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Florida Construction Law News

15APR 2016

Federal Court Recently Finds No Coverage Under “Your Work” Exclusion

by Ryan M. Charlson, Esq.

The United States District Court for the Middle District of Florida recently rendered a decision in Auto-Owners Insurance Company v. Elite Homes, Inc.[1] 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.[2]

Under Florida law, if the allegations in a complaint leave any ambiguity regarding a duty to defend, a coverage dispute is resolved in favor of the insured.[3] This determination is based solely on the allegations in the complaint against the insured.[4] The Croziers’ Amended Complaint alleged that the leaking windows led to systemic water intrusion throughout the home and caused damage to the frame subsurface, sheathing, insulation, drywall, and interior finishes. There were no allegations of damage to the Croziers’ personal property.

Elite cited to J.B.D. Construction, Inc. v. Mid-Continent Casualty Co.[5] and Voeller Construction v. Southern-Owners Ins. Co.[6] to persuade the Court that AOIC should be required to provide coverage for the Croziers’ claims. In J.B.D., the plaintiff alleged that the contractor’s work caused damage to an existing building and workout equipment, which were not included in the contractor’s scope of work. Similarly, in Voeller Construction, the complaint contained allegations of damage caused to an existing seawall that was not part of the subject construction. The Court in Elite Homes distinguished these cases on the grounds that there were clear allegations of damage to “other property” that were absent from the Croziers’ Second Amended Complaint.

The Court, relying upon Miranda Construction Development, Inc. v. Mid-Continent Casualty Co.,[7] found that the Amended Complaint’s allegation of “damage to interior potions of the home” was insufficient to impose a duty to defend on AOIC because “inferences are insufficient to trigger coverage.”[8] In granting AOIC’s Motion for Summary Judgment, the Court found that “[n]othing on the face of the Croziers’ amended complaint suggests that the water intrusion damaged anything beyond Elite Homes’ work, as defined in the ‘your work’ exclusion. Any other reading of the amended complaint would require the Court to give credence to conclusory ‘buzz words,’ and to indulge in impermissible inferences.”[9] Because there were no allegations of damage to other property, AOIC did not owe a duty to defend Elite. The Court further found that because no duty to defend existed, there was no duty to indemnify Elite for any settlement or judgment in the underlying lawsuit.

[1] No. 3:14-cv-1182-J-32-MCR, 2016 U.S. Dist. LEXIS 12910 (M.D. Fla. Feb. 3, 2016) (note: the final opinion has not been released for publication in the permanent law reports and until release, it is subject to revision or withdrawal).

[2] The “Damage To Your Work” provision excluded “‘[p]roperty damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard.’”

[3] Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575, 1580-81 (11th Cir. 1995).

[4] Amerisure Ins. Co. v. Gold Coast Marine Distribs., Inc., 771 So. 2d 579, 580-81 (Fla. 4th DCA 2000); Jones v. Fla. Ins. Guar. Ass’n., Inc., 908 So. 2d 435, 442-43 (Fla. 2005).

[5] 571 F. App’x 918 (11th Cir. 2014).

[6] No. 8:13-CV-3169-T-30-MAP, 2015 WL 11669420 at *1 (M.D. Fla. Mar. 13, 2015)

[7] 763 F. Supp. 2d 1336 (S.D. Fla. 2010).

[8] Fun Spree Vacations, Inc. v. Orion Ins. Co., 659 So. 2d 419, 421-22 (Fla. 3d DCA 1995).

[9] Auto-Owners Ins. Co. v. Elite Homes, Inc., supra note 1.