40 Fla. L.
Weekly D2199c
Weekly D2199c
Insurance
— All-risk — Coverage — Chinese drywall — Exclusions — Efficient proximate
cause — Homeowners’ action against all-risk insurer which denied their claim
for loss and damage to their home after Chinese drywall used in its
construction released sulfur gases causing them to vacate the home and causing
corrosion and deterioration of copper coils in air conditioning system and
other electrical components in house — Trial court did not err in entering
directed verdict in favor of insurer based on finding that Chinese drywall was
efficient proximate cause of insureds’ loss and that there were no ensuing
losses because all of the losses occurred as a direct and continuous result of
corrosive drywall — Whether Chinese drywall or humidity was efficient
proximate cause of loss was not question that should have been determined by
jury where uncontroverted evidence demonstrated that humidity was not a peril
that caused the insureds’ loss — Insurer also met burden of proving that
Chinese drywall was latent defect, which was an excluded peril, and that the
elemental sulfur and concomitant gases met the statutory definitions of
pollution and contaminant and fell within policy’s exclusion for gaseous
pollutants and contaminants, including vapors and fumes — Although appellate
court has held that finder of fact usually determines which peril was most
substantial or responsible factor in loss, in instant case the insureds
affirmatively requested that the trial court address insurer’s motion for
directed verdict, maintaining that they had proven their case under either
measure of causation; and de novo review of record reveals no conflict in the
evidence as to efficient proximate cause of loss — Insureds’ argument that
loss of use of home and subsequent damage to metals and electronics were
“ensuing losses” for which they were entitled to coverage is without merit —
Not only were losses the result of single discrete injury, the emanation of gas
from defective drywall, but the losses stemmed directly from an excluded risk
and fell within additional exclusions for pollution and corrosion
— All-risk — Coverage — Chinese drywall — Exclusions — Efficient proximate
cause — Homeowners’ action against all-risk insurer which denied their claim
for loss and damage to their home after Chinese drywall used in its
construction released sulfur gases causing them to vacate the home and causing
corrosion and deterioration of copper coils in air conditioning system and
other electrical components in house — Trial court did not err in entering
directed verdict in favor of insurer based on finding that Chinese drywall was
efficient proximate cause of insureds’ loss and that there were no ensuing
losses because all of the losses occurred as a direct and continuous result of
corrosive drywall — Whether Chinese drywall or humidity was efficient
proximate cause of loss was not question that should have been determined by
jury where uncontroverted evidence demonstrated that humidity was not a peril
that caused the insureds’ loss — Insurer also met burden of proving that
Chinese drywall was latent defect, which was an excluded peril, and that the
elemental sulfur and concomitant gases met the statutory definitions of
pollution and contaminant and fell within policy’s exclusion for gaseous
pollutants and contaminants, including vapors and fumes — Although appellate
court has held that finder of fact usually determines which peril was most
substantial or responsible factor in loss, in instant case the insureds
affirmatively requested that the trial court address insurer’s motion for
directed verdict, maintaining that they had proven their case under either
measure of causation; and de novo review of record reveals no conflict in the
evidence as to efficient proximate cause of loss — Insureds’ argument that
loss of use of home and subsequent damage to metals and electronics were
“ensuing losses” for which they were entitled to coverage is without merit —
Not only were losses the result of single discrete injury, the emanation of gas
from defective drywall, but the losses stemmed directly from an excluded risk
and fell within additional exclusions for pollution and corrosion
WILLIAM R. PEEK and STACEY PEEK, Appellants, v. AMERICAN INTEGRITY
INSURANCE COMPANY OF FLORIDA, Appellee. 2nd District. Case No. 2D14-780.
