Auto-Owners Insurance Company v. Environmental House Wrap, Inc. et al
Filing
84
ORDER granting 44 CalAtlantic's Motion for Summary Judgment and 46 Biscayne Bay's Motion for Partial Summary Judgment, and denying 47 Auto-Owners' Motion for Summary Judgment, as to the duty to defend. The issue of Auto-Own ers' duty to indemnify is STAYED pending completion of the Underlying Litigation. Joint Status Report due upon conclusion of the Underlying Lawsuit, or if not earlier resolved, by November 7, 2019, and every 90 days thereafter. The Clerk of the Court is directed to enter a final partial judgment on the duty to defend, and administratively close the file. See Order for details. Signed by Judge Marcia Morales Howard on 7/12/2019. (MHM)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION
AUTO-OWNERS INSURANCE COMPANY,
Plaintiff,
Case No. 3:17-cv-817-J-34PDB
v.
ENVIRONMENTAL HOUSE WRAP, INC.,1
and BISCAYNE BAY HOMEOWNERS
ASSOCIATION, INC.,
Defendants.
/
ORDER
THIS CAUSE is before the Court on cross-motions for summary judgment as to
Plaintiff Auto-Owners Insurance Company’s (Auto-Owners) duty to defend CalAtlantic
Group, Inc. (CalAtlantic) in an underlying state court action initiated by Defendant Biscayne
Bay Homeowners Association, Inc. (Biscayne Bay). See Defendant CalAtlantic Group,
Inc.’s Motion for Summary Judgment and Incorporated Memorandum of Law (Doc. 44;
CalAtlantic’s Motion); Defendant Biscayne Bay Homeowners Association, Inc.’s Motion for
Partial Summary Judgment Against Auto-Owners Insurance Company and Memorandum
of Law in Support Thereof (Doc. 46; Biscayne Bay’s Motion); Auto-Owners Insurance
Company’s Motion for Summary Judgment and Incorporated Memorandum of Law (Doc.
47; Auto-Owners’ Motion), each filed on December 14, 2018. The parties filed their
respective responses on January 7, 2019.
See Defendant CalAtlantic Group, Inc.’s
Memorandum in Opposition to Plaintiff Auto-Owners Insurance Company’s Motion for
Environmental House Wrap, Inc. (Environmental) has not appeared despite service of
process, see Return of Service (Doc. 12; filed October 25, 2017), and the Clerk of Court has entered
default against it, see Clerk’s Entry of Default (Doc. 14; filed October 27, 2017).
1
Summary Judgment (Doc. 53; CalAtlantic’s Response to Auto-Owners’ Motion); AutoOwners Insurance Company’s Response in Opposition to Biscayne Bay Homeowners
Association, Inc.’s Motion for Partial Summary Judgment and Incorporated Memorandum
of Law (Doc. 54; Auto-Owners’ Response to Biscayne Bay’s Motion); Auto-Owners
Insurance Company’s Response in Opposition to the Ryland Group, Inc.’s Motion for
Summary Judgment and Incorporated Memorandum of Law (Doc. 55; Auto-Owners’
Response to CalAtlantic’s Motion); Defendant Biscayne Bay Homeowners Association,
Inc.’s Response in Opposition to Plaintiff Auto-Owners Insurance Company’s Motion for
Summary Judgment (Doc. 56; Biscayne Bay’s Response to Auto-Owners’ Motion).
In their Motions, the parties also moved for summary judgment on the issue of AutoOwners’ duty to defend Environmental. However, at a motion hearing held on April 22,
2019, the Court denied Auto-Owners’ Motion to the extent Auto-Owners sought a
declaration that it did not have a duty to defend Environmental in the underlying state court
action, and in turn granted CalAtlantic and Biscayne Bay’s Motions to the extent the Court
declared that “Auto-Owners has a duty to defend and must defend Environmental against
the claims alleged in the underlying state court action[.]” See Order (Doc. 76). In light of
new arguments raised by Auto-Owners at the hearing, the Court took the Motions under
advisement to the extent they sought declarations regarding Auto-Owners’ duty to defend
CalAtlantic. Id. The Court directed the parties to submit additional briefing “limited to the
duty to defend CalAtlantic for damages that may have occurred before the operations were
completed but were not identified until after the completion of the project[,]” id., which they
have since done. See Auto-Owners Insurance Company’s Supplemental Brief on the
Products-Completed Operations Exclusion (Doc. 81; Auto-Owners’ Supplemental Brief);
2
Defendant Biscayne Bay Homeowners Association, Inc.’s Response to Auto-Owners
Insurance Company’s Supplemental Brief on the Products-Completed Operations Hazard
Exclusion (Doc. 83; Biscayne Bay’s Supplemental Brief). Accordingly, the remaining issue
of whether Auto-Owners had a duty to defend CalAtlantic in the underlying state court
action is ripe for review.
