What happened: the Eleventh Circuit ruled Zurich waived a $2.5 million flood deductible after its adjuster classified rain damage as water damage and paid out
Who’s involved: Zurich American Insurance Company and First Solar Electric
What’s at stake: the difference between a $100,000 and a $2.5 million per-event deductible across five rain events
Why it matters: insurers that pay on a coverage classification without reserving rights may be locked into it under Georgia law
Where it stands: affirmed in part, sent back to the lower court for two remaining events
A $100,000 deductible or a $2.5 million one - on a Georgia solar farm, that gap just cost an insurer its do-over.
The US Court of Appeals for the Eleventh Circuit ruled on October 22 that Zurich American Insurance Company waived a $2.5 million-per-event flood deductible on three of five rain events that damaged a 1,038-acre solar plant under construction. The ruling affirmed a jury verdict for the builder, First Solar Electric.
Between December 2019 and April 2020, five heavy rain events damaged solar arrays, roads, fencing, and electrical work at the site. Zurich’s adjuster inspected the property, recorded the losses as water damage, told First Solar’s broker the claims “were going to be viewed as water damage claims,” and marked “No” when the system asked whether the damage was caused by flood.
In June 2020, Zurich issued three $200,000 advance payments, each noting a $100,000 deductible. It did not reserve any right to revisit that call.
Two months later, Zurich reversed course. An August 2020 report flagged for the first time that the events might be floods - pushing the deductible from $100,000 to $2.5 million per event. By March 2021, Zurich’s outside counsel confirmed the insurer owed nothing because no event’s damages cleared the flood deductible.
The Eleventh Circuit held that under Georgia law, a deductible sets how much the insurer pays on a covered loss - not whether the loss is covered at all. Because the provision existed for Zurich’s benefit, Zurich could give it up. And it did: the adjuster classified the damage, communicated that call, and cut unconditional checks without reserving the right to change course.
“Once [Zurich] waived the policy conditions as to [applying the flood deductible], the condition could not be reclaimed,” the court wrote.
The ruling drew a line at the first three events. For the final two - March 3 and April 18, 2020 - the court threw out that part of the judgment and sent the waiver question to a jury, since Zurich had not paid on those before changing position. First Solar separately argued the correct deductible was $100,000 based on the project’s flood zone; the court rejected that too.
An adjuster makes a coverage call, the insurer pays on it, then someone upstream revisits the classification. Under Georgia law, there is no mulligan once the checks clear.
The findings in this article are based on a court opinion. The case has been sent back for further proceedings on the final two rain events.
