Clear Intent to Exclude Named Storms Not Enough to Deny Coverage

In 2015, the Shilo Christian Center in Melbourne, Florida cut its property insurance premiums in half by asking its insurer to drop coverage for named windstorms.

Hurricane Matthew struck the next year, ripping the roof of the church and unleashing a torrent of rainwater in its interior. Hurricane Irma followed up in 2017 and tore the roof off again.

Shiloh filed a damage claim after each storm, even though it had negotiated to eliminate coverage for named storms and reduced its premium cost from $48,545 to $22,500.

Aspen Specialty Insurance Co. denied those claims, but on Thursday a panel with 11th Circuit Court of Appeals ruled that the carrier must pay. Even though the parties clearly intended to eliminate hurricane coverage —and “Ex wind” was scribbled on Shiloh’s insurance application — Aspen issued policies that did not include an exclusion for named windstorms.

The appellate panel reversed a US District Court decision that found it would be “absurd” to find that there was coverage for hurricane damage because the church and the insurer had made their intentions clear.

“We hold, to the contrary, that, under Florida law—as in the law more generally—in the event of a conflict between clear text, on the one hand, and even compelling evidence of extra-textual ‘intent,’ on the other, the latter must give way to the former,” the opinion says.

In May 2015, Shiloh was refinancing a bank loan. The church asked its insurance agent to find out how much it could save if it excluded coverage for hurricanes. The agent quoted a premium of $32,000, but later revised that to $22,500.

Shiloh purchased a 2016 policy with the understanding that named windstorms would be excluded from coverage.

But after Hurricane Matthew struck on Oct. 6, 2016, the church filed a claim for damage caused by the storm. Aspen denied the claim.

Hurricane Irma struck in September 2017. Shiloh filed a second claim, which Aspen also denied.

Shilo filed a lawsuit in 2020 seeking a declaration from the court as to whether it had coverage. The complaint also accused Aspen of wrongfully denying its hurricane-damage claims.

US District Judge Carlos E. Mendoza, with the Middle District of Florida in Orlando, ruled that no coverage was owed because the parties clearly intended to exclude named windstorms from coverage.

Both quotes given by Shiloh’s insurance agent stated that named windstorms would be excluded, Mendoza said in an order granting summary judgment in favor of Aspen. The judge acknowledged that the policies did not include a named windstorm exclusion, but said under the circumstances it would be absurd to find coverage was owed.

On appeal, the 11th Circuit said a cardinal principle of Florida insurance law is that the text of a policy is paramount. Also, in insurance disputes ambiguous language in a policy is interpreted against the party that drafted the contract, a principle known as contra proferentem.

The panel said it came across a similar issue in a 2013 case and sent a certified question to the Florida Supreme Court. The court answered that ambiguities in insurance contracts should be interpreted using contra proferentem “rather than extrinsic evidence of the parties’ supposed ‘intent.'”

The opinion said the policy issued before Hurricane Irma clearly covers named windstorms, no matter what the church discussed with its insurance agent. The policy issued before Hurricane Matthew struck is less clear, but also must be interpreted to cover named storms because there is no exclusion, the panel said.

“As already explained in detail, Florida law is clear that when an insurance policy is facially ambiguous, the ambiguity is resolved in favor of coverage and against the insurer, without regard to extrinsic evidence of the parties’ supposed intentions or expectations,” the opinion says.