As we all know in the Sunshine State, many property owners leave Florida when the summer heat arrives. Property may be left unoccupied for several months. What happens when a toilet or other fixture malfunctions and no one is there to stop the leak? Will insurance pay for the damage? It depends on what an insurance policy covers.
Recently, a Florida appellate court faced the issue of whether water escaping as a relatively slow leak or as a sudden and large burst triggers insurance coverage. The facts in Price v. Castle Key Indemnity Company, 39 Fla. L. Weekly D 1864 (Fla. 2nd DCA, September 3, 2014) indicate that while the Price family was out of town for more than one month, 195,000 gallons of water escaped from a bathroom toilet located in the upstairs of the home, causing damage to the home.
The insurance policy covered “sudden and accidental direct physical loss to the property.” However, the policy excluded: [s]eepage, meaning continuous or repeated seepage or leakage over a period of weeks, months, or years, of water, steam, or fuel…from, within[,] or around any plumbing fixtures, including, but not limited to shower stalls, shower baths, tub installations, sinks[,] or other fixtures designed for the use of water or steam.
Due to a dispute over the insurance coverage, Price sued Castle Key.
Price argued that water had to have escaped at the rate of 6,000 gallons per day, creating an ambiguity as to whether the incident could be defined as “seepage.” Price further argued that his damage should be covered because “sudden” can mean unexpected, which may apply to water flow that occurs over time. The insurer maintained that wear, age, and rust caused the problem and thus denied coverage. The trial court granted summary judgment for the insurer.
The Florida appellate court reversed. The appellate court explained that while the terms of a contract may appear to be clear, in fact, a contract may be ambiguous if the contract’s words can be interpreted differently, especially when set in the context of different factual situations. The ambiguities do not become clear until additional evidence is introduced.
“Here, the terms of the insurance contract are not facially ambiguous,” the court explained. “[The basic undisputed facts agreed to by the parties demonstrate the existence of the alleged latent ambiguities in the terms of the contract. Specifically, based on the undisputed fact that a large amount of water flowed from the pipe over time, the meaning of the contractual terms of ‘seepage’ and ‘sudden’ are less than clear.”
The Florida appellate court determined that summary judgment was not proper at this time and sent the case back to trial court to determine whether the water escaping was an escalating leak or as a burst that remained at a constant rate.
This case highlights the importance for an association to check its insurance policies to see what type of leaks will be covered, especially where multi-level buildings are involved.
If the documents do not require it, associations may want to amend their documents to require owners to turn off water when owners vacate their units for an extended period of time, and to take other preventative measures.
It is not uncommon for an association to execute a release when settling a claim such as a personal injury from an accident occurring on association property. Will the release actually stand up and prevent the claimant from returning to assert more claims? Maybe yes, maybe no.
In a recent Florida appellate court decision, the court ruled that a release of claims was limited to a specific incident, and did not cover future claims. In Moxley v. U-Haul Co. of Florida, 39 Fla. L. Weekly D 2065 (Fla. 2nd DCA, October 1, 2014), Bell was killed when a U-Haul truck he was driving collided with a vehicle driven by Wakeman. Bell’s Estate settled and released U-Haul from all claims arising out of the incident.
Thereafter, it became complicated. Bell’s Estate sued Wakeman for wrongful death. In return, Wakeman filed a counterclaim against Bell and Wakeman was awarded more than $2 million on her counterclaim. Bell’s Estate then sued U-Haul for breach of contract for failing to defend Wakeman’s counterclaim. The trial court ruled that the release executed by the Estate barred the claims and granted judgment for U-Haul.
The Florida appellate court reversed. The court examined the language in the release, which defined the incident as the accident. The court noted that at the time the release was executed, U-Haul’s duty to provide a defense had not yet arisen since Wakeman had not yet filed her counterclaim. “U-Haul could not be expected to provide [the Estate] with a defense for a claim that was yet to be filed,” the court noted.
This case shows how important it is to have a release properly worded and the risks of relying on a release especially concerning future claims. Contact your association’s attorney with questions about releases to help avoid unanticipated problems.