluntarily.

Ultimately, the court deemed there was no waiver and Section 627.7015 did not bar the insurer's demand for appraisal.

When insureds are forced to sue their insurance company in order to receive benefits (not attorneys fees and costs), any payment of insurance policy proceeds by the insurance company should act as a confession of judgment, entitling the insured to properly pled attorney's fees.

In Jerkins v. USF & G Specialty Ins. Co., 2008 WL 678667, 33 Fla. L. Weekly D763 (Fla. 5th DCA March 14, 2008), the insureds sustained damage to their home due to Hurricane Charlie.  The insurance company's claims adjuster determined that the insureds sustained only $715.60 property damage due to the hurricane.  This claim was less than the insurance policy's deductible, and the insurance company made no payment on the claim.

Six months later, the insureds filed a breach of contract action against the insurance company.  The insurance company filed a motion to dismiss or abate the insured's suit in favor of appraisal, in accordance with the insurance policy, which provided, in pertinent part: "If you and we fail to agree on the amount of loss, either may ... Demand an appraisal of the loss...."

After the motion to dismiss was filed, the parties actually went forward with the appraisal process.  The appraisers determined the insureds actual loss was $9,084.29.  The insurance company paid the entire appraisal amount, minus the deductible.

Following payment, the insureds filed a motion for attorney's fee and costs pursuant to Section 627.428, Fla. Stat.  In their motion, the insureds maintained that the insurance company's payment constituted a "confession of judgment," entitling the insureds to attorney's fees.   However, in its opposition to the motion for attorney's fees, the insurance company argued that the insureds were not entitled to attorney's fees because the parties' dispute was resolved through appraisal, not litigation.  After a hearing, the trial court denied the motion for attorney's fees, citing Federated National Insurance Co. v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), in support of its decision.

The Fifth DCA determined that generally, payment made after a suit is filed operates as a confession of judgment.  The court claimed it was neither reasonable nor just to allow an insurance company to avoid statutory attorneys fees by simply paying insurance proceeds at some point after suit is filed but before final judgment is entered, likening voluntary payment of the insurer to the equivalent of a confession of judgment.  

The court cited its previous analysis of the confession of judgment doctrine as it relates to section 627.428, in State Farm Florida Insurance Co. v. Lorenzo, 969 So.2d 393, 397-98 (Fla. 5th DCA 2007), where the court determined the confession of judgment doctrine turned on the policy underlying section 627.428: discouraging insurers from contesting valid claims and reimbursing insureds for attorney's fees when they must sue to receive the benefits owed to them.   The court also noted the doctrine is generally not applied where the insureds were not forced to sue the insurance company to receive benefits, because otherwise applying the doctrine would encourage unnecessary litigation by rewarding a race to the courthouse for attorney's fees even where the insurer was complying with its obligations under the policy.

The court further reiterated that while Florida law does hold that payments are treated as confessions of judgment where an insurer first disputes the claim and then settles, "the existence of a bona fide dispute and not the mere possibility of a dispute, is a crucial condition precedent to such a holding."

The court determined the sixth month time lapse between claim and lawsuit, combined with the significant difference in the value of the damages, met the confession of judgment doctrine's standards.

Interestingly, the court commented that if the insurance company's policy contained a mandatory arbitration or appraisal provision, the insureds would not be entitled to attorney's fees under section 627.428.  Since the appraisal clause was permissive, the court did not see appraisal as a condition precedent to filing suit (and therefore recovering attorneys fees under the confession of judgment doctrine).  

Significantly, the court distinguished Federal National Insurance Company v. Esposito, 937 So.2d 199 (Fla. 4th DCA 2006), which the trial court relied upon to deny the insured's motion for attorney's fees and costs.  In Esposito, the insured invoked the appraisal process to settle a dispute she had with her insurance company over the value of hurricane damage to a structure.  Through the appraisal process, the parties agreed upon a value of the damage and the insurer paid the appraisal award in full.  Only after the appraisal process was well underway did the insured file an action seeking to confirm the appraisal award and attorney's fees. The Esposito court held that the trial court erred in confirming the appraisal award and entering judgment in favor of the insured because the parties settled their dispute without litigation.  The court determined the Esposito lawsuit was solely filed to obtain fees, not to settle a dispute. 

A sobering reminder about timely moving for attorneys fees in declaratory judgment actions was issued by the Fourth District Court of Appeal.  In Cardillo v. Qualsure Insurance Corp., out of the 4th DCA on February 20, 2007, the court determined a fairly innocuous "Order" which established insurance coverage--but left issues of liaiblity and damages set for a jury trial--was a "judgment" for purposes of Fla. R. Civ. P. 1.525.

Cardillo was initially sued for personal injury.  The defendant insured then filed a liability claim with his insurance company.  The insurance company contested coverage and its duty to defend.  The insurance company then sought a declaratory judgment of its rights and obligations pursuant to section 86.011, Florida Statutes.

On December 1, 2004, the trial court entered an order titled "Findings of Fact – Conclusions of Law-And Order Regarding Trial." In the order, the trial court stated that certain claims of the insured remain pending in the underlying litigation, but based upon the Court’s findings of fact and conclusions of law, those issues were no longer "outcome determinative" of the declaratory decree action.  In paragraph four of the trial court's order, the court determined that insurance coverage existed under the policy. Next, the order announced that "[a]ll remaining issues of liability and damages" proceed to a jury trial set the following month; "[a]ll stays previously entered . . . are lifted and all counsel advised to be fully ready to commence trial." The order then simply concluded that it is "DONE AND ORDERED."

