Tred Eyerly – April 16, 2012
The issue before the 11th Circuit was whether, under Florida law, a general contractor had coverage for a property damage claim limited to the defective work performed by a subcontractor, and not affecting any other portion of the project. The court found no coverage in Amerisure Mut. Ins. Co. v. Auchter Co., 2012 U.S. App. LEXIS 5412 (11th Cir. March 15, 2012).
Amelia Island Company contracted with Auchter Company, a general contractor, for construction of an inn and conference room. Auchter subcontracted with Register Contracting Company to install the Inn’s roof. Pursuant to the Florida Building Code, installation of the roof required that it be able to withstand 110 m.p.h. winds.
Register completed installing the roof tiles in January 1998. Beginning in 2002, the tiles began dislodging from the roof. During the 2004 hurricane season, three hurricanes caused more tiles to come off the roof. Some of these tiles hit other tiles, cracking them.
In 2006, the parties went to arbitration over the costs of repairs for the roof. Amellia alleged that Auchter breached its contract to perform in a workmanlike manner. Amelia did not allege that the falling roof tiles damaged any other property or part of the project. The entire roof had to be replaced because each tile had to be inspected to determine whether it was properly fastened. The arbitrator found Auchter liable for $2.1 million for the defective installation of the roof.
Auchter had a CGL liability policy with Amerisure. Amerisure defended Auchter in the arbitration under a reservation of rights. Amerisure filed a declaratory judgment action against both Auchter and Amelia in federal court seeking a determination that Amelia’s claim was not for “property damage.” Amerisure argued that Amelia’s claim was for recovery of the roof it had paid for but had not received, and any damage was limited to the roof itself. Amelia argued that the plain meaning of “property damage” under the CGL policy did not require that “other” property be damaged to trigger coverage. The district court agreed with Amerisure, granting its motion for summary judgment.
The Eleventh Circuit surveyed Florida law, primarily two cases: United States Fire Ins. Co. v. J.S.U.B., Inc. 979 So.2d 871 (Fla. 2007) and Auto-Owners Ins. Co. v. Pozzi Window Co., 984 So. 2d 1241 (Fla. 2008). J.S.U.B.noted that claims solely for the costs of repairing and replacing the actual defects in construction were not covered under CGL policies. In Pozzi, the court held that defective installation of a window did not constitute property damage unless the defective component resulted in physical injury to some other tangible property.
Here, Amelia’s claims for the Inn’s defective roof was not a claim for “property damage.” Register’s defective installation of the Inn’s roof did not cause”physical injury to tangible property” as required to trigger coverage under the CGL policy. The only damages Amelia alleged were those to correct the faulty roof supplied by Auchter’s subcontractor. Amelia’s claim was simply a claim for the cost of repairing the subcontractor’s defective work. Consequently, there was no allegation of “property damage.”