Hudson v. Prudential Property & Cas. Ins. Co.

District Court of Appeal of Florida
450 So. 2d 565 (1984)

ELI5:

Rule of Law:

Under an "all-risks" insurance policy, once the insured demonstrates a loss to the covered property, the burden of proof shifts to the insurer to establish that the loss was caused by a peril specifically excluded from coverage.

Facts:

In 1976, Donald and Mary Hudson purchased an "all-risks" homeowners insurance policy from Prudential Property and Casualty Insurance Company.
The policy contained a standard exclusion for losses caused by earth sinking.
A mandatory statutory endorsement amended the policy to cover direct loss caused by "sinkhole collapse," effectively changing the exclusion to cover "earth sinking other than sinkhole collapse."
In May 1981, while the policy was in effect, the earth supporting the Hudsons' home suddenly collapsed, causing damage to the property.
The Hudsons filed a claim with Prudential, asserting that a sinkhole caused the damage.
Prudential denied the claim, contending the damage was due to earth settlement, which it claimed was an excluded peril.

Procedural Posture:

Donald and Mary Hudson filed a breach of contract suit against Prudential Property and Casualty Insurance Company in a Florida trial court.
During the jury trial, the court denied the Hudsons' requested jury instruction regarding the burden of proof and instead gave the instruction requested by Prudential, which placed the burden on the Hudsons.
The jury returned a verdict in favor of Prudential.
The trial court entered a final judgment for Prudential and subsequently denied the Hudsons' motion for a new trial.
The Hudsons, as appellants, appealed the judgment to the District Court of Appeal of Florida, Second District, with Prudential as the appellee.

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Issue:

Does an insured, under an 'all-risks' policy that excludes 'earth sinking' but has an endorsement covering 'sinkhole collapse,' bear the burden of proving the loss was specifically caused by a sinkhole?

Opinions:

Majority - Scheb, Acting Chief Judge

No. An insured under an 'all-risks' policy does not bear the burden of proving that a loss falls within an exception to an exclusion. Once the insured establishes that a loss occurred to the covered property, the burden shifts to the insurer to prove that the loss was caused by an excluded peril. The policy in question is an 'all-risks' policy, not a specific peril policy, meaning it covers all losses unless specifically excluded. The Hudsons' only burden was to prove a loss occurred, which they did. The burden then shifted to Prudential to prove the loss fell under the 'earth sinking' exclusion. The sinkhole endorsement merely narrowed this exclusion; it did not change the 'all-risks' character of the policy or shift the burden of proof back to the insured. The trial court erred by instructing the jury that the Hudsons had to prove their home was damaged by a sinkhole, as this improperly placed the insurer's burden of proving an exclusion onto the insured.

Analysis:

This decision reinforces the fundamental burden-shifting framework for 'all-risks' insurance policies in Florida. It clarifies that an exception to an exclusion, such as the sinkhole endorsement here, does not alter the insurer's ultimate burden of proving that a loss is not covered. This ruling is protective of policyholders, preventing insurers from using complex policy language to shift their evidentiary responsibilities back to the insured. The case establishes that the insurer, as the drafter of the exclusionary language, must bear the burden of proving that the specific facts of a loss fall squarely within an exclusion.

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