After various procedural posturings, and upon request, the trial court entered a "judgment," which stated that the " Order rendered on December 1, 2004 is a Final Judgment, for which let execution issue, if appropriate."

On February 17, 2005, the insured filed a motion for attorney’s fees pursuant to section 627.428, Florida Statutes.

The question before the appellate court was whether the December 1st order constituted a final order or judgment which would start the 30 day time limit in Fla. R. Civ. P. 1.525. The court stated that Rule 1.525 applies equally, regardless of whether the time runs from a document titled "order," "final order," "judgment," or "final judgment," as long as the document is a final resolution of the rights and obligations of the parties. The court then concluded that the December 1st order was a final order regard the dec action, stating:  

"Patently, it was the intent of the trial court that nothing further should stand as an obstacle to concluding the underlying case and that the declaratory issues were 'disposed of.' The language of the order is more than sufficient to alert counsel that the clock is ticking as to a fee motion."

Since Fla. R. Civ. P. 1.525 is no longer construed as requiring a party to move for attorneys fees after a judgment is entered (For clarification of this issue, including effect of the 2005 amendment and interpretation of the Rule pre-amendment) see Barco v. School Board of Pinellas County, 2008 WL 321469 (Fla. Feb. 7, 2008)), and since nothing prohibits a party from moving for attorneys fees before a judgment is actually entered (Barco, above), it would be prudent to file a motion for attorneys fees within 30 days of any order that could be construed as being dispositive of insurance coverage. 

    It seems axiomatic that when an insured has to institute litigation against its insurance company to determine whether or not insurance coverage exists, and insurance coverage is found to exists, the insured should be entitled to attorney's fees pursuant to Section 627.428, Fla. Stat.  However, as seen by a recent Federal Court decision, such is not always the case.
     

    In Mizner Tower Condominium Assoc., Inc. v. QBE Ins. Corp. 2008 WL 151414 (S.D.Fla. Jan. 15, 2008), the court determined that an insured is not entitled to attorneys fees and costs when a "judgment" does not result in payment of wrongfully denied benefits.

    In Mizner, the insurer conditionally extended a commercial residential policy to the condominium association.  Continuation of coverage (beyond a date certain) was based upon the condominium association's completion of certain loss prevention conditions.  Prior to the date certain, the insured condominium association complied with the notice requirements and informed the insurance company that the required loss prevention measures had been satisfactorily completed.

    However, nearly three months after the date certain, the insured association notified the insurer that seven of the condominium's shutters might not be in compliance with the insured's underwriting requirements.  The insured asked the insurance company to inspect the shutters and make a determination whether the insurance policy was still valid in light of the shutters.  In response, the insurer stated that the continuing insurance coverage had been conditioned upon the insured's representation that the loss prevention conditions were completed, and stated "the Association's coverage could be jeopardized due to a material misrepresentation."  The insurer took no further action, and apparently did not make a site visit to inspect the shutters or make any determination as to the validity of the policy.  

    The insured, over the next few weeks, repeatedly asked the insurance company to instruct whether or not the insurer still provided hurricane coverage, and threatened to file a declaratory judgment action if it received no response.  Ultimately, a little over a month after notifying the insurer about the problem shutters, the insured filed the dec action to establish coverage.  

    Eight days after the dec action was filed, the insurance company sent correspondence to the insured which confirmed that hurricane coverage would remain "in full force and effect for the remainder of the current policy period."   Shortly thereafter, the insurance company filed a motion to dismiss/motion for summary judgment.  The Trial court determined (1) it was undisputed that the insured sought judicial determination that the policy was valid and enforceable; (2) the insurance company provided the  insured with written confirmation that the policy was valid and enforceable; and (3) summary judgment was appropriate.   

    The insured disagreed, stating the insurance company's confirmation of a valid and enforceable policy--which came after suit was filed--operated as a confession of judgment, entitling the insured to attorney's fees pursuant to Section 627.428, Fla. Stat.  The court held that attorney's fees were not available under the facts of the case:

"The Court is unaware of, and the [insured] has not provided any, legal basis for awarding fees pursuant to the above Section in a case where a judgment does not result in payment of wrongfully denied benefits.  The [insured] seeks to apply this Section to any claim between an insured and an insurance company where the insurer prevails regardless of whether or not an insurer has wrongfully withheld payment of a valid claim for benefits.  I decline to extend this Section's reach so far."

    The Florida courts have not issued any consumer noteworthy insurance law for the last few weeks, so I thought I'd give you some insights into the "Anti Concurring Cause Clause", which has become a recent focus in insurance litigation.  Principally, it is a creation by insurers to ensure they will not be responsible for paying any part of a loss, as long as an excluded cause contributes in any way to the damage. 

THE ANTI-CONCURRING CAUSE CLAUSE

      Many insurers are dramatically limiting their exposure for claims by including specific anti-concurring causation clauses (“ACCC”).  In order to understand the ACCC, it is necessary to review the concurring cause doctrine, review the validity of such exclusions, and look at application and effect of anti-concurring cause policy language. 

The Concurring Cause Doctrine

    The concurring cause doctrine applies where there are “independent” causes of damage which combine which cause a single loss.  For example, where two independent causes such as an earthquake and an unrelated lightning bolt, independently combine to cause a house fire.  Hrynkiw v. Allstate Floridian Ins. Co., 844 So. 2d 739, 743 (Fla. 5th DCA 2003).  Causes are independent “when they are unrelated such as an earthquake and a lightning strike, or a windstorm and wood rot.”  Paulucci v. Liberty Mut. Fire Ins. Co., 190 F.Supp.2d 1312, 1319 (M.D. Fla. 2002).  Under the concurring cause doctrine there is coverage “when a loss results from multiple independent causes, as long as one of the causes is an insured risk.”  Transamerica Ins. Co. v. Snell, 627 So. 2d 1275, 1276 (Fla. 1st DCA 1993); and Hrynkiw, above.  