Opinion filed September 25, 2015. Appeal from the Circuit Court for
Hillsborough County; Paul L. Huey, Judge. Counsel: Ernest P. Wagner of McGinnis
Wutscher Beiramee LLP; Michael Childress of Childress Duffy Ltd., Chicago; and
Steven L. Brannock of Brannock & Humphries, Tampa, for Appellants. Andrew
P. Rock and Wesley W. Levins of Rock Law Group, P.A., Maitland, for Appellee.
INSURANCE COMPANY OF FLORIDA, Appellee. 2nd District. Case No. 2D14-780.
Opinion filed September 25, 2015. Appeal from the Circuit Court for
Hillsborough County; Paul L. Huey, Judge. Counsel: Ernest P. Wagner of McGinnis
Wutscher Beiramee LLP; Michael Childress of Childress Duffy Ltd., Chicago; and
Steven L. Brannock of Brannock & Humphries, Tampa, for Appellants. Andrew
P. Rock and Wesley W. Levins of Rock Law Group, P.A., Maitland, for Appellee.
(SLEET, Judge.) William and Stacey Peek challenge the final judgment
entered against them in favor of American Integrity Insurance Company in the
Peeks’ breach of contract action against American Integrity. The action stemmed
from American Integrity’s denial of the Peeks’ claim for loss and damage to
their home after Chinese drywall was used in its construction. The trial
court’s final judgment is based on its order granting American Integrity’s
motion for directed verdict. Because the Peeks failed to establish below that
their loss was caused by a peril covered by their American Integrity insurance
policy, we affirm.
entered against them in favor of American Integrity Insurance Company in the
Peeks’ breach of contract action against American Integrity. The action stemmed
from American Integrity’s denial of the Peeks’ claim for loss and damage to
their home after Chinese drywall was used in its construction. The trial
court’s final judgment is based on its order granting American Integrity’s
motion for directed verdict. Because the Peeks failed to establish below that
their loss was caused by a peril covered by their American Integrity insurance
policy, we affirm.
The relevant facts of this case are undisputed. Chinese drywall was used
in the construction of the Peeks’ new home in Tampa. The Peeks had an all-risk
insurance policy with American Integrity effective November 21, 2008.
Immediately after they moved into the home in January 2009, the Peeks began to
smell a sulfur odor. In August 2009, the odor worsened and the Peeks reported a
claim to American Integrity indicating that they suffered a loss due to Chinese
drywall. Specifically, the Peeks claimed that there was a noxious sulfur odor
in the residence that caused them to vacate the home. Furthermore, the Peeks
claimed that there was corrosion and deterioration of copper coils in their air
conditioning system and other electrical components in the house.
in the construction of the Peeks’ new home in Tampa. The Peeks had an all-risk
insurance policy with American Integrity effective November 21, 2008.
Immediately after they moved into the home in January 2009, the Peeks began to
smell a sulfur odor. In August 2009, the odor worsened and the Peeks reported a
claim to American Integrity indicating that they suffered a loss due to Chinese
drywall. Specifically, the Peeks claimed that there was a noxious sulfur odor
in the residence that caused them to vacate the home. Furthermore, the Peeks
claimed that there was corrosion and deterioration of copper coils in their air
conditioning system and other electrical components in the house.
American Integrity concluded that the Peeks’ all-risk policy did not
afford coverage for the claimed losses associated with the Chinese drywall.
American Integrity cited policy exclusions for latent defects, corrosion,
pollutants, and faulty, inadequate, or defective construction materials and
contended that the Chinese drywall fit the definitions of all of these
exclusions. In response to the denial of coverage, the Peeks sued American
Integrity for breach of the insurance contract.
afford coverage for the claimed losses associated with the Chinese drywall.
American Integrity cited policy exclusions for latent defects, corrosion,
pollutants, and faulty, inadequate, or defective construction materials and
contended that the Chinese drywall fit the definitions of all of these
exclusions. In response to the denial of coverage, the Peeks sued American
Integrity for breach of the insurance contract.
