The Eleventh Circuit Court of Appeals recently reaffirmed Florida as an injury-in-fact trigger state in Carithers v. Mid-Continent Cas. Co., Case No. 14-11639 (11th Cir. April 7, 2015). However, the Court did not end the manifestation versus injury-in-fact debate, choosing instead not to address the appropriate trigger where it is “difficult (or impossible) to determine when the property was damaged.”
The Eleventh Circuit is based in Atlanta, Georgia. It has appellate jurisdiction over all United States District Courts in Alabama, Georgia and Florida.
In Carithers, Mid-Continent issued a standard form CG 00 01 liability policy to a general contractor. The owners claimed damages for the cost to repair the brick exterior, tile and mudbase on an exterior balcony and garage caused by water intrusion through the balcony. The trial court found coverage for the cost to repair all of the items and for the contractor’s defense fees. The appellate court affirmed, in part, and reversed, in part.
The Court addressed several interesting issues relating to the duties to defend and indemnify a general contractor for construction defects under a standard form policy. First, the Court found that when the underlying complaint is ambiguous and does not provide the carrier with sufficient information to apply a particular trigger theory, the carrier has a duty to defend all claims.
Second, the Court held that the burden is on the plaintiff seeking coverage to establish a loss within the terms of the policy by distinguishing a subcontractor’s defective work from damage caused by a subcontractor’s defective work. With regard to the damage to the brick, the Court reversed the damage award because the owners had not offered proof that the application of the brick coating – the alleged cause of damage to the brick – was the work of the same subcontractor who installed the brick.
With regard to the tile and mudbase on the balcony, the Court reversed the damage award for the same reason. The owner claimed that inadequate adhesive and mudbase caused property damage to the tile. Reaffirming Amerisure Mutual Ins. Co. v. Auchter Co., 673 F.3d 1294 (11th Cir. 2012), the Court held that it was immaterial whether the tile was purchased directly by the owner or by the subcontractor. Instead, the pertinent inquiry was whether the tile and mudbase were installed by the same subcontractor.
Finally, with regard to “rip and tear,” the Court held that the cost to demolish and repair the defective balcony was covered property damage because it was necessary to repair the damage to the non-defective garage. The Court held that this was part of the “cost of repairing damage caused by the defective work . . . “, quoting U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 889 (Fla. 2007). Arguably, this holding works against the public policy of denying coverage to the contractor for shoddy work by creating coverage for the cost to repair defective work that would not otherwise exist.
Overall, this decision allows insurers and insureds to more accurately assess covered and uncovered damages in a standard CGL policy issued to a general contractor.