Auto-Owners Insurance Company v. Elite Homes, Inc. et al

Filing 30

ORDER granting 16 Plaintiff Auto-Owners' Motion for Summary Judgment; and denying 19 Defendant Elite Homes, Inc.'s Cross-Motion for Summary Judgment. The Clerk should enter judgment in favor of Auto-Owners and against Elite Homes, Inc., terminate all pending motions and deadlines, and close the file. Signed by Judge Timothy J. Corrigan on 2/3/2016. (SEJ)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
AUTO-OWNERS INSURANCE
COMPANY,
Plaintiff,
v.

Case No. 3:14-cv-1182-J-32MCR

ELITE HOMES, INC., a Florida
Corporation, JOSEPH A. CROZIER, a
married couple, and EMILY CROZIER,
a married couple,
Defendants.
ORDER
This declaratory judgment action concerning a commercial general liability
insurer’s duty to defend and the “your work” exclusion is before the Court on Plaintiff
Auto-Owners Insurance Company’s Motion for Summary Judgment (Doc. 16) and
Defendant Elite Homes, Inc.’s Cross-Motion for Summary Judgment (Doc. 19). 1
Defendants Joseph and Emily Crozier did not file a response in opposition to summary
judgment. On October 23, 2015, the Court heard oral argument on the pending
motions, the record of which is incorporated by reference. (Doc. 27).

Elite Homes moved for summary judgment pursuant to Federal Rule of Civil
Procedure 56(f)(1) in its response in opposition to summary judgment. (Doc. 19 at 8).
1

I.

BACKGROUND
A.

Underlying Lawsuit

In March 2007, Joseph and Emily Crozier contracted with Elite Homes, Inc. to
build them a single family residence in Jacksonville Beach. (Doc. 16 at 23, ¶ 5). After
the house was completed, the windows leaked. (Id. at ¶ 6). Elite Homes tried to fix the
problems, but the repairs allegedly failed. (Id. at ¶ 7). In June 2014, the Croziers sued
Elite Homes in state court for breach of contract and negligence. 2 Elite Homes
tendered the claim to its commercial general liability insurance carrier, Auto-Owners
Insurance Company, seeking coverage for any liability and a defense to the state court
suit. (Doc. 1 at 4). Auto-Owners is providing a defense but contends that Elite Homes’
policy does not cover the damages claimed by the Croziers. 3 (Id.). Auto-Owners
therefore filed this suit seeking a declaratory judgment that it owes Elite Homes
neither a duty to defend nor indemnify.4 (Id. at 9). By agreement of the parties, these
two issues were bifurcated. (Docs. 12, 15).

The underlying lawsuit is currently pending in the Circuit Court in Duval
County, Florida, Crozier v. Elite Homes, Inc., Case No. 16-2014-CA-3913 Div. CV-E
(Fla. Cir. Ct. 2014). (Doc. 16 at 2).
The Croziers’ attorney, William Douglas Stanford, Jr., was present for the
hearing on the motions for summary judgment, including the discussion regarding
coverage issues.
2

The state court suit is set for trial in March 2016 before the Honorable James
H. Daniel. Both parties cite to provisions of the Croziers’ amended complaint, which
is the operative pleading.
3

Auto-Owners filed this declaratory judgment action in federal court pursuant
to 28 U.S.C. § 1332. (Doc. 1 at 1).
4

2

Auto-Owners now moves for summary judgment on the issue of its duty to
defend. (Doc. 16). Elite Homes filed a response in opposition, arguing the Court should
deny Auto-Owners’ motion and grant Elite Homes summary judgment on the duty to
defend instead (Doc. 19), to which Auto-Owners replied (Doc. 22).
B.

Auto-Owners Policy Provisions

The Auto-Owners policy (Doc. 1-2) covers “property damage” that occurs within
the policy period. It defines “property damage” as:
a. Physical injury to tangible property, including all
resulting loss of use of that property. All such loss of use
shall be deemed to occur at the time of the physical injury
that caused it; or
b. Loss of use of tangible property that is not physically
injured. All such loss shall be deemed to occur at the time of
the “occurrence” that caused it.
(Id. at 22) (emphasis added).
The policy excludes from coverage damage to “your work,” which is defined as:
(1) Work or operations performed by you [the insured] or on
your behalf; and
(2) Materials, parts or equipment furnished in connection
with such work or operations.
(Id. at 23) (emphasis added). “Your work” includes:
(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 warnings or
instructions.
(Id.).

