Hegel v. The First Liberty Insurance Corp.

The Hegels (plaintiffs) had purchased homeowner’s insurance from The First Liberty Insurance Corp. (defendant) that insured against sinkhole losses. In the policy, a sinkhole loss was defined as “structural damage to the building, including the foundation, caused by sinkhole activity.” The policy did not define structural damage. The Hegels later discovered damages to the walls and floors of their residence and submitted a claim to Liberty. Liberty determined that the damage was from normal concrete shrinkage, settling, and foundation issues that did not qualify as structural damage and denied the claim. The Hegels then hired a public adjuster who determined that sinkhole activity was one of several causes of the damage. The public adjuster defined structural damage as “damage which impedes the structural components from supporting the loads they are intended to support.” The Hegels then hired a testing laboratory that also determined that sinkhole activity and other factors had combined to cause the damage. The Hegels then got a bid of approximately $146,000 to repair their foundation and a bid of approximately $20,000 to repair cosmetic damage. The Hegels sued Liberty. Although both parties agreed that the term structural damage was unambiguous and should be given its plain meaning, the parties did not agree on what that meaning was. The trial court decided that structural damage meant any physical damage to the Hegels’ home (i.e., to their structure) and awarded them the full $166,000 from the bids. Liberty appealed.