by Robert P. Barton, Esq.
For years, in an effort to limit exposure in water damage claims, insurance carriers have been introducing limited water damage endorsements into their policies. Most endorsements limit coverage to $10,000 for damage caused by water. Historically, insurance companies have had mixed results in the enforcement of these endorsements, with some courts finding them either vague, ambiguous, or expressly do not include the cost of tear out and/or other policy benefits.
In more recent policies, carriers have begun including two water damage endorsements—one that excludes all water damage in the policy resulting from a plumbing system (“Exclusion Endorsement”), and another that rolls coverage back on, but limits liability to $10,000 (“Coverage Endorsement”). Importantly, the Fourth District Court of Appeal recently found a typical Exclusion Endorsement to be clear and unambiguous. See Dorothy Archer v. Tower Hill Signature Insurance Company, 46 Fla. L. Weekly D656a, 2021 WL 1115386 (Fla. 4th DCA Mar. 24, 2021). The court applied the Exclusion Endorsement against the insured and affirmed final summary judgment in favor of Tower Hill. It follows that, if an Exclusion Endorsement applies, the only way an insured can recover for water damage would be if another endorsement rolls coverage back on. This is where Coverage Endorsements come into play.
In Lightfoot v. Security First Insurance Company, the carrier had both an Exclusion Endorsement and Coverage Endorsement in its policy. The loss was caused by water damage from within a plumbing system, and the carrier tendered the $10,000 limit. The insureds then filed suit, seeking payment for damages in excess of $10,000, including tear out and other policy benefits. The carrier immediately filed a motion for final summary judgment. At the hearing, the insureds argued the Coverage Endorsement was unclear as to whether debris removal, build back, or tear out coverages were included. The carrier used the Archer case as a building block to support its argument that, like the Exclusion Endorsement, the Coverage Endorsement was also unambiguous. The court agreed, relying in part on Archer, finding:
[T]he Court finds the Exclusion Endorsement is clear and unambiguous and applies to exclude Plaintiffs’ plumbing leak claim. However, the Policy’s Coverage Endorsement rolls coverage back on . . .The only coverage afforded for damage caused by water in this case is that which is expressly stated within the Coverage Endorsement. Because Defendant has met its limit of liability under the Coverage Endorsement in this case, no additional payments are due under the Policy.
Notably, the court found the “only coverage afforded for damage caused by water . . . is that which is expressly stated within the Coverage Endorsement.” That is because the Exclusion Endorsement rid the policy of all coverage for water damage. Thus, any coverage for the loss was limited by the express terms of the Coverage Endorsement. This ruling provides a welcomed break from previous trial court rulings that have invalidated water damage endorsements. Moving forward, where appropriate, carriers could use the steps outlined above when seeking summary judgment in similar cases.
Robert P. Barton is an Associate with the RumbergerKirk law firm with offices in Tampa, Orlando, Miami, Tallahassee, and Birmingham. Robert represents insurance companies in coverage disputes and bad faith claims in both state and federal courts. He assists clients in cases involving homeowners, automobile, and commercial general liability policies and payment disputes. Robert can be reached at the Tampa office at [email protected].
LMA Newsletter of 5-17-21