I.
Background2
This insurance coverage dispute arises out of a lawsuit filed in state court on May
20, 2016, by Biscayne Bay regarding the construction and development of a 24-townhome
community known as the Biscayne Bay Townhomes in Jacksonville, Florida (the Project).
See Biscayne Bay Homeowners Ass’n, Inc. v. Evergreen Visibility, LLC, Case No. 2016CA-3462 (Fla. 4th Cir. Ct. 2016) (Underlying Lawsuit).3
Biscayne Bay, which is the
homeowners association responsible for the maintenance of the townhomes, sued
CalAtlantic and Environmental, along with more than 30 other defendants, in state court
for damages caused by alleged defects in the construction of the Project. See id. On July
18, 2017, Auto-Owners initiated the instant action for declaratory judgment, seeking a
declaration that it is not obligated to defend or indemnify Environmental or CalAtlantic in
the Underlying Lawsuit.4 See Complaint for Declaratory Relief (Doc. 1).
Because this case is before the Court on cross-motions for summary judgment, the Court
will, when addressing the merits of the party’s motions, view the facts presented in the light most
favorable to the party or parties opposing summary judgment. The Court will so note its perspective
when appropriate. The facts recited in this section are either undisputed, or any disagreement has
been indicated. See T-Mobile South LLC v. City of Jacksonville, Fla., 564 F. Supp. 2d 1337, 1340
(M.D. Fla. 2008).
3 The Court takes judicial notice of the state court proceedings in their entirety. See Fed.
R. Evid. 201.
4 At the April 22, 2019 hearing, the Court granted Biscayne Bay and CalAtlantic’s joint
motion to stay the issue of Auto-Owners’ duty to indemnify. See Order.
2
3
On April 19, 2019, Biscayne Bay and CalAtlantic notified the Court that they had
settled their claims in the Underlying Lawsuit, and that “[t]he settlement included an
assignment of . . . CalAtlantic’s rights, claims, and interests for additional insured coverage
under the subject Auto-Owners policy.” See Biscayne Bay Homeowners Association, Inc.’s
and CalAtlantic Group, Inc.’s Joint Motion to Substitute (Doc. 74; Motion to Substitute). At
Biscayne Bay and CalAtlantic’s request, and without objection by Auto-Owners,5 the Court
directed the Clerk of Court to substitute Biscayne Bay, as assignee of CalAtlantic, as
Defendant in place of CalAtlantic. See Endorsed Order Granting Motion to Substitute (Doc.
82; May 6, 2019). Thus, the only parties still actively litigating this case are Auto-Owners
and Biscayne Bay.
A.
The Allegations of the Underlying Complaint
For purposes of determining whether Auto-Owners had a duty to defend CalAtlantic
in the Underlying Lawsuit before the parties settled, the operative complaint is Biscayne
Bay’s Third Amended Complaint, filed on September 14, 2018.6 See Auto-Owners’ Motion,
Ex. A: Third Amended Complaint (Doc. 47-1; Underlying Complaint). According to the
In its response to the Motion to Substitute, Auto-Owners stated that it did “not oppose the
procedural substitution of [Biscayne Bay], as assignee of CalAtlantic.” See Auto-Owners Insurance
Company’s Response to the Association and CalAtlantic’s Joint Motion to Substitute (Doc. 78) at
1. However, Auto-Owners also noted that it did “not agree that such substitution grants [Biscayne
Bay] any substantive rights[,]” id. at 2, and that by consenting to the substitution, Auto-Owners was
not waiving “any rights or defenses related to the validity or enforceability of the assignment or
settlement agreement[,]” id. at 3.
6 The Court notes that after settling with CalAtlantic and absorbing CalAtlantic’s third-party
claims against various state court defendants, Biscayne Bay filed a fourth amended complaint in
the Underlying Lawsuit. In identifying the third amended complaint as the operative pleading, the
Court recognizes that ordinarily “[c]overage is determined from examining the most recent
amended pleading, not the original pleading.” Trailer Bridge, Inc. v. Illinois Nat. Ins. Co., 657 F.3d
1135, 1142 (11th Cir. 2011). However, because Biscayne Bay voluntarily dismissed CalAtlantic
before filing the fourth amended complaint in the Underlying Lawsuit, the fourth amended complaint
cannot be the operative pleading for determining whether Auto-Owners had a duty to defend
CalAtlantic until that point.
5
4
Underlying Complaint, CalAtlantic was the developer and general contractor for the Project.
See id. ¶ 12. Environmental was a subcontractor responsible for installing the “building
wrap, flashing, and building envelope waterproof system at all 24 buildings in the
community.” Id. ¶¶ 46, 278.
Biscayne Bay alleged that all of the various state court defendants “failed to
reasonably and adequately plan, develop, design, or construct the Townhomes.” Id. ¶ 90.
