New Florida Federal Court Decides Franqui re Florida Sinkhole Structural Damage Definition and Sinkhole Testing Requirements

Florida Homeowners Insurance Claims and Litigation Handbook

Are you up to date with the latest Florida Court rulings on homeowners insurance, sinkhole claims, and sinkhole activity?  If you aren’t sure, then make sure to check out this article!


Federal Judge James Whittemore recently joined Judges Radabaugh, Merryday and Lazzara in finding that “structural damage” caused by sinkhole activity must mean more than “damage to the structure caused by sinkhole activity”  This litigation involved an insurance policy that did not incorporate the Senate Bill 408 “structural damage” definition; therefore, the parties disputed whether coverage for sinkhole activity required more than just cracks caused by sinkhole activity.

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More specifically, the Court answered the following questions:

  • Does “structural damage” mean “damage to the structure” or does it mean something more, such as:
  • (1) the five part definition in Fla. Stat. 627.706 (2011);
  • (2) damage to the load bearing portions of the property; or
  • (3) damage that could cause the house to collapse?
  • Does an insurer with a pre-408 policy breach the policy when it does not conduct a full subsidence investigation in accordance with the pre-408 version of Fla. Stat. 627.707?

Structural Damage: The Court ruled “structural damage” in this insurance policy means “damage to the structural components of the building, excluding damage that is cosmetic in nature.”

Testing Requirements: Judge Whittemore also determined that Liberty Mutual did not breach the policy when it did not conduct a “full” subsidence investigation to eliminate sinkhole activity as a cause of the damage.

Analysis:

Here is the complete order:

Download (PDF, 829KB)

Again, we see trial courts construing the words “structural damage” to mean more than what we are used to seeing.  As you know, 20+ courts have determined “structural damage” simply meant “damage to the structure.”  This “lowered” standard resulted in any cracks triggering coverage for “sinkhole loss.”  With the newer interpretations, though, courts are now asking the homeowners’ expert to show that the sinkhole activity is causing substantial damage to important parts of the property.

As you know, this issue only remains relevant to those claims and cases arising under policies without a definition of “structural damage.”  Since late 2012, many of the insurers added a definition and removed all doubt on this issue.  Nevertheless, thousands of cases remain with these pre-408 policies, so these rulings could continue to build substantial momentum for insurers.

Conclusion:

I think the most amazing thing about this line of decisions is that this issue is still relevant in 2014.  Why is the “structural damage” issue still relevant?  If insurers had innovative services in 2006 using the same arguments they had now, they would be done paying the millions it continues to cost to litigate these issues, and the “structural damage” issue would have been irrelevant (one way or the other) 8 years ago.


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