NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING
MOTION AND, IF FILED, DETERMINED
IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT
OMEGA INSURANCE COMPANY, )
)
Appellant, )
)
v. ) Case No. 2D16-449
)
WILLIAM WALLACE and JOAN WALLACE, )
husband and wife, )
)
Appellees. )
___________________________________ )
Opinion filed August 16, 2017.
Appeal from the Circuit Court for Polk
County; John M. Radabaugh, Judge.
Scot E. Samis of Traub Lieberman Straus
& Shrewsberry, LLP, St. Petersburg, for
Appellant.
Richard N. Asfar and George A. Vaka of
Vaka Law Group, P.L., Tampa and
Richard T. Heiden of Richard T. Heiden,
P.A., Clearwater, for Appellees.
SILBERMAN, Judge.
Omega Insurance Company seeks review of a final judgment awarding
William and Joan Wallace just over $200,000 for subsurface remediation in their
sinkhole action. The final judgment was based on a directed verdict entered after the
trial court refused to consider the testimony of Omega's expert engineers and the
neutral evaluator regarding the proper method of subsurface repair. We conclude that
the proper method of subsurface repair is a jury question and reverse.
This appeal arises from a sinkhole insurance claim under a policy issued
by Omega to the Wallaces in August 2010. Much of the argument on appeal, as in the
trial court, concerns expert testimony and the proper definition of certain terms used in
the Omega policy. The policy contains a sinkhole loss coverage endorsement which
provides, in pertinent part, as follows:
B. COVERAGE
We insure for direct physical loss to property covered under
Section I caused by a Sinkhole Loss, including the costs
incurred to:
1. Stabilize the land and building; and
2. Repair the foundation;
In accordance with the recommendations of the professional
engineer who verifies the presence of a Sinkhole Loss in
compliance with Florida sinkhole testing standards and in
consultation with you.
(Emphasis added.) It also provides the following definitions:
"Sinkhole Activity" means settlement or systematic
weakening of the earth supporting such property only when
such settlement or systematic weakening results from
movement or raveling of soils, sediments, or rock materials
into subterranean voids created by the effect of water on a
limestone or similar rock formation.
"Sinkhole Loss" means structural damage to the building,
including the foundation, caused by Sinkhole Activity.
Personal property coverage shall apply only if there is
structural damage to the building caused by Sinkhole
Activity.
(Emphasis added.) The endorsement thus provides coverage for direct physical loss to
covered property due to a "Sinkhole Loss" as defined in the policy. While the policy
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defines "Sinkhole Loss" as "structural damage to the building, including the foundation,"
it does not define the term "structural damage."1
After an initial flurry of expert reports, Omega agreed that there was a
sinkhole loss and extended coverage. As is often the case with sinkhole claims, the
dispute between the parties mainly concerned the proper method of subsurface repair.
Omega retained an engineering firm that recommended compaction grouting to stabilize
the subsurface soil and to remediate the sinkhole conditions. The Wallaces obtained a
subsurface repair protocol from another engineering firm that recommended
underpinning in addition to compaction grouting. Omega then requested neutral
evaluation,2 and the neutral evaluator concluded that there was no need for
underpinning in addition to compaction grouting.
Despite the neutral evaluator's recommendation, the Wallaces submitted a
contract for subsurface repair including compaction grouting and underpinning. When
Omega refused to pay, the Wallaces sued Omega for breach of contract. In count four
of the operative complaint, the Wallaces alleged that Omega breached the policy by
refusing to make payment on the repair contract.
1
We note that, after the cause of action accrued in this case, the
legislature adopted a five-part definition of "structural damage." See § 627.706(2)(k),
Fla. Stat. (2011); ch. 2011-39, § 22, at 570, Laws of Fla. This amendment does not
apply retroactively. Sevila v. First Liberty Ins. Corp., 7 F. Supp. 3d 1226, 1230 (M.D.
Fla. 2014).
2
Neutral evaluation is a nonbinding method of alternative dispute
resolution created specifically for sinkhole cases. § 627.7074, Fla. Stat. (2010). It is an
informal proceeding in which each side presents its position to a qualified and neutral
expert, who then issues a decision that is admissible at trial. § 627.7074(12), (13).