The parties acknowledge that they conducted discovery, pretrial
proceedings, and the actual trial with the understanding that the Peeks’ burden
was to prove the cause of their loss pursuant to the “concurrent cause” rule
set forth in Wallach v. Rosenberg, 527 So. 2d 1386, 1387 (Fla. 3d DCA
1988). “Under that doctrine, when multiple perils act in concert to cause a
loss, and at least one of the perils is insured and is a concurrent cause of
the loss, even if not the prime or the efficient cause, the loss is covered.” Am.
Home Assurance Co. v. Sebo, 141 So. 3d 195, 197 (Fla. 2d DCA 2013) (citing Wallach,
527 So. 2d at 1387-88). As such, both the Peeks and American Integrity
presented their cases with the understanding that in order to be entitled to
damages, the Peeks had to prove that a covered peril at least contributed to
the cause of the loss.
proceedings, and the actual trial with the understanding that the Peeks’ burden
was to prove the cause of their loss pursuant to the “concurrent cause” rule
set forth in Wallach v. Rosenberg, 527 So. 2d 1386, 1387 (Fla. 3d DCA
1988). “Under that doctrine, when multiple perils act in concert to cause a
loss, and at least one of the perils is insured and is a concurrent cause of
the loss, even if not the prime or the efficient cause, the loss is covered.” Am.
Home Assurance Co. v. Sebo, 141 So. 3d 195, 197 (Fla. 2d DCA 2013) (citing Wallach,
527 So. 2d at 1387-88). As such, both the Peeks and American Integrity
presented their cases with the understanding that in order to be entitled to
damages, the Peeks had to prove that a covered peril at least contributed to
the cause of the loss.
At trial, the Peeks established through their own testimony and that of a
representative of American Integrity that they suffered a loss to their
property within the insurance policy period. The Peeks, however, did not
present any expert testimony or other evidence as to the cause of the loss.
During its case-in-chief, American Integrity presented expert testimony from
Dr. Ralph Moon, a botanist with extensive experience in testing and analyzing
building materials, as well as the investigation of building failure, mold, air
quality, material failure, and water damages. Dr. Moon testified that Chinese
drywall contains elemental sulfur, which when exposed to the atmosphere
immediately emits corrosive and noxious gases. According to Dr. Moon, it is not
temperature sensitive and the destructive effects of the sulfur gases progress
without requiring any energy. He opined that the Chinese drywall used in the
construction of the Peeks’ home was emitting destructive gases at the moment of
manufacture, prior to its installation in the Peeks’ home. He therefore
concluded that it was a faulty, inadequate, or defective construction material.
He also testified that the gases emitted from the drywall caused corrosion in
the metal components of the appliances and air conditioning system in the
Peeks’ home. Finally, he opined that the Chinese drywall itself was a pollutant
due to its emission of noxious and destructive gases.
representative of American Integrity that they suffered a loss to their
property within the insurance policy period. The Peeks, however, did not
present any expert testimony or other evidence as to the cause of the loss.
During its case-in-chief, American Integrity presented expert testimony from
Dr. Ralph Moon, a botanist with extensive experience in testing and analyzing
building materials, as well as the investigation of building failure, mold, air
quality, material failure, and water damages. Dr. Moon testified that Chinese
drywall contains elemental sulfur, which when exposed to the atmosphere
immediately emits corrosive and noxious gases. According to Dr. Moon, it is not
temperature sensitive and the destructive effects of the sulfur gases progress
without requiring any energy. He opined that the Chinese drywall used in the
construction of the Peeks’ home was emitting destructive gases at the moment of
manufacture, prior to its installation in the Peeks’ home. He therefore
concluded that it was a faulty, inadequate, or defective construction material.
He also testified that the gases emitted from the drywall caused corrosion in
the metal components of the appliances and air conditioning system in the
Peeks’ home. Finally, he opined that the Chinese drywall itself was a pollutant
due to its emission of noxious and destructive gases.
