Axis Surplus Insurance Company v. Contravest Construction Company et al

Filing 156

ORDER denying in part and denying without prejudice in part 59 Motion for Summary Judgment; granting 77 Motion for Summary Judgment and 88 Motion for Summary Judgment; declaring duty to defend of Plaintiff; granting 125 Motion to Dismiss; den ying as moot 125 Motion to Strike; granting 137 Motion for Summary Judgment (construed as a motion to dismiss); and dismissing 121 Second Amended Third-Party Complaint without prejudice as to Amerisure Mutual Insurance Company and setting deadline for filing of a third amended third-party complaint. Signed by Judge John Antoon II on 6/5/2012. (EK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
AXIS SURPLUS INSURANCE
COMPANY,
Plaintiff,
-vs-

Case No. 6:11-cv-320-Orl-28DAB

CONTRAVEST CONSTRUCTION
COMPANY, CONTRAVEST, INC., and
THE CREST AT WATERFORD LAKES
CONDOMINIUM ASSOCIATION, INC.,
Defendants.
______________________________________

ORDER
In this declaratory judgment action, Plaintiff Axis Surplus Insurance Company (“Axis”)
seeks a declaration that it has no duty to defend or indemnify Defendants Contravest
Construction Company and Contravest, Inc. (“the Insureds”) in an underlying suit brought
against the Insureds by Defendant The Crest at Waterford Lakes Condominium Association,
Inc. (“the Association”).

(Am. Compl., Doc. 9).

In turn, the Insureds have filed a

Counterclaim against Axis and a Second Amended Third-Party Complaint (“Third-Party
Complaint”) (Doc. 121) against several other insurers, seeking a declaration regarding the
various insurers’ obligations to defend and indemnify the Insureds in conjunction with the
underlying suit and, relatedly, the appropriate trigger for coverage with respect to the policies
at issue. (Countercl. & Third-Party Compl., Doc. 121, at 11-13). Two of those Third-Party
insurers–Amerisure Mutual Insurance Company (“Amerisure”) and Great American

Insurance Company (“Great American”)–have moved to dismiss1 the Third-Party Complaint
for lack of subject-matter jurisdiction, asserting that Contravest has not presented a
justiciable issue.2
As discussed below, Axis’s motion will be denied and the Insureds’ and the
Association’s cross-motions will be granted because Axis has a duty to defend the Insureds
in the underlying suit. Additionally, Amerisure’s motion and Great American’s motion will be
granted because the Insureds have not presented a justicable issue as to those parties.
I. Background
In the underlying suit, the Association brought claims against the Insureds for alleged
“negligent construction and development of the individual dwelling units and common areas
of The Crest at Waterford Lakes Condominium community” (“the Subject Property”).
(Underlying Compl., Doc. 9-1, ¶ 1). Due to this negligence, the Subject Property allegedly

1

Amerisure has filed its motion as a motion for summary judgment, but Amerisure
does not actually seek a judgment. Rather, Amerisure seeks dismissal of the Third-Party
Complaint for lack of subject-matter jurisdiction. The Court, therefore, construes Amerisure’s
motion as a motion to dismiss.
2

This case is currently before the Court on Axis’s Motion for Summary Judgment
(Doc. 59), the Response (Doc. 72) filed by Third-Party Defendant Everest National Insurance
Company (“Everest”), the Response (Doc. 73) filed by Third-Party Defendant Steadfast
Insurance Company (“Steadfast”), the Cross-Motion for Summary Judgment and Response
(Doc. 77) filed by the Insureds, the Cross-Motion for Summary Judgment and Response
(Doc. 88) filed by the Association, and the Reply to the Insureds’ Response (Doc. 99) filed
by Axis; Great American’s Motion to Dismiss or Strike Second Amended Third-Party
Complaint (Doc. 125) and the Response filed by the Insureds (Doc. 130); Amerisure’s Motion
for Summary Judgment (Doc. 137), the Response (Doc. 141) filed by the Insureds, the
Response (Doc. 143) filed by the Association, the Reply to the Insureds’ Response (Doc.
150) filed by Amerisure, and the Reply to the Association’s Response (Doc. 153) filed by
Amerisure.
-2-

