Construction Update – Florida Courts Continue to Address Coverage Issues in the Construction Realm
February 3, 2016 by boydjenerette on News
Florida Courts Continue to Address Coverage Issues in the Construction Realm
Elizabeth B. Ferguson and Kellie M. Humphries
Between October and December 2015, Florida Courts continued the recent trend of addressing insurance coverage issues in the construction defect litigation realm. There were five (5) crucial rulings; three (3) in favor of coverage and two (2) denying coverage. We believe every insurance carrier and insured should pay close attention to these rulings.
I. Pavarani Construction Co. v. ACE American Ins. Co., 2015 WL 6555434 (S.D. Fla. Oct. 29, 2015).
In furtherance of the expansive “rip and tear” doctrine, and citing Carithers v. Mid-Continent Co., Case No. 14-11639 (11th Cir. April 7, 2015), the Court Granted the General Contractor’s Motion for Summary Judgment in Part, concluding the insurer owed a duty to indemnify the General Contractor for all costs to resolve the claim for defective work of its subcontractors, including “rip and tear”. Specifically, where deficient CMU/reinforcing steel caused stucco de-bonding and cracking in the mechanical penthouse enclosure on the roof, the insurer had to indemnify the General Contractor for removal and replacement of those elements as it was necessary to remove those items to reach covered damages.
II. Bradfield v. Mid-Continent Cas. Co., 2015 WL 6956543 (M.D. Fla. Nov. 10, 2015).
When the insurance carrier for the General Contractor declined coverage, the General Contractor entered into a Coblentz agreement with the Homeowners. Pursuant to the Coblentz agreement, the General Contractor and Homeowners agreed to resolve their construction defect dispute by negotiating a consent judgement against the General Contractor. The General Contractor then assigned its claim against its insurer to the Homeowners in exchange for a release from any personal liability under the consent judgment. The Homeowners then filed suit against the General Contractor’s insurer to collect under the consent judgment. Summary Judgement was granted in favor of the insurer on the following grounds: (1) additional insured status was not extended to an entity not named in the policy; (2) the specific items of damage claimed were not covered or were excluded by the policy; and (3) the consent judgment entered in state court pursuant to the Coblentz agreement was not reasonable and/or was the result of collusion.
III. Core Construction Servs. Southeast, Inc. v. Crum & Forster Specialty Ins. Co., 2015 WL 8043940 (M.D. Fla. Dec. 7, 2015).
A General Contractor, Core Construction, sued its roofing subcontractor’s insurance carrier, Crum & Forster, as an Additional Insured, seeking coverage related to roof damage resulting from Hurricane Wilma. The Court granted Crum & Forster’s Motion for Summary Judgment, holding an insurer has no duty to defend, nor indemnify, a General Contractor where the Complaint itself (as opposed to other record evidence) fails to allege resulting property damage. The Court reasoned the resulting property damage is what constitutes an “occurrence” under a CGL policy.
IV. 1661 Riverside, LLC v. Amerisure Ins. Co., No. 16-2013-CA-5879, unpublished (Fla. 4th Cir. Ct. Dec. 8, 2015).
In direct conflict with Core Construction, the next day, the Fourth Judicial Circuit Court, in and for Duval County, Florida, issued an Order Granting Partial Summary Judgment to the Developer in a Declaratory Action. The Court held the insurer’s duty to defend the Developer in an underlying construction defect lawsuit was triggered by allegations outside the Complaint, which were “not originally within the scope of the pleadings[, but which] the insurance carrier upon notification [became] obligated to defend.” Relying on Evanston Ins. Co. v. Royal American Const. Co., Inc., 2007 WL 4240749 (N.D. Fla. 2007), the Court held the insurer’s duty to defend the Developer was “clearly triggered at the time covered claims were tendered to [the insurer], and were actually being litigated [in the underlying lawsuit, because] when a lawsuit is already pending, the duty to defend must be determined from the allegations actually being litigated.”
V. Mid-Continent Cas. Co. v. Treace, 2015 WL 9491876 (Fla. 5th DCA Dec. 31, 2015).
The Treaces were awarded damages in a construction defect action against their General Contractor. The Treaces then filed a garnishment proceeding against the General Contractor’s insurance carrier, Mid Continent Casualty Co. (“MCC”) to collect under the CGL policy issued to the General Contractor. The Treaces were awarded damages for water damage and MCC appealed. The Fifth DCA affirmed, holding the cost to access and repair water damage was covered by MCC’s policy. The Court also reversed the portion of the judgment which held attorney’s fees were not covered on two (2) grounds: 1. The supplementary payment provision in the MCC policy provided MCC would pay, “with respect to any claim [it] investigate[s] or settle[s], or any ‘suit’ against an insured [it] defend[s]…all costs taxed against the insured in the ‘suit.’”, but did not specifically define the phrase “all costs”, and a reasonable reading could include attorney’s fees; and 2. The provision failed to specifically exclude attorneys’ fees. The Court relied on two prior cases: Geico Gen. Ins. Co. v. Hollingsworth, 157 So.3d 365, 367-68 (Fla. 5th DCA 2015); and Geico Gen. Ins. Co. v. Rodriguez, 155 So.3d 1163 (Fla. 3d DCA 2014), which interpreted supplementary payment provisions substantially similar to the one in the MCC policy, and issued parallel rulings awarding attorney’s fees.
Elizabeth B. Ferguson
Board Certified Construction Lawyer
Partner / Practice Group Leader
Direct: 904.353.6245
Fax: 904.520.7393
Email: eferguson@boydjen.com