      The concurring cause doctrine is contrasted to the “efficient proximate cause doctrine.”  The efficient proximate cause doctrine applies where “dependent” causes combine to cause a single loss.  For example, where a fire causes an explosion or (seen below) where vandalism causes flooding.   Causes are dependent “when one peril instigates or sets in motion the other, such as an earthquake which breaks a gas main that starts a fire.”  Paulucci, above.

      In discussing insurance coverage pursuant to the concurring cause doctrine, the court in Wallach v. Rosenberg, 527 So. 2d 1386 (Fla. 3rd DCA 1988), stated: “[W]here an insured risk constitutes a concurrent cause of the loss even where ‘the insured risk [is] not … the prime or efficient cause of the accident.’ ”  Id. (quoting 11 Couch, Couch on Insurance 2d §44:268 (rev. ed. 1982).  Wallach went on to state: “[I]t seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage.”  Wallach, at 1388.  

      Wallach’s reasoning was followed in Paulucci.  The Paulucci court, in comparing and contrasting the concurring cause and efficient proximate cause doctrines, gave the example:

"[W]here an excluded earthquake and covered fire were independent such as where loss is caused by an unrelated simultaneous earthquake and lightning strike, the efficient proximate cause doctrine would be inapplicable.  In this scenario, the concurring causation doctrine would apply and mandate coverage regardless of which peril was covered and which peril excluded."

Id. at 1319.  See also, W. Am. Ins. Co. v. Chateau La Mer II Homeowners Ass’n, 622 So.2d 1105, 1108 (Fla. 1st DCA 1993)(holding that pursuant to the subject insurance policy and Florida law coverage existed for damage to balconies which resulted from both a covered cause (hidden decay) and an excluded cause (faulty design)).  

      In Paulucci, the court noted the concurring cause doctrine is the prevailing standard to evaluate loss in Florida when multiple perils are independent.  Paulucci at 1318.

Anti-Concurring Cause Clause – The Language

      In order to avoid the coverage consequences of the concurring cause doctrine, insurers abrogate the doctrine by inserting an ACCC.  Typical ACCC language provides, under “Exclusions”:

"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."

See, e.g., ISO form CP 10 30 04 02.  Following the exclusionary language, an extensive list of exclusions and qualifiers (including exclusions for earth movement, water, rot, fungus and bacteria, governmental action, etc.) sets forth those items that are not covered regardless of the cause of the loss.  Id.  It is also apparent from the language of the ACCC that the ACCC is intended to exclude not only concurrent causes, but also efficient proximate causes.

Anti-Concurring Cause Clause – Validity

      In light of such exclusions, it is important to determine whether such ACCCs are valid in the state of Florida.  The question turns on whether the concurring cause doctrine is a mandatory principal of insurance, a rule of interpretation of insurance contracts, or merely a default rule to utilize when interpreting coverage.  See, e.g., David P. Rossmiller, “Interpretation and Enforcement of Anti-Concurrent Policy Language in Hurricane Katrina Cases and Beyond” at p. 57-58, New Appleman on Insurance: Current Critical Issues in Insurance Law”, citing Kenneth S. Abraham, Peril and Fortuity in Property and Liability Insurance, 36 Tort & Ins. L. J., 777, 778 (Spring, 2001).

      Mandatory insurance rules cannot be set aside and cannot be altered by contractual agreement—if so, it would destroy the very principle of insurance.  Few mandatory rules exist, such as: the insured must have an insurable interest in the property or thing insured; the insured may not recover more than the total amount of the loss; and the insured may not insure against losses that are intended (from the standpoint of the insured.)  Id., citing Abraham at 780.  Such mandatory rules are routinely upheld, because it would be violation of public policy to violate the mandatory rules.  Clearly, the concurring cause doctrine is not a mandatory principle of insurance.

      The concurring cause doctrine is also not a rule of interpretation.  A rule of interpretation may not be altered by the parties, since it is a creature of ancient contract law and the judiciary.  For example, the parties may not contract that any ambiguity in the insurance policy would be decided against the insured.  Id.  Such a provision would not stand up in the courts of law.  Indeed, the concurring cause doctrine is not a guide to policy construction or interpretation, but actually presupposes policy construction and interpretation—the concurring cause doctrine is a “framework for analyzing the causal events that require interpretation of the policy to begin with.”  Rossmiller at 58.  

      The concurring cause rule (and efficient proximate cause rule) is a default rule of coverage.  And, unlike mandatory rules or rules of interpretation, parties can contract around a default rule.  Id., citing Abraham at 780.  See, for example, Couch on Insurance:

"The majority of jurisdictions permit the parties to an insurance contract to contract out of the efficient proximate cause doctrine.  However, there are a few jurisdictions which have statutory provisions which specifically prohibit an insurer from contracting out of the efficient proximate cause doctrine. [California and North Dakota]."
 
7 Couch, Couch on Insurance 3d § 101:45 (rev. ed. 2007).  Presumably, Couch’s pronouncement would hold true for the concurring cause doctrine as well.