sustained severe damage, including damage caused by water intrusion. (Id. ¶ 28). The
Association alleged that the defects were not readily discoverable by the Association or its
members through reasonable inspection at the time of purchase and that the Association’s
members only became aware of the defects through the retention of construction experts.
(Id. ¶ 30). Additionally, in the documents attached to the Underlying Complaint,3 the
Association states that it was prompted to retain construction experts by unit owner
complaints and observations at the Subject Property. (Exs. A & B to Underlying Compl.).
Experts inspected the premises and provided reports on August 26, 2008, (Ex. A to
Underlying Compl.), September 20, 2008, (Ex. B to Underlying Compl.), and September 15,
2008, (Ex. C to Underlying Compl.). In each of these reports, the experts disclosed the
existence of property damage.
Axis issued four commercial general liability (“CGL”) policies to the Insureds beginning
on July 21, 2003 and continuing through July 21, 2007, each lasting one year. (Am. Compl.
¶ 14; Countercl. at 9). Axis is currently defending the Insureds in the underlying suit based
on the 2005-2006 and 2006-2007 policies under a reservation of rights. (Am. Compl. ¶ 15).
Axis denied coverage under the 2003-2004 and 2004-2005 policies. (Id.). Amerisure issued
a CGL policy to the Insureds effective from March 15, 2003 through September 22, 2003,4

3

These documents are incorporated by reference into the underlying complaint.

4

The Amerisure policy was originally written to be effective for a full year, but
Amerisure notes that the policy was cancelled on September 22, 2003. (Amerisure Mot. for
Summ. J., Doc. 137, at 3). Whether the policy was cancelled or not is immaterial to the
Court’s analysis herein.
-3-

(Amerisure Policy, Doc. 137-2, at 2),5 and is currently participating in the defense of the
underlying suit under a reservation of rights, (Amerisure Mot. for Summ. J., Doc. 137, at 4;
Insureds’ Resp. to Amerisure Mot., Doc. 141, at 4). Unlike Axis, however, Amerisure has
not sought a judgment from this Court declaring that it has no duty to defend or indemnify
the Insureds. Finally, Great American issued five excess commercial liability policies6 to the
Insureds, each effective for one year beginning on February 17, 1997 and continuing through
February 17, 2002. (Great American Mot. to Dismiss, Doc. 125, at 3; Third-Party Compl. at
10; Great American Policy No. UMB 9-01-47-89-00, Doc. 125-1, at 3; Great American Policy
No. UMB 9-01-47-89-01, Doc. 125-2, at 3).7 Great American is not currently participating in
the defense of the underlying suit, (see Great American Mot. to Dismiss at 11), and has not
sought a declaration as to its obligations under its policies.
II. Justiciability
In the Third-Party Complaint, the Insureds allege that all of the insurers named therein
have issued reservations of rights regarding their duties to defend and indemnify the
Insureds in the underlying suit and have taken inconsistent positions regarding the issues
of coverage and the trigger for coverage. Specifically, the Insureds assert that there are four
potential trigger theories and that there is disagreement and uncertainty in Florida law as to

5

The page numbers cited for the Amerisure Policy are to the electronic filing pages.

6

Great American only issued two separate policies, but one of those policies was
renewed once and the other was renewed twice, amounting to five policy periods. (Great
American Mot. to Dismiss at 3; Third-Party Compl. at 10).
7

