Structural Damage Doesn’t Mean Any Damage to Structure

In Hegel v. First Liberty Insurance Corp., No. 14-10549, 2015 WL 821146 (11th Cir. Feb. 27, 2015), the Eleventh Circuit reversed the district court’s grant of summary judgment for the policyholder, finding that “structural damage” does not mean any “damage to the structure.”

The coverage dispute arose when the insurer First Liberty Insurance Corp. (“First Liberty”) denied the policyholders’ claim for a “sinkhole loss” which their homeowner’s insurance policy defined as “structural damage to the building, including the foundation, caused by sinkhole activity” but failed to define the term “structural damage.”

Relying on prior, unpublished decisions by the Middle District of Florida analyzing similar disputes under Florida law, the district court held that the term “structural damage” should be interpreted to mean any “damage to the structure.” Even though later decisions from the same court interpreted the term to mean “damage that impairs the structural integrity of the building” or “damage to the structural components of the building, excluding damage that is cosmetic in nature,” the court awarded the policyholders damages for all subsurface and cosmetic repairs as the parties stipulated that the home sustained “physical damage.”

On appeal, the Eleventh Circuit reversed the district court’s ruling because it erred by equating “physical damage” to the house to “structural damage to the building.” The court further held that equating the two terms would render the word “structural” meaningless because all property damage is physical. Moreover, since any damage to the building would not necessarily rise to the level of structural damage, the court concluded that the two terms were not the same.