On cross-examination of Dr. Moon, counsel for the Peeks attempted to prove
that Florida’s high humidity was a concurrent cause that acted in concert with
the sulfur gases to cause the loss to their home. And Dr. Moon did concede that
humidity could accelerate the emission of the sulfur gases. However, he
qualified that statement by adding that it was based upon an assumption that
the Peeks did not regularly air condition their home during times of higher
humidity. He noted that there was no evidence that the Peeks failed to run
their air conditioning system regularly during the spring and summer when they
first detected the sulfur odor. He concluded that the Chinese drywall emitted
the destructive gases despite geography and climate. Ultimately, he disagreed
that humidity was a driving factor behind the Peeks’ loss, characterizing it as
merely a “component” of the chemical equation. Finally, Dr. Moon testified that
there was no empirical evidence that humidity increased the amount of noxious
gases produced by the Chinese drywall installed in the Peeks’ home.
that Florida’s high humidity was a concurrent cause that acted in concert with
the sulfur gases to cause the loss to their home. And Dr. Moon did concede that
humidity could accelerate the emission of the sulfur gases. However, he
qualified that statement by adding that it was based upon an assumption that
the Peeks did not regularly air condition their home during times of higher
humidity. He noted that there was no evidence that the Peeks failed to run
their air conditioning system regularly during the spring and summer when they
first detected the sulfur odor. He concluded that the Chinese drywall emitted
the destructive gases despite geography and climate. Ultimately, he disagreed
that humidity was a driving factor behind the Peeks’ loss, characterizing it as
merely a “component” of the chemical equation. Finally, Dr. Moon testified that
there was no empirical evidence that humidity increased the amount of noxious
gases produced by the Chinese drywall installed in the Peeks’ home.
At the conclusion of Dr. Moon’s testimony, both parties rested their
respective cases. The Peeks did not present any rebuttal evidence to prove any
exceptions to the exclusions raised by American Integrity, nor did they present
any evidence of any ensuing losses. Thereafter, both parties moved for directed
verdicts. The Peeks conceded that their home was improperly designed and had
construction defects, but they argued that humidity was a concurrent covered
cause of the loss. American Integrity responded that the defective Chinese
drywall was the sole cause of the loss. The trial court reserved ruling on the
motions for directed verdict and conducted a charge conference to finalize jury
instructions based upon the concurrent cause doctrine.
respective cases. The Peeks did not present any rebuttal evidence to prove any
exceptions to the exclusions raised by American Integrity, nor did they present
any evidence of any ensuing losses. Thereafter, both parties moved for directed
verdicts. The Peeks conceded that their home was improperly designed and had
construction defects, but they argued that humidity was a concurrent covered
cause of the loss. American Integrity responded that the defective Chinese
drywall was the sole cause of the loss. The trial court reserved ruling on the
motions for directed verdict and conducted a charge conference to finalize jury
instructions based upon the concurrent cause doctrine.
On the following morning, American Integrity presented the trial court
with this court’s then newly-released opinion in Sebo, 141 So. 3d 195, as
support for its renewed motion for directed verdict. In Sebo, this court
“disagree[d] with Wallach‘s determination that the concurrent causation
doctrine should be applied in a case involving multiple perils and a
first-party insurance policy.” 141 So. 3d at 198. Instead, this court held that
“[t]he coverage analysis in first-party claims . . . should be decided on the
basis of the contract: if the efficient proximate cause of the loss is a
covered peril, the losses are covered; if it is an excluded peril, the losses
are not covered.” Id. at 201. Under this rule, “the finder of fact,
usually the jury, determines which peril was the most substantial or
responsible factor in the loss. If the policy insures against that peril,
coverage is provided. If the policy excludes that peril, there is no coverage.”
