Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca11-14-10549/USCOURTS-ca11-14-10549-0/pdf.json

Parties Involved:
Severin Hegel
Appellee
Stephanie Hegel
Appellee
The First Liberty Insurance Corporation
Appellant

Document Text:

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 14-10549

________________________

D.C. Docket No. 8:12-cv-01161-EAK-MAP

SEVERIN HEGEL and STEPHANIE HEGEL,

llllllllllllllllllllllllllllllllllllllllPlaintiffs - Appellees,

versus

THE FIRST LIBERTY INSURANCE CORPORATION, 

llllllllllllllllllllllllllllllllllllllllDefendant - Appellant.

________________________

Appeal from the United States District Court

for the Middle District of Florida

________________________

(February 27, 2015)

Before ED CARNES, Chief Judge, COX and GILMAN,∗ Circuit Judges.

 

∗ Honorable Ronald Lee Gilman, United States Circuit Judge for the Sixth Circuit, sitting 

by designation.

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GILMAN, Circuit Judge:

This case involves an insurance-coverage dispute that began in 2011 between 

Severin and Stephanie Hegel (the Hegels) and The First Liberty Insurance 

Corporation (First Liberty). The Hegels claim that First Liberty improperly denied 

their claim for a “sinkhole loss,” defined under their homeowner’s insurance policy 

as “structural damage to the building, including the foundation, caused by sinkhole 

activity.” First Liberty argues that the damage to the Hegels’ residence does not 

qualify as “structural damage,” a term that was not defined in either the policy or the 

version of the Florida sinkhole-insurance statute applicable to their claim. In 

February 2014, the district court granted summary judgment for the Hegels, finding 

that “structural damage” meant any “damage to the structure” and awarding them 

$166,518.17 in damages. First Liberty timely appealed.

For the reasons set forth below, we REVERSE the judgment of the district 

court and REMAND the case for further proceedings consistent with this opinion.

I. BACKGROUND

A. Factual background

1. The insurance policy and Florida’s sinkhole-insurance statute

The Hegels had a homeowner’s insurance policy with First Liberty for their 

Spring Hills, Florida residence, effective October 5, 2010. This policy insured 

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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.” (Emphasis 

added.) The policy, however, did not define the term “structural damage.”

The version of the Florida statute governing sinkhole insurance that was in 

effect in 2010 contained the same definition of “sinkhole loss” as the policy did, but 

similarly failed to define the term “structural damage.” See Fla. Stats. 

§ 627.706(2)(c) (2005). Prior to the statute being substantially amended in 2005,

however, the term “sinkhole loss” was defined as “actual physical damage to the 

property covered arising out of or caused by sudden settlement or collapse of the 

earth supporting such property.” Fla. Stats. § 627.706(3) (1981) (emphasis added).

The Florida Building Code (2004), on the other hand, defined “structural” as 

it relates to buildings:

For purposes of this code, “structural” shall mean any part, material or 

assembly of a building or structure which affects the safety of such 

building or structure and/or which supports any dead or designed live 

load and the removal of which part, material or assembly could cause, 

or be expected to cause, all or any portion to collapse or fail.

Fla. Bldg. Code, Existing Buildings § 202 (2004). And a May 17, 2011 amendment 

to Florida Statutes § 627.706 eventually provided a detailed, technical definition of 

“structural damage,” itself referencing the Florida Building Code:

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(2)(k) “Structural damage” means a covered building, regardless of the 

date of its construction, [that] has experienced the following:

1. Interior floor displacement or deflection in excess of acceptable 

variances as defined in ACI 117-90 or the Florida Building Code, 

which results in settlement related damage to the interior such that 

the interior building structure or members become unfit for service 

or represents a safety hazard as defined within the Florida Building 

Code;

2. Foundation displacement or deflection in excess of acceptable 

variances as defined in ACI 318-95 or the Florida Building Code, 

which results in settlement related damage to the primary structural 

members or primary structural systems that prevents those members 

or systems from supporting the loads and forces they were designed 

to support to the extent that stresses in those primary structural 

members or primary structural systems exceeds one and one-third 

the nominal strength allowed under the Florida Building Code for 

new buildings of similar structure, purpose, or location;

3. Damage that results in listing, leaning, or buckling of the exterior 

load-bearing walls or other vertical primary structural members to 

such an extent that a plumb line passing through the center of 

gravity does not fall inside the middle one-third of the base as 

defined within the Florida Building Code;

4. Damage that results in the building, or any portion of the building 

containing primary structural members or primary structural 

systems, being significantly likely to imminently collapse because 

of the movement or instability of the ground within the influence 

zone of the supporting ground within the sheer plane necessary for 

the purpose of supporting such building as defined within the 

Florida Building Code; or

5. Damage occurring on or after October 15, 2005, that qualifies as 

“substantial structural damage” as defined in the Florida Building 

Code.

