Driggers Engineering Services Inc. v. CNA Financial Corporation et al

Filing 19

ORDER: Valley Forge Insurance Company's Motion for Judgment on the Pleadings (Dkt. #14) is GRANTED. The Clerk of Court is directed to enter judgment in favor of the Defendant Valley Forge Insurance Company and against Driggers Engineering Services, Inc. All pending motions are denied as moot and the Clerk of Court is directed to close this case. Signed by Judge James S. Moody, Jr on 6/17/2015. (LN)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
DRIGGERS ENGINEERING SERVICES
INC.,
Plaintiff,
v.

Case No: 8:14-cv-3155-T-30TBM

CNA FINANCIAL CORPORATION and
VALLEY FORGE INSURANCE
COMPANY,
Defendants.

ORDER
THIS CAUSE comes before the Court upon Valley Forge Insurance Company’s
Motion for Judgment on the Pleadings (Dkt. #14) and Plaintiff's Memorandum in
Opposition (Dkt. #18). Upon review and consideration, it is the Court’s conclusion that the
Motion should be granted.
Background
I.

Procedural History

On November 20, 2014, Driggers Engineering Services, Inc. (“Driggers”) filed this
declaratory judgment action against Valley Forge Insurance Company (“Valley Forge”) in
the Circuit Court of the Twelfth Judicial Circuit, in and for Manatee County, Florida. On
December 19, 2014, Valley Forge filed its notice of removal of civil action and its answer,
affirmative defenses and counterclaim for declaratory relief.

On January 7, 2015,

Driggers filed its answer and affirmative defenses to Valley Forge’s counterclaim. The
pleadings are closed. Valley Forge now moves for judgment on the pleadings pursuant to
Federal Rule of Civil Procedure 12(c).
Valley Forge issued a tailored commercial package policy number 2053853309 to
Driggers, which includes commercial general liability coverage effective from August 10,
2007, through August 10, 2008, (the “Policy”). Driggers seeks insurance coverage under
the Policy for two lawsuits filed against it alleging damage arising out of its allegedly
defective or negligent roof test completed on or about April 5, 2008, at The Dunes
condominium building in St. Petersburg Beach, Florida.
II.

The Underlying Lawsuits

Driggers is a defendant in the underlying lawsuits styled American Home Assurance
Co., as subrogee of Franz Hanning v. Driggers Engineering Services, Inc., et al., Case No.
09-15163-CI, pending in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas
County, Florida, Civil Division, (the “American Home Lawsuit”) and Franz Hanning and
Kelly Hanning v. Driggers Engineering Services, Inc., et al., Case No. 12-3726-CI,
pending in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County,
Florida, (the “Hanning Lawsuit”) (collectively the “Underlying Lawsuits”). The
Underlying Lawsuits allege that in April 2008, Driggers negligently conducted a roof flood
test and other activities on The Dunes condominium building which resulted in damage to
the Hannings’ condominium unit.

2

The American Home Lawsuit alleges that Driggers had a non-delegable duty to
1. Conduct a thorough pre roof test inspection and identify the
unsealed lightning protection system.
2. Perform any work or tests on the roof in a safe manner, that
would not cause damage to any of the condominiums; and
3. Monitor the condominium units while performing a test on
the roof, to confirm that the units were not being damaged by
the test.
The American Home Lawsuit alleges that Driggers breached these duties when it
failed to:
1. Conduct a thorough pre roof test inspection and identify the
unsealed lightning protection system.
2. Perform any work or tests on the roof in a safe manner, that
would not cause damage to any of the condominiums; and
3. Monitor the condominium units while performing a test on
the roof, to confirm that the units were not being damaged by
the test.
The American Home Lawsuit ultimately alleges that as a result of the defective or
negligent roof test performed by Driggers, the Hannings suffered extensive property
damage. American Home paid insurance proceeds to the Hannings based on the terms of
its insurance contract with them and seeks to recover those costs.
The Hanning Lawsuit alleges that “Driggers owed a non-delegable duty to the
[Hannings] to provide its work in full compliance with a professional standard, … all
applicable Building Codes and generally accepted construction practices, in accord with
applicable designs, plans, and specifications and the applicable governing authorities

3

related thereto, and in accord with the flood testing procedures.” Driggers allegedly
breached these duties by its:
(a) Negligent operation of a roof flood test of the condominium
complex; and
(b) Negligent or improper inspection of the lightening [sic]
suppression system prior to performing the roof flood test; and
(c) Negligent supervision of the installation and work of
contractors, subcontractors, and sub-subcontractors so as to
ensure adequate design, installation, and techniques to protect
the HANNINGS[’] Property from water intrusion; and
(d) Negligent oversight of the roof flood test and inspection of
units as required under the testing guidelines; and
(e) Failure to follow the protocol described in the testing
procedure; and
(f) Improper performance of a roof flood test so as to allow
water from a roof flood test to drain into the HANNINGS[’]
Property.
The Hanning Lawsuit alleges damages in the form of diminution of value of the
condominium unit generally, and as a result of the stigma attached to reporting to future
potential purchasers that the property suffered from water intrusion. These damages are not
covered by their American Home policy and are specifically excluded from the settlement
with American Home.
III.