The page numbers cited for the Great American policies are to the electronic filing

pages.
-4-

which trigger theory applies. According to the Insureds, the various insurers have latched
on to this uncertainty and each insurer has adopted the trigger theory that is most beneficial
to it. The Insureds have also expressed that they are unable to proceed with settlement
negotiations in the underlying suit due to the uncertainty of what insurance coverage they
will have and are concerned that ultimately these inconsistent positions will leave them
“holding the bag,” so to speak, without any insurance coverage. To resolve these concerns,
the Insureds seek a judgment declaring the following: (1) each insurer’s obligation to defend
the Insureds in the underlying suit; (2) each insurer’s obligation to indemnify the Insureds
regarding the underlying suit; (3) the appropriate trigger for coverage with respect to the
policies at issue; and (4) the obligation of the insurers pursuant to section 627.428, Florida
Statutes to pay attorneys’ fees incurred by the Insureds in filing this declaratory action.
(Third-Party Compl. at 13).
Amerisure and Great American, however, assert that despite the Insureds’ concerns,
there is not a justiciable controversy between the Insureds and Amerisure or Great
American. Amerisure contends that it has not yet denied any coverage to the Insureds and
therefore no actual case or controversy exists between the Insureds. Great American, as
an excess insurer, notes that its obligations, if any, are contingent and have not yet arisen.
While the Court sympathizes with the Insureds, their concerns are not sufficient to create a
justiciable controversy between them and Amerisure or Great American, and therefore the
Third-Party Complaint must be dismissed as to Amerisure and Great American for lack of
subject-matter jurisdiction.
A. Legal Framework
-5-

“The federal courts are confined by Article III of the Constitution to adjudicating only
actual ‘cases’ and ‘controversies.’” Malowney v. Fed. Collection Deposit Grp., 193 F.3d
1342, 1346 (11th Cir. 1999) (quoting Allen v. Wright, 468 U.S. 737, 750 (1984)). In
recognition of this limitation, the Declaratory Judgment Act, 28 U.S.C. § 2201, specifically
limits jurisdiction to “actual controvers[ies].” 28 U.S.C. § 2201(a). Therefore, “[i]n all cases
arising under the Declaratory Judgment Act, the threshold question is whether a justiciable
controversy exists.” Atlanta Gas Light Co. v. Aetna Cas. & Sur. Co., 68 F.3d 409, 414 (11th
Cir. 1995) (internal citation omitted).
Although the cases addressing the justiciability of declaratory judgment actions “do
not draw the brightest of lines,” Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127
(2007), Supreme Court “decisions have required that the dispute be ‘definite and concrete,
touching the legal relations of parties having adverse legal interests’; and that it be ‘real and
substantial’ and ‘admi[t] of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a hypothetical state of
facts,’” id. (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41 (1937)). Thus,
“[t]he party who invokes a federal court’s authority must show, at an ‘irreducible minimum,’
that at the time the complaint was filed, he has suffered some actual or threatened injury
resulting from the defendant’s conduct, that the injury fairly can be traced to the challenged
action, and that the injury is likely to be redressed by favorable court disposition.” Atlanta
Gas Light, 68 F.3d at 414 (quoting U.S. Fire Ins. Co. v. Caulkins Indiantown Citrus Co., 931
F.2d 744, 747 (11th Cir. 1991)). Furthermore, if the party’s concern is the threat of future
injury, “[t]here must be a substantial likelihood that the plaintiff will suffer [such] future injury:
-6-

a ‘perhaps’ or ‘maybe’ chance is not enough.” Malowney, 193 F.3d at 1347. Indeed, even
a “well-founded” concern is insufficient to create a justiciable controversy if it is based on
speculation. Atlanta Gas Light, 68 F.3d at 415.
B. Amerisure’s Duties to Defend and Indemnify
Ultimately, the issues regarding Amerisure’s duty to defend and duty to indemnify do
not create justiciable controversies because Amerisure has not yet denied any coverage to
the Insureds. The facts of this case are similar to those in Atlanta Gas Light, wherein the
Eleventh Circuit determined there was no justiciable controversy. Id.
In Atlanta Gas Light, the insured (“AGL”) was potentially liable for the cleanup of
hazardous materials that its predecessor company disposed of from the mid-1800s until
sometime in the 1950s. Id. at 411. AGL sent notice of this potential liability to twenty-three
insurers that had issued policies to AGL’s predecessor during the relevant time period. Id.
at 412. The next day–before any of the insurers received the notice or had an opportunity
to respond–AGL filed a declaratory judgment action against all twenty-three of the insurers
to determine the extent of its insurance coverage. Id. AGL argued that even though the
insurers had not yet denied its claims, they had “denied coverage to similar [insureds] under
similar circumstances in the past.” Id. at 415. Despite acknowledging that AGL’s concern
that its insurers would deny its claims was “well-founded,” the court held that there was no
justiciable case or controversy over the insurers’ duties to defend and indemnify AGL, stating
that “AGL filed its complaint as an anticipatory maneuver designed to preempt whatever
actions the insurers may have taken after they received AGL’s notice.” Id.
Like the insurers in Atlanta Gas Light, Amerisure has not yet denied any coverage to
-7-

