SC Austin Holdings LLC v. MT Hawley Insurance Company

Background

Days before Hurricane Ian struck Florida, Mt. Hawley Insurance Company issued SC Austin Holdings LLC an insurance policy covering the Tropical Winds hotel in Daytona Beach. The hurricane brought 90-mph winds and more than a foot of rain, flooding the hotel and damaging nearly all of its rooms. The hotel closed for months. SC Austin notified Mt. Hawley of the damage and sought coverage for its losses, but Mt. Hawley denied the request.

Mt. Hawley moved for summary judgment, asking the court to rule without a trial in its favor on two issues: coverage for damage to the hotel’s second through seventh floors, and coverage for business-income losses caused by the hotel’s closure.

Physical-Damage Coverage

The court explained that the policy was an “all-risk” policy. Under that type of policy, once the insured shows that a loss occurred, the insurer has the burden of proving that the policy expressly excludes the claimed loss.

Mt. Hawley argued that an “anti-concurrent cause” exclusion applied to one of six possible explanations identified by SC Austin’s expert for the water damage. Mt. Hawley relied particularly on the “displaced PTAC” theory. The court held that Mt. Hawley had not identified evidence showing that this theory definitively caused some or all of the damage to floors two through seven.

The court also rejected Mt. Hawley’s argument that SC Austin’s claim failed because its expert listed possible causes without stating that any particular cause actually caused the damage. SC Austin did not have the burden to identify the cause of the damage at this stage. The court found a factual dispute involving conflicting evidence, including expert testimony that non-excluded causes may have caused the damage. Because Mt. Hawley had the burden of proving that an exclusion applied as a matter of law, and the evidence had to be viewed in the light most favorable to SC Austin as the non-moving party, summary judgment was not appropriate.

SC Austin also argued that other policy provisions created ambiguity and showed an intent to provide coverage even if the exclusion otherwise applied. The court did not decide those ambiguity arguments because it was denying the motion on other grounds. It stated that the parties should address the issue in later pretrial motions and proposed jury instructions.

Business-Income Losses and Disposition

The court stated that SC Austin’s business-income-loss claim depended on coverage for the physical damage. It therefore also denied summary judgment on the business-income-loss issue.

Judge Subramanian denied Mt. Hawley’s motion for summary judgment as to SC Austin’s claim for physical damage to floors two through seven and denied summary judgment on the business-income-loss question. The court directed the parties to meet and confer by February 28, 2025, and suggest trial dates in June. It also directed the Clerk of Court to terminate Docket Entry 28.