Florida, Sebo and the Concurrent Causation Doctrine

The Florida Supreme Court recently issued a widely reported decision, Sebo v. American Home Assurance Co., which applied the concurrent cause doctrine in ruling that an all-risk homeowner’s insurance policy provides coverage when damage is the result of multiple events—so long as at least one of them is a covered peril. Plaintiff John Sebo purchased a home, which he insured under an all-risk homeowner’s policy written by American Home. As an “all-risk” policy, it provided coverage for damage to property caused by all perils, except those it explicitly excluded. Design defects and faulty construction were among the excluded perils. Within less than two months of buying the house, Mr. Sebo discovered major leaks during rainstorms, which were later found to be the result of design defects and faulty construction. Hurricane Wilma then caused even more damage. When Mr. Sebo sought coverage for damage from the water intrusion, American Home denied most of the claim on the grounds that it was caused by design defects and faulty construction—which were excluded perils. But the Florida Supreme Court found coverage.

Much of the reporting on this decision that we’ve seen has missed an important nuance. Many posts have said that the case stands for the proposition that Florida now follows the “concurrent causation doctrine.” Under that doctrine, when damage to property results from a combination of covered and excluded perils, the damage is covered. But it’s not quite that simple. Sebo really stands for the proposition that Florida follows the concurrent causation doctrine if the exclusion at issue does not have what the industry calls “anti-concurrent causation” language.

If the complexity of that distinction makes your head hurt, you’re not alone. But fear not—you don’t even need an Advil. We’ll make this simple for you.

Most first-party property policies separate their excluded perils into groups—all of which are premised on the prospect that a given loss could be caused by a combination of perils. A common group of exclusions—though apparently not present in the Sebo policy—has what are known as “resulting loss” or “ensuing loss” exceptions. Those say that damage by the excluded peril is excluded, but if loss by a covered peril results, the resulting loss is covered. So, if a workman defectively installs piping and that defect is discovered, without more, there will be no coverage to replace it. But if the defectively installed piping causes a water leak, and water leaks are covered perils, the damage caused by resulting water leaks is covered.

The resulting loss exception is, in our experience, among the most frequently disputed types of first-party coverage issues. Of course, our experience could be self-selected because our focus on construction disputes frequently involves defective design and workmanship exclusions, which almost always have a resulting loss exception.

But the exclusions at issue in Sebo did not have resulting loss exceptions, and they didn’t have “anti-concurrent causation” language, either. (Cue the Advil.) “Anti-concurrent causation” is shorthand for a provision that says damage is excluded if it is caused by a combination of covered and excluded perils. So, if damage is caused by a combination of a covered peril and an excluded peril, and that excluded peril includes “anti-concurrent causation” language, then the damage is excluded.

Other excluded perils in the Sebo policy had “anti-concurrent causation” language, but the excluded perils at issue—again, defective design and workmanship—did not. That was ultimately what the case turned on. The Florida Supreme Court stated that “[b]ecause [insurer] did not explicitly avoid the [concurrent cause doctrine], we find that the plain language of the policy does not preclude recovery.” So the operative fact in Sebo was the absence of anti-concurrent causation language in the defective design and workmanship exclusions—coupled with the presence of anti-concurrent causation language for other excluded perils not at issue.

Such distinctions yield a simple takeaway for Sunshine State policyholders: keep an eye on the language prospective insurers employ regarding concurrent causation. Either that, or keep that Advil handy.