(Article from Insurance Law Alert, April 2023)
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Holding
Reversing a Florida district court decision, the Eleventh Circuit ruled that property insurance policies provided coverage for damage stemming from “named windstorms” notwithstanding express communications between the insurer and policyholder evidencing their mutual intent to exclude such coverage. Shiloh Christian Center v. Aspen Specialty Ins. Co., 2023 U.S. App. LEXIS 8847 (Apr. 13, 2023).
Background
A 2015 policy issued by Aspen to Shiloh covered damage arising from named windstorms. However, during the middle of that policy period, Shiloh informed Aspen that it no longer wished to maintain coverage for named windstorm-related claims. Therefore, Aspen issued an endorsement removing such coverage and reducing the premium. In 2016, during negotiations for a renewal policy, a broker gave Shiloh a quote for the “same coverage” as provided previously, including, in particular, coverage that excluded named storms. A binder confirmed the parties’ understanding, by indicating that the agreed-to scope of coverage excluded claims arising from named windstorms. However, the 2016 policy did not contain any exclusion for named windstorms. A 2017 renewal policy, which was issued following communications between the parties that expressly reiterated continued non-coverage for named windstorms, also failed to include such an exclusion.
When Shiloh sought coverage for two named windstorms that occurred in 2016 and 2017, Aspen denied coverage. In ensuing litigation, a Florida district court granted Aspen’s summary judgment motion. The district court reasoned that despite the absence of named windstorm exclusions in the policies, evidence of the parties’ intent to exclude such coverage was overwhelming. The Eleventh Circuit reversed.
Decision
The Eleventh Circuit explained that unambiguous policy language must be enforced as written, regardless of whether extrinsic evidence contradicts the policy’s terms. The court held that the 2016 policy unambiguously covered damage stemming from named windstorms because there was no explicit or implicit reference to an exclusion for named windstorms in the policy. In so ruling, the court rejected the district court’s finding that the parties’ annual renewals created a “continuous chain” of coverage under the terms initially created by the 2015 endorsement. The Eleventh Circuit reasoned that even if such a “chain” of coverage existed, the terms of coverage under each annual policy were not necessarily identical.
As for the 2017 policy, Shiloh conceded that it was facially ambiguous because it did not contain a named windstorm exclusion, but in the deductible section, contained a parenthetical that stated “excluding Named Windstorms.” Applying the doctrine of contra proferentem, the court resolved this ambiguity against the insurer.
Comments
A notable element of the Eleventh Circuit’s decision is the court’s use of contra proferentem to resolve ambiguity in the 2017 policy, rather than reliance on extrinsic evidence—evidence which indisputably indicated the parties’ mutual intent to exclude coverage for damage resulting from named windstorms. While courts employ different rules of policy construction in interpreting ambiguous policies, the Eleventh Circuit held that under Florida law, a facially ambiguous policy should be liberally construed in favor of coverage without regard to extrinsic evidence relating to the parties’ intent. In a footnote, however, the court left unanswered the question of whether extrinsic evidence could be considered in resolving latent ambiguities in insurance policies.