the Insureds. On the contrary, Amerisure is continuing to defend the Insureds in the
underlying suit and does not dispute its duty to do so. The Insureds argue that there is an
imminent threat of Amerisure denying coverage because Amerisure is defending the
Insureds under a reservation of rights. A reservation of rights, however, is insufficient to
create a substantial likelihood that the Insureds will suffer injury; it merely creates the
possibility that such an injury could occur. As noted previously, this sort of “maybe” or
“perhaps” chance of injury is not sufficient to create a justiciable controversy. Malowney, 193
F.3d at 1347. Like AGL, the Insureds here are attempting to preempt Amerisure’s potential
actions.
Furthermore, because there has been no resolution of the underlying suit, a
declaration as to Amerisure’s duty to indemnify is premature. Northland Cas. Co. v. HBE
Corp., 160 F. Supp. 2d 1348, 1360 (M.D. Fla. 2001). Thus, the potential injury from
Amerisure denying a duty to indemnify the Insureds is not only contingent on Amerisure
actually making such a denial but also on the resolution of the underlying suit. These
contingencies make the likelihood of injury even more uncertain.
Contrary to the Insureds’ assertion, the reason that the issue of Amerisure’s duty to
indemnify does not create a justiciable controversy is not merely that such a determination
is premature but rather that Amerisure has not yet denied its duty to indemnify the Insureds
and has not taken a position adverse to the Insureds.

Thus, there is no justiciable

controversy over whether Amerisure has a duty to defend or indemnify the Insureds.
C. Great American’s Duties to Defend and Indemnify
For similar reasons, there is no justiciable controversy over whether Great American
-8-

has a duty to defend or indemnify the Insureds. As noted, Great American issued excess
liability policies to the Insureds. Pursuant to these policies, Great American only incurs
coverage obligations when the applicable limits of the underlying insurance policies have
been exhausted by payment of claims or when damages are sought for an “occurrence” that
is covered by Great American’s policy but not covered by any of the underlying insurance
policies. (Great American Policy No. UMB 9-01-47-89-00 at 8; Great American Policy No.
UMB 9-01-47-89-01 at 7-8). The Insureds have not alleged that either of these conditions
has been met or that the Insureds have requested that Great American defend or indemnify
the underlying suit and that Great American has denied any such requests. Without such
allegations, the potential that the Insureds will be injured by Great American’s denial of
coverage is even more uncertain than the potential of being injured by Amerisure’s denial.
Not only is the potential injury from Great American contingent on both the outcome of the
underlying suit and Great American actually denying the claim, but it is also contingent on
the exhaustion of all underlying insurance policies. Such a hypothetical injury does not
create a justiciable controversy. See Official Creditors’ Comm. of Prods. Liab. & Pers. Injury
Claimants v. Int’l Ins. Co. (In re Pettibone), 121 B.R. 801, 808-09 (Bankr. N.D. Ill. 1990)
(dismissing claim seeking a declaration of excess liability insurer’s duties to defend and
indemnify because such duties were contingent on “the meeting of the $5,000,000 limit,
which has not and may never take place”).
D. Trigger for Coverage
It appears that the Insureds’ main reason for filing their Third-Party Complaint was to
obtain a declaration of which trigger for coverage applies that would be binding on all of the
-9-

