A recent federal appeals decision1 is important to understand the current rules for interpreting an insurance contract in Florida. It began with a very irreverent tone about insurance law:
This is an insurance case. Fear not, keep reading. In determining whether a pair of insurance policies covers losses resulting from “named windstorms,” we must decide an important and (as it turns out) interesting question about the interpretation of written legal instruments: What is a court to do when the most certain is contradicted by evidence of the subjective intentions and expectations of the contracting parties the surest indicators of an agreement̵7;s objective legal meaning?
At the risk of oversimplification, Aspen Specialty Insurance Company, a billion-dollar insurance conglomerate, has virtually all the evidence of subjective intent on its side: The record of the parties’ dealings, contract negotiations, and policy applications strongly suggests that the parties intended and expected the policies to exclude claims caused by named wind storms. But Aspen’s policyholder — Shiloh Christian Center, a small church in Florida — has the text: However clear the parties’ subjective intentions or expectations may be, the policies do not, by their plain language, exclude windstorm-related losses.
What then? The district court found the evidence of the parties’ subjective intent overwhelming and accordingly entered a guilty verdict against Aspen. On the contrary, we hold that, under Florida law—as in the law more generally—in the event of a conflict between plain text on the one hand and even compelling evidence of extratextual “intent” on the other, the latter must give way to the former…… We therefore annul the district court’s decision and remand for further proceedings.
The court ruled that the policy language controls. This is important because the facts appeared to strongly suggest that the parties contracted for an insurance policy without windstorm coverage. The facts were recited in part as follows:
In 2016 and 2017, respectively, Hurricanes Matthew and Irma tore through Melbourne, Florida, striking the Shiloh Christian Center. On both occasions, the storms peeled back the roof of the church, causing rain to drench the exposed structure.
In 2015, the year before Matthew hit, Shiloh’s property insurance policy with Aspen Specialty Insurance Company covered losses from so-called windstorms—i.e, Hurricanes. But in the middle of that year, Shiloh specifically asked Aspen to stop covering losses related to named wind storms. Aspen agreed and issued a recommendation implementing the requested change: ‘THIS ENDORSES THE POLICY. READ IT CAREFULLY. . . . It is understood and agreed that effective 7/16/2015, the following change is made to this policy: Named Windstorm coverage is removed from this policy.’ Reflecting the addition, Aspen lowered Shiloh’s premium and even refunded its previous payments for windstorm coverage.
In early 2016, Shiloh entered into negotiations to renew its policy with Aspen. An insurance broker gave Shiloh a quote for “the same coverage that was provided after the return premium was issued last year” — that is, the coverage after the change that “excludes[d] The name Storms.’ In her application for the insurance, Shiloh wrote “EX wind” in the section labeled “forms and conditions to apply for” for several of the covered premises. Aspen then issued a binder – which to the uninitiated is “a contract”. . . for interim insurance” which is “in effect at the date of application and terminates upon either the completion or rejection of the main policy.” … The binder described the agreed scope of coverage as follows: “All risks of direct physical loss or Damage excluding flood, earthquake and named windstorm. ‘
Soon after, Aspen issued the 2016 policy. Försätsbladet described the 2016 policy as a “renewal of” its predecessor from 2015. But the terms of the two policies differed in significant respects. First, the 2016 policy was about $10,000 cheaper per year than the amended 2015 policy. Much more significantly here, the 2016 policy contained no exclusion for losses caused by named wind storms.…
Aspen underwriting failed simply because it sent a policy without a storm exclusion. Most of the time there is no loss, and the big mistake is inconsequential. Not this time, as the court noted:
You know what happened next. In October 2016, a named wind storm – Hurricane Matthew – blew through Melbourne and ripped the roof off Shiloh’s building. Rainwater poured in, exacerbating the damage. Shiloh filed a claim for, in its words, “water damage to the roof from Hurricane Matthew.” Aspen denied the claim on several grounds, including, as relevant here, that Shiloh’s policy excluded coverage for losses caused by named wind storms.
The following year was basically a carbon copy. In early 2017, Shiloh began efforts to revamp its policy. As in 2016, Aspen provided a citation reminding Shiloh that the policy would exclude coverage for damage resulting from “Named Windstorms.” As in 2016, Shiloh applied for the policy, scribbled “EX wind” in the application’s “forms and conditions to apply” sections for certain buildings, and Aspen issued a binder reflecting the exemption named windstorm. As in 2016, Aspen then formally issued a policy that described itself as a “renewal” of the 2016 policy, but, again, whose “Exclusions” provision, while expressly eliminating losses arising from all kinds of contingencies, said nothing about named wind storms.
