Eleventh Circuit defines " structural damage " under an insurance policy to mean more than simply "physical" damage

Although commonly used in insurance policies, the term " structural damage " is typically an undefined term, leaving it to insurers, insureds, and sometimes the courts to define. In Florida, federal district courts had come to different conclusions as to the definition, and recently, the Eleventh Circuit weighed in on the debate. In Hegel v. The First Liberty Ins. Corp., 14-10549 (11th Cir. Feb. 27, 2015), the court was asked whether a district court had erred when it granted summary judgment to the insureds by finding that " structural damage " meant any "damage to the structure." In a ruling that may have broader impact beyond Florida, the Eleventh Circuit ruled that "construing ' structural damage ' to mean simply any 'damage to the structure' in the context of the insurance policy is facially unreasonable." Slip op. at 13.

The Hegel case involved damage to a house allegedly cause by sinkholes. The policy defined "sinkhole loss" to be " structural damage to the building, including the foundation, caused by sinkhole activity." Slip op. at 3, emphasis added in opinion. However, the policy did not define the term " structural damage ." The Eleventh Circuit looked to a Florida sinkhole statute and the Florida Building Code, for other definitions of "structural damage," and ruled that the district court erred by equating "'physical damage to Plaintiffs' home' with 'structural damage to the building.'" The court ruled that "[s]uch a construction would render the word 'structural' meaningless because all property damage is physical...." Slip op. at 13.

The Eleventh Circuit noted a difference between the definitions of "structural" and "structure" and found that "'damage to the structure' would encompass any physical damage to a building, even if only cosmetic, whereas 'structural damage' would exclude damage to a building's 'decorations or fittings.'" Slip op. at 15. "To equate 'structural damage' with any 'damage to the structure,' as the district court did, is thus untenable." Id. Instead, the Court ruled the phrase "'structural damage to the building' to mean 'damage that impairs the structural integrity of the building.'" Slip op. at 16, quoting Gonzalez v. Liberty Mut. Fire Ins. Co., 981 F. Supp. 2d 1219, 1231 (M.D. Fla. 2013). Interestingly, despite the differing definitions given by Florida courts and statutes, the Eleventh Circuit did not find ambiguity in the term " structural damage ."

The Court reversed the summary judgment in favor of the plaintiff homeowners and remanded the case back to the district court for a determination as to how much, if any, of the structural damage to the plaintiffs' house was due to sinkhole activity. To the extent cases in other jurisdictions involve the definition of " structural damage ," the Hegel opinion might be helpful authority in showing at least one court's definition.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.