As a result of the defendants’ failures, Biscayne Bay asserted that the townhomes suffer
from the following defects: “foundations; soils; site work; exterior wall and building envelope
defects; waterproofing defects; concrete and flatwork defects; defects in the roofing
systems, and cladding systems and related components; and the material and
workmanship incident to their installation.” Id. ¶ 91. In addition, Biscayne Bay alleged that
the aggregate effect of the defects “has caused and will continue to cause, communitywide water-intrusion damage to other components of the roofs and other components of
the building including, but not limited to the building exteriors, building framing, building
lath, building sheathing, drywall, paint, interior and exterior finishes, erosion of soils,
damages to concrete slabs, driveways, and walks, and damages to site work and other
components of the Townhomes . . . .” Id. ¶¶ 95, 104, 112-13, 120-21, 279. Based in part
on these allegations, Biscayne Bay brought three claims against CalAtlantic and two claims
against Environmental. As to CalAtlantic, Biscayne Bay asserted claims for violation of
Florida’s building code (Count I), negligence (Count II), and breach of implied warranty
(Count XLII). See Underlying Complaint at 22-27, 95-96. As to Environmental, Biscayne
Bay asserted claims for negligence (Count III) and violation of Florida’s building code
(Count XIX). See id. at 27-29, 56-57.
5
Notably, in the Underlying Complaint, Biscayne Bay did not allege when the water
damage actually occurred or when it was discovered. Instead, Biscayne Bay alleged only
that “[t]he defects and deficiencies were not readily discoverable by [Biscayne Bay] or its
members through reasonable inspection at the time of purchase, and [Biscayne Bay] and
its members became aware of the defects and deficiencies only after inspections
performed by expert consultants.” Id. ¶ 94. Additionally, in the Underlying Complaint,
Biscayne Bay did not allege when Environmental completed its work on the Project, when
certificates of occupancy were issued for the townhomes, or when Biscayne Bay took
possession of the townhomes.
B.
The Policy
Auto-Owners attached the commercial general liability (CGL) policy at issue as an
exhibit to its Complaint for Declaratory Relief. See id., Ex. D: Commercial General Liability
Insurance Policy Issued by Auto-Owners Insurance Company to Environmental House
Wrap, Inc. (Doc. 1-4; Policy). Environmental is the named insured in the Policy and
CalAtlantic is named as an additional insured. See Policy at 7-8.7 The Policy provides
coverage for “those sums that the insured becomes legally obligated to pay as damages
because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” See Policy
at 8. For the insurance to apply, the “property damage” must be “caused by an ‘occurrence’
that takes place in the ‘coverage territory.’” Id. An “occurrence” is defined as “an accident,
including continuous or repeated exposure to substantially the same general harmful
conditions.” Id. at 20. In addition, the “property damage” must “occur[ ] during the policy
period.” Id. at 8. The Policy defines “property damage,” in relevant part, as “[p]hysical injury
Because the Policy itself is not consecutively paginated, the Court will cite to the Policy
using the page numbering assigned by the Court’s CM/ECF docketing system.
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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.” Id. at 20-21.
The Policy provides that Auto-Owners “will have the right and duty to defend the insured
against any ‘suit’ seeking . . . damages for . . . “property damage.” Id. at 8.
The Policy also provides products-completed operations hazard coverage to
Environmental, which is defined in the Policy as follows:
[PCOH] [i]ncludes all . . . “property damage” occurring away from
premises you own or rent and arising out of . . . “your work”
except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned.
However, “your work” will be deemed completed at the
earliest of the following times:
(a) When all of the work called for in your contract has
been completed.
(b) When all of the work to be done at the job site has
been completed if your contract calls for work at more
than one job site.
(c) When that part of the work done at a job site has
been put to its intended use by any person or
organization other than another contractor or
subcontractor working on the same project.
Work that may need service, maintenance, correction, repair or
replacement, but which is otherwise complete, will be treated as
completed.
Id. at 20.
In relevant part, the Policy excludes coverage for:
j. “Property damage” to:
...
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(5) That particular part of real property on which you or any
contractors or subcontractors working directly or indirectly on
your behalf are performing operations, if the “property
damage” arises out of those operations; or
(6) That particular part of any property that must be restored,
repaired or replaced because “your work” was incorrectly
performed on it.
...
Paragraph (6) of this exclusion does not apply to “property
damage” included in the “products-completed operations
hazard.”
l. “Property damage” to “your work” arising out of it or any part
of it and included in the “products-completed operations hazard.”
Policy at 10-11. “Exclusion (l) is known as the ‘your work’ exclusion.” Amerisure Mut. Ins.
Co. v. Auchter Co., 673 F.3d 1294, 1298 (11th Cir. 2012) (internal citations omitted).
Endorsement Form 55202 adds CalAtlantic as an additional insured “only with
respect to liability arising out of ‘your work’ [i.e. Environmental’s work] for that insured [i.e.