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Fla. Stats. § 627.706(2)(k) (2011).

2. The damage and estimates of repair

The Hegels allege that, on March 1, 2011, they “discovered damage to their 

home, including, but not limited to, progressive physical damage to the walls and 

floors of the residence.” They subsequently submitted a claim for their damages to 

First Liberty under their homeowner’s policy.

First Liberty retained Structural Engineering and Inspections, Inc. (SEI) to 

investigate the claim in September 2011. SEI concluded in a report that the Hegels’ 

residence “DOES NOT MEET the criteria for Structural Damage as defined by 

Florida Statutes §627.706 [2011].” (Emphases in original.) The SEI report noted 

some cracking and other issues, but determined that nothing rose to the level of 

“structural damage” as defined in the 2011 version of the statute. In addition, SEI 

listed several possible causes for the observed damage that were unrelated to 

sinkholes, including differential settlements and ordinary concrete shrinkage. First 

Liberty accordingly denied the Hegels’ claim in October 2011, stating that their

residence “ha[d] 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.”

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In November 2011, the Hegels requested a neutral evaluation by a public 

adjuster. Kevin Scott, the neutral evaluator engaged for the claim, issued a report in 

July 2012. He noted that if the sinkhole claim was made under a policy with an 

effective date before May 17, 2011, then the 2011 definition of “structural damage” 

set forth in Florida Statutes § 627.706 would not apply. His report concluded that 

the damage to the Hegels’ residence was “the result of a combination of factors, 

including sinkhole activity,” but that “the observed distresses to the house can 

primarily be attributed to minor differential settlement of the structure and normal 

shrinkage/drying characteristics of the masonry materials.” Ultimately, Scott 

recommended subsurface grouting, at an estimated cost of $105,075, to remediate 

the sinkhole activity. He did not, however, apply any particular definition of 

“structural damage” to his evaluation, finding only that “[t]here was physical 

damage that resulted from settlement.”

The Hegels subsequently hired Central Florida Testing Laboratories, Inc. 

(CFTL) to review the findings and recommendations of SEI and the neutral 

evaluator, and to conduct additional testing. CFTL, in a report issued in March 

2013, found damage consisting of “widespread, minor cracking to both the exterior 

and interior of the home.” Like the neutral evaluator, CFTL determined that 

sinkhole activity was a contributing cause of the damage. To fully remediate the 

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effects of the sinkhole activity, the report recommended shallow chemical grouting 

in addition to the deep compaction grouting program proposed by the neutral 

evaluator, and estimated the total cost at $145,775. The Hegels next retained 

Champion Foundation Repair to prepare a bid based on CFTL’s recommended 

remediation plan, with the bid coming in at $141,180. Finally, the Hegels retained 

Triad Consulting Group (Triad) to estimate the cost of repairing cosmetic damages. 

Triad’s bid totaled $20,743.17.

B. Procedural background

In April 2012, before the neutral evaluator had completed his report, the 

Hegels filed suit against First Liberty for breach of contract in the Fifth Judicial 

Circuit Court in and for Hernando County, Florida. First Liberty removed the case

the following month to the United States District Court for the Middle District of 

Florida based on diversity of citizenship. It also filed an unopposed motion to stay 

the litigation until the neutral evaluation was completed. The case was reopened in 

September 2012, after which First Liberty filed a counterclaim for a declaratory 

judgment that the Hegels’ claimed damage falls outside the scope of the

homeowner’s insurance policy.

The two parties next filed competing motions for summary judgment. First 

Liberty submitted that its counterclaim was a pure question of contract law and that 

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there were no genuine disputes of material fact. It argued that the May 17, 2011 

amendment to the definition of “structural damage” in Florida Statutes § 627.706 

should be incorporated into the contractual definition of the term, and that the term

could not mean simply any “damage to the structure.”

In their motion, the Hegels claimed that they had met their burden of proving 

that the damage to the residence came within the terms of the policy, noting that First 

Liberty had not submitted any evidence to refute the opinions of the neutral 

evaluator and CFTL that sinkhole activity existed. The Hegels further argued that 

summary judgment on the damages claim was appropriate because First Liberty had 

not challenged any of the estimates of monetary damages.