      Moreover, it is apparent from reviewing Florida court decisions, that Florida courts anticipate and accept contractual exceptions to the concurrent cause doctrine.  In Wallach, above, the court applied the concurrent cause doctrine and specifically noted the policy did not contain a provision excluding concurrent causation.  (“There is no contention here that the policy contains a provision which specifically excludes coverage where a covered and an excluded cause combine to produce a loss.” Id. at 1388).  Additionally, in Chateau La Mer, above, the court held the concurrent cause doctrine was applicable in part because there was no policy provision which specifically excluded coverage where both a covered and an excluded cause combined to produce a loss.  Id. at 1108 (emphasis added).  Finally, in Paulucci, above, the court reviewed Wallach and Chateau La Mer II, and came to the conclusion “[U]nder Florida law, parties can contract around the concurrent cause doctrine through an express anti-concurrent cause provision.”  Paulucci at 1320.  The court also referenced the fact that courts applying Florida law (and the law of other states) have repeatedly upheld the validity of policy provisions which exclude coverage where a loss results from a combination of covered and non-covered causes.  Id.

      It is apparent that the parties may contract out of the concurring cause doctrine and efficient proximate cause doctrine, and the ACCC is valid in the state of Florida.

Anti-Concurring Cause Clause and the Valued Policy Law

      Initially, in Florida it appeared that the ACCC may not have been as effective as insurers intended, especially when faced with a “total loss” situation.  In Mierzwa v. Florida Windstorm Underwriting Ass'n, 877 So. 2d 774 (Fla. 4th DCA 2004), Florida’s Fourth District Court of Appeal the court reviewed an insurer’s exposure after a homeowner’s total loss during Hurricane Irene.  The insured had wind insurance with one carrier and flood insurance with another, and the wind insurer's policy contained an anti-concurrent cause clause excluding coverage for any damage other than by wind.  The wind insurer argued it was liable only for its pro rata share, not for the face amount of the policy.   

      The wind storm policy language clearly provided the amount of liability could be less than the face amount of the policy if the actual amount of repair/replacement was less than policy limits.  However, the court determined the insurance policy was subject to the 2003 version of the VPL which stated:

“In the event of the total loss of any building ... located in this state and insured by any insurer as to a covered peril ... the insurer's liability, if any, under the policy for such total loss shall be in the amount of money for which such property was so insured as specified in the policy....”

Mierzwa at 765 (citing § 627.702(1), Fla. Stat. (2003)).  The court noted the VPL is “part of every real property casualty insurance policy written on property in Florida.”  Id.  The court interpreted the VPL as a total loss requiring payment of the policy’s face amount regardless of liability and causation: “[T]he VPL provides that any liability of a casualty insurer where a covered peril is involved in a total loss must be for the face amount rather than pro rata with other coverages.” Id. at 776.  The court then specifically analyzed the interplay between the ACCC and the VPL. The Mierzwa court provided two reasons why the ACCC was void in light of the VPL:

• The court found the policy’s ACCC did not explicitly say that it overrode the meaning of VPL.  Thus, because the policy was silent on whether the insurer’s liability was merely pro rata with other coverage, or whether the VPL took precedence over the ACCC, there was a conflict between the VPL text and the ACCC text.  The court determined the conflict created an ambiguity in the policy.  The court followed the rule that where two interpretations could be given to an insurance contract, the interpretation which gives the greater indemnity prevails.  
• The court also determined the insurer did not establish that wind damage alone did not result in the total loss of the building, just that the wind was responsible for a certain percentage of the building’s damages.  Because of the possibility the wind damage alone could have resulted in the total loss of the building, the court determined the owner was entitled to the face amount of the policy on account of the windstorm damage.

Id. at 777-79.

      The Mierzwa opinion was released on June 23, 2004.  A Legislative fix soon followed.  Effective June 1, 2005, the VPL was amended, removing the very language Mierzwa was focused on.  Additionally, the liability for a total loss became proscribed by whether it was “caused by a covered peril”, and the following subsections were added:

"(b)  The intent of this subsection is not to deprive an insurer of any proper defense under the policy, to create new or additional coverage under the policy, or to require an insurer to pay for a loss caused by a peril other than the covered peril. In furtherance of such legislative intent, when a loss was caused in part by a covered peril and in part by a noncovered peril, paragraph (a) does not apply. In such circumstances, the insurer's liability under this section shall be limited to the amount of the loss caused by the covered peril. However, if the covered perils alone would have caused the total loss, paragraph (a) shall apply. The insurer is never liable for more than the amount necessary to repair, rebuild, or replace the structure following the total loss, after considering all other benefits actually paid for the total loss.

(c)  It is the intent of the Legislature that the amendment to this section shall not be applied retroactively and shall apply only to claims filed after effective date of such amendment."

Laws 2005, c. 2005-111, § 16.

      Soon after the Legislative fix, the Florida Supreme Court stepped in and expressly disapproved of Mierzwa’s interpretation of the VPL.  In Fla. Farm Bureau Cas. Ins. Co. v. Cox, 967 So. 2d 815 (Fla. 2007), the supreme court held the prior version of the VPL was intended only to set the valuation of the insured property.  The court also determined that the VPL did not intend for an insurer to pay for the total loss if a covered peril caused part of the total loss.  The Cox court completely ignored the issue of the ACCC.

      In light of the foregoing, the ACCC is a viable provision in Florida insurance policies.

Brief History of the ACCC

      In response to judicial expansion of property damage coverage in the 1960s and 1970s, Insurers and the Insurance Service Office developed newer and tougher ACCC restrictions in the early 1980s.  (Many property insurance policies prior to this time contained some form of ACCC language, but it did not cover the same breadth or scope as the language drafted in the 1980s.  Rossmiller at 46, n.5)  The new ACCC language was intended to bypass efficient proximate cause standard and a tort-like analysis of causation; restore the primacy of the policy’s contractual language; and prevent coverage of losses which the insurers never intended to cover.  Rossmiller at 46.