applicable insurers. The Insureds assert that they are being injured because the uncertainty
is hindering settlement negotiations in the underlying suit. Although the Court understands
the Insureds’ predicament, a declaration as to the trigger for coverage under each of the
policies amounts to a determination of the obligations of the insurers pursuant to those
policies and, as discussed in the previous sections, there is no case or controversy regarding
Amerisure’s and Great American’s duties under the policies. Additionally, the Third-Party
Complaint only alleges that “all insurers” have taken “inconsistent” positions as to which
trigger applies. The Insureds have not alleged that either Amerisure or Great American has
denied coverage based on a trigger theory or even that either has taken a position adverse
to the Insureds–only that the insurers disagree with one another.
Moreover, the crux of the trigger dispute is not a disagreement among the parties to
this suit but uncertainty in Florida law. What the Insureds truly seek is for this Court to
resolve the uncertainty in the law and analyze how Florida law would apply to the policies
at issue if there were an actual dispute over coverage. This amounts to an advisory opinion
and is not justiciable. See Creative Compounds, LLC v. Starmark Labs., 651 F.3d 1303,
1316 (Fed. Cir. 2011) (noting that in order for a declaratory judgment action to be justiciable,
the “court’s decision must admit of specific relief through a decree of a conclusive character,
as distinguished from an opinion advising what the law would be upon a hypothetical state
of facts” and finding that “[w]ithout an underlying legal cause of action, any adverse
economic interest that the declaratory plaintiff may have against the declaratory defendant
is not a legally cognizable interest sufficient to confer declaratory judgment jurisdiction”
(quotations omitted)).
-10-

E. Attorneys’ Fees
In the Third-Party Complaint, the Insureds additionally seek a declaration of the
Insurers’ obligations to pay the Insureds’ attorneys’ fees in connection with bringing this
declaratory judgment action pursuant to section 627.428, Florida Statutes.

Section

627.428(1) provides:
Upon the rendition of a judgment or decree by any of the courts of this state
against an insurer and in favor of any named or omnibus insured . . . the trial
court . . . shall adjudge or decree against the insurer and in favor of the
insured or beneficiary a reasonable sum as fees or compensation for the
insured’s . . . attorney prosecuting the suit in which the recovery is had.
Because this Court does not have subject-matter jurisdiction over the declaratory judgment
claims against Amerisure and Great American, the Insureds have not obtained a “judgment
or decree” against either Amerisure or Great American. Accordingly, the Insureds are not
entitled to any attorneys’ fees pursuant to section 627.428.
III. Axis’s Motion for Summary Judgment
The dispute between Axis and the Insureds echoes the Insureds’ concerns in the
Third-Party Complaint; they disagree over which trigger for coverage applies and whether
coverage was triggered under the Axis policies by the underlying suit.8 The relevant policy
language is as follows:
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage territory”; [and]

8

Although neither the Insureds nor Axis raises the issue, the controversy regarding
Axis’s obligations under its policies is justiciable because Axis takes an adverse position to
that of the Insureds and there is an imminent threat that Axis will deny coverage.
-11-

(2) The “bodily injury” or “property damage” occurs during the
policy period.
(CGL Coverage Form, Composite Ex. C to Doc. 9, at 6).9 Thus, in order to trigger coverage
under Axis’s policy, “property damage” must have “occurred” during the policy period. The
parties do not dispute that the alleged damage would constitute “property damage” under
the terms of the policy. The parties disagree, however, over whether the alleged property
damage “occurred” during the policy period.
Axis asserts that damage “occurs” when it is discovered and that the allegations of
the Underlying Complaint indicate that the damage was not discovered until 2008, which was
after the latest Axis policy expired. The Insureds and Third-Party Defendant Everest assert
that damage “occurs” when it is discoverable and that, based on the allegations of the
Underlying Complaint, the damages may have been discoverable during the Axis policy
periods. Each of these approaches is a variation of the “manifestation” trigger theory. The
Association and Third-Party Defendant Steadfast, however, argue that Florida follows the
“injury-in-fact” theory, under which damage “occurs” at the moment that there is actual
damage and the date of discovery is irrelevant.
As noted by the parties, the Florida Supreme Court has yet to issue an opinion on this
issue, and there is disagreement among the trial courts as to which theory is correct. This
disagreement stems from different interpretations of two cases–Trizec Properties, Inc. v.
Biltmore Construction Co., 767 F.2d 810 (11th Cir. 1985), and Travelers Insurance Co. v. C.