To obtain expedited appellate review of the contract-interpretation question, 

and solely for the purposes of summary judgment, First Liberty stipulated that

should the district court conclude that “structural damage” means any “damage to 

the structure,” First Liberty would admit that such damage exists and was caused by 

sinkhole activity, and would accept the Hegels’ submitted monetary-damages 

estimates.

The district court denied First Liberty’s summary-judgment motion in 

September 2013, relying on prior, unpublished Middle District of Florida decisions

considering similar disputes under Florida law. It held that the term “structural 

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damage” should be interpreted to mean any “damage to the structure.” Later 

decisions from the same court, however, have defined “structural damage” more 

narrowly. See Gonzalez v. Liberty Mut. Fire Ins. Co., 981 F. Supp. 2d 1219, 1231 

(M.D. Fla. 2013) (holding that “structural damage” means “damage that impairs the 

structural integrity of the building”); Franqui v. Liberty Mut. Fire Ins. Co., No. 

8:12-cv-01257-T-27MAP, 2014 WL 1092405, at *7 (M.D. Fla. Mar. 18, 2014) 

(unpublished) (holding that “structural damage” means “damage to the structural 

components of the building, excluding damage that is cosmetic in nature”).

In February 2014, the district court granted the Hegels’ motion for summary 

judgment, awarding them $166,518.17 in damages plus prejudgment interest. Final 

judgment was entered on February 5, 2014. First Liberty timely filed a notice of 

appeal two days later.

II. ANALYSIS

A. Standard of review

We review an order granting summary judgment de novo and apply the same 

legal standards that governed the district court’s decision. Ave. CLO Fund, Ltd. v. 

Bank of Am., N.A., 723 F.3d 1287, 1293 (11th Cir. 2013). A district court properly 

grants summary judgment when the movant shows that “there is no genuine dispute 

as to any material fact and the movant is entitled to judgment as a matter of law.” 

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Chapman v. Procter & Gamble Dist., LLC, 766 F.3d 1296, 1312 (11th Cir. 2014) 

(quoting Fed. R. Civ. P. 56(a)) (internal quotation marks omitted).

Contract interpretation is subject to the same de novo review. Am. Cas. Co. 

v. Etowah Bank, 288 F.3d 1282, 1285 (11th Cir. 2002). Because insurance policies 

are considered contracts, “[i]nterpretation of insurance policy language is [also] a 

matter of law, subject to de novo review.” Graber v. Clarendon Nat’l Ins. Co., 819 

So. 2d 840, 842 (Fla. Dist. Ct. App. 2002) (citing Coleman v. Fla. Ins. Guar. Ass’n, 

517 So. 2d 686 (Fla. 1988)); see also Mich. Millers Mut. Ins. Corp. v. Benfield, 140 

F.3d 915, 924 (11th Cir. 1998). Questions of statutory interpretation are likewise

reviewed de novo. Boroski v. Dyncorp Int’l, 700 F.3d 446, 450 (11th Cir. 2012).

B. The district court erred in equating the contractual term “structural 

damage” with any “damage to the structure”

On appeal, First Liberty sets forth two independent, alternative theories to 

support its argument that the district court’s contractual interpretation was 

erroneous: (1) the plain meaning of “structural damage” cannot be any “damage to 

the structure” in the context of the contractual phrase “structural damage to the 

building”; and (2) the insurance policy incorporates the definitions of “structural” 

under the Florida Building Code (2004) and “structural damage” as “clarified” by 

the 2011 amendment to Florida Statutes § 627.706, such that the term “structural 

damage” must mean more than any “damage to the structure.” We agree with First 

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Liberty that the plain meaning of “structural damage” cannot be simply any

“damage to the structure” in the relevant context. As to the more technical 

definitions of “structural” and “structural damage” contained in the Florida Building 

Code and Florida Statutes § 627.706, however, we disagree with the proposition that 

they are incorporated into the insurance policy.

1. The plain meaning of the term “structural damage” as used in 

the context of the insurance policy cannot be any “damage to 

the structure”

“Because federal jurisdiction over this matter is based on diversity, Florida 

law governs the determination of the issues on this appeal.” State Farm Fire and 

Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004). In interpreting 

insurance policies,

Florida courts start with the plain language of the policy as bargained 

for by the parties. If that language is unambiguous, it governs. If the 

relevant policy language is susceptible to more than one reasonable 

interpretation, one providing coverage and the other limiting coverage, 

the insurance policy is considered ambiguous, and must be interpreted 

liberally in favor of the insured and strictly against the drafter who 

prepared the policy.

Id. (quoting Auto-Owners Ins. Co. v Anderson, 756 So. 2d 29, 34 (Fla. 2000)) 

(internal quotation marks omitted). 