      This clear intent of the clause was set out by Michael E. Bragg, assistant counsel for State Farm Insurance Companies who wrote “Concurrent Causation and the Art of Policy Drafting: New Perils for Property Insurers”, 20 Forum 385 (Spring 1985) cited extensively throughout Rossmiller, above. 

Practical Considerations

      The ACCC is a draconian provision.  Recall the ACCC language:

"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."
 
Broken into its simplest parts, if an excluded cause contributes to any portion of the loss, the loss is excluded in its entirety.  No portion of the loss is compensable.  

      The ACCC language accomplished the insurer’s goal.  Bragg, above, noted that the ACCC was intended to apply in “every situation where the loss would not have occurred ‘but for’ the excluded peril.”  Mr. Bragg also claimed:

“The new language established a purging effect by making the occurrence of any of these excluded events an absolute prohibition to a finding of coverage.  Thus, once a loss occurs which would not have happened in the absence of an excluded event, there is no coverage.”

Rossmiller at 71 (citing Bragg).

      The sweeping effect of the ACCC was seen in Front Row Theatre, Inc. v. American Manufacturer’s Mut. Ins. Companies, 18 F.3d 1343 (6th Cir. 1993).  In Front Row Theatre, the theatre property was flooded and the carpet damaged.  The cause of the flood was attributed both to a covered event (water backing up from a sewer) and an excluded event (surface water).  The court noted coverage was not warranted because of the explicit language of the flood exclusion:

      "Despite our conclusion that a portion of the damage to the theater fell within the 'water that backs up from a sewer' exception, however, we cannot agree with Plaintiff that this conclusion mandates a ruling in their favor.  As discussed above, a portion of the damage to the theater was also caused by surface water flooding.  Thus, the language of the policy that specifically barred coverage where flooding was a contributory cause governs, and precludes payment.

* * * Damage to the theater's carpeting was caused both by surface water, and by water that backed up from a sewer.  However, under the specific language of the policy in the instant case where, as here, a contributing cause of the damage was a flood, [the insurer] explicitly contracted out of liability."

Id. at 1348-49 (emphasis added).  It is not clear from the facts whether Front Row Theatre involved the concurring cause doctrine or the efficient proximate cause doctrine.  It is a common problem for courts to confuse the efficient proximate cause doctrine with the concurrent cause doctrine in reviewing ACCC provisions.  (This fact is extensively dealt with in Rossmiller.)  However, as noted above, the ACCC intents to eliminate the insurer’s duty to pay in either situation.

      In TNT Speed & Sport Center, Inc. v. American States Ins. Co., 114 F.3d 731 (8th Cir. 1997), a vandal removed sandbags from a levee and, as a result, the levee collapsed and water damaged the insured’s buildings. The insurance policy covered losses caused by vandalism, but excluded flood losses.  The policy’s ACCC also excluded coverage for damage arising concurrently from a covered and an excluded peril. After a review of state and extra jurisdictional cases, the Eighth Circuit held that the ACCC was valid and precluded recovery under the policy.

      In Ramirez v. American Family Mut. Ins. Co., 652 N.E.2d 511 (Ind. Ct. App. 1995), the insured’s claimed their water damage was caused by ice accumulating on power lines, resulting in a power outage, which was a peril covered by the policy. The court, however, determined the water damage was caused by failure of a sump pump (regardless of the cause of its failure).  Accordingly, the court held the ACCC excluded the loss for damage caused by a sump pump:

"The Ramirezes’ contention necessarily fails in light of the clear and unambiguous language of the exclusion. The exclusion unequivocally states that loss resulting from sump pump failure is not covered 'regardless of any other cause or event contributing concurrently or in any sequence to the loss.' Thus, the fact that the sump pump failure was preceded by a power outage resulting from the accumulation of ice on the power lines does not remove the Ramirezes’ claim from this exclusion…."

Id. at 516.

      In Paulucci, above, the parties moved for summary judgment on an ACCC provision in the policy.  The insurer argued the insured’s building collapsed in part because of wet and dry rot and wear and tear, excluded causes under the ACCC, and therefore no coverage was available.  The insured argued the ACCC was a violation of public policy and against Florida law, and argued the building collapsed due to excessive rain pooling on the roof during Tropical Storm (formerly Hurricane) Gordon.  After deciding the ACCC clause was valid in Florida, and recognizing the exclusion would completely bar the insured’s claim (citing Front Row Theatre, above), the court determined the evidence was conflicting as to the prior condition of the structure before the collapse and as to the severity of the storm:

"[I]n evaluating whether the anti-concurrent cause provision provides a defense in the instant case, there must be a factual determination as to whether the loss was caused by an excluded cause. Ultimately, summary judgment is not warranted for either party on this affirmative defense because questions of fact remain as to the storm's impact on the garage and as to the extent to which the structural condition of the garage was less than ideal."

Id. at 1318.

      In Citizens Property Ins. Corp. v. Manning, 966 So. 2d 486 (Fla. 1st DCA 2007), the trial court determined, on the authority of Mierzwa, above, that the 2004 version of the VPL required the insurer to pay the face amount of the policy because wind had contributed to a total loss of the house.  The appellate court noted: “The record left no doubt that wind contributed to the total loss of the Mannings’ home, but was unclear as to what damage the wind alone caused.”  Id.  On the authority of Fla. Farm Bureau Cas. Ins. Co. v. Cox, above, which was not available at the time of the trial court's ruling, the First District Court of Appeal reversed the trial court award.  Significantly, the court referenced the ACCC and remanded the case to determine what portion of the loss, if any, was solely attributable to the covered cause of wind.  Based upon the expert testimony set forth in the case, it is not apparent the plaintiff would be able to easily accomplish this task.  Manning is a practical example of the effects of the ACCC on the insured’s and insurer’s burdens of proof, as explained below.

