PEOPLE'S TRUST INSURANCE COMPANY v. SHEILA BANKS

Opinion

Third District Court of Appeal State of Florida

Opinion filed September 13, 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.

On Motion for Clarification HENDON, J.

We grant Appellant’s motion for clarification, withdraw our previous

opinion filed August 16, 2023, and replace it with the following opinion.

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 the 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. . . .

2 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, 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.1 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.”

1 The limit of liability of the LWD endorsement provides,

LIMIT OF LIABILITY

The Property Coverage limit for liability for all covered property provided by this endorsement is shown on “your” Declaration 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.

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

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

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

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

6 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 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)

7 (“[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.

It follows that there is no additional coverage provision for tear out

costs separate from water damage loss. See 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 v. Nat'l Specialty Ins. Co., 548 F.

8 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, 2023) (per

curiam affirmance citing to Vasquez), rather than follow the reasoning of

Dodge, Panettieri, and Rosa. We decline.

9 Vazquez is distinguishable from the present case. Unlike the parties

in Vazquez, the parties in this case did not stipulate that the relevant

endorsement covered tear out. As explained in Panettieri,

However, in Vazquez, the parties stipulated that the operative policy’s limited water damage coverage endorsement provided coverage for tear out costs, and the question presented to the Fifth District was whether the $10,000 sub-limit applied to tear out costs. Here, no such stipulation occurred, and even more, as mentioned above, Insured’s argument on appeal is based on his contention that the LWD Endorsement in the instant case ‘does not provide coverage for Tear Out.

Panettieri, 344 So. 3d at 41 (emphasis in original, internal citation omitted).

Here, as in Panettieri, the LWD endorsement in PTIC’s policy does not

provide coverage for tear out, but only provides coverage for sudden and

accidental direct physical loss by water. Vazquez is thus distinguishable 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.