The Policy and its “Testing Exclusion”

The Policy issued to Driggers covers
…those sums that the insured becomes legally obligated to pay
as damages because of "bodily injury" or "property damage" to
which this insurance applies. [Valley Forge has] the right and
duty to defend the insured against any "suit" seeking those
damages. However, [Valley Forge has] no duty to defend the

4

insured against any "suit" seeking damages for "bodily injury"
or "property damage" to which this insurance does not apply.
…
The Policy defines “property damage” to mean:
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 of use shall be deemed to occur at the
time of the "occurrence" that caused it.
The Policy contains a Testing or Consulting Errors and Omissions Exclusion (the
“Testing Exclusion”) which provides, in relevant part:
This insurance does not apply to "bodily injury", "property
damage" or "personal and advertising injury" arising out of:
1. An error, omission, defect or deficiency in:
a. Any test performed; or
b. An evaluation, a consultation or advice given, by or on
behalf of any insured; …
Driggers submitted the Underlying Lawsuits to Valley Forge to obtain defense
coverage under the Policy. Valley Forge denied the claim asserting that the Testing
Exclusion applied because the property damage allegedly suffered by the Hannings (and
American Home as their subrogee) “arises out of” the allegedly negligent or defective
performance by Driggers during the roof test. Valley Forge also cited to other reasons for
denying the claim which are not at issue in this Motion.

5

Discussion
I.

Legal Standard
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment on the

pleadings. In evaluating a motion for judgment on the pleadings, a court will accept the
facts in the complaint as true and view them in the light most favorable to the nonmoving
party. See Cunningham v. Dist. Attorney's Office for Escambia County, 592 F.3d 1237,
1255 (11th Cir. 2010). “Judgment on the pleadings is proper when no issues of material
fact exist, and the moving party is entitled to judgment as a matter of law based on the
substance of the pleadings and any judicially noticed facts.” Id.
II.

Duty to Defend
An insurer's duty to defend is to be determined from the allegations in the complaint

against the insured. Nat’l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So. 2d 533 (Fla.
1977). The insurer must defend if the allegations in the underlying complaint could bring
the insured within the policy provisions of coverage. State Farm Mutual Auto. Ins. Co. v.
Universal Atlas Cement Co., 406 So. 2d 1184 (Fla. 1st DCA 1981), rev. denied, 413 So.
2d 877 (Fla. 1982). See also Pioneer Nat'l Title Ins. Co. v. Fourth Commerce Props. Corp.,
487 So. 2d 1051, 1054 (Fla. 1986) (a liability insurance carrier must defend the insured
only when the initial pleadings fairly bring the case within the scope of coverage). If the
complaint alleges facts partially within and partially outside the coverage of the policy, the
insurer is obligated to defend the entire suit. Tropical Park, Inc. v. United States Fidelity
and Guaranty Co., 357 So. 2d 253, 256 (Fla. 3d DCA 1978).

6

The duty to defend is separate and apart from the duty to indemnify and the insurer
is required to defend the suit even if the true facts later show there is no coverage. Klaesen
Bros., Inc. v. Harbor Ins. Co., 410 So. 2d 611 (Fla. 4th DCA 1982). All doubts as to
whether a duty to defend exists in a particular case must be resolved against the insurer and
in favor of the insured. Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So. 2d 810,
814 (Fla. 1st DCA 1985); Lawyers Title Ins. Corp. v. JDC (Am.) Corp., 52 F.3d 1575, 1580
(11th Cir. 1995) (under Florida law, “[i]f 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.”)
“However, if the pleadings show the applicability of a policy exclusion, the insurer
has no duty to defend.” State Farm Fire & Cas. Co. v. Tippett, 864 So. 2d 31, 35 (Fla. 4th
DCA 2003) review denied, 885 So. 2d 389 (Fla. 2004). In Florida, it is well settled that
courts strictly construe exclusionary clauses in liability insurance policies to allow the
broadest coverage possible. See Westmoreland v. Lumbermens Mut. Cas. Co., 704 So. 2d
176, 179 (Fla. 4th DCA 1997). The applicability of a policy exclusion is a matter of law
that can be properly resolved on the pleadings. See, e.g., Scottsdale Ins. Co. v. Pursley, 487
Fed. Appx. 508, 511 (11th Cir. 2012).
It is undisputed that many of the allegations in the Underlying Lawsuits pertain to
testing, and therefore fall within the Testing Exclusion. Neither party argues that the terms
used in the Testing Exclusion are ambiguous. Driggers simply argues that all of the
allegations do not fall within the exclusion, since the exclusion does not reference protocol,
guidelines, procedures, or work performed in preparation of a test, before the test,

