Since 2005, Florida law has defined “sinkhole loss” as “structural damage to the building, including the foundation, caused by sinkhole activity.” The term “structural damage” was long-undefined, however, leading numerous Florida courts to interpret that phrase broadly as meaning nothing more than “damage to the structure.” In 2011, however, the Florida Legislature adopted a much narrower five-part definition of “structural damage” for application when construing policies affording coverage for sinkhole loss. Fla. Stat. §627.706(2)(k) (2011). The state’s federal courts have now split on the issue of whether that definition automatically applies to contracts of insurance issued after the statute’s effective date.
The question came to the forefront in Juan Pinzon and Jaqueline Espitia v. The First Liberty Ins. Corp., 2013 WL 5487027 (M.D.Fla., Sept. 30, 2013), a breach of contract action under a homeowners insurance policy. The insureds contended that their property had suffered damages from sinkhole activity, but First Liberty denied the claim after securing a professional engineer’s report that concluded that “none of the damage at the Pinzon & Espitia residence are [sic] structural damage as defined by the Florida Statutes.” A lawsuit followed. After removal, First Liberty filed for summary judgment and requested that the court apply the narrow five-part definition of “structural damage” adopted in 2011 to the insureds’ claim.
The policy tracked the 2005 enactment; it defined the covered parallel “Sinkhole Loss” as meaning “structural damage to the building, including the foundation, caused by sinkhole activity,” but it afforded no definition of the phrase “structural damage” itself. The contract of insurance had an inception date of June 9, 2011, which was 23 days after the new five-part definition went into effect on May 17, 2011, and First Liberty therefore argued that the narrow definition applied. The insureds countered by contending that the court “should employ standard tenants of insurance contract interpretation and give [the phrase] the broadest possible interpretation to ensure coverage.” Read more ›