Id. at 198.
with this court’s then newly-released opinion in Sebo, 141 So. 3d 195, as
support for its renewed motion for directed verdict. In Sebo, this court
“disagree[d] with Wallach‘s determination that the concurrent causation
doctrine should be applied in a case involving multiple perils and a
first-party insurance policy.” 141 So. 3d at 198. Instead, this court held that
“[t]he coverage analysis in first-party claims . . . should be decided on the
basis of the contract: if the efficient proximate cause of the loss is a
covered peril, the losses are covered; if it is an excluded peril, the losses
are not covered.” Id. at 201. Under this rule, “the finder of fact,
usually the jury, determines which peril was the most substantial or
responsible factor in the loss. If the policy insures against that peril,
coverage is provided. If the policy excludes that peril, there is no coverage.”
Id. at 198.
In response to American Integrity’s renewed motion for directed verdict,
the Peeks did not request to reopen their case to address this new causation
doctrine, nor did they move for a mistrial based upon the fact that trial was
conducted with a different measure of causation in mind. Instead, the Peeks
asked the court to decide the motions for directed verdict based upon the
efficient proximate cause doctrine in Sebo. The Peeks acknowledged that Sebo
changed their burden of proof from showing that humidity was but one cause of
their loss to showing that it was the efficient proximate cause of the loss,
but they maintained that they had met that burden. The trial court disagreed
and ruled that the Chinese drywall was the proximate efficient cause of the
Peeks’ loss and that “there were no ensuing losses because all of the losses
occurred as a direct and continuous result of the corrosive Chinese drywall.”
The trial court therefore granted American Integrity’s motion for directed
verdict and entered final judgment for American Integrity on the Peeks’ breach
of insurance contract action. It is this final judgment that the Peeks now
challenge.
the Peeks did not request to reopen their case to address this new causation
doctrine, nor did they move for a mistrial based upon the fact that trial was
conducted with a different measure of causation in mind. Instead, the Peeks
asked the court to decide the motions for directed verdict based upon the
efficient proximate cause doctrine in Sebo. The Peeks acknowledged that Sebo
changed their burden of proof from showing that humidity was but one cause of
their loss to showing that it was the efficient proximate cause of the loss,
but they maintained that they had met that burden. The trial court disagreed
and ruled that the Chinese drywall was the proximate efficient cause of the
Peeks’ loss and that “there were no ensuing losses because all of the losses
occurred as a direct and continuous result of the corrosive Chinese drywall.”
The trial court therefore granted American Integrity’s motion for directed
verdict and entered final judgment for American Integrity on the Peeks’ breach
of insurance contract action. It is this final judgment that the Peeks now
challenge.
On appeal, the Peeks argue that the trial court erred in granting American
Integrity’s motion for directed verdict because (1) the evidence established
that their loss was caused by both the Chinese drywall and the humidity of
Florida; (2) humidity is covered by the insurance policy as a “weather event”;
and (3) the question of whether the Chinese drywall or the humidity of Florida
was the efficient proximate cause of the loss was a question that should have
been determined by the jury.1 We disagree.
Integrity’s motion for directed verdict because (1) the evidence established
that their loss was caused by both the Chinese drywall and the humidity of
Florida; (2) humidity is covered by the insurance policy as a “weather event”;
and (3) the question of whether the Chinese drywall or the humidity of Florida
was the efficient proximate cause of the loss was a question that should have
been determined by the jury.1 We disagree.
“[T]he general rule of evidence is that a plaintiff seeking to recover
under an ‘all-risks’ policy has the burden of proving that, while the policy
was in force, a loss occurred to the insured’s property.” Hudson v.
Prudential Prop. & Cas. Ins. Co., 450 So. 2d 565, 568 (Fla. 2d DCA
1984). Under the efficient proximate cause rule, the plaintiff must also prove
that the covered loss was the “most substantial or responsible” cause of the
loss. Sebo, 141 So. 3d at 198. The burden then shifts to the insurer to
prove that the efficient proximate cause of the loss is excepted or excluded. Cf.
Hudson, 450 So. 2d at 568.
under an ‘all-risks’ policy has the burden of proving that, while the policy
was in force, a loss occurred to the insured’s property.” Hudson v.
