Watch the full video at https://rumble.com/v2kkfz8-policy-words-overrule-unwritten-intent.html and at https://youtu.be/tx4sd4nba_w
The Eleventh Circuit Court of Appeals was asked to determine what a court should do when all the most certain evidence of the subjective intentions and expectations of the contracting parties completely contradicts the plain words of the insurance policies issued. IN Shiloh Christian Center v. Aspen Specialty Insurance Companyno. 22-11776, United States Court of Appeals, Eleventh Circuit (April 13, 2023) the Eleventh Circuit followed the generally accepted rules for interpreting insurance contracts.
SUBJECTIVE INTENT v. POLICY ORDER
Aspen Specialty Insurance Company, a billion-dollar insurance conglomerate, had essentially all the evidence of subjective intent on its side. The policyholder – Shiloh Christian Center, a small church in Florida – had the policy text.
The district court found the evidence of the parties’ subjective intent overwhelming and granted summary judgment to Aspen.
FACTS
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 hurricane losses. In the middle of that year, Shiloh specifically asked Aspen to do so stop which covers named windstorm-related losses. 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. The binder described the agreed scope of coverage as follows: “All risks of direct physical loss or damage except flood, earthquake and named windstorm.”
Aspen then issued the 2016 policy. The cover 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, the 2016 policy contained no exclusion for losses caused by named wind storms. An exclusion of “named wind storms” was conspicuously absent from the policy issued.
In October 2016, a windstorm named Hurricane Matthew blew through Melbourne, tearing the roof off Shiloh’s building. Aspen denied the claim because Shiloh’s policy excluded coverage for losses caused by named wind storms. The following year was basically a carbon copy. Aspen formally issued a policy that described itself as a “renewal” of the 2016 policy, but, again, whose “Exclusions” provision, while expressly cutting out losses arising from all kinds of contingencies, said nothing about named windstorms .
Like clockwork, in September 2017, a named windstorm Hurricane Irma blew through the city and ripped the roof off Shiloh’s building. As in Hurricane Matthew, water poured in, exacerbating the damage. Shiloh sued Aspen for breach of contract, seeking a declaration that its 2016 and 2017 policies—which we call the Matthew and Irma Policies—covered damage caused by named wind storms.
The district court announced Aspen’s sentence. It held that “no reasonable jury” could find that the parties intended the policy at issue to cover named windstorms.
ANALYSIS
The Irma Policy covers unambiguously named wind storms and the Matthew Policy, although ambiguous, covers them through the traditional versus proferentem canon for interpretation of insurance contracts.
The general rules governing the interpretation of policies under Florida law are clear that the guiding principle is that a policy’s text is paramount.
INTERPRETATION OF POLICY
First, the Irma Policy covers uniquely named wind storms. The expressio unius canon applies with particular force because the Irma Policy’s catalog of exceptions is so detailed. In fact, the Irma Policy apparently does not exclude—and thus cover—losses resulting from named wind storms.
Florida law is clear that when a policy is facially ambiguous, the ambiguity is resolved in favor of coverage and against the insurer, without regard to extrinsic evidence of the parties’ presumed intent or expectation. Accordingly, the Matthew Policy, like the Irma Policy, covers damage arising from named wind storms.
The court concluded:
- Regardless of evidence of the parties’ subjective intentions and expectations, the plain language of the Irma Policy unambiguously covers losses caused by named wind storms.
- Although potentially ambiguous, the Matthew Policy similarly—and again, regardless of evidence of the parties’ subjective intentions and expectations—covers losses caused by named windstorms pursuant to versus proferentem canon, according to which ambiguous insurance contracts are interpreted in favor of coverage and against the insurer.
Aspen failed to properly underwrite and issue the two relevant policies to Shiloh by failing to incorporate the named windstorm exclusion it originally issued in 2015. There was no doubt that the parties intended to exclude windstorms, the premium was reduced as a result of the intent, but Aspen left the exclusion outside the two policies in effect at the time of the two hurricanes. For reasons not described in the opinion, Aspen failed to reform the two policies to provide the insurance the parties agreed to issue and had to pay the claims that neither party expected to cover Shiloh’s property.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
Subscribe and receive videos limited to Excellence in Claims Handling subscribers at locals.com https://zalmaoninsurance.locals.com/subscribe.
Please consider subscribing to my publications on substack at https://barryzalma.substack.com/publish/post/107007808
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and zalma@zalma.com
Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257
Write to Mr. Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published on https://zalma.substack.com. Access the Zalma On Insurance podcast at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; https://creators.newsbreak.com/home/content/post; Go to Insurance Claims Library – https://zalma.com/blog/insurance-claims-library.
