Florida Court Rules On the Definition of Structural Damage in Insurance Policies

 

Contradicting myriad state and federal trial court rulings that the term “structural damage” means “damage to the structure,” the Honorable Steven D. Merryday, U.S. District Judge for the Middle District of Florida, has ruled that the plain meaning of the term “structural damage” means “damage to the structural integrity of a building.”

On September 3, 2013, Judge Merryday issued an Order granting an insurance carrier’s motion for summary judgment on the interpretation of the term “structural damage” as contained within an insurance policy with a date of loss and policy inception that pre-dates the enactment of amendments to section 627.706, Florida Statutes that went into effect on May 17, 2011. 

The Court also denied the Plaintiffs’ motion for summary judgment and directed judgment in favor of the Defendant’s counterclaim, declaring that:

‘Structural damage’ to the building is damage to a part, material, or assembly of the building that affects the stability of the building or that supports a dead or designed live load, and the removal of which part, material, or assembly could be expected to cause a portion of the building to collapse or fail.

Gonzalez v. Liberty Mutual Fire Ins. Co., 8:12-CV-02549-SDM-EAJ (M.D. Fla. September 3, 2013).

In Gonzalez, the Plaintiffs reported a claim to their homeowners’ insurance carrier, Liberty Mutual, for “sinkhole loss.”  The Plaintiffs’ policy provided sinkhole loss coverage, but required structural damage in order to constitute a “sinkhole loss.”  The policy, which incepted prior to 2011 enactment of amendments to section 627.706, did not define “structural damage,”  however.

The carrier retained an engineering firm to determine whether the insured property had sustained structural damage.  The engineers found that structural damage did not exist at the insured residence. Based on their engineer’s report, the carrier denied the Plaintiffs’ claim for sinkhole loss.

The Plaintiffs subsequently filed a two-count complaint against the carrier.  Count I of the complaint sought a declaration from the Court that the carrier must conduct subsurface testing pursuant to the requirements of the Florida Statutes to determine whether or not there was sinkhole activity at the insured property and coverage for the loss if sinkhole activity was confirmed.

Count II of the complaint alleged that the carrier breached its policy of insurance with its insureds by failing to provide coverage for a covered loss to the insured property caused by sinkhole activity.  Based on its engineer’s finding that structural damage did not exist, the carrier filed an answer and counterclaim asserting that the Plaintiffs had not sustained a “sinkhole loss”

Disagreeing with the rulings of several other Florida federal and state trial judges, including the decision in Cunningham v. Liberty Mutual Fire Insurance Company, Case No. 8:12-cv-1398-T35-TBM (M.D. Fla. May 29, 2013), Judge Merryday held that “structural damage” means more than mere “damage to the structure” and reasoned that the term “structural damage” means “damage to the structural integrity of the building.” 

In the ruling, the Court analyzed the term “structural damage” in a judicial context and cited to ample legal authority from various jurisdictions that have interpreted the term “structural” as plainly meaning “any part, material or assembly of a building or structure which affects the safety of such building or structure and/or which supports any dead or designed live load and the removal of which part, material or assembly could cause, be expected to cause, all or any portion to collapse or fail.”  This definition derives from sec. 202.2 of the 2004 Florida Existing Building Code.  

Additionally, the Court determined that the adjoining use of the term “physical” and “structural” in Section 627.7073 confirms that “physical damage” is different and broader than “structural damage.”

Finally, the Court explored the legislative history of the term as it is used in the sinkhole-related insurance claims arena.  In 2005 the Legislature changed section 627.706 to define “sinkhole loss” as “structural damage to the building, including the foundation.”

In summary, this case marks the first time a court has recognized that the 2011 amendments to Florida’s sinkhole statutes were simply a clarification to effect the legislative intent of 2005 amendments designed to generally reduce the number of sinkhole claims arising under prior law.

 

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