A Florida appellate court recently held that coverage for a loss caused by Chinese drywall was barred by pollution and latent defect exclusions, despite covering ensuing losses, because the insureds failed to prove that a covered peril was the efficient proximate cause of the loss. Peek v. Am. Integrity Ins. Co. of Fla., 2015 WL 5616294 (Fla. 2d DCA September 25, 2015).

The insureds made a claim under their all-risk homeowners’ policy for damage to their home caused by Chinese drywall used in its construction. The insurer denied coverage for the loss based on the policy’s exclusions for latent defects, corrosion, pollutants, and faulty, inadequate, or defective construction materials. The insureds sued the insurer for breach of contract, alleging that humidity was a concurrent cause contributing to the loss triggering coverage under the policy. At trial, the insureds established that they suffered a loss to their property within the policy period, but failed to present evidence regarding the cause of loss or any rebuttal evidence to prove any exceptions to the exclusions raised by the insurer. After the charge conference to finalize jury instructions based upon the concurrent cause doctrine, the insurer filed a renewed motion for directed verdict based upon the efficient proximate cause doctrine, which provides that, the finder of fact, usually the jury, determines which peril was the most substantial or responsible factor in the loss and if that peril is covered, then coverage is provided for the loss. The trial court granted the insurer’s motion for directed verdict and entered final judgment in favor of the insurer. The insureds appealed.

On appeal, the insureds argued that the evidence established 1) that their loss was caused by both the Chinese drywall and humidity, 2) that humidity is covered under the policy as a “weather event” and 3) that the question of whether the Chinese drywall or humidity was the efficient proximate cause of the loss was a jury question. The appellate court disagreed, noting that the uncontroverted evidence demonstrated that humidity was not a peril that caused the insureds loss, let alone that it was the efficient proximate cause of their loss. It determined that there was no question for the jury to resolve and that the trial court did not err in entering a directed verdict for the insurer. In the alternative, the insureds argued that, even if the excluded peril of Chinese drywall was the efficient proximate cause of their loss, the insurer is still required to cover the ensuing loss to the property. The appellate court disagreed, holding that an excluded cause of loss – defective Chinese drywall – led directly to another set of exclusions – pollution and corrosion. The appellate court affirmed.