## Facts

- Severin and Stephanie Hegel owned a Florida home insured under a homeowner’s policy issued by First Liberty Insurance Corporation, effective October 5, 2010.
- The policy covered “Sinkhole Loss,” defined as “structural damage to the building, including the foundation, caused by sinkhole activity,” but it did not define “structural damage.”
- In March 2011, the Hegels reported cracking and progressive physical damage to walls and floors and submitted a sinkhole claim.
- First Liberty retained experts who attributed the damage to non-sinkhole causes (e.g., settlement and shrinkage) and concluded the damage did not qualify as “structural damage” under the policy; the insurer denied coverage.
- The Hegels retained their own adjuster and testing firm, which concluded sinkhole activity was among the causes and recommended extensive subsurface repairs plus cosmetic repairs.
- The Hegels sued in federal district court for breach of the insurance policy for failure to pay a covered sinkhole loss.
- The district court granted summary judgment for the Hegels, construing “structural damage” to mean any damage to the structure and awarding damages.
- First Liberty appealed.

## Issues

1. How should the undefined term “structural damage” in a Florida sinkhole-loss policy provision be interpreted when the provision mirrors statutory language defining sinkhole loss as “structural damage to the building, including the foundation, caused by sinkhole activity”?
2. Did the district court err by interpreting “structural damage” as any physical damage to the house?

## Decision

- The Eleventh Circuit reversed the judgment for the Hegels and remanded.
- The court rejected the district court’s construction equating “structural damage” with any damage to the structure.
- The court held that, in context, “structural damage” means damage that impairs the building’s structural integrity, not merely cosmetic or minor physical damage.
- The court directed further proceedings to determine whether sinkhole activity caused damage meeting the structural-integrity standard.

## Legal Principles

- Undefined insurance terms that mirror statutory language are interpreted in context, including statutory history and related technical sources, to identify their ordinary meaning.
- “Structural damage” is a subset of all physical damage; it denotes impairment of a building’s structural integrity rather than superficial defects.
- Courts avoid interpretations that render contract or statutory modifiers meaningless (canon against surplusage).
- Contra proferentem does not justify an expansive reading when context supplies a sufficiently clear, narrower meaning.

## Conclusion

The Eleventh Circuit held that “structural damage” in sinkhole coverage requires damage impairing a building’s structural integrity, reversed a summary judgment that treated any physical damage as covered, and remanded for application of the correct standard.


Hegel v. First Liberty Ins. Corp., 778 F.3d 1214 (11th Cir. 2015)