Prudential Prop. & Cas. Ins. Co., 450 So. 2d 565, 568 (Fla. 2d DCA
1984). Under the efficient proximate cause rule, the plaintiff must also prove
that the covered loss was the “most substantial or responsible” cause of the
loss. Sebo, 141 So. 3d at 198. The burden then shifts to the insurer to
prove that the efficient proximate cause of the loss is excepted or excluded. Cf.
Hudson, 450 So. 2d at 568.
Here, the Peeks did establish a loss during the insurance policy’s
effective period. However, they are incorrect in maintaining that the evidence
below established that humidity contributed to that loss. At trial, there was
no dispute that the Chinese drywall inside the Peeks’ home contained elemental
sulfur and emitted malodorous, noxious, and corrosive sulfur gases. Dr. Moon
opined that these destructive gases were present at the moment that the Chinese
drywall was manufactured and that the gases began emanating from the drywall as
soon as the elemental sulfur in the drywall mixed with the air. Although he did
acknowledge on cross-examination that humidity could accelerate the emission of
the gases, accelerating the emission is not the same as causing it. Dr. Moon
specifically testified that the Chinese drywall would produce the destructive
gases in any climate, and the Peeks did not present an expert witness of their
own to contradict Dr. Moon’s testimony. As such, the uncontroverted evidence
demonstrated that humidity was not a peril that caused the Peeks’ loss, let
alone that it was the efficient proximate cause of their loss.2
effective period. However, they are incorrect in maintaining that the evidence
below established that humidity contributed to that loss. At trial, there was
no dispute that the Chinese drywall inside the Peeks’ home contained elemental
sulfur and emitted malodorous, noxious, and corrosive sulfur gases. Dr. Moon
opined that these destructive gases were present at the moment that the Chinese
drywall was manufactured and that the gases began emanating from the drywall as
soon as the elemental sulfur in the drywall mixed with the air. Although he did
acknowledge on cross-examination that humidity could accelerate the emission of
the gases, accelerating the emission is not the same as causing it. Dr. Moon
specifically testified that the Chinese drywall would produce the destructive
gases in any climate, and the Peeks did not present an expert witness of their
own to contradict Dr. Moon’s testimony. As such, the uncontroverted evidence
demonstrated that humidity was not a peril that caused the Peeks’ loss, let
alone that it was the efficient proximate cause of their loss.2
Furthermore, American Integrity met its burden of proving that the Chinese
drywall was an excluded peril. Dr. Moon’s testimony established that the
Chinese drywall’s defective nature could not be discovered without testing,
thus fitting the definition of a latent defect; latent defects are excluded
under the Peeks’ policy. And the elemental sulfur and the concomitant gases
were proven to meet the statutory definitions of “pollution” and “contaminant”
contained in section 403.031(1), (7), Florida Statutes (2008). The Peeks’
policy excluded gaseous pollutants and contaminants, including vapors and
fumes.
drywall was an excluded peril. Dr. Moon’s testimony established that the
Chinese drywall’s defective nature could not be discovered without testing,
thus fitting the definition of a latent defect; latent defects are excluded
under the Peeks’ policy. And the elemental sulfur and the concomitant gases
were proven to meet the statutory definitions of “pollution” and “contaminant”
contained in section 403.031(1), (7), Florida Statutes (2008). The Peeks’
policy excluded gaseous pollutants and contaminants, including vapors and
fumes.
We do acknowledge that in Sebo this court stated that under the
efficient proximate cause doctrine “the finder of fact, usually the jury,
determines which peril was the most substantial or responsible factor in the
loss.” 141 So. 3d at 198. However, the Peeks affirmatively requested that the
trial court address American Integrity’s motion for directed verdict,
maintaining that they had proven their case under either measure of causation.
