42
Fla. L. Weekly D1786aTop of Form

Insurance
— Homeowners — Sinkhole loss — Trial court erred in entering directed
verdict against insurer awarding homeowners damages for subsurface remediation
in sinkhole action after refusing to consider testimony of insurer’s expert
engineers and neutral evaluator regarding proper method of subsurface repair —
Proper method of repair was jury question given conflicting evidence on this
issue

OMEGA INSURANCE COMPANY, Appellant,
v. WILLIAM WALLACE and JOAN WALLACE, husband and wife, Appellees. 2nd District.
Case No. 2D16-449. Opinion filed August 16, 2017. Appeal from the Circuit Court
for Polk County; John M. Radabaugh, Judge. Counsel: Scot E. Samis of Traub
Lieberman Straus & Shrewsberry, LLP, St. Petersburg, for Appellant. Richard
N. Asfar and George A. Vaka of Vaka Law Group, P.L., Tampa and Richard T.
Heiden of Richard T. Heiden, P.A., Clearwater, for Appellees.

(SILBERMAN, Judge.) Omega Insurance
Company seeks review of a final judgment awarding William and Joan Wallace just
over $200,000 for subsurface remediation in their sinkhole action. The final
judgment was based on a directed verdict entered after the trial court refused
to consider the testimony of Omega’s expert engineers and the neutral evaluator
regarding the proper method of subsurface repair. We conclude that the proper
method of subsurface repair is a jury question and reverse.

This appeal arises from a sinkhole
insurance claim under a policy issued by Omega to the Wallaces in August 2010.
Much of the argument on appeal, as in the trial court, concerns expert
testimony and the proper definition of certain terms used in the Omega policy.
The policy contains a sinkhole loss coverage endorsement which provides, in
pertinent part, as follows:

B. COVERAGE

We insure
for direct physical loss to property covered under Section I caused by a
Sinkhole Loss, including the costs incurred to:

1.
Stabilize the land and building; and

2. Repair
the foundation;

In
accordance with the recommendations of the professional engineer who verifies
the presence of a Sinkhole Loss
in compliance with Florida sinkhole testing standards and in consultation with
you.

(Emphasis added.) It also provides
the following definitions:

“Sinkhole
Activity” means settlement or systematic weakening of the earth supporting such
property only when such settlement or systematic weakening results from
movement or raveling of soils, sediments, or rock materials into subterranean
voids created by the effect of water on a limestone or similar rock formation.

“Sinkhole
Loss” means structural damage to the building, including the
foundation, caused by Sinkhole Activity. Personal property coverage shall
apply only if there is structural damage to the building caused by Sinkhole
Activity.

(Emphasis added.) The endorsement
thus provides coverage for direct physical loss to covered property due to a
“Sinkhole Loss” as defined in the policy. While the policy defines “Sinkhole
Loss” as “structural damage to the building, including the foundation,” it does
not define the term “structural damage.”1

After an initial flurry of expert
reports, Omega agreed that there was a sinkhole loss and extended coverage. As
is often the case with sinkhole claims, the dispute between the parties mainly
concerned the proper method of subsurface repair. Omega retained an engineering
firm that recommended compaction grouting to stabilize the subsurface soil and
to remediate the sinkhole conditions. The Wallaces obtained a subsurface repair
protocol from another engineering firm that recommended underpinning in
addition to compaction grouting. Omega then requested neutral evaluation,2 and the neutral evaluator concluded
that there was no need for underpinning in addition to compaction grouting.

Despite the neutral evaluator’s
recommendation, the Wallaces submitted a contract for subsurface repair
including compaction grouting and underpinning. When Omega refused to pay, the
Wallaces sued Omega for breach of contract. In count four of the operative
complaint, the Wallaces alleged that Omega breached the policy by refusing to
make payment on the repair contract.

At trial, the Wallaces offered the
expert testimony of engineer Sonny Gulati of Florida Testing and Environmental,
Inc. (“FTE”). Gulati concluded that there had been structural damage to the
building and foundation of the Wallace residence constituting a “Sinkhole Loss”
as defined by the policy. Gulati applied the engineering definition of
“structural damage,” which required that the load-carrying capability of the
foundation be compromised. He concluded that the remediation should include
both compaction grouting and underpinning.

