Ambiguities in Florida Policies: Comprehending Coverage Should Not Require the Proverbial Philadelphia Lawyer

Conflicting policy provisions seem to be an increasing byproduct of the ever-growing number of coverage exclusions and limitations that insurance carriers are sneaking into policies. With the news of an upcoming special legislative session to address insurance premium hikes and rumors of potential changes, the best practice is for homeowners to read their policies and understand what is covered in the event of a loss. The truth is, however, reading a homeowner insurance policy these days seems like a game of “musical policy provisions.”

Fortunately for Florida homeowners, courts in Florida have made clear that where an insurance policy creates an ambiguity, the ambiguity should be construed in favor of coverage and against the insurer:

We must follow the guiding principle that this Court has consistently applied that insurance contracts must be construed in accordance with the plain language of the policy. Further, we consider that ‘[i]f the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the [other] limiting coverage, the insurance policy is considered ambiguous.’ An ambiguous provision is construed in favor of the insured and strictly against the drafter.¹

I recently handled a case that involved a claim for roof damage and ensuing water and mold loss from Tropical Storm Claudette. In pertinent part, the policy contained the following provision:

SECTION I – PERILS INSURED AGAINST
COVERAGE A – DWELLING and COVERAGE B –
OTHER STRUCTURES
We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property. We do not insure, however, for loss”
…

2. Caused by:
…

e. Any of the following:
(1) Wear and tear, marring, deterioration;
…

Under items 1. and 2., any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.

The policy also contained a Special Provisions—Florida endorsement, which added the following exclusionary language:

The following paragraph 2.e.(9) is added to
SECTION I – PERILS INSURED AGAINST:

(9) Constant or repeated seepage or leakage of water or steam, or the presence of condensation of humidity, moisture or vapor which occurs over a period of weeks, months or years, whether hidden or not.

The insurance carrier ultimately denied the claim, relying on the “constant or repeated seepage or leakage” exclusionary language to deny the ensuing water and mold loss. In addition, in its coverage denial letter, the insurance carrier focused on the fact that several months passed following the storm before the homeowner reported the claim. What the carrier ignored, however, was that the policy’s Limited Fungi, Wet Or Dry Rot, Or Bacteria Coverage endorsement, for which the homeowner had paid an additional premium, added the following language:

SECTION I – PERILS INSURED AGAINST
COVERAGE A – DWELLING and COVERAGE B –
OTHER STRUCTURES

* * *
The following paragraph 2.e.(9) is added:

(9) Constant or repeated seepage or leakage of water or steam or the presence of condensation of humidity, moisture, or vapor over a period of 14 or more days from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance.

At first glance, the language from both endorsements appear to exclude the same thing—ensuing loss from “constant or repeated seepage or leakage.” However, the exclusionary language added by the Limited Fungi, Wet Or Dry Rot, Or Bacteria Coverage endorsement is more narrow than that of the Special Provisions—Florida endorsement. The Limited Fungi, Wet Or Dry Rot, Or Bacteria Coverage endorsement excludes “constant or repeated seepage or leakage…from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance.” In other words, if the “constant or repeated seepage or leakage” resulted from something other than a plumbing or similar system, i.e., roof damage, the ensuing loss would be covered.

When reading the two provisions side by side, it becomes clear that the policy—as the Florida Supreme Court so eloquently described – “requires the proverbial Philadelphia lawyer to comprehend the terms embodied in it.”² With the upcoming special legislative session to address premium rate increases, it is safe to assume that more changes are coming. However, regardless of what provisions the legislature allows insurance carriers to include in homeowner insurance policies, insurance carriers still must clearly and unambiguously establish the circumstances under which coverage exists.
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¹ Wash. Nat’l Ins. Corp. v. Ruderman, 117 So. 3d 943, 950 (Fla. 2013) (citing Taurus Holdings, Inc. v. United States Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005) (citations omitted)).
² Id. (citing Hartnett v. Southern Ins. Co., 181 So. 2d 524 (Fla. 1965)).