The Hegels had a homeowner’s insurance policy with First Liberty for their Spring Hills, Florida residence. That policy insured against “Sinkhole Loss” as an exception to the policy’s exclusion for damage caused by earth movement. Under the policy, “Sinkhole Loss means structural damage to the building, including the foundation, caused by sinkhole activity. The policy, however, did not define the term “structural damage.”

The Hegels filed a claim under the policy alleging that their home had suffered “progressive damage to the walls and floors” due to sinkhole activity. First Liberty hired structural engineers to investigate the damage and denied the Hegels’ claim stating that the residence “had not sustained structural damage to the building or foundation” and that the damage was “related to normal concrete shrinkage, differential settlement, and improper embedment of the foundation.” The Hegels filed suit in Florida State Court for breach of contract, alleging that First Liberty improperly denied their claim for a “sinkhole loss.” First Liberty removed the case to the United States District Court for the Middle District of Florida. The trial court, awarded damages plus prejudgment interest to the Hegels. Liberty Mutual timely appealed.

The essence of the dispute both in the trial court and on appeal is the definition of “structural damage,” a term that was not defined in the homeowner’s insurance policy or the version of the Florida sinkhole-insurance statute applicable to the claim. The Hegels alleged that the sinkhole caused “structural damage” to their home as evidenced by the progressive damage to the walls and floors. Liberty Mutual disagreed and argued that “structural damage” and damage to a structure are not one and the same.

On appeal the Eleventh Circuit reversed the trial court’s decision. The Eleventh Circuit held that, the plain meaning of the phrase “structural damage to the building” in an insurance contract where there term is undefined, means “damage to the structural integrity of a building.” It does not mean any damage to the structure, which as the Hegels argued is synonymous with any physical damage to the building. The Eleventh Circuit stated that to equate “structural damage” with “damage to a structure” is unreasonable as such a definition renders the term “structural” as meaningless in the insurance contract.

Hegel v. First Liberty Ins. Corp., (11th Cir. Feb. 27, 2015) 2015 WL 821146