Burden of Proof on an All Risks Policy in Florida

Recently, a colleague of ours in the industry published a blog post regarding burdens of proof in an all risks policy scenario in Florida. His blog post can be found here and here. We think that the author’s analysis in that post is flawed.

It is important to first understand what an all risks policy is. An all risks policy covers fortuitous loss or damage to property other than that resulting form willful misconduct or fraudulent acts. See Fayad v. Clarendon Nat. Ins. Co., 899 So. 2d 1082, 1085 (Fla. 2005). Most all risks policies these days state that the insurance company covers against direct loss to property if that loss is a physical loss to property. Most policies then go on to create various exceptions and exclusions to coverage. Thus, under the most all risks policies, the insured must show that there was a direct physical loss during the policy period. Once that occurs, the burden shifts to the insurance company to prove that the loss is excluded. See Castillo v. State Farm Fla. Ins. Co., 971 So. 2d 820, 824 (Fla. 3rd DCA 2007)

Our colleague in his post relies on Homeowners Choice Property & Casualty v Maspons, 211 So. 3d 1067 (Fla. 3d DCA 2017) to state that in hurricane scenario, the insured must do more than simply show the damages that were caused during the hurricane. His analysis is flawed as it ignores the facts of the Maspons case. In Maspons, the insureds noticed their kitchen sink draining slowly. They hired a plumber who determined that the cast iron line had broken and failed. The insurance company hired their own plumber who came to a similar conclusion. However, there had been no leak or water damage to the interior of the home, just the broken drain line. The insurance company denied coverage for the loss.

In analyzing the insurance policy, the Maspons Court looked at the ensuring agreement which stated:

[w]e insure against risk of direct loss to property … only if that loss is a physical loss to property.

The Court also looked at the underlying exclusion:

[w]e do not insure, however, for loss… caused by… wear and tear, marring, deterioration….

Lastly, the Court looked at the exception to the exclusion:

[i]f any of these cause water damage, not otherwise excluded, from a plumbing, heating, air conditioning or automatic fire protection sprinkler system or household appliance, we cover loss caused by the water including the cost of tearing out and replacing any part of the building necessary to repair the system or appliance. We do not cover loss to the system or appliance from which this water escaped. 

The Court then correctly stated that the damage to the pipe was direct and physical loss within the meaning of the property. However, that damage was excluded as wear and tear or deterioration. Thus, the only way the insureds could get coverage was if they had an ensuing loss. Since there had been no allegations that the water from the pipe had damaged anything, there was no coverage to be had.

As the above recitation of the facts shows, the holding from Maspons does not mean that the insured has to show anything more than a physical loss to initially bring the claim. However, once the insurance company has proved that an exclusion applies, it is up to the insured to show that there’s an exception to that exclusion exists to bring the loss back into coverage. Such an analysis typically does not occur on hurricane cases. The physical loss to the roof generally allows the insured to bring the claim. The insurer then has the burden to prove that the roof was not damaged by the hurricane and some exclusion applies. Ensuing damage typically does not come into play on at least the roof portion of hurricane cases.

Policy interpretation is a complicated business. As we often tell all of our clients, you should review your policy every year to ensure that you are actually getting coverage for items you want. Most importantly, the policy should be reviewed for exclusions and exceptions to coverage that may exclude the very thing you want to have insured.


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