CalAtlantic] by or for you [i.e. Environmental].” Id. at 7. Significantly, the endorsement also
includes a completed operations exclusion, which states that “[t]he insurance provided
herein to the Additional Insured [CalAtlantic] does not apply to the ‘products-completed
operations hazard.’” Id. (emphasis added).
II.
Standard of Review
Under Rule 56 of the Federal Rules of Civil Procedure (Rule(s)), “[t]he court shall
grant summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a). The
record to be considered on a motion for summary judgment may include “depositions,
documents, electronically stored information, affidavits or declarations, stipulations
8
(including those made for purposes of the motion only), admissions, interrogatory answers,
or other materials.” Rule 56(c)(1)(A).8 An issue is genuine when the evidence is such that
a reasonable jury could return a verdict in favor of the nonmovant. See Mize v. Jefferson
City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (quoting Hairston v. Gainesville Sun
Publ’g Co., 9 F.3d 913, 919 (11th Cir. 1993)). “[A] mere scintilla of evidence in support of
the non-moving party’s position is insufficient to defeat a motion for summary judgment.”
Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d 1243, 1247 (11th Cir. 2004)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).
The party seeking summary judgment bears the initial burden of demonstrating to
the court, by reference to the record, that there are no genuine issues of material fact to be
determined at trial. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991).
“When a moving party has discharged its burden, the non-moving party must then go
beyond the pleadings, and by its own affidavits, or by depositions, answers to
interrogatories, and admissions on file, designate specific facts showing that there is a
genuine issue for trial.” Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir.
1995) (internal citations and quotation marks omitted). Substantive law determines the
materiality of facts, and “[o]nly disputes over facts that might affect the outcome of the suit
Rule 56 was revised in 2010 “to improve the procedures for presenting and deciding summaryjudgment motions.” Rule 56 advisory committee’s note 2010 Amends.
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The standard for granting summary judgment remains unchanged. The language of
subdivision (a) continues to require that there be no genuine dispute as to any
material fact and that the movant be entitled to judgment as a matter of law. The
amendments will not affect continuing development of the decisional law construing
and applying these phrases.
Id. “[A]lthough the interpretations in the advisory committee[‘s] notes are not binding, they are
highly persuasive.” Campbell v. Shinseki, 546 F. App’x 874, 879 n.3 (11th Cir. 2013). Thus, case
law construing the former Rule 56 standard of review remains viable and applies here.
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under the governing law will properly preclude the entry of summary judgment.” Anderson,
477 U.S. at 248. In determining whether summary judgment is appropriate, a court “must
view all evidence and make all reasonable inferences in favor of the party opposing
summary judgment.” Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995) (citing
Dibrell Bros. Int’l, S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578 (11th Cir.
1994)). Notably, the instant action is before the Court on cross-motions seeking summary
judgment. “The principles governing summary judgment do not change when the parties
file cross-motions for summary judgment.” T-Mobile S. LLC v. City of Jacksonville, Fla.,
564 F. Supp. 2d 1337, 1340 (M.D. Fla. 2008). Instead, applying the same principles, “the
Court must determine whether either of the parties deserves judgment as a matter of law
on the undisputed facts.” Id.
III.
Applicable Law
“Under Florida law, insurance contracts are ‘construed according to their plain
meaning, with any ambiguities construed against the insurer and in favor of coverage.’”9
See Amerisure, 673 F.3d at 1301 (quoting U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d
871, 877 (Fla. 2007)). When construing an insurance policy, a court “‘should read each
policy as a whole, endeavoring to give every provision its full meaning and operative
effect.’” J.S.U.B., 979 So. 2d at 877 (quoting Auto-Owners Ins. Co. v. Anderson, 756 So.
2d 29, 34 (Fla. 2000)). However, “‘[a] court cannot rewrite an insurance contract to extend
coverage beyond what is clearly set forth in the contractual language.’” Szczeklik v. Markel
This case is before the Court based on its diversity jurisdiction. See Complaint ¶¶ 2, 4-7.
As such, the Court applies the substantive law of the forum state, Florida. See Auto-Owners Ins.
Co. v. E.N.D. Servs., Inc., 506 F. App’x 920, 923 n.2 (11th Cir. 2013). The parties do not dispute
that Florida law applies. See Auto-Owners’ Motion at 11; Biscayne Bay’s Motion at 5; CalAtlantic’s
Motion at 5 (each applying Florida law).
9
10
Int’l Ins. Co., 942 F. Supp. 2d 1254, 1260 (M.D. Fla. 2013) (quoting Fla. Residential Prop.
& Cas. Joint Underwriting Ass’n v. Kron, 721 So. 2d 825, 826 (Fla. 3d Dist. Ct. App. 1998)).