Omega offered the expert testimony
of two engineers from SDII Global Corporation and the neutral evaluator. While
the neutral evaluator concluded there was damage to the structure, he was not
asked to give an opinion on whether there was a “Sinkhole Loss” as defined by
the policy. The SDII engineers concluded there was a “Sinkhole Loss,” but they
applied the definition of structural damage that was used by the insurance
industry and some courts.3 This definition of structural damage
only required damage to the structure rather than compromise of the
load-carrying capability of the foundation. The SDII engineers and the neutral
evaluator also characterized the damage as “cosmetic” because it could be
repaired without repairing the foundation or load-bearing portions of the
structure. They agreed with Gulati that compaction grouting was necessary for
remediation, but they did not believe the damage was significant enough to
require underpinning.

At the close of Omega’s case, the
Wallaces moved for a directed verdict on count four of the amended complaint,
arguing that Gulati’s opinion established the method of subsurface repair as a
matter of law. According to the Wallaces, the policy contained language
requiring that any subsurface repair protocol be recommended by a “professional
engineer who verifies the presence of a Sinkhole Loss.” They asserted that
their expert, Gulati, was the only professional engineer who verified that
there was a “Sinkhole Loss” using what they claimed to be the proper definition
of structural damage, which was the engineering definition.

Omega’s counsel responded that the
defense experts also found a “Sinkhole Loss” for which the policy provides
coverage. Counsel maintained that in light of the conflicting expert testimony
as to the proper method of repair, that issue was appropriate for resolution by
the jury. Counsel added that under the Wallaces’ strained interpretation of the
policy, Gulati’s opinion testimony on behalf of the Wallaces could not even be
considered. According to counsel, the policy contained language requiring that
any subsurface repair protocol be prepared “in compliance with Florida sinkhole
testing standards.” Counsel asserted that Gulati’s protocol could not have met
this standard because he did not perform any testing at the Wallace
residence. Counsel stated that if the court were inclined to grant the
Wallaces’ motion for directed verdict, then Omega should be permitted to amend
its pleadings to deny coverage. Counsel reiterated that was not the preferred
option as “we want to fix the house.”

The trial court granted the Wallaces
a directed verdict on count four and denied Omega’s motion to amend the
pleadings. The court ultimately entered a final judgment awarding the Wallaces
$207,628.96 (the full amount of the policy plus prejudgment interest). The
court denied Omega’s motions for rehearing and new trial and Omega’s renewed
motion to require a contract for repair as a condition of subsurface repair benefits.4

On appeal, Omega asserts that the
trial court erred in granting the Wallaces’ motion for directed verdict,
denying its request to amend its pleadings, and denying its motion to require a
contract for repair as a condition of subsurface repair benefits. We conclude
that the trial court erred in granting a directed verdict in favor of the
Wallaces on the proper method of repair and reverse. This holding renders the
remaining issues moot.

This court conducts a de novo review
of orders granting directed verdicts. Jackson Hewitt, Inc. v. Kaman, 100
So. 3d 19, 27 (Fla. 2d DCA 2011). The issue that gave rise to the directed verdict
is a matter of contract interpretation. The Wallaces relied on the portion of
the sinkhole endorsement providing coverage for sinkhole damages “[i]n
accordance with the recommendations of the professional engineer who
verifies the presence of a Sinkhole Loss in compliance with Florida
sinkhole testing standards and in consultation with you.” (Emphasis added.) The
Wallaces asserted that, under this provision, a subsurface repair protocol may
be used only if it is recommended by a “professional engineer who
verifies the presence of a Sinkhole Loss” using the engineering definition of
“structural damage.”

The Wallaces also relied on the
portion of the sinkhole endorsement that defines “Sinkhole Loss” as “structural
damage to the building, including the foundation, caused by Sinkhole Activity.”
They successfully convinced the trial court that the opinion of their expert
was unrefuted as to the existence of structural damage and a sinkhole loss.
They claimed that a directed verdict in their favor was appropriate because
SDII and the neutral evaluator refused to agree that there was “structural
damage to the building” using the engineering definition of “structural damage”
and, therefore, did not “verif[y] the presence of a Sinkhole Loss.”

