The District Court of Appeal in Florida issued a decision in an insurance coverage dispute in a case involving the insurance company’s liability provision. According to the facts, the insurance company insured the homeowner’s residence. A failed cast iron sanitary plumbing system in the home caused water to escape and cause damage to the dwelling. The cast-iron pipes deteriorated because of wear and tear, deterioration, and corrosion.
The insurance company permitted coverage for the water damage for $10,000, under the Limited Water Endorsement (LWD) in the policy. The homeowners claimed that the insurance company owed them additional funds for the cost of tearing out and replacing the concrete slab. The owners cited language in the primary policy, which stated that the company covered losses related to water damage, including the cost of tearing out and replacing necessary parts. Finally, the parties agree that the policy does not cover the repair or replacement costs of the corroded pipes.
The parties agree to most of the policy terms; however, they disagree with the liability provision in the LWD endorsement. The company argues that the $10,000 applies to water damage and the related costs, whereas the homeowners contend that the limitation applies only to the water damage.
Under Florida law, courts must construe insurance contracts per the plain language of the policies. The law considers policies ambiguous when language is susceptible to more than one interpretation. Courts must interpret ambiguous policy provisions in favor of the insured.
In this case, the language states “the limit of liability for all damage to covered property.” Here, it is clear that the leakage did not damage the concrete slab. In response, the insurance company argues that the water damage loss includes the tear-out costs. However, the court found that they did not use the term “water damage loss”; instead, the company used the term “damage to covered property.”
The court acknowledges the provision could apply to both water damage and tear-out costs. However, the homeowner’s interpretation is reasonable regarding the policy’s definitions. The court found in favor of the homeowners because the insurance company created the ambiguity, which can be interpreted in either party’s favor. Ultimately, the court affirmed the lower court’s finding favoring the homeowners.
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