Although the insured bears the burden of proving that a claim is covered by the insurance
policy, the “burden of proving an exclusion to coverage is . . . on the insurer.” LaFarge
Corp. v. Travelers Indemn. Co., 118 F.3d 1511, 1516 (11th Cir. 1997). However, if there
is an exception to the exclusion, “the burden returns to the insured to prove the exception
and show coverage.” See Mid-Continent Cas. Co. v. Frank Casserino Constr., Inc., 721
F. Supp. 2d 1209, 1215 (M.D. Fla. 2010).
Additionally, Florida law instructs that an insurer’s duty to defend is determined
solely by the allegations in the underlying complaint. See Category 5 Mgmt. Grp., LLC v.
Companion Prop. & Cas. Ins. Co., 76 So. 3d 20, 23 (Fla. 1st. Dist. Ct. App. 2011); see also
Lawyers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575, 1580 (11th Cir. 1995).
Ordinarily, “[c]overage is determined from examining the most recent amended pleading,
not the original pleading.” Trailer Bridge, 657 F.3d at 1142. “The duty arises when the
relevant pleadings allege facts that ‘fairly and potentially bring the suit within policy
coverage.’” Lawyers Title Ins. Corp., 52 F.3d at 1580 (quoting Lime Tree Vill. Cmty. Club
Ass’n v. State Farm Gen. Ins. Co., 980 F.2d 1402, 1405 (11th Cir. 1993)). The actual facts
of the situation are not relevant, such that “the insurer must defend even if facts alleged
are actually untrue or legal theories unsound.” Id. As a result, “an insurer’s duty to defend
is distinct from, and broader than, the duty to indemnify.” Sinni v. Scottsdale Ins. Co., 676
F. Supp. 2d 1319, 1323 (M.D. Fla. 2009). In addition, where a complaint “alleges facts
partially within and partially outside the coverage of the policy, the insurer is obligated to
defend the entire suit.” Category 5 Mgmt. Grp., LLC, 76 So. 3d at 23. Significantly, “[i]f an
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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., 52
F.3d at 1580-81.
IV.
Analysis
As noted above, the Court has already determined that Auto-Owners must defend
Environmental in the Underlying Lawsuit.
In doing so, the Court concluded that the
Underlying Complaint sufficiently alleged “property damage,” caused by the “occurrence”
of Environmental’s allegedly faulty workmanship. The Court additionally found that the
Underlying Complaint included allegations of damage to property other than
Environmental’s own work.
Specifically, the Underlying Complaint fairly alleged that
Environmental’s faulty installation of the building wrap, flashing, and a waterproof system
caused water damage to other property—drywall, paint, interior and exterior finishes, and
driveways—for which other subcontractors were responsible. Finally, the Court concluded
that the Underlying Complaint could be fairly read to allege potentially covered property
damages that occurred within the Policy period.
Pursuant to the additional insured
endorsement, CalAtlantic is also potentially covered for the claims against it relating to the
alleged water damage caused by Environmental’s faulty workmanship, unless the Court
determines that the completed operations exclusion applies to preclude coverage.
Notably, in their Motions for summary judgment, Auto-Owners and Biscayne Bay
agree that “[a] completed operations exclusion bars coverage for injuries that occur after
the insured completed its work on a particular operation.” See Auto-Owners’ Motion at 15;
Biscayne Bay’s Motion at 15. The parties disagree, however, about whether the Underlying
Complaint alleged damage that occurred during ongoing operations.
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Specifically,
Biscayne Bay argues that the completed operations exclusion did not bar coverage for
CalAtlantic because the “Underlying Complaint will be considered to allege damage which
occurred during ongoing and completed operations. Since the [ ] Underlying Complaint
contains at least one allegation within the scope of coverage (i.e., claims for damages
during ongoing operations) . . . Auto-Owners must defend [CalAtlantic] against the entire
suit, even if it does not ultimately trigger the duty to indemnify.” Biscayne Bay’s Motion at
15 (citations omitted). In contrast, Auto-Owners argues that the completed operations
exclusion bars coverage for the claims against CalAtlantic because the Underlying
Complaint alleged that the damage caused by Environmental’s faulty workmanship
occurred after the Project was completed. See id. at 14-16. In making this argument,
however, Auto-Owners improperly relies on an earlier complaint filed in the Underlying
Action in which Biscayne Bay had alleged that the damages occurred after certificates of
occupancy were issued for the townhomes.
Id.
However, that complaint has been
superseded and, as the Court stated at the hearing, the operative Underlying Complaint
does not allege when the damage occurred or when the Project was completed.