Like clockwork, in September 2017, a named wind storm – Hurricane Irma – blew through town and, you guessed it, tore the roof off Shiloh’s building. As in Hurricane Matthew, water poured in, exacerbating the damage. Shiloh filed another claim listing the “cause of loss” — again, in its words — as “Hurricane Irma.” And just as it had a year earlier, Aspen denied Shiloh’s claim on several grounds, including that its policy excluded losses caused by named wind storms.
Aspen failed to provide insurance with a proper windstorm exclusion twice, and two separate windstorms damaged the policyholder’s structure.
How do Florida courts interpret insurance policies with these unique facts? This case is important because it overruled the district court judge who allowed evidence of policy intent to be considered. I will leave out case references to make the rules easier to read:
The general rules governing the interpretation of insurance policies under Florida law are clear. The cardinal principle is that a policy’s text is paramount: “Florida courts begin with “the plain language of the policy, as negotiated by the parties.”…In particular, “[i]n insurance coverage cases under Florida law, the courts look at the policy as a whole and give each provision its full meaning and effect.’ To be sure, Florida law allows reviewing courts to venture outside the policy’s four corners in limited circumstances — to consider, for example, whether an insured’s “application” should be understood as “amplif[y]extendor modif[y]’ the policy. Fla. Stat. Section 627.419 (1). However, Florida law is clear that in the event of a conflict between the policy and the underlying application, the policy governs…(‘[T]the general rule” is that “the provisions of the policy  rule if there is a conflict between the provisions of the application and the policy.’)
In addition to these grounds, Florida law provides more specific rules for the interpretation of ambiguous and unambiguous insurance policies. The rule applicable to unambiguous policies is ruthlessly straightforward: If the policy’s “language is unambiguous, it controls”—end of story…(‘Where the language of an insurance contract is plain and unambiguous, a court must construe the policy in accordance with the plain meaning to give effect to the policy as written.’). Importantly, it is true even where extrinsic evidence contradicts the terms of the policy…(“It is well established under Florida law that parol evidence is inadmissible to vary or contradict the clear and unambiguous language of a contract.”). And that is “especially true when the agreement contains an integration clause stating that the parties intended the written agreement to be the entire agreement.”…
When confronted with a policy that is facially ambiguous, Florida courts apply the familiar contra proferentem canon. According to this rule of interpretation, “any ambiguity that remains after reading each policy as a whole and endeavoring to give each provision its full meaning and effect must be liberally construed in favor of coverage and strictly against the insurer.”…
Importantly here, the Florida Supreme Court has made clear that facial difficulties in insurance contracts should be resolved by reference to contra proferentem rather than extrinsic evidence of the presumed “intent” of the parties. And in fact it did so in response to a question that we certified for it. IN Ruderman ex rel. Schwartz v. Washington National Insurance Corp., 671 F.3d 1208 (11th Cir. 2012), we confronted (1) a Florida policy that was facially ambiguous and (2) an apparent split among Florida courts on how to resolve the ambiguity. A series of decisions showed that “[a]ambiguous insurance provisions are liberally construed in favor of the insured and strictly against the policy maker.” but another suggested that courts should “look to extrinsic evidence to resolve the ambiguity before construing any remaining ambiguity against the policy maker.” We were unsure on how we would proceed and certified several questions to the Florida Supreme Court, one of which was whether,[i]If there is an ambiguity in this assurance, a court should “first attempt to resolve the ambiguity by examining available extrinsic evidence.” In what we called a “definitive answer”.” the Florida Supreme Court “advised us that the answer” is “no” – versus proferentem checks…
The bottom line is that political language controls in Florida. Insurers should exclude clearly if they want to avoid coverage. In this case, the policy was clear because none of the policies issued had a windstorm exclusion.
I went back to the district court case to see if the insurer tried to file a policy reform lawsuit. None were made. I don’t want to comment on what might have happened because more evidence wasn’t developed.
If you enjoyed reading today’s blog, you will love reading Bill Wilson’s book, which we discussed in When Words Collide: Policy Interpretation Doctrines and the 10 Commandments. Understand your insurance better—RTFP!
Many of us grow up and we grow out of the literal interpretation that we receive as children, but we carry the scars throughout our lives. Whether it’s scars of beauty or scars of ugliness, it’s pretty much in the eye of the beholder.
– Stephen King
1 Shiloh Christian Center v. Aspen Specialty Ins. Co.No. 22-11776 (11Th Cir. 13 April 2023).