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At trial, the Wallaces offered the expert testimony of engineer Sonny
Gulati of Florida Testing and Environmental, Inc. ("FTE"). Gulati concluded that there
had been structural damage to the building and foundation of the Wallace residence
constituting a "Sinkhole Loss" as defined by the policy. Gulati applied the engineering
definition of "structural damage," which required that the load-carrying capability of the
foundation be compromised. He concluded that the remediation should include both
compaction grouting and underpinning.
Omega offered the expert testimony of two engineers from SDII Global
Corporation and the neutral evaluator. While the neutral evaluator concluded there was
damage to the structure, he was not asked to give an opinion on whether there was a
"Sinkhole Loss" as defined by the policy. The SDII engineers concluded there was a
"Sinkhole Loss," but they applied the definition of structural damage that was used by
the insurance industry and some courts.3 This definition of structural damage only
required damage to the structure rather than compromise of the load-carrying capability
of the foundation. The SDII engineers and the neutral evaluator also characterized the
damage as "cosmetic" because it could be repaired without repairing the foundation or
load-bearing portions of the structure. They agreed with Gulati that compaction grouting
was necessary for remediation, but they did not believe the damage was significant
enough to require underpinning.
At the close of Omega's case, the Wallaces moved for a directed verdict
on count four of the amended complaint, arguing that Gulati’s opinion established the
3
See, e.g., Shelton v. Liberty Mut. Fire Ins. Co., 25 Fla. L. Weekly Fed.
D73a (M.D. Fla. Apr. 17, 2013), and cases cited therein.
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method of subsurface repair as a matter of law. According to the Wallaces, the policy
contained language requiring that any subsurface repair protocol be recommended by a
"professional engineer who verifies the presence of a Sinkhole Loss." They asserted
that their expert, Gulati, was the only professional engineer who verified that there was
a "Sinkhole Loss" using what they claimed to be the proper definition of structural
damage, which was the engineering definition.
Omega's counsel responded that the defense experts also found a
"Sinkhole Loss" for which the policy provides coverage. Counsel maintained that in light
of the conflicting expert testimony as to the proper method of repair, that issue was
appropriate for resolution by the jury. Counsel added that under the Wallaces' strained
interpretation of the policy, Gulati's opinion testimony on behalf of the Wallaces could
not even be considered. According to counsel, the policy contained language requiring
that any subsurface repair protocol be prepared "in compliance with Florida sinkhole
testing standards." Counsel asserted that Gulati's protocol could not have met this
standard because he did not perform any testing at the Wallace residence. Counsel
stated that if the court were inclined to grant the Wallaces' motion for directed verdict,
then Omega should be permitted to amend its pleadings to deny coverage. Counsel
reiterated that was not the preferred option as "we want to fix the house."
The trial court granted the Wallaces a directed verdict on count four and
denied Omega's motion to amend the pleadings. The court ultimately entered a final
judgment awarding the Wallaces $207,628.96 (the full amount of the policy plus
prejudgment interest). The court denied Omega’s motions for rehearing and new trial
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and Omega's renewed motion to require a contract for repair as a condition of
subsurface repair benefits.4
On appeal, Omega asserts that the trial court erred in granting the
Wallaces' motion for directed verdict, denying its request to amend its pleadings, and
denying its motion to require a contract for repair as a condition of subsurface repair
benefits. We conclude that the trial court erred in granting a directed verdict in favor of
the Wallaces on the proper method of repair and reverse. This holding renders the
remaining issues moot.
This court conducts a de novo review of orders granting directed verdicts.