Perhaps recognizing the problems with the argument presented in its Motion, AutoOwners presented an entirely different argument at the motion hearing, arguing for the first
time that the timing of the damage is irrelevant for purposes of determining whether the
completed operations exclusion applies. Specifically, Auto-Owners contends that “[t]he
definition of ‘products-completed operations hazard’ focuses on the timing of completion of
the work, not the timing of damages.” Auto-Owners’ Supplemental Brief at 6-7. “Because
CalAtlantic is seeking coverage under the [Policy] after the work at the Project was
completed and after the Project was put to its intended use,” Auto-Owners asserts that “this
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is a ‘products-completed operation hazard,’ and CalAtlantic is not entitled to coverage . . .
.” Id. at 8.
Upon consideration, the Court finds Auto-Owners’ proposed interpretation of the
completed operations exclusion to be unreasonable. “A completed operations exclusion
bars coverage for [damages] that occur after the insured completed its work on a particular
operation.” J.S.U.B., 906 So. 2d at 308 (emphasis added). Thus, to determine whether
the exclusion applies to a particular claim, the Court must necessarily consider when the
project was completed in relation to when the damages occurred. Indeed, courts applying
Florida law have consistently determined whether the completed operations exclusion
applied by considering whether the damage occurred during ongoing operations. See,
e.g., Sandpiper Constr. Co. Inc. v. United States Fidelity and Guar. Co., 348 So. 2d 379,
380 (Fla. 2d Dist. Ct. App. 1977) (affirming trial court’s decision that completed operations
exclusion barred coverage because “operations had been completed prior to collapse of
the roof”); Greenway Village South Condominium Ass’ns, Inc. v. Roach, 397 So. 2d 954,
956 (Fla. 4th Dist. Ct. App. 1981) (holding completed operations exclusion did not bar
coverage where “the insured negligently . . . damaged an existing structure before the
project was completed”); Auto-Owners Ins. Co. v. Marvin Dev. Corp., 805 So. 2d 888, 892
(Fla. 2d Dist. Ct. App. 2001) (holding completed operations exclusion “applied because the
property damage occurred after Marvin Development completed construction of the
residence”). See also Great Divide Ins. Co. v. Amerisure Ins. Co., Case No. 2:17-cv14271, 2018 WL 1318340, at *3 (S.D. Fla. Mar. 14, 2018) (“The determination of whether
the Amerisure insurance policy covers completed operations is critical because it is
undisputed that Mr. Henkle fell after Drawdy had completed its work.”); Cincinnati Ins. Co.
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v. Quorum Mgmt. Corp., 186 F. Supp. 3d 1307, 1323 (M.D. Fla. 2016) (“These facts clearly
show that Franck’s and Campbell completed production of their ‘product’ and completed
their ‘work’ prior to the occurrence of any damages . . . .”).
In support of its position, Auto-Owners relies heavily on Scottsdale Insurance
Company v. Granada Insurance Company, 371 F. Supp. 3d 1130, 1140 (S.D. Fla. 2019),
in which the district court held that
[w]hen assessing completed-operations hazard exclusions . . .,
the relevant timeframe under Florida law is when the project is
completed, and not when latent damage may have occurred.
Where a latent defect might have caused damages during the
policy period, but the damage materializes after a project is
complete and the site or product is put to its intended use, the
completed-operations hazard exclusion bars coverage.
However, Scottsdale is not binding on this Court; nor is it persuasive given the authority
cited above and in light of the Eleventh Circuit’s recent decision in Southern-Owners
Insurance Company v. MAC Contractors of Florida, LLC, 768 F. App’x 970, 973 (11th Cir.
2019).10 In MAC Contractors, Southern-Owners Insurance Company sought a declaratory
judgment that it owed no duty to defend or indemnify its insured, KJIMS Construction,
against a state-court lawsuit brought by Paul and Deborah Doppelt. Id. at 971. KJIMS
served as general contractor for the construction of a residence for the Doppelts. Id.
“Problems arose between KJIMS and the Doppelts after construction began, and KJIMS
eventually left the job site before completing the project and before the issuance of a
certificate of occupancy.” Id. The Doppelts subsequently sued KJIMS in state court
claiming, among other things, “‘damage to wood floors and the metal roof’ that KJIMS had
“Although an unpublished opinion is not binding . . ., it is persuasive authority.” United
States v. Futrell, 209 F.3d 1286, 1289 (11th Cir. 2000) (per curiam); see generally Fed. R. App. P.
32.1; 11th Cir. R. 36-2 (“Unpublished opinions are not considered binding precedent, but they may
be cited as persuasive authority.”).
10
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failed to remediate despite its assurances that the damages would be repaired.” Id.
Southern-Owners argued, and the district court agreed, that it had no duty to defend KJIMS
in the underlying action in light of the policy’s Your Work exclusion, which precluded
coverage for property damage to KJIMS’s work and included in the products-completed
operations hazard. Id. at 971-72. In other words, for the Your Work exclusion to apply,
the property damage must have occurred after the work was completed or abandoned. Id.
at 973. On appeal, “KJIMS argue[d] that the district court erred because the underlying
complaint [was] silent as to the timing of damages and [could] reasonably be construed to
allege ‘property damage’ occurring during ongoing operations—that is, before KJIMS
abandoned the project.” Id. at 972-73. KJIMS maintained that “property damage occurring
before the work is ‘completed’ or ‘abandoned’ is not included in the ‘products-completed
operations hazard’ and, as a result, falls outside the Your Work exclusion.” Id. at 973.