3

The “Damage To Your Work” provision excludes from coverage “‘[p]roperty
damage’ to ‘your work’ arising out of it or any part of it and included in the ‘productscompleted operations hazard.’”5 (Id. at 8) (emphasis added).
The policy also contains an “impaired property” exclusion that is primarily
directed to damages for loss of use. (Id.). Specifically, the “Damage To Impaired
Property Or Property Not Physically Injured” provision excludes from coverage
“‘[p]roperty damage’ to ‘impaired property’ or property that has not been physically
injured, arising out of: (1) [a] defect, deficiency, inadequacy or dangerous condition in
‘your product’ or ‘your work’; or (2) [a] delay or failure by you or anyone acting on your
behalf to perform a contract or agreement in accordance with its terms.” (Id.) (emphasis
added). The “impaired property” exclusion, however, “does not apply to the loss of use
of other property arising out of sudden and accidental physical injury to ‘your product’
or ‘your work’ after it has been put to its intended use.” (Id.) (emphasis added).
II.

STANDARD OF REVIEW
A.

Summary Judgment

Summary judgment is proper where “there is no genuine issue as to any
material fact” and “the movant is entitled to judgment as a matter of law.” Fed. R. Civ.
P. 56(c). “The burden of demonstrating the satisfaction of this standard lies with the
movant, who must present pleadings, depositions, answers to interrogatories, and

Unlike some other cases in this area, the policy at issue here does not contain
a “subcontractor’s exception” to the “your work” exclusion. (Doc. 1-2 at 8; Doc. 16 at
13). Moreover, Elite Homes has not asserted that the involvement of a subcontractor
affects the coverage issue.
5

4

admissions on file, together with the affidavits, if any, that establish the absence of
any genuine material, factual dispute.” Branche v. Airtran Airways, Inc., 342 F.3d
1248, 1252-53 (11th Cir. 2003) (internal quotations omitted). An issue is genuine when
the evidence is such that a reasonable jury could return a verdict for the non-movant.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986).
In determining whether summary judgment is appropriate, a court must draw
inferences from the evidence in the light most favorable to the non-movant and resolve
all reasonable doubts in that party’s favor. See Centurion Air Cargo, Inc. v. United
Parcel Serv. Co., 420 F.3d 1146, 1149 (11th Cir. 2005). However, “Rule 56 mandates
the entry of summary judgment, upon motion, against a party who fails to make a
showing sufficient to establish an element essential to his case on which he bears the
burden of proof at trial.” Schechter v. Ga. State Univ., 341 F. App’x 560, 562 (11th Cir.
2009) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).
B.

Duty to Defend

Federal courts sitting in diversity must apply the choice of law rules of the
forum state. See Miranda Const. Dev., Inc. v. Mid-Continent Cas. Co., 763 F. Supp. 2d
1336, 1339 (S.D. Fla. 2010). The parties agree that Florida law governs this dispute.
In Florida, “the general rule is that an insurance company’s duty to defend an
insured is determined solely from the allegations in the complaint against the insured,
not by the actual facts of the cause of action against the insured, the insured’s version
of the facts[,] or the insured’s defenses.” Amerisure Ins. Co. v. Gold Coast Marine
Distribs., Inc., 771 So. 2d 579, 580-81 (Fla. Dist. Ct. App. 2000); see also Jones v. Fla.
5

