Case Law Update: , 2018 WL 1020272 (Fla. 5th DCA Feb. 23, 2018).
In this case, the Fifth District Court of Appeal explored the exclusion for constant and repeated seepage of water in the American Integrity Homeowner's Insurance Policy. Insurance Companies should consider this ruling in framing a proper defense to a case in which a water leak has been occurring at the insured property for a period of time. The case is a good reminder that the insured’s initial burden is low. The insured must only prove that a direct, physical loss occurred to the property during the policy period. The insured does not have the burden to prove that a loss occurred on a specific date or during a specific period of time, only that a direct, physical loss occurred during the policy period. The burden then shifts to the insurer to prove an exclusion to coverage.
In this case, the policy language excludes coverage for constant and repeated seepage or leakage of water which occurs over a period of 14 or more days. This exclusionary language is common to most homeowner’s insurance policies. Per the Court's ruling, even if there is evidence that a leak has been going for a period of 14 days or more, damages resulting from the first 13 days of water release are covered under the insurance policy. Below is detailed summary of the Appellate Court's ruling:
The American Integrity policy issued to insured Hicks was an All-Risk policy. Mr. Hicks' water supply line began leaking in September, 2012, while he was out of town. When he returned at the end of October, 2012, the supply line was leaking heavily, releasing almost 1,000 gallons of water a day. The claim submitted by Mr. Hicks was denied by American Integrity based on the provision of the policy which provides as follows:
We do not insure...for loss...[c]aused by...[c]onstant or repeated seepage of leakage of water...over a period of 14 or more days.”
American Integrity filed a motion a summary judgment, arguing that because the record evidence reflected that the leak was going on for a period exceeding 14 days, the claim was unambiguously excluded under the terms of the policy. In response, Mr. Hicks filed his own motions for summary judgment, arguing that his property sustained a direct, physical loss during the policy period, that the damages arising from the first 13 days of the leak are covered under the policy and that the total damages for the first 13 days of the leak totaled $40,926.77 (based on an expert opinion). At the trial level, American Integrity's motion for summary judgment was granted because the Court was unsure, based on the facts presented that it could make the determination that the loss from the first 13 days was covered.
The Appellate Court here reversed the grant of summary judgment in favor of American Integrity, finding that the policy language at issue does not unambiguously "exclude(d) losses caused by constant or repeated leakage or seepage over a period of thirteen days or less." The Court also found that it was unambiguously clear that "a provision excluding losses caused by constant leakage of water over a period of fourteen or more days likewise excludes losses caused by constant leakage of water over a period of less than fourteen days. Because there is ambiguity in the policy language, the language most be construed in the light most favorable to the insured. In the light most favorable to the insured, coverage exists for damages caused by the first 13 days of the leak.
The Appellate Court therefore, reversed summary judgment in favor of American Integrity and remanded with instructions for the trial Court to enter partial summary judgment in favor insured on the issue of damages from the first 13 days of the loss being covered by the policy. Therefore, the issue at trial would be the damages arising from days 1-13 of the water leak. The Court also states that the insurer has the burden at trial to prove that a particular loss was sustained after the 13th day and therefore, not covered under the exclusionary provision.
Thoughts Going Forward
Insurers should consider re-writing the “Constant and Repeated Leakage and Seepage” provision, making it clear that ALL DAMAGE first presented in a claim beyond 14 days after the date of loss are simply not covered. However, if a claim is presented within the first 13 days it is not considered “repeated leakage and seepage.” (More or Less “All water losses need to be reported within the first 13 days or else coverage will not apply unless good cause can be shown otherwise.")