Summary Judgment Win Could Pave the Way for Insurance Carriers to Enforce Water Damage Coverage Limitation Endorsements | Rumberger | Kirk

If you live in Florida, chances are you’ve seen a billboard or heard an ad about water damage or pipe business. For some time now, policyholders have filed claims and lawsuits for repair costs that often exceed $ 100,000. However, Rumberger Kirk’s recent success in obtaining a final summary judgment for a carrier could be a path to success for carriers looking to enforce the limitation of water damage coverage in the future.

In an effort to limit exposure to water damage claims, insurance companies (in exchange for a premium credit) have included several limited water damage endorsements in their policies. Most recommendations limit coverage to $ 10,000 for damage caused by water from a plumbing system, including the cost of tearing out. Historically, insurance companies have had mixed results in enforcing these endorsements. Many courts have invalidated the notes based on arguments from the prosecution that the notes are either vague or ambiguous, or expressly exclude the costs of tearing off and / or other secondary policy benefits. At the end of the tunnel, however, there may finally be light.

In more recent policies, carriers have begun to include two water damage endorsements: one that excludes all water damage in the policy that results from a plumbing system (“ Exclusion Endorsement ”), and another that reverses coverage but limits liability to $ 10,000 (“Coverage Approval”). Importantly, the Fourth District Court of Appeal recently established the validity of a typical Exclusion Endorsement in Dorothy Archer v. Tower Hill Signature Insurance Company, 46 Fla. L. Weekly D656a, 2021 WL 1115386 (Fla. 4 DCA March 24, 2021). In doing so, the court in Archer found the Exclusion Endorsement clear and unambiguous! As a result, the court applied the exclusion to the insured and the lower court upheld the final summary judgment in Tower Hill’s favor. This case is important because, presumably, carriers can now include this exclusion statement in their policies (if not already in place) to exclude all water damage resulting from, among other things, ‘accidental or deliberate discharge or flooding of water or steam from a plumbing system. In addition, this approval completely removes the policy from any coverage for water damage, meaning that the only way an insured can recover from water damage would be if another approval reverses coverage. This is where Coverage Endorsements come into play.

As noted above, Florida courts have repeatedly voided Coverage Endorsements. However, in Lightfoot v. Security First Insurance Company, the carrier had both an exclusion application and a coverage review in its policy. The loss was indisputably caused by water damage from a plumbing system, and the carrier immediately offered the full $ 10,000 limit. The policyholders then filed for payment for property damage in excess of $ 10,000, plus tearing out and various other benefits, such as debris removal. Having already reached his liability limit, the carrier refused and a lawsuit was filed. In response to the lawsuit, the carrier filed a motion for final summary judgment. At the hearing, the policyholders argued that the coverage review was unclear as to whether coverages for debris removal, build-up, or tear-out were included. The carrier, on the other hand, relied on the recent Archer case as a building block to support its argument that if the lockout confirmation was clear and unambiguous, so was the coverage test. The court agreed with the carrier, relying in part on Archer, and found:

[T]The court holds that the exclusion confirmation is clear and unambiguous and applies to rule out plaintiffs’ claim that the plumbing is leaking. However, the policy’s coverage is reversed for sudden and accidental damage caused by the discharge or flooding of water from a plumbing system. The Coverage Endorsement also provides for a total liability limit of $ 10,000 for all covered water losses. The loss in this case was caused by the sudden and unintentional discharge or flooding of water from a pipe system. The defendant accepted the coverage and paid a total of $ 10,000, in accordance with the policy’s approval. The Court ruled that the Coverage Endorsement is clear and unambiguous and must be applied in accordance with its clear meaning. The only cover offered in this case for damage caused by water is that expressly stated in the Cover Application. Since the defendant has met his liability limit under the cover charge in this case, no additional payments are due under the policy.

Notably, the court found “the only cover offered for water-induced damage. . . is that which is expressly stated in the Coverage Recommendation. “That’s because the exclusion filing completely strips the policy of all coverage for water damage. So any coverage for the loss must be limited to the express terms of the Claim for Cover. The Coverage Endorsement in Lightfoot made no mention of tearing, debris removal, and the like.” Therefore, the court was right in providing a final summary of the verdict for Security First. The court’s ruling constitutes a welcome departure from previous court rulings that invalidated water damage records. Carriers may, if applicable, cancel the use the steps described above to request summary proceedings in similar cases.

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