Both the Hegels and First Liberty contend that the term “structural damage” is 

unambiguous and should be given its “plain meaning,” but the parties disagree on 

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what that meaning is. Even the district judges in the Middle District of Florida, in 

interpreting the same term in similar insurance policies under Florida law, have 

reached opposite conclusions. Compare Ayres v. USAA Cas. Ins. Co., No. 

8:11-cv-816-T-24TGW, 2012 WL 1094321, at *4 (M.D. Fla. Apr. 2, 2012)

(unpublished) (holding that “structural damage” means “damage to the structure”), 

with Gonzalez v. Liberty Mut. Fire Ins. Co., 981 F. Supp. 2d 1219, 1231 (M.D. Fla. 

2013), and Franqui v. Liberty Mut. Fire Ins. Co., No. 8:12-cv-01257-T-27MAP, 

2014 WL 1092405, at *7 (M.D. Fla. Mar. 18, 2014) (unpublished).

This court has held that “differing interpretations of the same provision is 

evidence of ambiguity, particularly when a term is not explicitly defined or clarified 

by the policy.” Dahl-Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379, 1382 

(11th Cir. 1993) (citation omitted). On the other hand, the lack of a definition in a 

policy “does not necessarily render the term ambiguous and in need of interpretation 

by the courts.” State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 

1076 (Fla. 1998). And the directive to interpret insurance policies liberally in favor 

of the insured applies “[o]nly when a genuine inconsistency, uncertainty, or 

ambiguity in meaning remains after resort to the ordinary rules of construction.” 

Excelsior Ins. Co. v Pomona Park Bar & Package Store, 369 So. 2d 938, 942 (Fla. 

1979).

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Here, no genuine ambiguity exists because construing “structural damage” to 

mean simply any “damage to the structure” in the context of the insurance policy is 

facially unreasonable. Defining “structural damage” as such merely begs the 

question of what is “structural” or “structure,” and what does either mean within the 

phrase “structural damage to the building”? Terms and phrases cannot be viewed 

in isolation; “courts must construe an insurance contract in its entirety, striving to 

give every provision meaning and effect.” Dahl-Eimers, 986 F.2d at 1381 (citing 

Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So. 2d 938, 941 (Fla. 

1979)).

The district court awarded the Hegels damages for all subsurface and 

cosmetic repairs based on the parties’ stipulation that there was “physical damage to 

Plaintiffs’ home.” Because “structural damage” is necessary for the Hegels to 

recover under the policy, the court must have equated “physical damage to 

Plaintiffs’ home” with “structural damage to the building.” Equating the two, 

however, essentially defines “structural damage” as “physical damage”—an 

untenable result. Such a construction would render the word “structural” 

meaningless because all property damage is physical, thereby violating a 

foundational rule of contract construction that every word be given effect. See 

Equity Lifestyle Props., Inc. v. Fla. Mowing And Landscape Serv., Inc., 556 F.3d

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1232, 1242 (11th Cir. 2009) (“[This court] must read the contract to give meaning to 

each and every word it contains, and . . . avoid treating a word as redundant or mere 

surplusage ‘if any meaning, reasonable and consistent with other parts, can be given 

to it.’” (quoting Roberts v. Sarros, 920 So. 2d 193, 196 (Fla. Dist. Ct. App. 2006))). 

Indeed, at oral argument, counsel for the Hegels was unable to identify what type of 

damage to the property would not be “structural” under their preferred definition.

The key problem here is one of confusion between the words “structural” and 

“structure.” In construing insurance-policy terms, Florida courts “commonly adopt 

the plain meaning of words contained in legal and non-legal dictionaries.” Brill v. 

Indianapolis Life Ins. Co., 784 F.2d 1511, 1513 (11th Cir. 1986) (citing Gov’t Emps. 

Ins. Co. v. Novak, 453 So. 2d 1116, 1118 (Fla. 1984)). “Structural” is an adjective, 

defined in the Oxford English Dictionary as “[f]orming a necessary part of the 

structure of a building or other construction, as distinct from its decoration or 

fittings.” Structural, adj., Oxford English Dictionary, http://www.oed.com/view/

Entry/191887 (June 2014) (last visited Feb. 26, 2015). The noun “structure,” on the 

other hand, is simply a synonym for a building. See Structure, n., Oxford English 

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Dictionary, http://www.oed.com/view/Entry/191895 (June 2014) (last visited Feb. 

