Insurance Policy Patent v. Latent Ambiguities

J.P. Gonzalez-Sirgo
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Founder of J.P. Gonzalez-Sirgo, P.A.

A policyholder can benefit from ambiguities in an insurance policy since such ambiguities are construed against the insurance company.  This is a basic principal of contract interpretation.  That is, ambiguities are construed against the drafter of the contract.  However, there are different kinds of ambiguities in the language and application of a contract that can make this analysis more complicated.  Some ambiguities are present solely based on the language and word choice of a policy while sometimes language that appears clear and unequivocal can become ambiguous when applied to actual facts and circumstances.

The 2nd District case of Price v. Castle Key Indemnity Company provides an informative discussion on how these differing types of ambiguities can impact an insurance claims dispute.  Price sought relief from summary judgment in favor of Castle Key in a coverage dispute after his home was damaged by 195,000 gallons of water that escaped from an upstairs bedroom while he was away.  The damage to the home was caused by water overflowing from a toilet for at least a 32 day period.  Price posited that based on this that the volume of water overflow was 6,000 gallons per day.

Price contended that the policy provided coverage for the water damage based on a provision indicating coverage for “sudden and accidental direct physical loss to property.”  The insurance company countered by claiming the damage was not “sudden” and asserting the following exception to coverage:

“[s]eepage, meaning continuous or repeated seepage or leakage over a period of weeks, months, or years, of water, steam, or fuel…from, within[,] or around any plumbing fixtures, including but not limited to shower stalls, shower baths, tub installations, sinks[,] or other fixtures designed for the use of water or steam.”

Price contended that 6,000 gallons a day raised a question of fact for the jury as to whether such a high volume of water constituted “seepage”.  He also argued that the term “sudden” could be construed to mean “unexpected”, so the jury could find that the water overflow was encompassed by the term even though the leak continued for over a month.  

In analyzing the relevant policy language, the court noted that a provision or language in an insurance policy is ambiguous when it is susceptible to multiple meanings.  The court also noted that such ambiguities can come in two forms: (1) patent ambiguities and (2) latent ambiguities.  The court pointed out that a patent ambiguity is based solely on the language and terms of the contract without resort to outside facts or circumstances.  With a latent ambiguity the language appears clear and unequivocal on its face but becomes ambiguous when construed in terms of specific facts or extraneous evidence giving rise to multiple interpretations.

The court considered the language at issue in this case to constitute latent ambiguities.  The court found that the extrinsic fact that as much as 6,000 gallons per day overflowed over at least a 32 day period raised a question of fact for the jury regarding whether the water leak was “sudden” or “seepage”.  This decision does not necessarily mean that the policyholder will prevail in the trial court but merely that the jury could reasonably interpret the language to find coverage.

This case demonstrates the subtle distinctions in policy interpretation that can impact the outcome of a coverage dispute.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

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