Burden of Proof

       Typical insurance law holds that the burden is initially on the insured to prove that the insurance policy provides coverage for a claim. Once the insured shows coverage, the burden shifts to the insurer to prove an exclusion applies to the coverage.  If there is an exception to the exclusion, the burden shifts back to the insured to demonstrate the applicability of the exception.  See, e.g., East Florida Hauling, Inc. v. Lexington Ins. Co., 913 So. 2d 673 (Fla. 3rd DCA 2005).

      Under the Concurring Cause Doctrine, the insurer was required to show the exclusion was the sole, proximate cause of the loss.  In Wallach, above, the Third DCA approved the trial court’s jury charge which stated: "[The insurer] has the burden of proof to show by the greater weight of the evidence that the exclusion in the insurance policy was the sole, proximate cause of damage or loss to the property." Id. at 1387.  Significantly, under the Concurring Cause Doctrine, it was not incumbent upon the insured to apportion the loss (and would not benefit the insured to do so).  In Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc., 420 F.3d 1317 (11th Cir. 2005), the court held:

      "The concurrent cause doctrine does not demand that we apportion the loss.  See generally Wallach; see also Orient Mid-East Lines, Inc. v. Shipment of Rice on Board S.S. Orient Transporter, 496 F.2d 1032 (5th Cir. 1974) (holding shipowner liable for entire loss when it could not show how much of the damage resulted from a cause entitled to exemption); Fire Ass'n of Philadelphia v. Evansville Brewing Ass'n, 73 Fla. 904, 75 So. 196, 199 (1917) (finding that plaintiff could recover for the entire loss, even if the loss was facilitated in part by an explosion excluded by the policy); Armco Chile Prodein, S.A. v. M/V NORLANDIA, 880 F.Supp. 781, 791 (M.D.Fla. 1995) (if claimant is able to prove at least a concurrent cause of damage, the burden then shifts back to the carrier to apportion between amount of damages caused by the exception and those damages caused by the covered cause; failure of carrier to differentiate causes of damage renders the carrier liable for the entire damage)."

Guideone Elite at 1330-31 (emphasis added).

      However, the burden of proof analysis is encumbered with dealing with an ACCC.  Recall that once the insured shows coverage, the burden shifts to the insurer to prove an exclusion applies to the coverage and, if there is an exception to the exclusion, the burden shifts back to the insured to demonstrate the applicability of the exception.  East Florida Hauling, above.  

      One of the clearest pronouncements of the parties’ respective burdens is set forth in a Texas federal case,
Lexington Ins. Co. v. Unity/Waterford-Fair Oaks, Ltd., 2002 WL356756 (N.D. Tex. 2002), wherein the court held:

"[The insurer] has the burden of proving that the exclusionary language contained in the Anti-Concurrent Cause Clause exempts [the insurer] from liability for interior damage to the second floor units caused by roof leaks. To do so under section (D) of the Anti-Concurrent Cause Clause, [the insurer] must establish the absence of a genuine issue of material fact concerning whether inadequate maintenance was a contributing cause to the roof leaks. In other words, [the insurer] must conclusively establish that inadequate maintenance was a contributing cause. If [the insurer] succeeds in making this showing, it is exempt from liability for all damages caused directly or indirectly by the excluded cause, i.e., inadequate maintenance, regardless of any other cause or event contributing concurrently or in any sequence to the loss. That this is the legal effect of the adoption of an Anti-Concurrent Cause Clause within a policy is well established in those jurisdictions that have considered the question."

Id. at *4.  

      In Manning, above, the insured’s expert plainly stated he could not allocate the loss.  Under the concurrent cause doctrine, the insurer would have been liable for the entire amount of damages for the indivisible loss.  However, when the court analyzed the expert opinion under the ACCC, the court found the opinion insufficient to satisfy the insured’s burden to establish what property was solely damaged by the covered cause, wind.  In other words, the insurer failed to meet its first burden to prove coverage under the policy:

"The record does contain an uncontroverted engineer's affidavit to the effect that wind, wind-driven rain, and storm surge combined to destroy the [insureds’] home (and other evidence values the house at considerably more than the sum of the face amount of [the insurer’s] policy and the flood insurance proceeds), but the record is devoid of evidence establishing the amount of damage caused solely by wind.  The engineer's affidavit explicated his opinion that, while wind undoubtedly contributed to the destruction of the house, wind acted in combination with other forces, and that the precise effects of wind alone were difficult, if not impossible, to ascertain from the rubble:
    
'It is an arduous task to determine the failure mode of a structure when it lies in front of you. It is bordering on clairvoyance to state with certainty a particular mode of failure when you don't even have the ability to examine the structure because it has been removed.

We all understand that a hurricane is a very complex and violent set of variables and is highly unpredictable at best. Therefore I am not prepared to say with any degree of certainty that the failure of this structure was due to a single source. To the contrary, I think this failure was caused by a whole series of events that will never be established for certain. I also think that to rule out the effects of hurricane force winds contributing to failure of this structure is simplistic and naive.'