In determining whether the Your Work exclusion applied, the Eleventh Circuit
observed that “‘[p]roperty damage occurs when the damage happens, not when the
damage is discovered or discoverable.’ And where the underlying allegations, even though
silent as to the timing of damages, can be reasonably construed to allege property damage
that occurred during the policy period, ‘there is a potential for coverage.’” Id. (quoting
Carithers v. Mid-Continent Cas. Co., 782 F.3d 1240, 1247 (11th Cir. 2015); Trizec
Properties, Inc. v. Biltmore Const. Co., 767 F.2d 810, 813 (11th Cir. 1985)). The court
ultimately concluded that
although the underlying allegations are silent as to the timing of the damages,
the allegations can be reasonably construed to allege damages that occurred
during ongoing operations. In particular, the Doppelts alleged “damage to
wood floors and the metal roof” that KJIMS had failed to remediate despite its
assurances that the damages would be fixed. It is reasonable to infer from
16
this allegation that KJIMS had promised to remediate the damage to the wood
floors and metal roof before it abandoned the project.
MAC Contractors, 768 F. App’x at 973. “Construing the Your Work exclusion narrowly and
resolving all doubts in favor of KJIMS,” the court held “that the underlying allegations [could]
fairly be construed to allege damages during ongoing operations.” Id. (citations omitted).
Applying the principals articulated by the court in MAC Contractors to the instant
case, the Court finds that the completed operations exclusion does not bar coverage for
CalAtlantic. Auto-Owners argues that the exclusion precludes coverage because the
Underlying Complaint “alleges that the townhomes were put to their intended use
(purchased and occupied) and, after that, the deficiencies were found by unit owners who
purchased the home[s]. It was not until 2016, over seven years after the last townhome
was completed in 2008, that the claim was made and [the] lawsuit was filed.” Id. at 8-9.
However, “[p]roperty damage occurs when the damage happens, not when the damage is
discovered or discoverable.”11
Carithers, 782 F.3d at 1247.
Here, the Underlying
Complaint alleges that “[t]he defects and deficiencies were not readily discoverable by
The Eleventh Circuit has applied the injury-in-fact trigger three times in the context of
similar, occurrence-based CGL policies and latent damages for purposes of determining whether
the damage occurred during the policy period or during ongoing operations. See Carithers, 782
F.3d at 1247; Trizec, 767 F.2d at 813; see also MAC Contractors, 768 F. App’x at 973. The Court
recognizes, however, that the Eleventh Circuit explicitly limited its holdings in Carithers and Trizec
to the specific terms of the policies and facts before it in those cases. See Carithers, 782 F.3d at
1247; Trizec, 767 F.2d at 813. Significantly, the court in Carithers recognized “the difficulty that
may arise, in cases such as this one, where the property damage is latent, and is discovered much
later,” but noted that the district court had made a factual finding that the property in that case was
damaged in 2005. 782 F.3d at 1247. Accordingly, the Eleventh Circuit “express[ed] no opinion on
what the trigger should be where it is difficult (or impossible) to determine when the property was
damaged.” Id. The Court also recognizes that Biscayne Bay’s allegations in the Underlying
Complaint regarding when the water damage occurred are even more vague than those in MAC
Contractors. Nevertheless, in the absence of controlling (or persuasive) authority suggesting that
the Court should apply the manifestation trigger (or some other test) to determine whether the
alleged damages occurred during ongoing operations in the instant case, the Court will apply the
injury-in-fact trigger.
11
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[Biscayne Bay] or its members through reasonable inspection at the time of purchase, and
[Biscayne Bay] and its members became aware of the defects and deficiencies only after
inspections performed by expert consultants.”12 Id. ¶ 94. Biscayne Bay does not allege in
the Underlying Complaint when Environmental’s allegedly faulty workmanship began to
physically damage the townhomes. Moreover, the Underlying Complaint does not even
allege when Environmental completed its work.13 Thus, based on the allegations of the
Underlying Complaint, the damage could have occurred any time after commencement of
construction and before the inspection, thereby potentially including ongoing operations.
While the allegation that the defects were not discovered, or capable of discovery, until the
inspection, could mean that the property damage occurred long after Environmental
completed its work on the Project, this is not the only possible inference. The allegations
could also, “at least marginally and by reasonable implication,” refer to water damage that
began years before the inspection, but were not discovered, or were discovered but not
The Limited Condition Survey Summary Report attached to the original state court
complaint shows that the expert consultants performed their inspections on January 19, 2016.