26, 2015) (defining “structure” as “[a] building, an edifice”).1

 

Based on these definitions, “damage to the structure” would encompass any 

physical damage to a building, even if only cosmetic, whereas “structural damage” 

would exclude damage to a building’s “decoration or fittings.” Any structural 

damage would necessarily encompass damage to the building, but the opposite is not 

necessarily true; i.e., many types of lesser damage to a building would not be 

structural damage. To equate “structural damage” with any “damage to the 

structure,” as the district court did, is thus untenable.

Even the Hegels in their appellate brief appear to retreat from the district

court’s definition, arguing instead that the “damage must be to the structure itself as 

determined by professional engineers.” But this definition is no better than the 

district court’s definition because it fails to account for how professional engineers 

assess “structural damage.” Kevin Scott, the neutral evaluator and a professional 

engineer, defined the term as follows: “It’s damage which impedes the structural 

components from supporting the loads that they are intended to support. That is my 

engineering opinion of structural damage.” Scott’s definition is essentially the 

 1 In keeping with Eleventh Circuit Internal Operating Procedure 10 under Federal Rule of 

Appellate Procedure 36, ‘Citation to Internet Materials in an Opinion,’ a copy of the internet 

materials cited in this opinion is available at this Court’s Clerk’s Office.

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same as the only published district-court decision to squarely decide the plain 

meaning of the term. See Gonzalez v. Liberty Mut. Fire Ins. Co., 981 F. Supp. 2d 

1219, 1231 (M.D. Fla. 2013) (interpreting “structural damage” to mean “damage 

that impairs the structural integrity of the building”). We agree with the excellent 

analysis in Gonzalez and therefore construe the phrase “structural damage to the 

building” to mean “damage that impairs the structural integrity of the building.”

2. “Structural damage” as used in the 2005 version of Florida’s 

sinkhole-insurance statute does not mean “damage to the 

structure”

Both parties acknowledge that the 2005 version of Florida Statutes § 627.706

applies to the Hegels’ insurance policy. Although that version does not define the 

term “structural damage,” the legislative history behind its enactment is fully 

consistent with our determination regarding the plain meaning of the term. Recall 

that, in 2005, the Florida legislature changed the definition of “sinkhole loss” from 

“actual physical damage to the property covered” to “structural damage to the 

building.” Ch. 2005-111, § 17, Laws of Fla. In making the 2005 revision, the 

legislature’s intention was “generally to reduce the number of sinkhole claims and 

related disputes arising under prior law.” Ch. 2011-39, § 21, Laws of Fla. This 

statement strongly implies that “structural damage” is different from—and more 

restrictive than—“actual physical damage.”

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3. Definitions from other sources are not relevant in determining the 

plain meaning of the term “structural damage” as used in the 

Hegels’ insurance policy

First Liberty urges us to incorporate into the insurance policy the relatively 

narrow definitions of “structural” as set forth in the Florida Building Code (2004)

and “structural damage” as “clarified” by the 2011 amendment to Florida Statutes 

§ 627.706. But we must determine the plain meaning of the term “structural 

damage” utilizing the procedure required by Florida law. See Garcia v. Fed. Ins. 

Co., 969 So. 2d 288, 291-92 (Fla. 2007) (stating that insurance contracts are 

construed according to their plain meaning and that, when doing so, courts may 

consult dictionary definitions). “[C]ourts may not rewrite contracts, add meaning 

that is not present, or otherwise reach results contrary to the intentions of the 

parties.” Interline Brands, Inc. v. Chartis Specialty Ins. Co., 749 F.3d 962, 965 

(11th Cir. 2014) (quoting Taurus Holdings, Inc. v. U.S. Fidelity and Guar. Co., 913 

So. 2d 529, 532 (Fla. 2005)) (internal quotation marks omitted). And an insurer 

cannot, “by failing to define the terms [in a policy] . . . , insist upon a narrow, 

restrictive interpretation of the coverage provided.” Dahl-Eimers v. Mut. of Omaha 

Life Ins. Co., 986 F.2d 1379, 1382 (11th Cir. 1993) (internal quotation marks 

omitted). We therefore decline to incorporate these specific definitions into the

Hegels’ insurance policy.

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III. CONCLUSION

For all of the reasons set forth above, we REVERSE the judgment of the 

district court and REMAND the case for further proceedings consistent with this 

opinion. This will require the district court to decide if a genuine dispute of 

material fact exists regarding how much, if any, structural damage to the Hegels’ 

house (as properly defined) is due to sinkhole activity. The district court’s 

determination on this issue will in turn lead to either a new grant of summary 

judgment for the appropriate party or to a trial on the merits.

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