The [insureds] never even alleged that the amount of damage attributable to wind alone exceeded the policy deductible. Since the record does not establish this threshold fact, it is not clear that the [insureds] are entitled to recover anything or that the burden to prove an exclusion will ever shift to [the insurer]."

Manning at 486 and n.3.

      Hurricane Katrina litigation may help to clarify the uncertainty surrounding the burden of proof with the ACCC.  Initially, in Tuepker v. State Farm Fire & Cas. Co., 2006 WL 1442489 (S.D.Miss. 2006), the court stated “[B]ecause this is an exclusion from coverage in a comprehensive homeowners insurance policy, and because the exclusion constitutes an affirmative defense, State Farm would bear the burden of proving that the exclusion applies to the plaintiffs' claims.”  When Tuepker was appealed to the Fifth Circuit, State Farm argued “[O]nce an insurer has provided evidence that an item of claimed damage resulted at least in part from an excluded peril, the burden shifts to the insured to produce evidence as to what portion of the damages were caused by perils covered by the policy.”  Tuepker v. State Farm Fire & Cas. Co., 507 F.3d 346, 357 (5th Cir. 2007)  The Fifth Circuit conveniently sidestepped the issue due to a high-low agreement between the parties: “The questions that the parties raise regarding the burden of proof are not relevant to the case and controversy at issue in this court….”  Id.

      In another Katrina case, Broussard v. State Farm Fire & Cas. Co., 2007 WL 113942 (S.D. Miss. 2007), the trial judge made specific findings regarding the burden of proof:

"6.  Once the plaintiffs established this prima facie case [that the plaintiffs' dwelling sustained wind damage during Hurricane Katrina and that ultimately the dwelling was a total loss], based on the stipulations in the pre-trial order, the burden shifted to [the insurer] to prove the merits of its affirmative defense based upon the water damage exclusion in the policy.  That burden of proof requires [the insurer] to establish, by a preponderance of the evidence, what portion of the total loss is attributable to flood damage and is therefore outside the policy coverage…. 

7.  All of [the insurer’s] evidence was directed to proving that 100% of the damage to the insured property was caused by rising water, yet [the insurer’s] own expert witness, Dr. Gurley, testified that it was more probable than not that the [insureds’] dwelling sustained at least some wind damage to its roof. In an attempt to quantify the likelihood of this wind damage having occurred, Dr. Gurley estimated that there was a 75% probability that the damage to the plaintiffs' roof consisted of the loss of between 0% and 35% of the shingles on the roof of the dwelling. Dr. Gurley also testified that based on the data now available he cannot make a determination of the extent of wind damage to the [insureds’] dwelling before the storm surge arrived.

8.  The evidence is overwhelming that when the flood reached the [insureds’] property it was sufficient in force and duration to destroy the dwelling regardless of the extent of the preceding wind damage. Thus, the force of the storm surge was sufficient to destroy the dwelling if it were undamaged at the time the water reached it, and it was sufficient to remove the debris of the property if the dwelling had collapsed or suffered extensive damage from the force of the wind before the storm surge arrived. The key issue is how much damage had occurred as a result of wind before the storm surge arrived. That preceding wind damage would be covered, and any additional damage caused by the arrival of the flood would be excluded.

9.  In these circumstances, it is the allocation of the burden of proof that is critical, for one party or the other must bear this total loss in the absence of evidence by which the two types of losses may be reasonably identified and separated.

10.  Because the plaintiffs have met their burden of proof under the policy, via the stipulations in the pre-trial order, the burden of proof was and is on [the insurer] to establish, by a preponderance of the evidence, that portion of the total loss that was attributable to excluded flooding and rising water. [The insurer] is obliged under its policy to pay all of the loss that it does not establish, by a preponderance of the evidence, to have been caused by flooding.

11.  No evidence has been introduced from which any finder of fact could reasonably determine what part of the loss of the [insureds’] property is attributable to water as opposed to wind.

12.  Accordingly, I find, as a matter of law, that [the insurer] has not met its burden of proof as to the segregation of this total loss into wind damages, which are covered, and water damages which are excluded from coverage. [The insurer] has also failed to establish or to offer evidence that would support a finding that the insured property sustained no wind damage.

13.  Since [the insurer] has offered no evidence which would allow the finder of fact to make a reasonable determination of the amount of the total loss that is attributable exclusively to water damage, I find that [the insurer] has failed to meet its burden of proof as to the extent of the damage caused by water, and since the [insureds] have established by stipulation that they sustained a total loss of their dwelling and its contents as a result of Hurricane Katrina, a covered windstorm peril, I find that [the insurer] is liable to the plaintiffs for the limits of coverage under the policy…."

Id. at *2, 3 (citations omitted, emphasis added).

      State Farm has appealed this Order, and the Fifth Circuit heard oral argument on December 5, 2007.  The results should be enlightening regarding the insured’s and insurer’s respective burdens of proof under the ACCC.

Conclusion

      It is apparent the anti concurring cause clause is valid in Florida, and will serve to contract around both the concurrent cause doctrine and the efficient proximate cause doctrine.  Summary judgment would be appropriate in cases where there is no dispute whether an excluded peril caused the loss in any measure.

An uninsured motorist insurer is not forced to use the same expert it relied upon in evaluating personal injury protection (PIP) benefits, and a third party defendant does not have sufficient commonality of interest that it has to use the expert, either. 

In GEICO General Ins. Co. v. Berner, 2007 WL 4409786 (Fla. 3rd DCA December 19, 2007), the appellate court held it was error to limit the Defendants’ choices of a medical expert.  In Berner, a motorist struck a pedestrian as he crossed the street.  The motorist was uninsured/underinsured, and the pedestrian submitted a claim for PIP benefits to his own insurance company.  The insurance company required its insured to submit to a physical examination for the PIP claim. 

