Sebo v. American Home Assurance Company

The Return of the Efficient Proximate Cause Doctrine in Florida

Florida’s Second District Court of Appeal recently revived an old debate regarding whether coverage is available for damages caused by independent excluded and covered causes in the case of Sebo v. American Home Assurance Co. The Second District concluded that the damage is covered if the covered cause is the efficient proximate cause of the damage.

The question in Sebo, which has been debated by Florida courts for decades, is whether there is coverage when a combination of excluded and covered perils cause damage. The parties did not dispute that there were two independent causes of substantial water damage to Sebo’s multimillion dollar mansion: (1) faulty construction; and (2) Hurricane Wilma. According to Sebo’s policy, faulty construction was excluded; however, hurricane damages were covered. Sebo argued that, so long as the covered cause of damage was at least a cause of the damage, then the claim is covered. This argument is known as the “concurrent cause doctrine.” Using the efficient proximate cause doctrine, American argued that Sebo had to prove that Hurricane Wilma was the efficient proximate cause of damage. The trial court agreed with Sebo, and the jury issued a verdict in the amount of $7,680,000.00.

American appealed the decision, and Florida’s Second District Court of Appeal held that American was correct – Sebo could only obtain coverage for the damage if Hurricane Wilma was the efficient proximate cause of the damage. The Second District explained the efficient proximate cause doctrine requires the jury to determine which cause was the “most substantial or responsible factor in the loss.” The Second District examined the history of the two doctrines, including the two Florida cases that courts cite most often: the First District’s 1974 decision in Hartford Accident & Indemnity Co. v. Phelps, and the Third District’s 1988 decision in Wallach v. Rosenberg. Although the Phelps decision relied on the efficient proximate cause doctrine, the Third District in Wallach rejected the Phelps decision and determined that the concurrent cause doctrine should apply. Since 1988, no appellate court has genuinely reexamined the issue, and the concurrent cause doctrine appeared to be the prevailing law in Florida. In response to Wallach, many insurers amended their policies to contain an anti-concurrent cause clause for certain perils, thereby requiring the courts to use the efficient proximate cause doctrine in certain circumstances.

Sebo leaves Floridians in a muddled state of affairs. For example, if a home with poorly laid tile suffers a water leak and the tiles debond, become hollow, and crack, coverage might depend on where the home is located. Until more courts weigh in, insureds and insurers will need to closely examine the facts of their case, evaluate what the policies state with respect to the potential causes, and assess whether Sebo or Wallach controls their decision.