Ins. Guar. Ass’n, Inc., 908 So. 2d 435, 442-43 (Fla. 2005). If the complaint alleges facts
which fairly create coverage under the policy, the duty to defend is triggered. See
Trizec Props., Inc. v. Biltmore Const. Co., 767 F.2d 810, 811-12 (11th Cir. 1985)
(citations and internal quotation marks omitted) (applying Florida law). “If an
examination of the allegations of the complaint leaves any doubt regarding the
insurer’s duty to defend, the issue is resolved in favor of the insured.” Lawyers Title
Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575, 1580-81 (11th Cir. 1995) (citations
omitted). However, if the alleged facts and legal theories do not fall within a policy’s
coverage, no duty to defend arises. See id. at 1584. Unsupported and conclusory “buzz
words” in the complaint are insufficient to trigger coverage. See State Farm Fire and
Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004). Inferences, too, are not
enough. See Fun Spree Vacations, Inc. v. Orion Ins. Co., 659 So. 2d 419, 421-22 (Fla.
Dist. Ct. App. 1995) (“[T]he allegations in the complaint control in determining the
insurer’s duty to defend . . . inferences are not sufficient.”) (citations omitted).6
III.

ANALYSIS
The parties agreed at oral argument that this case essentially boils down to one

issue: whether the Croziers’ amended complaint in the underlying action sufficiently
alleges damage to “other property,” such that the policy’s “your work” exclusion does
not bar coverage.7 In relevant part, the amended complaint alleges that the water

The parties agree that where there is no duty to defend, there is no duty to
indemnify. See E.S.Y., Inc. v. Scottsdale Ins. Co., No. 15-21349-CIV, 2015 WL
6164666, at * 6 (S.D. Fla. Oct. 14, 2015) (citing Farrer v. U.S. Fid. & Guar. Co., 809
So. 2d 85, 88 (Fla. Dist. Ct. App. 2002)).
6

7

The parties agreed at oral argument that any dispute regarding “loss of use”
6

intrusion due to leaky windows caused: “extensive damage to other property
includ[ing] the frame subsurface, sheathing, insulation, drywall, and interior finishes”
(Doc. 16 at 24, ¶ 14); “damage to interior portions of the home” (id. at 28, ¶ 32); and
“damage to other property including, but not limited to, exterior wood framing, wood
substrate, vapor barriers, insulation, drywall, and interior finishes” (id. at ¶ 33).
As such, Elite Homes argues, the underlying action sufficiently alleges “other
property” damage triggering Auto-Owners’ duty to defend. (Doc. 19 at 4-8). AutoOwners, on the other hand, contends that the allegations of damage solely relate to
the home, all of which is Elite Homes’ “work.” (Doc. 16 at 12-14). Therefore, AutoOwners argues, the “your work” exclusion applies and precludes coverage.
While the parties agreed at oral argument that any allegations of personal
property damage would be “other property” and trigger the duty to defend, even under
the “most liberal and broadest of readings,” the underlying amended complaint
contains no allegations of damage to personal property or property other than the
home itself. Cf. Bradfield v. Mid-Continent Cas. Co., No. 5:13-CV-222-OC-10PRL,
2015 WL 6956543, at *16 (M.D. Fla. Nov. 10, 2015) (insurer had no duty to defend
where plaintiffs only alleged damages for the cost of repairing or replacing defective

is subsumed within the overarching issues of whether the “your work” exclusion
applies and whether the amended complaint sufficiently alleges damage to “other
property.” In addition, Elite Homes concedes in its response that the policy’s mold,
stucco, and impaired property exclusions “have no bearing” on the duty to defend
analysis because the amended complaint contains allegations that fall outside of these
exclusions. (Doc. 19 at 8). Accordingly, the Court will not address allegations regarding
loss of use, nor any concerning mold, stucco, and impaired property exclusions.
7

work caused by latent defects, including water intrusion, and did not allege “property
damage” covered by the insurance policy);8 see also Miranda, 763 F. Supp. 2d at 1340.