7

simultaneously with the test, inspections, or inspections of work performed by others (not
the insured) in the vicinity of the test location. Therefore, Driggers argues, the allegations
in the Underlying Lawsuits that pertain to its alleged negligence in the inspections
completed prior to the test, failure to identify the unsealed lightning protection system,
failure to monitor the condominium units during the test, and negligent supervision of subcontractors, all fall outside the Testing Exclusion.
Valley Forge argues that the operative language in the Testing Exclusion is that the
property damage “arise out of” an error, omission or a defective or deficient test. Under
Florida law, the term “arising out of” is “broader in meaning than the term caused by and
means originating from, having its origin in, growing out of, flowing from, incident to or
having a connection with.” Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d
528, 539 (Fla. 2005) (internal quotation marks omitted). The term “requires more than a
mere coincidence between the conduct ... and the injury. It requires some causal
connection, or relationship. But it does not require proximate cause.” Id. at 539–40.
Therefore, in evaluating the Testing Exclusion, Valley Forge urges the Court to conclude
that all of the alleged wrongful acts “arise out of” the roof testing.
Further, Valley Forge relies on American Registry of Pathology v. Ohio Casualty
Ins. Co., 461 F.Supp. 2d 61 (D.D.C. 2006); which the Court finds clearly distinguishable.
In that case, the parties did not dispute whether the alleged acts constituted or arose out of
testing, evaluation, consultation or advice. The dispute in American Registry was whether
the individual accused of committing the wrongful acts was an “insured” or “acting on
behalf of an insured” under a vicarious liability theory.

8

a. Cases Interpreting the Testing Exclusion
“There is relatively scant case law interpreting the [testing exclusion] or similar
insurance policy language.” Emanuel v. Ace Am. Ins. Co., CIV.A. ELH-11-875, 2012 WL
2994285, at *9 (D. Md. July 20, 2012). The parties did not cite to any cases within the
Eleventh Circuit, but the Court located one case interpreting a testing exclusion: Dow
Chem. Co. v. Royal Indem. Co., 635 F.2d 379, 389 (5th Cir. Jan. 26, 1981) 1 (applying
Texas law). 2 There, the court examined an underlying complaint which alleged property
damage from the insured’s failure to conduct adequate testing of its construction. The
insurer argued that the allegations fell within the testing exclusion. The court found the
language in the testing exclusion 3 ambiguous because “it [did] not indicate when someone
has a duty to test, and to what extent this testing should be effected.” Therefore, the court
held that it was “unable to hold that any evidence in the record as a matter of law
support[ed] the application of this exclusion clause under the present circumstances.”
In another case that concluded that the language in the testing exclusion was
ambiguous, Century Sur. Co. v. Gene Pira, Inc., CV 13-07289 DDP AGRX, 2014 WL
6474987, at *4 (C.D. Cal. Nov. 19, 2014), a plumber conducted a test of a sprinkler system

1

Unless later superseded by Eleventh Circuit precedent, a Fifth Circuit decision issued before October 1, 1981, binds
this court. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).

2

Under Texas law, like Florida law, “insurance policies will be interpreted liberally in favor of the insured and
ambiguities strictly against the insurer, especially when dealing with exceptions and words of limitation.” Dow Chem.
Co., 635 F.2d at 386 (citing Ramsay v. Maryland American General Insurance Company, 533 S.W.2d 344 (Tex.
1976)). Further, “when the language of the insurance policy is susceptible of more than one reasonable construction,
courts should apply that construction which favors the insured and permit recovery.” Id. (citing Glover v. Nat’l
Insurance Underwriters, 545 S.W.2d 755 (Tex. 1977)).

3

The policy excluded from coverage loss due to “(f)aulty workmanship, error, omission or deficiency in respect to
the operation or testing of any insured property regardless of to whom attributable.” Dow Chem. Co., 635 F.2d at 389.