9

Due to the fact that several documents are a part of Composite Exhibit C to Doc. 9,
the cited page numbers reference the electronic filing numbers to avoid confusion.
-12-

J. Gayfer’s & Co., 366 So. 2d 1199, 1200 (Fla. 1st DCA 1979).
In Gayfer’s, the court interpreted the term “occurrence” in a policy provision that read
as follows: “[The Insurer] will pay on behalf of the Insured all sums which the Insured shall
become legally obligated to pay as damages because of bodily injury or property damage
. . . caused by an occurrence” during the policy period. Gayfer’s, 366 So. 2d at 1200. The
underlying suit in Gayfer’s involved allegations that the insured negligently installed a roof
drainage system during the policy period, and then after the policy period expired a joint in
the drainage system failed and discharged water into the building. Id. There was no
discussion about when the damage occurred–it was undisputed that it occurred after the
policy period expired. Id. Rather, the issue before the Gayfer’s court was whether the fact
that the negligent act that caused the damage occurred during the policy period was enough
to trigger coverage or if the actual damage had to have occurred during the policy period.
Id. at 1201-02.
To resolve this issue, the Gayfer’s court looked at the definition of “property damage”
contained in the policy, which stated that “property damage means the physical injury to or
destruction of tangible property which occurs during the policy period including the loss of
use thereof at any time resulting therefrom, or . . . loss of use of tangible property which has
not been physically injured or destroyed provided such loss of use is caused by an
occurrence during the policy period.” Id. at 1201 n.1. The court determined that the
language of the policy was unambiguous and that the damage itself–not just the negligent
act–had to occur during the policy period. Id. at 1202 (“We find . . . that the phrase ‘caused
by an occurrence’ informs the insured that an identifiable event other than the causative
-13-

negligence must take place during the policy period.”). In explaining its holding, the court
stated that “[t]he term ‘occurrence’ is commonly understood to mean the event in which
negligence manifests itself in property damage or bodily injury, and it is used in that sense
here.” Id. at 1202.
Thereafter, American Motorists Ins. Co. v. Southern Security Life Insurance Co., 80
F. Supp. 2d 1280 (M.D. Ala. 2000), and Auto Owners Insurance Co. v. Travelers Casualty
& Surety Co., 227 F. Supp. 2d 1248 (M.D. Fla. 2002) (Report and Recommendation adopted
by the district judge), were decided. In these cases, the sentence in Gayfer’s mentioning the
word “manifests” was interpreted to mean that Florida courts follow the manifestation trigger
theory, Am. Motorists, 80 F. Supp. 2d at 1284; Auto Owners, 227 F. Supp. 2d at 1266;
subsequent cases have continued to follow their lead without separately analyzing
Gayfer’s,10

see,

e.g.,

Mid-Continent

Cas.

Co.

v.

Siena

Home

Corp.,

No.

5:08–CV–385–Oc–10GJK, 2011 WL 2784200, at *3 (M.D. Fla. July 8, 2011); Frank
Casserino Constr., Inc. v. CED Constr. Partners, Ltd., 721 F. Supp. 2d 1209, 1216 (M.D. Fla.
2010); Essex Builders Grp., Inc. v. Amerisure Ins. Co., 485 F. Supp. 2d 1302, 1309 (M.D.
Fla. 2006). As discussed, however, the issue of when damage “occurs” in order to trigger
coverage was not before the Gayfer’s court–only the issue of whether a negligent act alone
is sufficient to trigger damages.

