Eleventh Circuit Defines 'Structural Damage' Under An Insurance Policy

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...