9

which caused flooding to a penthouse. The court reviewed the “full context in which the
general commercial liability Policy was issued,” and relied on testimony from the insured’s
agent that he told the insurer’s agent that routine plumbing activities necessarily involved
“testing” to ensure completion of the work, and requested omission of the exclusion from
the policy. 4 The insurer’s agent interpreted the exclusion as not including routine testing,
communicated that interpretation to the insured’s agent, and issued the policy unchanged.
The court concluded that the word “test” as used in the testing exclusion 5 was ambiguous
because it could include standalone tests or other tests necessarily conducted in conjunction
with other plumbing activities which would ultimately render the coverage illusory.
The aforementioned cases are distinguishable. In this case, the Testing Exclusion as
applied to the acts alleged in the Underlying Lawsuits is not susceptible to two or more
interpretations. The Court does not see a basis for concluding that the Testing Exclusion is
ambiguous, and Driggers offers none.
Other courts that have addressed similar testing exclusions have concluded that they
bar coverage. See, e.g. Scottsdale Indem. Co. v. Hartford Cas. Ins. Co., CIV.A. 06-5339,
2008 WL 131105, (E.D. Pa. Jan. 10, 2008). In Scottsdale Indem. Co. the insured company,
SMS, was hired to perform safety inspections at a construction job site. Id. at * 1. A

4

Under California law, “[t]he provisions of a contract must be read in context, taking into account the circumstances
of the case and the language of the contract in its entirety.” Universal City Studios Credit Union v. Cumis Ins., 208
Cal. App. 4th 730, 737, 145 Cal. Rptr. 3d 650 (2012).

5

“[The] ‘Testing or Consulting Errors and Omissions’ exclusion, [] stated that the Policy did not apply to injuries
‘arising out of [ ] an error, omission, defect, or deficiency in [ ] any test performed ....’ ” Century Sur. Co., 2014 WL
6474987, at *1.

10

construction worker at the site was injured when he fell from a ladder. Id. He sued SMS,
claiming that the ladder was faulty and SMS’s negligent inspection did not reveal the fault
before the accident. Id. SMS argued that the injury did not “arise out of” an error or
omission in its evaluation or consultation. The Scottsdale Indem. Co. court rejected that
argument and held that coverage was precluded by the testing exclusion (referred to as the
“CG 2233 endorsement”) stating: “[c]learly, to the extent that SMS's liability derived from
its failure to identify and inform the construction company as to the faulty ladder, this was
an ‘error, omission, defect or deficiency in’ an ‘evaluation’ or ‘consultation.’ ” Id. at *6.
The court found no ambiguity in the plain meaning of this provision, and stated that since
SMS’s only function at the site was to perform safety inspections, “[i]t could only have
been in this role that SMS was liable.” Id. at * 6-7.
In Navigators Specialty Ins. Co. v. Beltman, 11-CV-00715-RPM, 2012 WL
5378750, at *10-11 (D. Colo. Nov. 1, 2012) the court applied the exclusion and concluded
that because the claims against the insureds arose out of the “evaluation” or “consultation”
provided in the form of a report and its related documentation, the testing exclusion barred
all coverage. See also AMCO Ins. Co. v. Inspired Technologies, Inc., CIV. 08-5748
JRT/FLN, 2012 WL 2395179, at *5 (D. Minn. Jun. 25, 2012) (concluding that allegations
fell within testing exclusion where complaint alleged facts that essentially argued that the
insured’s test was defective or its interpretation of that test was defective).
b. Cases Interpreting the Professional and Medical Services Exclusion
Driggers’ argument, that the other alleged acts in the Underlying Lawsuits were not
part of the “roof test,” is similar to arguments propounded by insureds defending against

11

the “professional services” or “medical services” exclusions. These exclusions typically
exclude from coverage injuries to third persons arising out of or caused by the rendering
or failure to render “any professional service[,]” see Alpha Therapeutic Corp. v. St. Paul
Fire & Marine Ins. Co., 890 F.2d 368, 369 (11th Cir. 1989); or “ ‘... [m]edical, surgical,
dental, x-ray or nursing service, treatment, advice or instruction ... [or] any health or
therapeutic service, treatment, advice or instruction....’ ” Colony Ins. Co. v. Suncoast Med.
Clinic, LLC, 726 F.Supp. 2d 1369, 1372 (M.D. Fla. 2010).
In cases involving the professional or medical services exclusions, several courts
within this district have held that clerical and ministerial duties, medical transcription
transportation of a patient, and administrative duties like hiring medical staff and
implementing emergency procedures are “intricate” or “integral” parts of medical services,
thereby “arising out of” professional or medical services. Therefore, those allegations fall
within the exclusion and bar coverage under the respective CGL policy. See, e.g. id. at
1375 (denying coverage under CGL policy’s medical services exclusion where allegations
stated that insureds failed “to have in place sufficient policies and procedures, staff, and
assistive technology to ensure that diagnostic tests and communication between physicians
and other medical personnel was performed”); Alpha Therapeutic Corp., 890 F.2d at 371
(“while transposing the test results may be a clerical task, if the test results are transposed
improperly, the testing process fails. Clearly, transposing test results and figures is an
intricate part of testing plasma for hepatitis, which is a professional service.”); Maryland
Cas. Co. v. Florida Atl. Orthopedics, P.L., 771 F.Supp. 2d 1328, 1334 (S.D. Fla. 2011)
aff'd, 469 Fed. Appx. 722 (11th Cir. 2012) (“Hiring medical staff and implementing

