Homeowners are sometimes surprised to find out that their insurance policy may cover the cost to replace all continuous tile flooring in their home in the event that a portion of a single tile is damaged due to an object being dropped on it. Nonetheless, dropped object claims have steadily increased over the past few years and have resulted in some homeowners being indemnified for an entire new floor when only a fraction of one tile was damaged. These claims developed largely in part due to Florida Statute § 626.9744, which governs claim settlement practices relating to property insurance. The statute has been interpreted to require insurers to replace flooring throughout an entire house as long as the homeowner claims that the damaged section of the flooring cannot be matched and that the same type of flooring runs continuously throughout the house.
Specifically, paragraph 2 of Section 626.9744 provides that, unless otherwise provided by the policy:
When a loss requires replacement of items and replaced items do not match in quality, color, or size, the insurer shall make reasonable repairs or replacement of items in adjoining areas. In determining the extent of the repairs or replacement of items in adjoining areas, the insurer may consider the cost of repairing or replacing the undamaged portions of the property, the degree of uniformity that can be achieved without such cost, the remaining useful life of the undamaged portion, and other relevant factors.
The following arguments are often expressed by insureds to encourage payment from their carrier for replacement of their entire floor: they are not in possession of spare matching tiles; they searched extensively for matching tiles, to no avail; or, they will not agree to let the insurer harvest a tile from a hidden area of the floor, such as underneath a kitchen cabinet, because the hidden area may no longer be hidden if they decide to remodel in the future. Due to the costs associated with litigation and despite their attempts to avoid coverage for the entire floor, many insurers were forced to pay claims for tile damage resulting from dropped objects because it made more economic sense and they couldn’t escape the then existing policy language and statutory interpretation. However, the insurance industry found ways to limit their liability concerning these claims by changing their policy language and having the courts interpret existing policy language.
Citizens Property Insurance Corp., the states insurer of last resort and also the states largest property insurer for business and homeowners, modified its policies to have a $10,000 cap for cosmetic or aesthetic damage to flooring including, but not limited to, chips, scratches, dents, marring or any other damage that covers less than 5% of the total floor surface area of the building and does not prevent typical use of the floor. Most other property insurers have followed Citizens lead in incorporating similar limiting language into their policies.
Recently, Florida’s Fourth District Court of Appeal, in Ergas v. Universal Property and Casualty Insurance Company, held that damage to a homeowners tile flooring caused by a dropped hammer constituted marring within the meaning of the exclusion in the policy. Most homeowners insurance policies contain a policy exclusion stating that any loss caused by wear and tear, marring, or deterioration is not covered. In Ergas, the Court found that the plain meaning of the term mar includes: to inflict damage; to spoil, to ruin; and to impair the soundness, perfection or integrity of. The Ergases suggested that the word marring must be interpreted in context of the wear and tear, marring, deterioration exclusion. As such, the Ergases argued that the terms wear and tear and deterioration suggest damage to property occurring gradually or over time, and not damage caused by a sudden, accidental risk. The Court held that the three specific causes listed (wear and tear, marring, and deterioration) do not require interpretation by reference to each other, and upheld summary judgment in favor of the insurer.
While the Ergas holding was a blow to insureds, the holding may not shut the door on these claims forever. There were several arguments that were not presented for the Court’s consideration and creative lawyering could carve out exceptions to the apparent ban on dropped object claims. The Court stated that the insureds did not argue the definition of the term mar is ambiguous because it is over-inclusive of damage. More specifically, the Court noted that mar could include both superficial damage to the appearance of an object and more serious damage to an object. Further, the Court opined that marring could be interpreted to cover all damage to property insured, whether slight or substantial, thereby gutting coverage under the insurance policy, which is against public policy. Lastly, the Court noted that mar should not be construed to reach an absurd result, such as the all-encompassing definition explored in Ergas. Although the Ergas decision appears to be a substantial development for the insurance industry, insurers and their counsel should continue to cultivate and craft arguments to ensure that the Fourth Districts concerns with a ridiculous definition of marring are exhausted.