The Deductible Divide – the Eleventh Circuit Clarifies Why Not All Property Losses Are Treated Alike

By Tiffany L. McAvoy

In the May 29, 2026 Eleventh Circuit opinion, Florida East Coast Holdings Corp. v. Lexington Insurance Co., the court held  that when a deductible is bound to damaged locations, the policy will not be read to apply that deductible to preventative measures. 2026 U.S. App. LEXIS 1552.

In that case, Florida East Coast Holdings Corporation (“FEC”) had removed crossing gates from railroad sites in hundreds of locations in anticipation of damage from Hurricane Irma. That cost of the removal, subsequent replacement with the same gates, employment of additional personnel, and resultant delayed trains was over five-million dollars.

After the storm passed, and damages were averted, FEC sought coverage for its expenditures through its insurance policy with Lexington Insurance Company (“Lexington”). The relevant policy provisions included time element losses, property damage, reduction of loss expenses, professional fees, protection and preservation of property, business interruption, and consequential losses. Lexington  denied the claim on the ground that the losses were below the applicable deductible.

The Eleventh Circuit held that while the district court had properly identified the relevant policy provisions, it had incorrectly calculated the applicable deductible. The policy included a 5% of property values at damaged locations deductible that was subject to a minimum of $750,000. The policy additionally contained a “Railroad Operations” deductible of $750,000.

Lexington had argued, and the district court agreed, that  the 5% deductible was to be calculated based on the total value of the gates for all of FEC’s 600 affected locations. However, in overturning the district court, the Eleventh Circuit sided with FEC and held that because none of the locations were damaged, the 5% calculation was inapplicable. Instead, only the $750,000 railroad operations deductible was applicable. The rational for its decision was that the language of the deductible provisions of the policy plainly stated that the 5% calculation only applied to “damaged locations” and there was no “direct physical” damage to any gate locations.

This decision highlights the Eleventh Circuit’s commitment to the unambiguous terms of policies¹ It additionally stands for the principal that damage-based deductibles are not triggered by anticipated damage or voluntary precautionary actions.

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¹ In citing Mirriam-Webster dictionary, and a plain reading of the context of the provision, the court additionally held that the “reduce the loss” provision’s plain meaning is “to diminish in size, amount, extent, or number”. Therefore a loss must have occurred before coverage is afforded under that provision. Correspondingly, the court held that the words “protect, preserve, and prevent” require an impending loss.