Who Pays?

Who Pays?

By Michael J. Gelfand, Esq. / Published September 2021

Photo by iStockphoto.com/Slphotography


     Simply saying the name of the small town, home to Champlain Towers South condominium, will forever evoke the horror of the late June catastrophic building collapse. As our thoughts are extended to those directly touched by the tragedy, volunteer directors of high-rise condominiums everywhere are inundated by member/owner calls seeking reassurance.

     It may take months, if not longer, for experts to determine what caused the collapse. As with many catastrophes, there likely will be a number of failures that unfortunately coincided at the wrong time, lining up with terrible results. The swift conclusions by “talking heads” and those with few facts and lots of conjecture should not mislead and detract from the serious investigation.

     In the interim, there are some immediate lessons that may help avoid another “Surfside.” First, pursue a probing turnover/transition engineering inspection and follow up on the results. Second, implement regular maintenance of the structural components. An integral element to these steps is budgeting meaningful reserves for deferred maintenance so that there will be money when repairs are necessary. Additionally, pay attention to the fine print of contracts so that vendors have appropriate insurance and bear the risk of their work.

Water Damage From Rusty Pipes is Not Covered Under Insurance Policy

     An all-too-common occurrence for any property owner, including an association, is damage from a leaky pipe. Will the damage be covered by casualty insurance? Maybe not, if the damage is caused by an “act of nature.”

     A Florida appellate court recently ruled that insurance coverage for water damage caused by the deterioration of cast iron pipes under a home because of rust or corrosion was limited to $10,000. The facts in Dodge v. People’s Trust Insurance Co., 46 Fla. L. Weekly D 1286 (Fla. 4th DCA, June 2, 2021), indicate that water overflow from the homeowners’ plumbing system caused damage to their home. The insurer agreed that the loss was caused by the deterioration of the pipes because of rust or corrosion.

     Although the insurer accepted coverage, the insurer stated that the policy limited the insurer’s liability for water damage to $10,000. The homeowners sued the insurer for breach of the insurance contract. The trial court granted summary judgment for the insurer.

     The Florida appellate court agreed with the trial court’s decision that the water damage exclusion of the insurance policy limited coverage to $10,000. The court explained that the insurance policy excluded water damage “caused by or resulting from … any act of nature.” The court concluded that the phrase “act of nature” did not require an uncontrollable or unpreventable event.

      The loss in this case was caused by rust or corrosion. “Corrosion, the chemical reaction between iron and moist air, is an act of nature or a naturally occurring force,” the court stated. “Thus, the rust or corrosion occurred because of a natural act.” Although the policy had an exclusion for water damage caused by an act of nature, the homeowners were at least able to receive something because the policy limited coverage to $10,000.

     A number of insurance policies have a complete exclusion for acts of nature, and the property owner or association will receive nothing for 

damage caused by acts of nature. However, some policies may have a limitation of coverage, meaning that there may be some proceeds available. Even if it’s not enough to cover the entire claim, something may be better than nothing.

     A key is understanding before a loss what are the terms of your policy, and after a loss, carefully review the policy for claim requirements!

Who Pays for Destroyed Buried Utilities?

     What happens when a buried wire or pipe, located underground, is destroyed during excavation? Who pays for the repair costs? Who pays for the personal injuries? To help avoid having to repair or replace underground utilities, the owner of property, including associations with buried lines, should register with the non-for-profit corporation set up by the Florida Legislature.

     In Peoples Gas System v. Posen Construction, Inc., 46 Fla. L. Weekly S 166 (Fla., June 10, 2021), the Florida Supreme Court was asked to address a question posed by the U.S. Court of Appeals for the Eleventh Circuit involving PGS, a natural gas distributor, and Posen Construction, Inc., a road construction company and excavator.

     Back in 2010, Mario Santos, a Posen employee, ruptured a PGS pipeline during excavation causing an explosion which severely injured Santos. Before Santos started work, he provided advance notice of the excavation pursuant to Florida’s Underground Facility Damage Prevention and Safety Act (“Act”), but PGS maintained that the notice was deficient. Santos sued Posen and PGS and settled. Thereafter, PGS sued Posen in federal court to recover the settlement amount it paid to Santos. The federal district court dismissed the case, and PGS appealed to the U.S. Court of Appeals, which is how the case ended up before the Florida Supreme Court.

      The Florida Supreme Court ruled that an Act member-operator can sue under the Act to recover damages from an excavator for payments to a third party for personal injuries related to the excavator’s alleged violation of the Act. The Court concluded the following: 

  • The Act creates a stand-alone cause of action.
  • Liability under the Act is subject to proof of proximate causation and to the defense of comparative fault.
  • Losses recoverable under the Act can include purely economic damages independent of personal injury or property damage.

     In 1993, the legislature enacted the Underground Facility Damage Prevention and Safety Act to provide a single toll-free telephone number for excavating contractors and the public to provide notification to the system of their intent to engage in excavation or demolition. The notification system provides member operators an opportunity to identify and locate their underground facilities. A “member operator” is defined as any person “who furnishes or transports materials or services by means of an underground facility.” One of the stated purposes of the Act is to prevent injury to people or property and the interruption of services resulting from damage to an underground facility caused by excavation or demolition operations.

     This Act is important for associations, including, for example, those that have installed or are considering installing charging stations for electric vehicles. All member operators who furnish materials or services using an underground facility must join Sunshine 811, the not-for-profit corporation formed by the Florida Legislature with the adoption of the Act. Membership applications are available at sunshine811.com.

Michael J. Gelfand, Esq.

Senior Partner, Gelfand & Arpe, P.A.

     Michael J. Gelfand, Esq., the Senior Partner of Gelfand & Arpe, P.A., emphasizes a community association law practice, counseling associations and owners how to set legitimate goals and effectively achieve those goals. Gelfand is a dual Florida Bar Board Certified lawyer in Condominium and Planned Development Law and in Real Estate Law, Certified Circuit and County Civil Court Mediator, Homeowners Association Mediator, an Arbitrator, and Parliamentarian. He is a past Chair of the Real Property Division of the Florida Bar’s Real Property, Probate & Trust Law Section, and a Fellow of the American College of Real Estate Lawyers. Contact him at ga@gelfandarpe.com or (561) 655-6224.