The U.S. District Court for the Middle District of Florida dismissed a property insurance case after holding that ambiguous, non-specific pleading of a cause of loss is not enough. Causation is often a focus in property insurance cases. The exact cause of a particular loss will determine if the loss is covered or excluded under the insurance policy—meaning whether a plaintiff-insured will recover from their insurer. However, in state and federal courts, plaintiffs often get by with pleading merely that “a covered loss occurred during the policy period.”
In Emergency Flood Restoration Services, Inc. v. Chubb Custom Insurance Company,[1] the federal district court in Florida held that “[c]onclusory allegations that the loss is covered under the Policy without details regarding the circumstances of the loss is not sufficient to meet [the federal] pleading standards.” The court was considering a breach of contract complaint for coverage filed by an assignee of a property insurance policy.[2] In the complaint, the plaintiff alleged only that, “[o]n or about January 22, 2017, while the policy was in full force and effect, the property sustained a covered loss as a result of wind, wind driven rain, and/or hail (Loss).”[3] The plaintiff provided no further details about causation. Importantly, the court held that “at a minimum, Plaintiff must allege specifically how the damage occurred and what damage occurred to apprise Defendant of the claims being made against it.”
This ruling is significant because the complaint is generally the guide to determine the outer limits of discovery during litigation and admissible evidence at trial. Vague, ambiguous, and non-specific pleading can lead to overreaching discovery and the introduction of what should be irrelevant evidence at trial. Of particular concern is overreaching expert opinions that attempt to create theories of covered causation that do not match the loss as reported and adjusted pre-suit.
Consider, for example, that an insured reports a property loss shortly after a hurricane for windstorm damage to a roof and ensuing interior water damage. The claim is adjusted as a hurricane claim. During the claim investigation, aerial photographs taken several months before the storm show damage to the roof and invoices show prior efforts to repair interior water damage. The insurer denies the claim based on the evidence of prior damage and its determination that repair costs for any new damage would fall below the insurance policy’s hurricane deductible.
In turn, the insured files suit alleging only that the insured property “sustained covered damage due to a windstorm during the policy period” and the case proceeds through litigation. The insurer moves to dismiss the complaint for failure to allege enough details about the loss, but the court denies the motion. After substantial litigation (and the accompanying costs of the same), the insured produces a causation expert who opines that the damage was not caused by the hurricane, but by an unnamed windstorm event that occurred earlier in the same policy period. The unnamed windstorm event occurred before the aerial photographs were taken and before the interior repairs were undertaken. Over the insurer’s objection, the court allows the expert to testify at trial as to his unnamed windstorm theory of causation because, in part, it was within the bounds of the allegations in the complaint.
As a result of the vague pleading and the consequential expansion of the scope of discovery, the insurer must address a new theory of causation that was not a part of its initial claim adjustment. The insurer may face exposure for repair costs subject to a different, and often lower, “all other perils” policy deductible.
While this exact fact pattern
does not happen in every case, it occurs more frequently than it should. State
and federal courts are often reluctant to require pleading that is more
specific. Under Emergency Flood
Restoration Services, Inc.,plaintiffs
will be required to amplify their pleadings with a specific cause of loss. It
should serve as persuasive authority for other courts grappling with this same
issue.
[1] Case No.: 6:19-cv-129-Orl-40GJK, 2019 WL 5451089, *2 (M.D. Fla. Aug. 9, 2019).
[2] Id. at *1.
[3] Id. at *2 (internal quotes omitted).