The Florida Court of Appeals determined that there was no coverage for damage to the insured's home caused by the installation of Chinese drywall. Peek v. Am. Integrity Ins. Co., 2015 Fla. App. LEXIS 14147 (Fla. Ct. App. Sept. 25, 2015).
Chinese drywall was installed in the Peek's new home. After moving in, the Peeks reported to American Integrity a sulfur odor caused by the Chinese drywall. The odor caused the Peeks to vacate their home. The Peeks also claimed corrosion and deterioration of copper coils in the air conditioning system were caused by the Chinese drywall.
American Integrity denied coverage based upon policy exclusions for latent defects, corrosion, pollutants, and faulty, inadequate or defective constrution materials. The Peeks sued American Integrity.
To prevail at trial, the Peeks had to prove that a covered peril at least contributed to the cause of the loss under the concurrent cause rule. The Peeks proved that they suffered a loss within the policy period. The Peeks, however, did not present any expert testimony or other evidence as to the cause of loss. American Integrity's expert, Dr. Ralph Moon, a botanist, opined that the Chinese drywall was emitting destructive gases at the moment they were manufacutred, prior to its installation in the Peeks' home. He therefore concluded that it was a faulty, inadequate, or defective construction material.
On cross-examination, the Peeks' counsel tried to prove that Florida's high humidity was a concurrent cause that acted in concert with the sulfur gases to cause the loss to their home. Dr. Moon conceded that humidity could accelerate the emission of the sulfur gases. He qualified this statement, however, by stating that this was based upon an assumption that the Peeks did not use air conditioning in their home during times of high humidity. There was no evidence, however, that the Peeks did not use air conditioning during such periods. Both parties moved for a directed verdict.
Before the court could rule on the motions, the Florida Court of Appeals issued a decision in Am. Home Assurance Co. v. Sebo,141 So.3d 195 (Fl. Ct. App. 2013). In Sebo, the court determined that in deciding coverage under first party claims, the efficient proximate cause test should be used, not the concurrent causation test. Therefore, if the efficient proximate cause of the loss was a covered peril, the loss was covered; if it was an excluded peril, the loss was not covered.
The Peeks did not request to reopen the case to address the new causation doctrine, nor did they move for a mistrial. Therefore, the court entered a directed verdict for American Integrity. The Chinese drywall was the proximate efficient cause for the loss and there were no ensuing losses because all of the losses occurred as a direct and continuous result of the corrosive Chinese drywall.
The appellate court affirmed. The Peeks' evidence was insufficient to establish that humidity contributed to the loss. Dr. Moon testified that the Chinese drywall would produce the destructive gases in any climate. The Peeks did not present an expert witness to contradict this testimony. Therefore, the uncontradicted evidence was that humidity was not a peril that caused the loss, nor was it the efficient proximate cause of the loss.
Nor was there an ensuing loss. The sulfur gases and the corrosion caused by the chemicals released by the sulfur gases eminated from the Chinese drywall. Thus, the losses were not "ensuing." Further, the claimed ensuing losses were excluded by the policy because an excluded cause of loss - defective Chinese drywall - led directly to another set of exclusions - pollution and corrosion.