Bradfield was decided on November 10, 2015, and thus was unavailable to the
parties at the October 23, 2015 oral argument. It contains an extensive history of
commercial general liability policies in Florida, which the Court finds instructive here.
See Bradfield, 2015 WL 6956543, at *13-16.
8

With some procedural variations, but otherwise similar to this case, in
Bradfield, a homeowner sued an insurer for failing to defend the construction company
which defectively constructed the homeowner’s custom residential home. The
underlying complaint alleged that latent defects led to various problems, including
water intrusion, which affected the structural integrity of the home. (Id. at *16). Judge
Hodges concluded that the complaint in the underlying case “only sought damages for
the repair and replacement of defective materials and/or defective work performed by
[the contractor],” which did not constitute “property damage” covered by the
commercial general liability policy. (Id. at *17) (noting that, as in Amerisure Mut. Ins.
Co. v. Auchter Co., 673 F.3d 1294 (11th Cir. 2012), allegations of “defects in the form
of repair and replacement of improper and/or defective materials, improper
installation, and the use of materials that do not comport with building codes and/or
plan specifications” are not “property damage”). The court emphasized the absence of
any mention of damage to floors, walls, ceilings, cabinetry, doors, or appliances, much
less a broader discussion of what portions of the Bradfield home were damaged by
water intrusion. (Id.). In the absence of allegations of damage to specific, non-defective
portions of the Bradfield home, the homeowner failed to allege any “property damage”
covered by the policy. Therefore, the Bradfield court concluded that the homeowner
did not establish a duty to defend, reasoning the claimed defects did not fall within
the policy’s definition of “property damage” and the mold exclusion excluded any other
claimed damages relating to mold. (Id. at 18). Consequently, with no “property
damage” alleged, the court did not reach the issue of whether a “your work” exclusion
applied. See Auchter, 673 F.3d at 1309 (“Because we determine that Amelia’s claim
involves no ‘property damage,’ we need not determine whether any policy exclusions
or exceptions apply.”) (citations omitted).
While on its face Bradfield bears some similarity to this case, the Court notes
key distinctions. Unlike in Bradfield, the Croziers have (undisputedly) alleged
“property damage” under the policy through their allegations of damage to nondefective portions of the home, such as the frame subsurface, sheathing, and other
structural components. (Doc. 16 at 24, ¶ 14). However, Auto-Owners argues (Doc. 16
at 12), and Elite Homes has conceded (Doc. 19 at 5), that damage to Elite Homes’ own
work (i.e., the frame subsurface, sheathing, etc.) is excluded from coverage under the
policy’s “your work” exclusion. Consequently, Elite Homes has marshalled its
arguments around the “other property” allegations in the amended complaint.
8

The amended complaint alleges that Elite Homes constructed the residence and that
defective installation of the windows led to systemic water intrusion throughout the
home. (Doc. 16 at 23-25, ¶¶ 5-16). While the allegations in paragraphs 14, 32, and 33
include language such as “damage to other property,” “damage to interior portions of
the home,” and “damage to other property including, but not limited to,” these claims,
read in context, relate solely to the home’s structure itself, all constructed by Elite
Homes. Elite Homes unequivocally states in its response that “damage to the insured’s
work is excluded from coverage,” (Doc. 19 at 5), thus conceding that the Croziers’
allegations of damage to the frame subsurface, sheathing, insulation, drywall, and
interior finishes constitute damage to Elite Homes’ work and fall within the “your
work” exclusion. That exclusion states that “‘property damage’ to ‘your work’ arising
out of it or any part of it . . .” is excluded from coverage. Accordingly, the damage to
the structural elements of the home, which allegedly occurred due to Elite Homes’
defective installation of the windows, certainly “arises” out of Elite Homes’ work and
is therefore excluded from coverage.
The language in the amended complaint which arguably constitutes the closest
call—“damage to interior portions of the home”—is, on its face, an allegation of damage

Therefore, the analysis in Bradfield of a distinction between a contractor’s installation
of defective components (which would be excluded from coverage as outside the
definition of “property damage”), and non-defective components (which might be
covered “property damage”) is not the fulcrum on which the analysis in this case turns.
Instead, due to the “your work” provision excluding from coverage any damage to nondefective components installed by Elite Homes, the parties—and consequently the
Court—focus their attention on whether the Croziers’ amended complaint sufficiently
alleges damage to “other property.”
9