And based on our de novo review of the record before us, there was no conflict
in the evidence below as to the efficient proximate cause of the Peeks’ loss. See
Sims v. Cristinzio, 898 So. 2d 1004, 1006 (Fla. 2d DCA 2005) (“The
standard of review on appeal of the trial court’s ruling on a defendant’s motion
for directed verdict is the same test used by the trial court in ruling on the
motion.”). Nor were there any inferences that could be lawfully drawn from the
evidence that would have supported a conclusion that there was any other cause
of the Peeks’ loss. As such, there was no question for the jury to resolve, and
the trial court did not err in entering directed verdict for American
Integrity. See id. at 1005 (“A motion for directed verdict should
be granted only where no view of the evidence, or inferences made therefrom,
could support a verdict for the nonmoving party.”).
efficient proximate cause doctrine “the finder of fact, usually the jury,
determines which peril was the most substantial or responsible factor in the
loss.” 141 So. 3d at 198. However, the Peeks affirmatively requested that the
trial court address American Integrity’s motion for directed verdict,
maintaining that they had proven their case under either measure of causation.
And based on our de novo review of the record before us, there was no conflict
in the evidence below as to the efficient proximate cause of the Peeks’ loss. See
Sims v. Cristinzio, 898 So. 2d 1004, 1006 (Fla. 2d DCA 2005) (“The
standard of review on appeal of the trial court’s ruling on a defendant’s motion
for directed verdict is the same test used by the trial court in ruling on the
motion.”). Nor were there any inferences that could be lawfully drawn from the
evidence that would have supported a conclusion that there was any other cause
of the Peeks’ loss. As such, there was no question for the jury to resolve, and
the trial court did not err in entering directed verdict for American
Integrity. See id. at 1005 (“A motion for directed verdict should
be granted only where no view of the evidence, or inferences made therefrom,
could support a verdict for the nonmoving party.”).
The Peeks also argue in the alternative that even if the excluded peril of
Chinese drywall is the efficient proximate cause of their loss, American
Integrity is still required to cover the loss under the “ensuing loss”
provision of the Peeks’ insurance policy. That provision provides as follows:
“We do not insure loss to property described in Coverages A and B caused by any
of the following. However, any ensuing loss to property described in Coverages
A and B not excluded or excepted in this policy is covered.”
Chinese drywall is the efficient proximate cause of their loss, American
Integrity is still required to cover the loss under the “ensuing loss”
provision of the Peeks’ insurance policy. That provision provides as follows:
“We do not insure loss to property described in Coverages A and B caused by any
of the following. However, any ensuing loss to property described in Coverages
A and B not excluded or excepted in this policy is covered.”
An ensuing loss follows as a consequence of an excluded loss, and the crux
of the ensuing loss provision is that there must be a covered cause of loss
that ensues from the excluded cause of loss. TRAVCO Ins. Co. v. Ward,
715 F. Supp. 2d 699 (E.D. Va. 2010) (interpreting an ensuing loss provision
similar to the one at issue here). Given that American Integrity proved that
the Chinese drywall was an excluded defective construction material, it was the
Peeks’ burden to demonstrate that the policy covered a loss that occurred
subsequent to and as a result of that excluded peril.
of the ensuing loss provision is that there must be a covered cause of loss
that ensues from the excluded cause of loss. TRAVCO Ins. Co. v. Ward,
715 F. Supp. 2d 699 (E.D. Va. 2010) (interpreting an ensuing loss provision
similar to the one at issue here). Given that American Integrity proved that
the Chinese drywall was an excluded defective construction material, it was the
Peeks’ burden to demonstrate that the policy covered a loss that occurred
subsequent to and as a result of that excluded peril.
The Peeks argue that the evidence below established that the defective
Chinese drywall led to (1) a subsequent loss of use of their home due to odor
and (2) subsequent damage to metals and electronics separate from any defective
materials, pollutants, or corrosion. We do not agree.
Chinese drywall led to (1) a subsequent loss of use of their home due to odor
and (2) subsequent damage to metals and electronics separate from any defective
materials, pollutants, or corrosion. We do not agree.