However, Biscayne Bay did not attach the report to its amended complaints in the Underlying
Lawsuit. In any event, the report does not contain any information from which the Court could
discern when the alleged property damage occurred.
13 As an exhibit to its Supplemental Brief, Auto-Owners submitted certificates of occupancy
issued for the townhomes. See Auto-Owners’ Supplemental Brief, Ex. A (Doc. 81-1). Significantly,
Auto-Owners makes no attempt to establish that it is appropriate for the Court to consider this
extrinsic evidence in its analysis of the duty defend by citing to relevant Florida law recognizing the
narrow circumstances where a court may consider evidence extrinsic to the underlying complaint
when determining the duty to defend. See, e.g., Higgins v. State Farm Fire & Cas. Co., 894 So.
2d 5, 10 n.2 (Fla. 2005) (identifying “some natural exceptions” to the principal that the obligation to
defend is determined solely by the underlying complaint “where an insurer’s claim that there is no
duty to defend is based on factual issues that would not normally be alleged in the complaint”).
See also Composite Structures, Inc. v. Cont’l Ins. Co., 560 F. App’x 861, 865 (11th Cir. 2014); First
Specialty Ins. Corp. v. 633 Partners, Ltd., 300 F. App’x 777, 785 (11th Cir. 2008). In any event, the
Court finds it inappropriate to consider this evidence because, among other reasons, Biscayne Bay
has not alleged in the operative Underlying Complaint that the damage occurred after the
certificates of occupancy were issued.
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indicative of construction defects, until later.14 See Trizec, 767 F.2d at 813. Because the
Court is required to resolve any doubts as to a duty to defend in favor of the insured, see
Lawyers Title Ins. Corp., 52 F.3d at 1580-81, and because an insurer must defend if the
allegations against the insured allege facts potentially and even only partially within
coverage, see Category 5 Mgmt. Grp., LLC, 76 So. 3d at 23, the Court determines that
Auto-Owners had a duty to defend CalAtlantic in the Underlying Lawsuit.
Accordingly, it is ORDERED:
1.
Auto-Owners Insurance Company’s Motion for Summary Judgment and
Incorporated Memorandum of Law (Doc. 47) is DENIED to the extent Auto-Owners seeks
a declaration that it did not have a duty to defend CalAtlantic in the Underlying Lawsuit.
2.
CalAtlantic Group, Inc.’s Motion for Summary Judgment and Incorporated
Memorandum of Law (Doc. 44) and Biscayne Bay Homeowners Association, Inc.’s Motion
for Partial Summary Judgment Against Auto-Owners Insurance Company and
Memorandum of Law in Support Thereof (Doc. 46) are GRANTED to the extent the Court
declares that Auto-Owners had a duty to defend CalAtlantic in the Underlying Lawsuit.
3.
The issue of Auto-Owners’ duty to indemnify is STAYED pending the
completion of the Underlying Litigation. The Clerk of Court is directed to terminate any
pending motions and administratively close the file pending further order of the Court.
To the extent Auto-Owners is suggesting that Biscayne Bay was required to notify AutoOwners of the damage during ongoing operations, the Court finds such an argument to be without
merit. Indeed, such a requirement would essentially convert the Policy from an occurrence-based
policy, which covers claims for damage that occur during the policy term irrespective of when the
claims are actually asserted against the insured, to a claims-made policy, which only covers claims
“brought to the attention of the insurer within the policy term[.]” Trizec, 767 F.2d at 812 n.3.
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4.
The parties shall file a joint status report upon the conclusion of the
Underlying Lawsuit. If the Underlying Lawsuit has not been resolved by November 7,
2019, then the parties shall file a joint status report at that time and every 90 days thereafter
until the Underlying Lawsuit is completed.
5.
Pursuant to Rule 54(b), finding that there is no just reason to delay the entry
of final judgment on the issue of Auto-Owners’ duty to defend, the Clerk of Court is
directed to enter final partial judgment in favor of Defendant Biscayne Bay Homeowners
Association, Inc., and against Plaintiff Auto-Owners Insurance Company, declaring that
Auto-Owners Insurance Company has a duty to defend Environmental House Wrap, Inc.
in the Underlying Lawsuit and that Auto-Owners Insurance Company had a duty to defend
CalAtlantic Group, Inc. in the Underlying Lawsuit before the parties settled.15
DONE AND ORDERED in Jacksonville, Florida on July 12, 2019.
lc23
Copies to:
Counsel of Record
Because the Court has stayed the issue of Auto-Owners’ duty to indemnify pending the
outcome of the Underlying Lawsuit, the Court finds that the balance of judicial administrative
interests and the relevant equitable concerns weigh in favor of Rule 54(b) certification. See
Ebrahimi v. City of Huntsville Bd. of Educ., 114 F.3d 162, 166 (11th Cir. 1997).
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