to the home, which is (as described above) Elite Homes’ work. While the Court is not
suggesting that Florida law requires an underlying complaint to allege what specific
personal property sustained damage, Florida law makes it clear that “inferences are
insufficient to trigger coverage.” See Fun Spree, 659 So. 2d at 421-22. Accordingly, as
the facts are alleged in the Croziers’ amended complaint, any determination that it
alleges damage to personal property (in contrast to the structure of the home itself)
would be a proscribed inference.
Despite Elite Homes’ contentions, the facts of this case are distinguishable from
those in J.B.D. Construction, Inc. v. Mid-Continent Casualty Co., 571 F. App’x 918
(11th Cir. 2014) and Voeller Construction v. Southern-Owners Insurance Co., No. 8:13CV-3169-T-30MAP, 2015 WL 1169420, at *1 (M.D. Fla. Mar. 13, 2015) (citing J.B.D.),
in which the Eleventh Circuit and Middle District of Florida respectively found a duty
to defend.
In J.B.D., Sun City, the owner of the fitness center, noticed damage caused by
water leaks in the fitness center’s roof, windows, and doors. J.B.D., 571 F. App’x at
919-20. This damage included rusting steel, peeling paint, and blistering and
discolored stucco. Id. at 920. Despite efforts to repair the damage, Sun City believed
the construction was defective and refused to release the final construction payment
to J.B.D. Thus, J.B.D. sued Sun City for the unpaid amount. In response, Sun City
filed three counterclaims, alleging that J.B.D.’s construction defects violated minimal
building codes, caused damage to the building, and caused “damages to the interior of
the property, other building components and materials, and other, consequential and
10

resulting damages” and “damage to other property.” Id. The Eleventh Circuit reversed
the district court’s holding that the insurer had no duty to defend:
Count II of the Sun City Counterclaim, which is the statutory civil action
for violations of the Florida Building Code, unequivocally states a claim
for “damage to other property” caused by J.B.D.’s alleged building code
violations. This reference to “other property” potentially included
damage to non-fitness center property such as the adjacent Atrium
building to which the fitness center was being connected or damage to
other equipment, such as exercise machines, which may have been
moved into the building post-construction. Count III of the
Counterclaim, the negligence claim, also references “damages to the
interior of the property, other building components and materials,” and
thus potentially includes allegations of damage to the same non-project
property. Accordingly, these allegations of damage to property other
than the fitness center caused by J.B.D.’s or its subcontractor’s defective
work potentially came within MCC Policy coverage and, therefore,
triggered [the insurer’s] duty to defend J.B.D. in the entire suit.
Id. at 926.
As an initial matter, unpublished opinions like J.B.D. are not considered
binding precedent, though they may be cited as persuasive authority. United States v.
Mejia, 154 F.3d 1297, 1298 n.1 (11th Cir. 1998) (“[u]npublished opinions of this court
are non-binding precedent”) (citing Eleventh Circuit Rule 36-2 (stating in part that
“[u]npublished opinions are not considered binding precedent”)).
Moreover, though on its face J.B.D. is similar to this case, on close analysis,
distinctions arise. While Auto-Owners disputes that it has any duty to defend Elite
Homes, the parties in J.B.D. agreed at oral argument that the insurer had a duty to
defend in the underlying litigation. J.B.D., 571 F. App’x at 926. Thus, the Eleventh
Circuit’s extended discussion of the insurer’s duty to defend is dicta, for “all that is
said which is not necessary to the decision of an appeal given the facts and
11

circumstances of the case is dicta.” Aron v. United States, 291 F.3d 708, 716 (11th Cir.
2002) (Carnes, J., concurring). And, of course, “dicta is not binding on anyone for any
purpose.” Edwards v. Prime, Inc., 602 F.3d 1276, 1298 (11th Cir. 2010).
In addition, the Eleventh Circuit noted that J.B.D. and Sun City entered into a
contract for the construction of a fitness center, to be built as an addition to an existing
“Atrium” building physically joined at the buildings’ roof lines. J.B.D., 571 F. App’x at
919. The contract, therefore, contemplated property other than the fitness center
property. Here, however, Elite Homes agreed to construct a single family home for the
Croziers; there was no “existing property” to consider and none was referenced in the
parties’ contract.9 Thus, the Croziers’ amended complaint only references damages to
the structure itself, which fall within the policy’s “your work” exclusion. At oral
argument, counsel for Elite Homes did not elaborate on what personal property was
damaged by the defective work, instead relying on references (not alleged in the
amended complaint) to hypothetical grandfather clocks and floor rugs. And, the
Croziers have made no attempt to amend the complaint to allege damage to personal
property.10