10

Additional cases relied on Auto-Owners and American Motorists to assume without
deciding that the manifestation theory was applicable when the ultimate issue of the case
did not turn on what theory applied. United Nat’l Ins. Co. v. Best Truss Co., No.
09-22897-CIV, 2010 WL 5014012, at *5 n.4 (S.D. Fla. Dec. 3, 2010); Assurance Co. of Am.
v. Lucas Waterproofing Co., 581 F. Supp. 2d 1201, 1207 (S.D. Fla. 2008).
-14-

This issue was succinctly explained by the Texas Supreme Court in a similar case as
follows:
We also note that decisions sometimes cited as following the manifestation
rule, and which indeed use a form of the word “manifest” in their analysis, do
not actually follow the manifestation rule as opposed to the [injury-in-fact] rule,
because they were not concerned with latent damage where these two rules
diverge. Instead, these cases merely hold that the time of the injury or
damage, as opposed to the time of the alleged negligent conduct that caused
the injury, is the triggering event under the policy. These cases, when carefully
reviewed, may actually be more aligned with the [injury-in-fact] rule than with
the manifestation rule, and appear to use a form of the verb “manifests” merely
as a synonym for “results in” or “leads to,” rather than drawing a distinction
between the actual occurrence of damage and the later discovery or
obviousness of damage.
Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 27 (Tex. 2008). Indeed,
Don’s Building Supply specifically referenced Gayfer’s as a case that has been improperly
cited to support the manifestation theory, stating that while “[t]he [Gayfer’s] court did state
that an ‘occurrence’ under the policy ‘is commonly understood to mean the event in which
negligence manifests itself in property damage or bodily injury,’” when the case is “read in
context” it is clear that “the court was not adopting the manifestation rule in lieu of the
injury-in-fact rule, but was distinguishing between the date of the insured’s alleged negligent
work, which occurred during the policy period, and the date of the property damage, which
occurred and became immediately evident upon occurrence, after the policy period had
expired.” Id. at 27 n.26. The Don’s Building Supply court also noted that after Gayfer’s was
decided, “[t]he Eleventh Circuit . . . held that the injury-in-fact rule applies to CGL policies
under Florida law” in Trizec. Id.
Trizec, unlike Gayfer’s, did address the issue of when damage occurs in order to

-15-

trigger coverage. In Trizec, a roof deck was negligently installed, causing water intrusion
damage. 767 F.2d at 812. The policy at issue in Trizec was very similar to the one at issue
here and required the insurer to cover “property damage . . . caused by an occurrence.” Id.
(emphasis removed). Property damage was then defined in part as “physical injury to or
destruction of tangible property occurring during the policy period.” Id. (quotation omitted).
Like the policy at issue here, the physical injury or destruction of tangible property had to
occur during the policy period in order to trigger coverage.
The Trizec court interpreted this language as requiring an injury-in-fact analysis,
stating that “the damage itself . . . must occur during the policy period for coverage to be
effective” and that “[t]here is no requirement that the damages ‘manifest’ themselves during
the policy period” in order to trigger coverage. Id. at 813. Although the court did limit its
holding to the specific terms of the policy before it, id. n.6 (refusing to determine whether the
manifestation theory was correct in all situations, but holding that the theory was
“incompatible with the language of the policy at issue”), that does not change the outcome
of this case. As discussed, the policy at issue here and the one in Trizec are materially
similar, and therefore, the analysis in Trizec is applicable here.11 Pursuant to the particular

