PEOPLE'S TRUST INSURANCE COMPANY v. SHEILA BANKS

• Court: District Court of Appeal of Florida
• Decided: August 16, 2023
• Docket: 22-1436
• Status: Published

Opinion

Third District Court of Appeal State of Florida

Opinion filed August 16, 2023. Not final until disposition of timely filed motion for rehearing.

________________

No. 3D22-1436 Lower Tribunal No. 20-1425 ________________

People's Trust Insurance Company, Appellant,

vs.

Sheila Banks, et al., Appellees.

An Appeal from the Circuit Court for Miami-Dade County, David C. Miller, Judge.

Brett Frankel and Jonathan Sabghir (Deerfield Beach); and Cole, Scott & Kissane, P.A., and Mark D. Tinker (Tampa) and Scott A. Cole, for appellant.

The Nation Law Firm, LLP, and Mark A. Nation (Longwood), for appellees.

Before LOGUE, C.J., and HENDON and GORDO, JJ.

HENDON, J. People’s Trust Insurance Company (“PTIC”) appeals from an adverse

final summary judgment. We reverse.

Facts

The appellees, Sheila and Randy Banks (“Insureds” or “Appellees”),

own a home covered by an insurance policy issued by PTIC. That policy

insures against “direct physical loss to property.” The policy excludes

losses caused by “wear and tear” and “deterioration.” Unless the loss is

“otherwise excluded,” the policy covers insured property damaged by an

accidental discharge of water from within a plumbing system, including the

cost to tear out and replace any part of the building necessary to access

and repair that system, but does not cover the system itself. All of the

enumerated causes of loss are subject to an indirect and concurrent cause

provision, which reads,

SECTION I – EXCLUSIONS A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. . . .

One of the exclusions is for certain categories of water loss, including flood,

sump overflows, etc. In order to take advantage of a reduced premium, the

Insureds opted for a Water Damage Exclusion (“WDX”) endorsement to

their policy. That endorsement replaced the policy’s basic water exclusion,

2 and defined water to include, among other things, “[d]ischarge or overflow

of water or steam from within a plumbing, heating, air conditioning or

automatic fire protective sprinkler system or from within a household

appliance,” and “[c]aused by or resulting from human or animal forces or

any act of nature.”

In addition to the WDX endorsement, the Insureds also purchased a

less expensive but more restrictive Limited Water Damage Coverage

(“LWD”) endorsement. The relevant provision provides coverage for

“sudden and accidental direct physical loss to covered property by

discharge or overflow of water or steam from within a plumbing . . .

system.” The limit of liability of the LWD endorsement provides,

LIMIT OF LIABILITY

The total limit of liability for all damage to covered property provided by this endorsement is $10,000.00 per loss. This limit applies to all damaged covered property under Coverage A, B, and C combined.

This limit also includes the cost of tearing out and replacing any part or portion of the covered building or other structure necessary to access or repair that part or portion of the system or appliance from which the discharge occurred or cause the overflow.

(emphasis added).

In November 2018, the Insureds experienced a water loss caused by

the deterioration of their property’s old cast iron plumbing. They timely

3 notified PTIC. The Insureds sought two kinds of coverage in their claim: 1)

coverage for the actual physical damage the water caused, and 2)

coverage for the cost of having to excavate the damaged pipes from the

property and repair the plumbing system. PTIC accepted the loss as

covered by the LWD endorsement. PTIC explained in a letter to the

Insureds that the coverage existed only as provided by the LWD

endorsement, and only up to the $10,000.00 limit. Without the LWD

endorsement, the loss would not have been covered pursuant to the WDX

endorsement. PTIC tendered the full $10,000.00 limit to the Insureds,

minus a $2,000 payment PTIC had already made.

The Insureds subsequently sued PTIC for breach of contract, seeking

the actual cash value of the loss and damages, and declaratory relief. PTIC

answered, asserting full payment under the LWD provision, thus

discharging its contractual obligation. Both parties moved for summary

judgment.

