Burdens of proof are always an important thing to understand in conducting an appropriate legal analysis, particularly as they relate to a coverage analysis in first-party property insurance claims. Shockingly, I have seen insurance company representatives who, when evaluating an insurance claim for coverage, do not fully understand the analysis under an all-risk policy form. This confusion can lead to litigation that may otherwise be unnecessary and can actually cause the insurance company additional costs above the amount of the claim.

The type of policy form involved, i.e., whether it is an all-risk or named-peril policy, generally determines whether a policyholder must demonstrate that the loss involved in a claim occurred by a covered peril or not. In Florida, under an all-risk policy, the policyholder must prove only that damage to the property occurred while the policy was in effect, then the burden then shifts to the insurer to prove that the loss arose from a cause that is excluded under the policy. If the policy is a named-peril policy, however, the policyholder has the burden of proving that the damage was the result of a covered cause.

Understanding this all-risk analysis and the parties’ burdens of proof is important because it makes a very big difference from a coverage perspective. The initial showing under an all-risk policy requires the policyholder prove that loss or damage occurred to covered property while the policy was in effect. Once met, the burden then shifts to the insurer to prove unambiguously that the loss is excluded; otherwise; the loss is usually covered, absent fraud or misconduct by the policyholder. I think of the all-risk burdens this way: the insured has an initial speed bump to get over and then the insurer has a mountain to climb. If the insurer does not climb the mountain and clearly prove an exclusion, then there is coverage.

Typically, the policyholder and insurer should be able to agree on whether the policy involved is an all-risk or named-peril form and should be able to appropriately assess the claim for coverage on that basis. Sometimes, however, they cannot agree on what type of policy is involved, as occurred in Royale Green Condo. Assoc., Inc. v. Aspen Specialty Ins. Co., No. 07-21404, 2009 WL 799429 (S.D. Fla. March 24, 2009). This is an usual scenario. Disagreements over the burdens on the all-risk analysis are more common. I have heard insurance company representatives state, for example, that the policyholder cannot prove the cause of loss is from a covered peril in a claim involving an all-risk policy. That type of statement reveals a misunderstanding of the burden of proof.

Association policyholders faced with such a misunderstanding of the policy burden of proof are actually thrust into a situation where they must educate the insurer’s representative on the appropriate evaluation. This can occur at a variety of different levels, whether in pre-suit discussions, at alternative dispute resolution proceedings such as appraisal or mediation, or during the litigation in discovery, depositions and eventual trial. It is important to understand the distinction between these policy forms and for associations to evaluate, through their representatives, what type of policy forms they purchased to cover the condominium property.