First, the evidence below demonstrated that the odor present in the Peeks’
home was a manifestation of the sulfur gases emanating from the Chinese drywall
and that the corrosion was caused by the chemicals released by the sulfur gases,
which emanated from the Chinese drywall. As such, the losses were not
“ensuing.” Id. at 718-19 (“An ensuing loss is a loss that occurs
subsequent in time to an initial loss. In the present case, only a single
claimed loss has occurred. The Chinese Drywall released reduced sulfur gases
which harmed Defendant, members of his family, and items of personal property
inside the Ward Residence. Although this damage occurred gradually over a
period of time, it still represents a single discrete loss from a single
discrete injury, namely the off-gassing of defective Chinese Drywall.”
(footnote omitted)).
home was a manifestation of the sulfur gases emanating from the Chinese drywall
and that the corrosion was caused by the chemicals released by the sulfur gases,
which emanated from the Chinese drywall. As such, the losses were not
“ensuing.” Id. at 718-19 (“An ensuing loss is a loss that occurs
subsequent in time to an initial loss. In the present case, only a single
claimed loss has occurred. The Chinese Drywall released reduced sulfur gases
which harmed Defendant, members of his family, and items of personal property
inside the Ward Residence. Although this damage occurred gradually over a
period of time, it still represents a single discrete loss from a single
discrete injury, namely the off-gassing of defective Chinese Drywall.”
(footnote omitted)).
Additionally, both of the claimed ensuing losses are specifically excluded
under the policy because an excluded cause of loss — defective Chinese drywall
— led directly to another set of exclusions — pollution and corrosion.
Exclusions must be read in conjunction with other policy provisions, and
ensuing loss exceptions are not applicable if the ensuing loss was directly
related to the original excluded risk. Swire Pac. Holdings, Inc. v. Zurich
Ins. Co., 845 So. 2d 161, 167 (Fla. 2003). In Swire, the Florida
Supreme Court confirmed that an ensuing loss exception is not applicable if the
ensuing loss is directly related to the original excluded risk. “To hold otherwise
would be to allow the ensuing loss provision to completely eviscerate and
consume the design defect exclusion.” Id. at 168. Here, the damage to
the Peeks’ home and consequently the odors and corrosion of metals and
electronics were directly related to the defective Chinese drywall and thus
directly stemmed from an excluded risk. Thus coverage was excluded under the
express terms of the insurance contract. Accordingly, we must affirm the trial
court’s final judgment in favor of American Integrity.
under the policy because an excluded cause of loss — defective Chinese drywall
— led directly to another set of exclusions — pollution and corrosion.
Exclusions must be read in conjunction with other policy provisions, and
ensuing loss exceptions are not applicable if the ensuing loss was directly
related to the original excluded risk. Swire Pac. Holdings, Inc. v. Zurich
Ins. Co., 845 So. 2d 161, 167 (Fla. 2003). In Swire, the Florida
Supreme Court confirmed that an ensuing loss exception is not applicable if the
ensuing loss is directly related to the original excluded risk. “To hold otherwise
would be to allow the ensuing loss provision to completely eviscerate and
consume the design defect exclusion.” Id. at 168. Here, the damage to
the Peeks’ home and consequently the odors and corrosion of metals and
electronics were directly related to the defective Chinese drywall and thus
directly stemmed from an excluded risk. Thus coverage was excluded under the
express terms of the insurance contract. Accordingly, we must affirm the trial
court’s final judgment in favor of American Integrity.
Affirmed. (ALTERBERND and SILBERMAN, JJ, Concur.)
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1The Peeks also argue on appeal that Sebo was wrongly decided and
should be reconsidered by this court. We decline that invitation.
should be reconsidered by this court. We decline that invitation.
2Because the Peeks failed to establish that there was a concurrent cause of
their loss, their argument that the language of their insurance policy
contractually obligated the parties to determine causation under the concurrent
cause doctrine is moot.
their loss, their argument that the language of their insurance policy
contractually obligated the parties to determine causation under the concurrent
cause doctrine is moot.