The Insureds argued below, and here, that the WDX provision in the

policy did not apply to their loss because the wear and tear, and

deterioration of the cast iron pipes was not caused by human, animal, or

any “act of nature,” as stated in the WDX endorsement. They point out that

the phrase “act of nature” is not defined. Instead, they contend that the

4 corrosion in the pipes was a “natural process,” not an “act of nature,” thus,

the WDX exclusion for “act of nature” is inapplicable. As a result, they

maintain, the WDX endorsement does not apply, and the LWD

endorsement was not triggered. Even if it was, they argue, the LWD only

applies to limit the actual physical damage caused by water from a

plumbing system and does not limit coverage for the cost of tearing out any

part of the Insured’s home to repair the plumbing system from which the

water escaped.

PTIC, on the other hand, asserted that, in exchange for a reduced

premium, the Insureds accepted the WDX endorsement which eliminated

all coverage for water damage. The Insureds then bought back limited

water damage coverage via the LWD endorsement, which covered “direct

physical loss . . . by discharge or overflow of water . . . from within a

plumbing system.” That coverage came with a payout limit of $10,000.00,

which limit expressly included tear-out costs, and which PTIC duly paid

pursuant to the LWD contract.

In August 2020, the trial court heard both motions for summary

judgment and granted partial summary judgment in favor of the Insureds,

and denied PTIC’s motion for summary judgment. The trial court concluded

that the wear and tear, and deterioration, was not caused by an “act of

5 nature,” as required by the WDX endorsement, and the LWD endorsement

did not apply to the cost of tearing out and replacing the plumbing in the

Insureds’ property. The parties agreed to take the claim to appraisal

pursuant to the policy terms. The appraisal award totaled $113,318.17.

PTIC appeals from the final judgment granted to the Insureds pursuant to

the appraisal award.

Discussion

Insurance policy construction is a question of law subject to de novo

review. People's Tr. Ins. Co. v. Progressive Express Ins. Co., 336 So. 3d

1207, 1209 (Fla. 3d DCA 2021); Arguelles v. Citizens Prop. Ins. Corp., 278

So. 3d 108, 111 (Fla. 3d DCA 2019); Fayad v. Clarendon Nat’l. Ins. Co.,

899 So. 2d 1082, 1085 (Fla. 2005) (citing Dimmitt Chevrolet, Inc. v. Se. Fid.

Ins. Corp., 636 So. 2d 700, 701 (Fla. 1993)) (“[T]he issue of whether an

exclusionary clause precludes coverage for damages is a question of

law.”). Additionally, the appellate court must construe insurance policies in

a reasonable, practical, and just manner. First Pros. Ins. Co. v. McKinney,

973 So. 2d 510 (Fla. 1st DCA 2007). Where the language in an insurance

contract is plain and unambiguous, “a court must interpret the policy in

accordance with the plain meaning so as to give effect to the policy as

written.” Wash. Nat’l. Ins. Corp. v. Ruderman, 117 So. 3d 943, 948 (Fla.

6 2013); U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla. 2007)

(holding that, in construing insurance contracts, courts should read each

policy as a whole, endeavoring to give every provision its full meaning and

operative effect).

This Court declines to interpret the insurance policy language at issue

in such a way as to separate the ordinary meaning of “act of nature” from

“natural process.” To conclude that the deterioration of the Insureds’ old

cast iron plumbing pipes is not an “act of nature” would lead to an absurd

result, i.e., coverage costs in excess of what was expressly excluded from

the bargained-for coverage. “[A] single policy provision should not be read

in isolation and out of context, for the contract is to be construed according

to its entire terms, as set forth in the policy and amplified by the policy

application, endorsements, or riders.” State Farm Mut. Auto. Ins. Co. v.

Mashburn, 15 So. 3d 701, 704 (Fla. 1st DCA 2009).

Recent appellate cases involving the identical policy language, and

as applied to similar facts, have interpreted the phrase “act of nature” to

mean ordinary natural processes rather than extraordinary, unforeseen

events, or events usually classified as an “act of God.” See Dodge v.

