The United States District Court for the Middle District of Florida recently rendered a decision in Auto-Owners Insurance Company v. Elite Homes, Inc. addressing the duty to defend when a “your work” exclusion exists in Commercial General Liability (CGL) policy. In Elite Homes, Joseph and Emily Crozier sued Elite Homes, Inc. (“Elite”) in state court for damages arising out of window leaks in their home. Elite tendered the defense of the claim to Auto-Owners Insurance Company (“AOIC”) seeking coverage for liability and damages. AOIC disclaimed coverage under the policy it issued to Elite (“Policy”) on the grounds that the window leaks only implicated issues with Elite’s scope of work; therefore, any claims were subject to the your work exclusion in the Policy. AOIC filed a declaratory judgment action in federal court, and moved for summary judgment on the issue of its duty to defend.
AOIC’s Motion relied on the Policy’s definition of “your work,” which excluded claims for damage to (1) work or operations performed by the insured or on its behalf; and (2) materials, parts, or equipment furnished in connection with such work or operations. The term “your work” also included (1) warranties or representations made at any time with respect to the fitness, quality, durability, performance, or use of “your work”; and (2) the providing of or failure to provide instructions. AOIC took the position that because Elite was the contractor who built the entire home, any damage to components of the home would constitute damage to its scope of work and would fall under the “Damage To Your Work.” Continue reading
When entering into a consent judgment that purports to assign rights under an insurance policy, both the assignee and insurer should be cautious of various issues that could preclude coverage. Some of these issues include whether the insured was an additional insured under the policy, whether the judgment is for damage/loss covered under the policy, and, if not, whether it allocates between covered and non-covered loss, and whether the judgment was reasonable in light of the facts that existed at the time of settlement. These issues were discussed in Bradfield v. Mid-Continent Casualty Company and resolved in favor of the insurer.
In Bradfield, the Bradfields brought suit against the insurer as a result of a Coblentz Agreement entered into in an underlying state court case. The underlying state court case (the “Underlying Lawsuit”) was brought by the Bradfields against two construction companies, Horgo Signature Homes, Inc. (“Horgo Signature”) and Winfree Homes, Inc. (“Winfree”). The Underlying Lawsuit alleged that the Bradfields’ home was constructed by Horgo Signature and Winfree with latent defects that materially affected the structural integrity of the home. The defendants requested defense and indemnity from their insurer, Mid-Continent Casualty Company (“Mid-Continent”), but the insurer denied coverage for the Underlying Lawsuit. As a result, an agreement, known as a Coblentz Agreement, was reached between the Bradfields and the defendants, whereby the defendants entered into a consent judgment with Bradfields and assigned their rights under the Mid-Continent policy to the Bradfields. Pursuant to the terms of the agreement, the Bradfields brought a federal action against Mid-Continent for breach of contract and declaratory judgment.