There is nothing in the plain
language of the insurance policy’s sinkhole endorsement that requires the use
of a particular definition, to the exclusion of other definitions, to determine
the existence of “structural damage” in order to provide an opinion on the
proper method of subsurface repair. To uphold the directed verdict below, this
court would have to read additional language into the policy.5 Cf. Roker v. Tower Hill
Preferred Ins. Co., 164 So. 3d 690, 693 (Fla. 2d DCA 2015) (holding that a
statute requiring the insurer to pay for repair “in accordance with the
recommendations of the professional engineer” did not “require the insured to
enter into a contract for the subsurface repairs recommended by the insurer’s
engineer to the exclusion of any other professional recommendations”).

Omega’s expert engineers agreed that
the Wallaces had a covered sinkhole loss based on damage to the structure, even
though they disagreed as to the precise definition to be given to the term
“structural damage” and the appropriate method of repair. The testimony of
Omega’s experts that there had been a sinkhole loss based on sinkhole activity
that damaged the Wallace’s residence was consistent with the terms of the
policy. Thus, the trial court erred in refusing to consider that testimony.

By extending coverage for the
Wallaces’ “Sinkhole Loss,” Omega necessarily conceded that there had been
structural damage, as contemplated by the policy, caused by “Sinkhole
Activity.” Any dispute as to whether there was sufficient structural damage to
constitute a “Sinkhole Loss” was rendered moot, and the only issue to be
resolved at trial pertaining to subsurface damage was the proper method of
repair.

Generally, the question of the
proper method of subsurface repair of a home damaged by sinkhole activity is
for the jury to resolve. Roker, 164 So. 3d at 694. At trial, the parties
offered the testimony of four engineers, and they all agreed there was damage
to the structure even though they disagreed regarding the proper method of
subsurface repair. Omega’s two experts from SDII and the neutral evaluator
testified that compaction grouting alone was the proper protocol. The Wallaces’
expert from FTE disagreed and testified that underpins should be added. Omega
correctly argues that the jury should have been allowed to resolve this
dispute.

We therefore reverse the final
judgment and remand for a jury trial on the method of repair. We note that any
judgment on remand must be consistent with the policy’s loss settlement
provision which only obligates Omega to pay for subsurface repairs after the
insureds enter into a contract and then only obligates Omega to make payment as
the work is performed. See Citizens Prop. Ins. Corp. v. Stieben,
200 So. 3d 215, 215-16 (Fla. 2d DCA 2016); Citizens Prop. Ins. Corp. v.
Blaha, 194 So. 3d 411, 416 (Fla. 2d DCA 2016).

Reversed and remanded. (LaROSE,
C.J., and CRENSHAW, J., Concur.)

__________________

1We note that, after the cause of
action accrued in this case, the legislature adopted a five-part definition of
“structural damage.” See § 627.706(2)(k), Fla. Stat. (2011); ch.
2011-39, § 22, at 570, Laws of Fla. This amendment does not apply retroactively.
Sevila v. First Liberty Ins. Corp., 7 F. Supp. 3d 1226, 1230 (M.D. Fla.
2014).

2Neutral evaluation is a nonbinding
method of alternative dispute resolution created specifically for sinkhole
cases. § 627.7074, Fla. Stat. (2010). It is an informal proceeding in which
each side presents its position to a qualified and neutral expert, who then
issues a decision that is admissible at trial. § 627.7074(12), (13).

3See, e.g., Shelton v. Liberty Mut. Fire Ins. Co., 25 Fla. L.
Weekly Fed. D73a (M.D. Fla. Apr. 17, 2013), and cases cited therein.

4The sinkhole endorsement contains a
loss settlement provision which provides, in pertinent part:

We may
limit any payment for Sinkhole Loss to the actual cash value, not including any
repairs below the foundation, until you enter into a contract for building
stabilization or foundation repairs. After you enter into a contract, we shall
pay the amounts necessary to begin and perform such repairs as the work is
performed and the expenses are incurred, without requiring you to advance
payment for such repairs.

This provision is consistent with
section 627.707(5)(b), Florida Statutes (2010).

5For this
same reason, we find no merit in Omega’s assertion that Gulati’s opinion could
not be considered because Gulati did not personally perform testing “in
compliance with Florida sinkhole testing standards.”