People's Tr. Ins. Co., 321 So. 3d 831, 835 (Fla. 4th DCA 2021) (“Corrosion,

the chemical reaction between iron and moist air, is an act of nature or a

7 naturally occurring force. Thus, the rust or corrosion occurred because of a

natural act.”); Rosa v. Safepoint Ins. Co., 350 So. 3d 468, 471 (Fla. 5th

DCA 2022) (“[T]he rust or other corrosion that occurred in the pipes in [the

insured's] dwelling, regardless of whether it was perhaps preventable or

controllable, was a naturally occurring force and thus an act of nature. As

an act of nature, the loss came within the policy exclusion for ‘any act of

nature.’”). Notably, in Santana v. People's Trust Insurance Co., 48 Fla. L.

Weekly D646 (Fla. 3d DCA Mar. 29, 2023) (citation opinion), this Court has

chosen to follow the precedent set by Dodge and Rosa. See also Certain

Interested Underwriters at Lloyd's London v. Pitu, Inc., 95 So. 3d 290, 293

(Fla. 3d DCA 2012) (finding the water loss exclusion endorsement was

clear and unambiguous in its limitation of coverage for those losses

covered by the policy to $25,000); Herrington v. Certain Underwriters at

Lloyd's London, 342 So. 3d 767, 770 (Fla. 4th DCA 2022) (“The policy

language covers ‘loss caused by the water including the cost of tearing out’

parts of the structure to repair the system which leaked. ‘Tear out’ costs are

thus part of the water damage loss. Therefore, the endorsement limiting all

water damage loss includes tear out expenses.”); Panettieri v. People's Tr.

Ins. Co., 344 So. 3d 35, 40 (Fla. 4th DCA 2022) (holding no separate and

distinct coverage exists for tear out costs apart from water damage); Yanes

8 v. Nat'l Specialty Ins. Co., 548 F. Supp. 3d 1307, 1315 (S.D. Fla. 2021)

(“Reading the provisions of the Subject Policy together as a whole, the

Court finds that [the insurer’s] liability under the Subject Policy—including

liability for Tear Out Coverage—is limited by the [Limited Water Damage

Coverage Endorsement] to $10,000.00.”).

As explained in Panettieri,

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, 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.

Panettieri, 344 So. 3d at 39–40 (citation and footnote omitted).

The Insureds argue that this Court should follow the holding and

reasoning from Security First Insurance Co. v. Vazquez, 336 So. 3d 350,

351 (Fla. 5th DCA 2022), reh'g denied (Mar. 25, 2022), review dismissed,

SC22-583, 2022 WL 1764701 (Fla. May 31, 2022), and Security First

Insurance Co. v. Nichols, 48 Fla. L. Weekly D837 (Fla. 6th DCA Apr. 21,

9 2023) (per curiam affirmance citing to Vasquez), rather than follow the

reasoning of Dodge, Panettieri, and Rosa. We decline.

As an initial matter, Vazquez can be distinguished from the present

matter. In that case, the Court noted that Security First could have, but did

not, expressly recite that the tear-out costs were subject to the $10,000

limit of liability contained in the LWD Endorsement. The Court reasoned

that because the limit of liability provision in Security First’s LWD

Endorsement could reasonably be interpreted in each party's favor, and

because the ambiguity was created by Security First, the Court affirmed the

lower court’s ruling in favor of the insured homeowner. Vazquez, 336 So.

3d at 353.

In the case before us, however, the LWD endorsement in PTIC’s

policy expressly provides that “[t]he total limit of liability for all damage to

covered property provided by this endorsement is $10,000.00 per loss.

This limit applies to all damaged covered property under Coverage A, B,

and C combined,” and “[t]his limit also includes the cost of tearing out and

replacing any part or portion of the covered building or other structure

necessary to access or repair that part or portion of the system or

appliance from which the discharge occurred or caused the overflow.”

(emphasis added). Because of the difference in the relevant policy

10 language, Vazquez is not applicable and we decline to follow it. We

continue to follow the precedent set by the Courts in Dodge, Panettieri,

Rosa, and Santana.

Accordingly, we reverse and remand for entry of summary judgment

in favor of PTIC.

Reversed and remanded.