11

The lower courts that have adopted the manifestation theory have attempted to
distinguish Trizec. In Siena Home and Best Truss, the courts asserted that because Trizec
only addressed the duty to defend and not the duty to indemnify, the analysis in Trizec did
not apply. Siena Home, 2011 WL 2784200, at *3 n.9; Best Truss, 2010 WL 5014012, at *5
n.4. In those cases, however, no explanation was provided for why one trigger theory should
be used for determining a duty to defend while another should be used for determining the
duty to indemnify. Nevertheless, this case involves the duty to defend, so Trizec clearly
applies. Other cases have perhaps misconstrued the statement in Trizec limiting its analysis
to the policy before it to disregard Trizec’s analysis altogether. See, e.g., Frank Casserino,
721 F. Supp. 2d at 1216. As discussed in the text, the language of the policy in Trizec is
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policy language at issue and the binding analysis of Trizec, this Court will apply the injury-infact trigger theory.
Under Florida law, whether there is a duty to defend is determined by the facts and
legal theories alleged in pleadings against the insured. Lawyers Title Ins. Corp. v. JDC (Am.)
Corp., 52 F.3d 1575, 1580 (11th Cir. 1995) (citations omitted). “The insurer must defend
when the complaint alleges facts which fairly and potentially bring the suit within policy
coverage.” Lime Tree Vill. Cmty. Club Ass’n, Inc. v. State Farm Gen.l Ins. Co., 980 F.2d
1402, 1405 (11th Cir. 1993). The Underlying Complaint suggests that the damage occurred
at some point after the buildings were completed but before the experts inspected the
property. This time period includes the time that Axis’s policies were in effect, and therefore
Axis has a duty to defend the Insureds in the underlying suit.
Moreover, even if the manifestation theory were applicable, Axis would still have a
duty to defend the Insureds. Even under Axis’s strict interpretation of the manifestation
theory–that property damage “manifests” when it is discovered–the Underlying Complaint
potentially brings the suit within coverage. While the Underlying Complaint states that the
extent of the damage was discovered by expert inspections, it is also alleges that those
inspections were triggered by observations and complaints from owners. Based on these
allegations, the observations and complaints must have taken place prior to the expert
inspection and therefore the damages may have been discovered during the time that the
Insureds were covered by an Axis policy. Again, these allegations are sufficient to determine

very similar to that of the policy at issue here; therefore, the fact that Trizec may not apply
to all insurance policies does not negate its application here.
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that Axis has a duty to defend the Insureds in the underlying suit.
While Axis has a duty to defend, a decision as to its duty to indemnify is premature.
Except where there is no duty to indemnify for want of a duty to defend, “an insurer’s duty
to indemnify is dependent on the outcome of a case, [and] any declaration as to the duty to
indemnify is premature unless there has been a resolution of the underlying claim.”
Northland Cas. Co., 160 F. Supp. 2d at 1360 (citations omitted). Thus, Axis’s request for a
declaration that it has no duty to indemnify will be denied without prejudice to reassertion
after the underlying suit is resolved.
IV. Conclusion
In accordance with the foregoing, it is ORDERED and ADJUDGED as follows:
1. The Motion for Summary Judgment (Doc. 59) filed by Axis is DENIED as to Axis’s
duty to defend in connection with the underlying suit and DENIED without prejudice as to
Axis’s duty to indemnify in connection with the underlying suit;
2.

The Cross-Motion for Summary Judgment (Doc. 77) filed by Contravest

Construction Company and Contravest, Inc. and the Cross-Motion for Summary Judgment
(Doc. 88) filed by the Association, Inc. are GRANTED;
3. It is hereby declared that Axis Surplus Insurance Company has a duty to defend
Contravest Construction Company and Contravest, Inc. in connection with The Crest at
Waterford Lakes Condominium Association, Inc. v. Contravest, Inc., et al., Case No. 2009CA-5348 (9th Jud. Cir. Orange County, Fla.).
4. The Motion to Dismiss or Strike Second Amended Third-Party Complaint (Doc.
125) filed by Great American is GRANTED insofar as it seeks dismissal and DENIED as
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moot insofar as it seeks to strike the Second Amended Third-Party Complaint. The Second
Amended Third-Party Complaint (Doc. 121) is DISMISSED without prejudice as to Great
American Insurance Company for lack of subject-matter jurisdiction;
5. The Motion for Summary Judgment (Doc. 137) that this Court construed as a
motion to dismiss filed by Amerisure is GRANTED. The Second Amended Third-Party
Complaint (Doc. 121) is DISMISSED without prejudice as to Amerisure Mutual Insurance
Company for lack of subject-matter jurisdiction;
6. If the Insureds can remedy the jurisdictional defects, they may file a Third
Amended Third-Party Complaint on or before Tuesday June 19, 2012.
DONE and ORDERED in Chambers, Orlando, Florida this 5th day of June, 2012.

Copies furnished to:
Counsel of Record
Unrepresented Party

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