12

appropriate emergency procedures is an intricate part of the provision of medical services,
which is excluded from coverage under the policy”).
c. Testing Exclusion Bars Coverage for the Underlying Lawsuits
The Court concludes that the allegations in the Underlying Lawsuits fall within the
Testing Exclusion. Based on the allegations in the Underlying Lawsuits, Driggers was
hired specifically to perform the roof test on the condominium building. The only
reasonable inference drawn from that allegation is that all inspections, monitoring,
supervision, and other conduct it performed was in furtherance of that roof flood test.
Therefore, the alleged conduct underlying the negligence claims arise directly or indirectly
from the roof test, in that the alleged damage was caused by, originated from, had their
origin in, grew out of, flowed from, were incident to or had a connection with the roof test.
Driggers’ argument to the contrary, that the inspection, monitoring, and supervision
are distinct and separate, is unavailing. See James River Ins. Co. v. Ground Down
Engineering, 540 F.3d 1270, 1275 (11th Cir. 2008) (damages sought by injured party all
related to the pollution clean-up, therefore placing the complaint squarely within the CGL
policy’s pollution exclusion); Chartis Prop. & Cas. Co. v. Jassy, 8:12-CV-2087-T30MAP, 2013 WL 5921541, at *5 (M.D. Fla. Nov. 4, 2013), appeal dismissed (Mar. 11,
2014) (“Since the negligence allegation against the [insureds] is based entirely on [] [their]
failure to disclose the Chinese Drywall, and [] [they] could only be liable for omissions of
material facts of which they were aware at the time of the sale, the claim falls under the
intentional act exclusions.”); Am. Cas. Co. of Reading, Pa. v. Superior Pharmacy, LLC,
8:13-CV-622-T-27TBM, 2015 WL 628382, at *5 (M.D. Fla. Jan. 8, 2015) (concluding that

13

allegations in underlying complaint fell within policy exclusion when the only reasonable
inference from the allegations is that all claims arose from conduct that violated the
Telephone Consumer Protection Act, and thus fell within scope of insurance policy
exclusion for distribution of facsimiles in violation of statutes). See also Maryland Cas.
Co. v. Florida Atl. Orthopedics, P.L., 771 F.Supp. 2d at 1334-35 (labeling insured’s
argument “specious” when it attempted to separate the act of transporting someone to an
emergency facility after surgical complications from the medical procedures which
necessitated the transportation in the first place in an attempt to avoid the medical services
exclusion).
III.

Duty to Indemnify
Since Valley Forge does not have the duty to defend against the Underlying

Lawsuits, it follows that it also has no duty to indemnify. See Trailer Bridge, Inc. v. Ill.
Nat'l Ins. Co., 657 F.3d 1135, 1146 (11th Cir. 2011) (“[A] court's determination that the
insurer has no duty to defend requires a finding that there is no duty to indemnify.”).
Conclusion
The Court concludes that the language in the Testing Exclusion as applied to the
Underlying Lawsuits is unambiguous. Further, the allegations in the Underlying Lawsuits
fall squarely within the clear meaning of the Testing Exclusion since all of the alleged acts
arise out of the roof test. The absence of Valley Forge’s duty to defend the lawsuit results
in no duty to indemnify.
It is therefore ORDERED AND ADJUDGED that:

14

1.

Valley Forge Insurance Company’s Motion for Judgment on the Pleadings
(Dkt. #14) is GRANTED.

2.

The Clerk of Court is directed to enter judgment in favor of the Defendant
Valley Forge Insurance Company and against Driggers Engineering
Services, Inc.

3.

All pending motions are denied as moot and the Clerk of Court is directed to
close this case.

DONE and ORDERED in Tampa, Florida, this 17th day of June, 2015.

Copies furnished to:
Counsel/Parties of Record
S:\Odd\2014\14-cv-3155 judgment on the pleadings.docx

15