Hurricane Ian Shoreline Loss: Four Policies, Oh Joy!
October 19, 2023
On September 13, 2023, the Third District Court of Appeal released its opinion in People’s Trust Insurance Company v. Banks.1 The opinion is a substitute opinion for the Court’s original opinion, which was issued on August 13, 2023.2 The sole issue for the Court’s decision was whether a “limited water damage endorsement,” which contained a sub-limit of $10,000 for all damages caused by water, included the cost to tear out portions of the property necessary to access the failed drain plumbing line in order to repair the line. The Court aligned itself with the Fourth and Fifth Districts and a majority of Florida federal courts and held that tear-out costs were included within the sub-limit.3 Therefore, upon payment of the $10,000 sub-limit, the insurance company’s obligations ended.
In Banks, the insureds experienced a water loss when their cast-iron drain plumbing system malfunctioned. The insurer, People’s Choice Insurance Company, paid the sub-limit of $10,000 specified under the policy. The insureds then sued, claiming that People’s Choice was still responsible for the cost to tear out the concrete slab to access the failed drain line. On cross-motions for summary judgment, the trial court found that People’s Choice was responsible for tear-out costs in addition to the sub-limit for water damage. The Third District reversed.4
The People’s Choice policy contained a water damage exclusion, which eliminated all coverage for water damage, and a “limited water damage” endorsement, which stated:
LIMIT OF LIABILITY
The Property Coverage limit for liability for all covered property provided by this endorsement is shown on “your” Declarations page per occurrence.
This coverage does not increase the Property Coverage limit(s) of liability that apply to the damaged covered property.
All other provisions of your policy that are not affected by this endorsement remain unchanged.
The Court aligned itself with the Fourth District’s decision in Panettieri v. People’s Trust Ins. Co.,5 and quoted from its core holding:
A plain reading of the exception to c. (5) indicates that tear out coverage is included as part of the loss to property unless the loss is excluded. Therefore, no separate and distinct coverage exists for tear out costs apart from water damage, as Insured argues. The Perils Insured Against provision simply defines tear out coverage as included as part of covered loss to property, but excluded when the loss is excluded.
As noted above, based on our analysis in Dodge,6 we find that the loss caused by water damage is excluded by the WDE Endorsement. Hence, the loss, including tear out costs, is otherwise excluded in the policy, and thus, the exception to c. (5) does not provide coverage for tear out costs here. As a result, no ambiguity or conflict exists within these provisions of the policy. The loss is left expressly excluded under the WDE Endorsement.7
Thus, since “the loss” was excluded, the provision of the main coverage form, which provided for tear-out costs in addition to coverage for water damage, was not resurrected by the limited water damage endorsement.
The Court also distinguished a decision from the Fifth District Court of Appeal in Security First Insurance Company v. Vazquez,8 which held that tear-out costs were a separate coverage, which was not excluded by a similar limited water damage endorsement. The critical distinction in Vazquez was the fact that the parties stipulated to coverage for tear-out costs.
Furthermore, the Fifth District’s decision in Rosa v. Safepoint Insurance Company,9 reached the same conclusion as the courts in Banks and Dodge v. People’s Trust Insurance Company.10 Therefore, Vazquez is clearly limited to its unique facts.
In sum, the Third District, which encompasses a vast, heavily-populated area, has eliminated any argument that similar limited water damage endorsements provide separate coverage for tear-out costs. Given the fact that tear-out costs can easily eclipse actual damage done by water, insurers may now rest easily, knowing that tear-out cost cannot be written into a clear limited water damage endorsement. That rule is now the unanimous rule in the Third, Fourth and Fifth Districts and therefore the entire state, unless and until the First, Second and Sixth Districts address the issue.
1 — So. 3d —, 2023 WL 5944177 (Fla. 3d DCA Sept. 13, 2023) (not final).
2 See People’s Trust Ins. Co. v. Banks, 2023 WL 5247280 (Fla. 3d DCA Aug. 16, 2023) (withdrawn on motion for rehearing, — So. 3d —, 2023 WL 594177 (Fla. 3d DCA Sept. 13, 2023) (not final). The Court granted rehearing because the policy language quoted in the original opinion was nowhere to be found in the actual People’s Choice policy.
3 See Panettierei v. People’s Trust Ins. Co., 344 So. 3d 35 (Fla. 4th DCA 2022); Certain Interested Underwriters at Lloyd’s London v. Pitu, Inc., 95 So. 3d 290 (Fla. 3d DCA 2012); Dodge v. People’s Trust Ins. Co., 321 So. 3d 831 (Fla. 4th DCA 2021); Rosa v. Safepoint Ins. Co., 350 So. 3d 468 (Fla. 5th DCA 2022); Yanes v. Nat’l Specialty Ins. Co., 548 F.Supp. 3d 1307 (S.D. Fla. 2021); Ramirez v. Scottsdale Ins. Co., 548 F.Supp. 3d 1318 (S.D. Fla. 2021).
4 Banks, 2023 WL 594177, at * 4.
5 344 So. 3d 35 (Fla. 4th DCA 2022).
6 v. People’s Trust Ins. Co., 321 So. 3d 831 (Fla. 4th DCA 2021)
7 Banks, — So. 3d —, 2023 WL 594177, *3 (Fla. 3d DCA Sept. 13, 2023), quoting Panettierei v. People’s Trust Ins. Co., 344 So. 3d 35, 39-40 (Fla. 4th DCA 2022) (internal footnote omitted).
8 336 So. 3d 350 (Fla. 5th DCA 2022), reh’g denied (Mar. 25, 2022), rev. dismissed, SC22-583 (2022 WL 1764701 (Fla. May 31, 2022).
9 350 So. 3d 468 (Fla. 5th DCA 2022).
10 321 So. 3d 831 (Fla. 4th DCA 2021).