Background
First Solar Electric LLC was constructing a solar power plant in Georgia when five heavy-rain events damaged the project between December 2019 and April 2020. Its builders-risk policy with Zurich American Insurance Company covered both water and flood damage, but imposed a $100,000 per-event deductible for water damage and a $2.5 million per-event deductible for flood damage. Zurich’s adjuster initially classified the first three losses as water damage and issued three unconditional $200,000 advance payments without reserving Zurich’s right to change that determination.
Zurich later concluded that all five events involved flood damage and that the losses from each event did not exceed the applicable $2.5 million deductible. First Solar sued. The district court held that the flood deductible otherwise applied but that Zurich had waived it for all five events, rejected Zurich’s argument that the suit was contractually time-barred, and conducted a damages-only trial that produced a verdict for First Solar. Zurich appealed, and First Solar cross-appealed the ruling that the flood deductible applied absent waiver.
The Court’s Holding
The Eleventh Circuit held that, under Georgia law, the deductible limited Zurich’s payment obligation rather than the policy’s scope of coverage. Because flood losses were covered risks and the deductible was a contractual limitation imposed for Zurich’s benefit, the deductible was subject to waiver.
Zurich waived the flood deductible for the first three rain events as a matter of law by treating them as water-damage claims, applying the lower deductible, and making unconditional payments without reserving its rights. But the evidence did not establish waiver as a matter of law for the March 3 and April 18 events, for which Zurich made no advance payments before its August 2020 notice that the flood deductible might apply. The court therefore affirmed the damages and prejudgment interest awarded for the first three events, vacated those awards for the final two events, and remanded for further proceedings on whether Zurich waived the deductible as to those losses.
The court also held that the policy’s suit-against-the-company clause was a delayed-discovery protection, not a contractual deadline barring later suits. It upheld the denial of Zurich’s motion to strike First Solar’s damages witness. Rejecting First Solar’s cross-appeal, the court concluded that the policy unambiguously assigned the project a $2.5 million flood deductible, the evidence did not support reformation for mutual mistake, and the rain events met the policy’s definition of flood.
Key Takeaways
- Under Georgia law, an insurer may waive a deductible that limits payment for an otherwise covered loss.
- Zurich’s unconditional payments under its initial coverage determination waived the higher flood deductible for the first three events, and a later reservation-of-rights notice could not undo that waiver.
- Waiver remained a factual question for the two events that were not the subject of advance payments before Zurich notified First Solar of its changed position.
Why It Matters
The decision distinguishes limitations on an insurer’s payment obligation from limitations on coverage itself. Although waiver generally cannot create coverage for an excluded risk, it can prevent an insurer from enforcing a deductible applicable to a risk the policy already covers.
The ruling also underscores the consequences of making claim payments without a timely reservation of rights. At the same time, it requires courts to assess waiver claim by claim when the insurer’s conduct differs among separate loss events.