Jackson Hewitt, Inc. v. Kaman, 100 So. 3d 19, 27 (Fla. 2d DCA 2011). The issue that
gave rise to the directed verdict is a matter of contract interpretation. The Wallaces
relied on the portion of the sinkhole endorsement providing coverage for sinkhole
damages "[i]n accordance with the recommendations of the professional engineer who
verifies the presence of a Sinkhole Loss in compliance with Florida sinkhole testing
standards and in consultation with you." (Emphasis added.) The Wallaces asserted
that, under this provision, a subsurface repair protocol may be used only if it is
4
The sinkhole endorsement contains a loss settlement provision which
provides, in pertinent part:
We may limit any payment for Sinkhole Loss to the actual
cash value, not including any repairs below the foundation,
until you enter into a contract for building stabilization or
foundation repairs. After you enter into a contract, we shall
pay the amounts necessary to begin and perform such
repairs as the work is performed and the expenses are
incurred, without requiring you to advance payment for such
repairs.
This provision is consistent with section 627.707(5)(b), Florida Statutes (2010).
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recommended by a "professional engineer who verifies the presence of a Sinkhole
Loss" using the engineering definition of "structural damage."
The Wallaces also relied on the portion of the sinkhole endorsement that
defines "Sinkhole Loss" as "structural damage to the building, including the foundation,
caused by Sinkhole Activity." They successfully convinced the trial court that the
opinion of their expert was unrefuted as to the existence of structural damage and a
sinkhole loss. They claimed that a directed verdict in their favor was appropriate
because SDII and the neutral evaluator refused to agree that there was "structural
damage to the building" using the engineering definition of "structural damage" and,
therefore, did not "verif[y] the presence of a Sinkhole Loss."
There is nothing in the plain language of the insurance policy's sinkhole
endorsement that requires the use of a particular definition, to the exclusion of other
definitions, to determine the existence of "structural damage" in order to provide an
opinion on the proper method of subsurface repair. To uphold the directed verdict
below, this court would have to read additional language into the policy.5 Cf. Roker v.
Tower Hill Preferred Ins. Co., 164 So. 3d 690, 693 (Fla. 2d DCA 2015) (holding that a
statute requiring the insurer to pay for repair "in accordance with the recommendations
of the professional engineer" did not "require the insured to enter into a contract for the
subsurface repairs recommended by the insurer's engineer to the exclusion of any other
professional recommendations").
5
For this same reason, we find no merit in Omega's assertion that Gulati's
opinion could not be considered because Gulati did not personally perform testing "in
compliance with Florida sinkhole testing standards."
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Omega's expert engineers agreed that the Wallaces had a covered
sinkhole loss based on damage to the structure, even though they disagreed as to the
precise definition to be given to the term "structural damage" and the appropriate
method of repair. The testimony of Omega's experts that there had been a sinkhole
loss based on sinkhole activity that damaged the Wallace's residence was consistent
with the terms of the policy. Thus, the trial court erred in refusing to consider that
testimony.
By extending coverage for the Wallaces' "Sinkhole Loss," Omega
necessarily conceded that there had been structural damage, as contemplated by the
policy, caused by "Sinkhole Activity." Any dispute as to whether there was sufficient
structural damage to constitute a "Sinkhole Loss" was rendered moot, and the only
issue to be resolved at trial pertaining to subsurface damage was the proper method of
repair.
Generally, the question of the proper method of subsurface repair of a
home damaged by sinkhole activity is for the jury to resolve. Roker, 164 So. 3d at 694.
At trial, the parties offered the testimony of four engineers, and they all agreed there
was damage to the structure even though they disagreed regarding the proper method
of subsurface repair. Omega's two experts from SDII and the neutral evaluator testified
that compaction grouting alone was the proper protocol. The Wallaces' expert from FTE
disagreed and testified that underpins should be added. Omega correctly argues that
the jury should have been allowed to resolve this dispute.
We therefore reverse the final judgment and remand for a jury trial on the
method of repair. We note that any judgment on remand must be consistent with the
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policy's loss settlement provision which only obligates Omega to pay for subsurface
repairs after the insureds enter into a contract and then only obligates Omega to make
payment as the work is performed. See Citizens Prop. Ins. Corp. v. Stieben, 200 So. 3d
215, 215-16 (Fla. 2d DCA 2016); Citizens Prop. Ins. Corp. v. Blaha, 194 So. 3d 411,
416 (Fla. 2d DCA 2016).
Reversed and remanded.
LaROSE, C.J., and CRENSHAW, J., Concur.
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