In fact, the contract provided for demolition of “any existing living structure,
accessory structure, swimming pool, septic tank, driveway, and the like.” (Doc. 1-1 at
11).
9

Given the presence of the Croziers’ attorney at oral argument and the
discussion as to whether the underlying complaint sufficiently alleged damage to
personal property, the Court frankly expected the Croziers to seek to amend their
complaint in the underlying action to allege personal property damage if they had a
good faith basis to do so. However, they have not.
10

12

Voeller is even more easily distinguished. There, the underlying complaint
alleged that Voeller Construction defectively built a condominium building and
defectively installed its components. See Voeller, 2015 WL 1169420, at *3. Similar to
Auto-Owners, insurer Southern-Owners argued that the “your work” exclusion
combined with the “property damage” definition in the insurance policies precluded
coverage. Id. Upon review of the underlying complaint, however, the court found
sufficient facts regarding damage to “other property” to invoke potential coverage
under the policies. Id. at *4. In particular, a report attached to the complaint
referenced damage to an existing sea wall, as well as water intrusion into equipment
and elevator rooms which might have contained equipment added post-construction.
Id.
In contrast, there are no facts alleging damage unrelated to the structure of the
home in the Croziers’ amended complaint. Moreover, the amended complaint does not
reference any evidence similar to that contained in the report in Voeller which might
indicate damage to property not encompassed by the “your work” exclusion.
As Auto-Owners argues, this case is more similar to Miranda Construction
Development, Inc. v. Mid-Continent Casualty Co., a duty to defend case concerning
the defective construction of a residence’s foundation. 763 F. Supp. 2d 1336 (S.D. Fla.
2010). Notwithstanding that Miranda did not involve an “other property” clause, the
underlying complaint contained no allegations of damage to property beyond the home
itself. Like here, the Miranda court considered that the complaint included the
language “including but not limited to,” which preceded a list of damages to the
13

flooring, trusses, roof, and walls. The court concluded that “all damages alleged in the
underlying complaint are directly tied to the home and the alleged defective
construction of the same by Miranda.” Id. at 1340. Accordingly, such damages were
not covered because of the “your work” exclusion in the insurance policy. Id.
Such is the case here. The “other property” damage specified in the underlying
complaint relates only to the structure of the home. While any doubts regarding the
duty to defend are resolved in favor of the insured under Florida law, the allegations
of the complaint must still “fairly and potentially bring the suit within policy
coverage.” Jones, 908 So. 2d at 438. Nothing 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.
Accordingly, Auto-Owners owes no duty to defend Elite Homes. Further, having
found that there is no duty to defend, there is no obligation for Auto-Owners to
indemnify Elite Homes for any settlement or judgment in the Croziers’ lawsuit.
Accordingly, it is hereby
ORDERED:
1. Plaintiff Auto-Owners Insurance Company’s Motion for Summary
Judgment (Doc. 16) is GRANTED.
2. Defendant Elite Homes, Inc.’s Cross-Motion for Summary Judgment
(Doc. 19) is DENIED.
14

3. The Clerk should enter judgment in favor of Plaintiff Auto-Owners
Insurance Company and against Defendant Elite Homes, Inc., declaring that under
the Auto-Owners Insurance Company Policy for Commercial General Liability
Coverage, Number 992322-78581888-07, Auto-Owners owes no duty to defend or
indemnify Elite Homes in the lawsuit currently pending in the Circuit Court in Duval
County, Florida, Crozier v. Elite Homes, Inc., Case No. 16-2014-CA-3913 Div. CV-E
(Fla. Cir. Ct. 2014).
4. The Clerk should terminate all pending motions and deadlines, and close
the file.
DONE AND ORDERED in Jacksonville, Florida the 3rd day of February,
2016.

sj
Copies to:
Counsel of record

15