Florida Third District Affirms Coverage Exclusion Under Policy’s Water Damage Exclusion Endorsement

By Zachary D. Sonenblum

In Spartan Servs. Corp. v. People’s Trust Ins. Co., Florida’s Third District Court of Appeal affirmed the lower court’s entry of summary judgment in favor of People’s Trust finding that coverage was excluded pursuant to the policy’s Water Damage Exclusion Endorsement.

In exchange for a policy premium discount of $576.00, a Water Damage Exclusion Endorsement was added to the Insured’s policy. The Water Damage Exclusion Endorsement excludes coverage for loss caused by certain types of water penetration or water damage, including loss caused by water penetrating the roof or walls of the home:

THIS ENDORSEMENT CHANGES YOUR POLICY. PLEASE READ IT CAREFULLY

For a premium credit, the policy is changed as follows:

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Under SECTION I – EXCLUSIONS item 3. Water is replaced by the following:

        3. Water, meaning:

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f. Water penetration through the roof system or exterior walls of windows unless water penetration is a direct result of damage caused by  Peril Insured Against other than water and not otherwise excluded in the policy;

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Water Damage resulting from rain that enters the insured dwelling through an opening that is a direct result of physical damage caused by a Peril Insured Against, other than water, will be covered under that peril provided that peril is not otherwise excluded in the policy. The covered damage will be subject to the applicable deductible stated in your policy Declarations.

The Insureds made a claim for a loss suffered as a result of a roof leak and People’s Trust fully denied the claim. A year later, the Insureds executed two assignments of benefits (AOBs) with Spartan Services Corp for water mitigation and tarping services. People’s Trust rejected Spartan’s estimates and invoices explaining that “coverage does not exist for our insured on the underlying claim.”

Spartan Services Corp—as assignee—sued People’s Trust for breach of contract seeking compensation for services performed. People’s Trust moved for summary judgment based on the policy’s Water Damage Exclusion Endorsement.  Spartan contended the Endorsement did not apply to the dwelling and that therefore it did not need to establish a peril created opening.  

The trial court granted summary judgment finding that the Endorsement applies to all coverages and that the undisputed facts established the loss was excluded from coverage by the Water Damage Exclusion Endorsement, and that Spartan failed to present evidence of an exception to the exclusion. To make a claim under an all-risk policy, the insured must establish that her home suffered a covered loss while the policy was in effect. Once established, “the burden shifts to the insurer to prove that the cause of the loss was excluded from coverage under the policy’s terms.” And if an insurer relies on an exclusion to deny coverage, the insurer “has the burden of demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation.” The burden then shifts once more to the insured to prove an exception to the exclusion.

Spartan appealed—contending that the policy provides coverage for ensuing loss caused by wear and tear, and that the Water Damage Exclusion Endorsement does not preclude coverage given that this is an all-risk policy. On appeal, Spartan did not argue that the Endorsement does not apply at all; but instead argued that the “Endorsement does not exclude coverage for the water damage claim—specifically, water damage the parties agree was caused by wear-and-tear of the roof.”

Florida’s Third DCA did not find Spartan’s argument persuasive and affirmed the trial court’s finding that 1) the loss was excluded under the plain language of the Endorsement, and 2) that Spartan failed to present evidence of an exception to the exclusion under the Endorsement.

In reaching its decision, the Court reasoned as follows:

Stated differently, People’s Trust does not insure for loss caused directly or indirectly by “water,” defined to include water that penetrates “through the roof system . . . unless water penetration is a direct result of damage caused by a Peril Insured Against other than water.” (Emphasis added). This policy language precludes coverage for an “ensuing loss”— water damage to the interior—from wear-and-tear (an explicitly excluded peril) where the water damage is not a direct result of a peril insured against.

CONCLUSION

Spartan’s ensuing loss was excluded from coverage under the plain language of the base policy and the Endorsement. Therefore, the trial court correctly entered summary judgment in favor of People’s Trust.

Since the Water Damage Exclusion Endorsement precluded coverage for the Insured’s loss, the court affirmed summary judgment in favor of the insurer.