Insurer Had No Duty To Defend Additional Insured’s Faulty Work, Judge Holds
(December 9, 2015, 10:38 AM EST) -- ORLANDO, Fla. — Allegations of an additional insured’s faulty work to a roof do not constitute an “occurrence,” a Florida federal judge ruled Dec. 7, finding that a commercial general liability insurer had no duty to defend or indemnify (Core Construction Services Southeast, Inc. v. Crum & Forster Specialty Insurance Co., No. 14-1790, M.D. Fla.; 2015 U.S. Dist. LEXIS 163695).
(Order available. Document #69-160108-002R.)
Core Construction Services Southeast Inc. served as general contractor for the Lakeview at Carlton Lakes, a condominium project. In 1996, Core Construction entered into a subcontract with Patnode Roofing Inc. to install roofs at the Lakeview. From Aug. 1, 2003, to Aug. 1, 2008, Patnode was insured under a series of one-year commercial general liability policies issued by Crum & Forster Specialty Insurance Co. Patnode completed its work on the Lakeview in 1998.
In 2005, Hurricane Wilma hit the Lakeview, and a number of its roofs were damaged.
Empire Indemnity Insurance Co. paid a portion of the losses sustained by the Lakeview at Carlton Lakes Condominium Association Inc., then entered into an assignment allowing it to pursue the association’s claims resulting from the roof damage. Empire, as both assignee and subrogee of the association, sued Core Construction, Patnode and others in 2007, seeking to recover damages allegedly caused by construction defects in the condominium project.
Duty To Defend
Core Construction tendered its defense to Crum & Forster, but the insurer refused to defend or indemnify Core Construction. On Nov. 3, 2014, Core Construction sued Crum & Forster in the U.S. District Court for the Middle District of Florida, alleging that the insurer breached one or more of the CGL policies by refusing to defend or indemnify Core Construction as an additional insured. On Aug. 10, 2015 Core Construction settled the underlying action. Core Construction and Crum & Forster filed motions for summary judgment.
Judge Gregory A. Presnell granted summary judgment to Crum & Forster, finding that the insurer had no duty to defend or indemnify Core Construction. Citing United States Fire Insurance Co. v. J.S.U.B., Inc. (979 So.2d 871, 891 [Fla. 2007]), the judge held that Florida law provides that faulty work can constitute an “occurrence” when the work causes “property damage” to the completed project. However, the judge noted that the faulty workmanship must result in damage to some other element to cause property damage.
The judge then cited Auto-Owners Insurance Co. v. Pozzi Window Co. (984 So. 2d 1241, 1248 [Fla. 2008]) to explain that the “mere inclusion of a defective component, such as a defective window, or the defective installation of a window, does not constitute property damage unless that defective component results in physical injury to some other tangible property.”
No ‘Occurrence’
Judge Presnell agreed with Crum & Forster that there were no allegations that Patnode’s allegedly faulty work resulted in “property damage” because it asserted only that the roofs had been damaged, rather than asserting that the faulty roofs had caused damage to other elements of the Lakeview. The judge found that Empire asserted that as a result of various breaches of duty on the part of Core Construction and the other defendants, the plaintiffs have been damaged and have been required to repair and replace the roofs of the condominiums.
“The only items explicitly referenced in the Fourth Amended Complaint as requiring repair or replacement are the roofs. Similarly, the document assigning the Association’s claims to Empire — which was attached to the Fourth Amended Complaint — recites that the Association ‘believes that the damages and defects sustained by the roofs of the 24 buildings at [the Lakeview] caused by negligent and faulty construction exceed $2,684,358.16’ and limits the claims assigned to ‘the damages to the roofs of the 24 buildings at [the Lakeview],’” the judge said.
Finally, the judge rejected Core Construction’s argument that Empire’s complaint establishes two categories of damages — one consisting of damages resulting from the Defendants’ breaches, and one consisting of the repair and replacement of the roofs. However, the judge held that it does not suggest that Empire alleged that the roofs had to be replaced and their failure caused damage to other parts of the buildings, as needed to assert a claim for property damage. Therefore, the judge ruled that Crum & Forster had no duty to defend or indemnify.