A Zurich Insurance unit cannot change its mind about how to classify storm damage after paying claims under a lower deductible, a federal appeals court ruled Thursday, upholding part of a $12.2 million jury verdict for a solar developer.
In Zurich American Insurance Company v. First Solar Electric LLC, the 11th U.S. Circuit Court of Appeals ruled on Thursday that Zurich American gave up its right to apply a much higher deductible to three of five rain-damage claims. “Golfers get mulligans,” the judge wrote. “But in this case, the insurance company does not.”
First Solar Electric, a unit of Tempe, Arizona-based solar manufacturer First Solar, was building a solar plant in Georgia when five heavy rain events occurred between December 2019 and April 2020. Its builders risk policy with Zurich American carried a $100,000 deductible per event for water damage and $2.5 million per event for flood damage.
A Zurich American adjuster recorded the losses as water damage. In June 2020, he approved three $200,000 advance payments for the first three events without reserving any right to change course.
The policy defined “flood” as, among other things, “a general and temporary condition of partial or complete inundation of normally dry land areas” or “the unusual and rapid accumulation or runoff of surface waters from any source.” “Water damage” is defined as “all damage caused by water, whatever the source, whether or not driven by wind, other than that otherwise defined as flood or that resulting from a named storm.”
In an August 2020 status update, the insurer first said the events might be floods. In 2021, it said it owed nothing, because damage from each event fell below the flood deductible.
First Solar Electric sued. The U.S. District Court for the Middle District of Georgia ruled before trial that Zurich American had waived the right to apply a flood deductible later. After a five-day trial limited to damages, a jury returned a $12.2 million verdict against Zurich American in 2025.
The appeals court, which sits in Atlanta, rejected Zurich American’s argument that Georgia law did not allow it to waive the flood deductible. It also said that the August 2020 status update reserving rights to change its decision came too late.
The appeals panel upheld the damages and prejudgment interest for the first three events, for which Zurich had issued the advance payments. These events accounted for about $8.5 million of the verdict. For the last two events, they said a jury must decide whether Zurich American waived the deductible through its conduct prior to the 2020 status update. The panel vacated those awards and sent the case back to the lower court.
The court also ruled against Zurich American on a policy clause governing when suits can be filed. However, it agreed with the insurer that, without waiver, the flood deductible applied. The adjuster was never deposed, the court noted, and Zurich American offered no evidence explaining why its position had changed.
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