The insured filed suit against the driver, and also sued his insurance company for UM/UIM benefits.  Two months into the litigation, the insurance company served a request for examination of its insured by another doctor pursuant to Rule 1.360.  The insured objected to his insurance company’s request, claiming the insurance company already had its examination.  The defendant driver served his own request for medical examination pursuant to Rule 1.360, and the insured pedestrian objected to the driver’s request on the ground that the driver and the insurance company shared a commonality of interests in the damage phase of the litigation. The trial court agreed, and ordered that the PIP evaluator serve as the defense medical expert for both the insurance company and the defendant driver.  

The Third District Court of Appeal reversed the trial court’s decision, agreeing with the defendants that the trial court impermissibly limited its choice of medical experts.  Acknowledging that Rule 1.360 allows the defendant the choice of medical expert, the court determined “There is a substantial legal and practical difference between an insurer's evaluation of a personal injury protection benefit claim and a claim for uninsured (or underinsured) motorist benefits. The coverages are different, the claims focus is different, and the economics of the claims handling processes is different.”  Id. at *2.

The court focused on PIP’s purpose of providing “swift and virtually automatic payment so that the insured may get on with his life without undue financial interruption.”  The court also referenced the modest amount ($10,000.00) of PIP coverage, and compared it to the “substantial penalties” that an insurance company can incur for failing to timely pay the PIP benefit claim.  The court contrasted the purpose of UM/UIM motorist coverage, to treat the insured the same as if the tortfeasor had been financially responsible.  The court stated: “Not only are the financial stakes almost always higher, but also more exacting, traditional principles of ‘causation’ and ‘foreseeability’ are in play.”  Id. at *3.   

The court then concluded that PIP examinations are likely to be more cursory and frequently are conducted by less-credentialed or experienced medical professionals, and held that “to restrict an insurer's choice of defense medical expert to a physician consulted for a reason other than that for which the examiner was retained is inconsistent with the purpose and plain language of Rule 1.360(a)(1)(A).”  Id.  The court summarily concluded the trial court departed from the essential requirements of law when it did not let the defendant driver choose its own expert. 

The Florida Supreme Court has recently issued two opinions which shed light on whether standard form commercial general liability (CGL) insurance policy covers a general contractor’s liability for defective work performed by its subcontractor.  

On the same day, the supreme court issued its opinions in U.S. Fire Ins. Co. v. J.S.U.B., Inc., 2007 WL 4440232 (Fla. December 20, 2007) and Auto-Owners Ins. Co. v. Pozzi Window Co., 2007 WL 4440389 (Fla. December 20, 2007).  Both cases involved interpretation of the "occurrence" and "property damage" provisions of standard form CGL insurance policies with "Products Completed Operations Hazard" coverage.  In both cases, the insurance company had denied coverage claiming the subcontractor's faulty workmanship was not an "occurrence" and did not cause "property damage."

In J.S.U.B., after a general contractor completed the construction of several homes, damage to the foundations, drywall, and other interior portions of the homes appeared due to subcontractors' use of poor soil, improper soil compaction, and improper testing.  The contractor sought coverage under its CGL policies, and the insurance company denied coverage.  The contractor instituted a declaratory judgment action to see whether the insurance policy provided coverage. 

The issue presented to the court was "whether a post-1986 standard form commercial general liability policy with products-completed operations hazard coverage, issued to a general contractor, provides coverage when a claim is made against the contractor for damage to the completed project caused by a subcontractor's defective work."  Id. at 6.  The court addressed the issue in two parts, and held: faulty workmanship that is neither intended nor expected from the standpoint of the contractor can constitute an "occurrence" under a post-1986 CGL policy; and the subcontractors' defective soil preparation caused "property damage" within the meaning of the policy.  The court specifically noted "[i]f there is no damage beyond the faulty workmanship or defective work, then there may be no resulting 'property damage.' "  Id. at 14.  The court determined the claims were covered by the insurance policy.

In Auto-Owners, a general contractor constructed a multimillion dollar house in Coconut Grove, Florida.  The house's windows were defectively installed by a subcontractor, causing water leakage around the windows.  The contractor's insurance company tried to avoid coverage, arguing the subcontractor"s defective installation was not an "occurrence", and the resulting damage was not "property damage", as those terms were defined by the policy.  The court applied the J.S.U.B. analysis regarding whether faulty workmanship constituted an "occurrence" under a post-1986 standard form commercial general liability policy with products-completed operations hazard coverage, issued to a general contractor.  However, unlike J.S.U.B., the court agreed with the insurance company and found the defective installation was not "property damage", precluding coverage under the insurance policy.

The court clearly distinguished J.S.U.B., on the basis that it involved a claim for costs to repair damage caused by the subcontractor's defective work, and Auto-Owners involved a claim for costs to repair or replace the defectively installed windows.  The court recognized a difference between a claim for the costs of repairing or removing defective work (such as replacing defectively installed windows in Auto-Owners) which is not a claim for "property damage", and a claim for the costs of repairing damage caused by the defective work (such as cracks in the walls due to settling from improperly compacted soil in J.S.U.B.) which is a claim for "property damage."  The court held because the subcontractor's defective installation of the windows was not "physical injury to tangible property," there was no "property damage" under the terms of the CGL policies and no coverage for the costs of repair or replacement of the defective work.

These cases provide valuable insight into when an insurance company has a duty to defend and indemnify general contractors under a commercial general liability insurance policy for subcontractors' faulty work.