FLORIDA’S NEW CIVIL REMEDIES ACT – BULLETPOINTS AS TO HOW IT IMPACTS CONSTRUCTION

Posted on March 26, 2023March 26, 2023 by David Adelstein

There has been much talk about Florida’s new Civil Remedies Act (House Bill 837) that Governor DeSantis approved on March 24, 2023. As it pertains to construction, here is how I see it with key bulletpoints on the impact this new Act has on the construction industry:

New Florida Statute s. 86.121– This is an attorney’s fees statute for declaratory relief actions to the prevailing insured to determine insurance coverage after TOTAL COVERAGE DENIAL. (Note: A defense offered pursuant to a reservation of rights is not a total coverage denial.) This right only belongs to the insured and cannot be transferred or assigned. And the parties are entitled to the summary procedure set forth in Florida Statute s. 51.011 requiring the court to advance the cause on the calendar. The new statute does say it does NOT apply to any action arising under a residential or commercial property insurance policy. (Thus, since builder’s risk coverage is a form of property insurance, the strong presumption is this new statute would not apply to it.) Rather, the recent changes to Florida Statute s. 626.9373 would apply which provides, “In any suit arising under a residential or commercial property insurance policy, there is no right to attorney fees under this section.”

Florida Statute s. 95.11 – The statute of limitations for negligence causes of action are two years instead of four years. This applies to “causes of action accruing after the effective date of this act.”

Florida Statute s. 624.155 – Adds language relative to bad faith insurance claims including bad faith claims asserted under the common law.

Florida Statute 768.81 – Includes a greater percentage of fault section in the comparative negligence statute that states, “In a negligence action to which this section applies, any party found to be greater than 50 percent at fault for his or her own harm may not recover any damages. This subsection does not apply to an action for damages for personal injury or wrongful death arising out of medical negligence pursuant to chapter 766.”

Florida Statute s. 627.428– This statute was repealed. This was the attorney’s fees statute for insurance disputes.

Florida Statute s. 627.756 – This modified the language in this statute but still provides in a suit by an owner, contractor, a subcontractor, a laborer, or materialman against a surety under a payment or performance bond, if the claimant prevails, it can recover reasonable attorney’s fees for prosecuting the suit.

“This act shall not be construed to impair any right under an insurance contract in effect on or before the effective date of this act. To the extent that this act affects a right under an insurance contract, this act applies to an insurance contract issued or renewed after the effective date of this act.”

Please feel free to reach out to me if you view this Act differently.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

AN OCCURRENCE UNDER BUILDER’S RISK INSURANCE POLICY IS BASED ON THE LANGUAGE IN THE POLICY

Posted on March 18, 2023March 18, 2023 by David Adelstein

Builder’s risk insurance coverage is a vital property insurance coverage during the course of construction. Builder’s risk insurance is not a one-size-fits-all product so please make sure you are working with your insurance broker to procure this product that factors in and covers risk associated with the project.

Builder’s risk insurance is typically an occurrence-based policy. No different than other occurrence-based policies (such as commercial general liability), a dispute may arise as to the occurrence. This could be due to the triggering of the actual policy during the coverage period or it could be due deductible obligations, as in the case discussed below. When dealing with a builder’s risk insurance policy–again, no different than any policy–the language in the policy matters. Definitions used in the policy to define specific terms matter and, in numerous cases, the ordinary dictionary meanings of terms matter. But it all starts with the policy language.

In KT State & Lemon, LLP v. Westchester Fire Insurance Co., 2023 WL 2456499 (M.D.Fla. 2023), a builder’s risk policy provided coverage from April 2018 through the end of November 2019. There was a $50,000 per occurrence deductible for loss caused by or from water damage. An extension to the builder’s risk policy was negotiated through the end of January 2020 that increased this water damage deductible to $250,000 per occurrence. During construction and the testing of the fire suppression (sprinkler) system, leaks started to occur resulting in water damage. Two leaks occurred in September 2019, one leak in October 2019, one leak in November 2019, and two leaks in December 2019 (during the extension and higher water damage deductible period).

The plaintiff-insured argued that all of the leaks in the fire sprinkler system should constitute one single occurrence. Naturally, it did so because one occurrence would be a $50,000 deductible since the initial leak occurred prior to the extension period. The insurer took a contrary position and argued that each leak was a separate occurrence meaning there were four leaks with a $50,000 per occurrence deductible and two leaks in December 2019 each with a $250,000 deductible. This is a big deal from a dollar’s perspective as it means each leak would have to have damages in excess of the per occurrence deductible and the insured would potentially be responsible for the first $700,000 in water damage based on the six leaks.

“In Florida, the [insurance] contract should be ‘construed according to the plain language of the policy,’ and any ambiguities must be ‘construed against the insurer and in favor of coverage.’ KT State, supra, at *2 (citations omitted).

The Court looked at the policy language, specifically how the builder’s risk policy defined the term “occurrence” as it would be this definition in the policy that shed light on whether there would be one occurrence or multiple occurrences:

All LOSS attributable directly or indirectly to [1] one originating cause, event, incident or repeated exposure to the same originating cause, event or incident, or [2] to one series of similar originating causes, events, incidents or repeated exposures to the same originating cause, event or incident first occurring in the Policy period. All such LOSS will be treated as one OCCURRENCE, unless a specified period of time is included in this Policy. The most the Company will pay for LOSS in any one OCCURRENCE is the applicable Limit of Insurance shown on the Declarations.

As to the underlined above, the policy did not define the terms “series” or “similar.” Yet, these terms are not technical terms so the Court looked at the ordinary dictionary definitions. “The dictionary meaning of ‘series” is ‘[a] number of things of one kind (freq. abstract, as events, actions, conditions, periods of time) following one another in time or in logical order.’ The dictionary meaning of ‘similar’ is ‘alike in substance’ or ‘having characteristics in common.’” KT State, supra, at *3 (citations omitted). Based on the definition of “occurrence” in the policy, and the ordinary dictionary definitions of “series” and “similar,” the Court found the six fire sprinkler leaks constituted only one occurrence:

Reading the policy language from the standpoint of an ordinary person, in light of the common meaning of the terms used, and in a common-sense and natural manner produces only one reasonable conclusion. Plaintiffs’ claimed loss was attributable, directly, or indirectly, to a “series of similar originating causes, events, [or] incidents,” and therefore resulted from one occurrence. The loss resulted from leaks in the same sprinkler system, due in whole or part to improper installation by the same [subcontractor] crew under the same contract, in the same general location in the same building, and occurred one after the other in a relatively short span of time from late September to December 2019.

KT State, supra, at *4.

Yet, despite there being one occurrence, the Court applied a caveat to the benefit of the insurer since there were two leak incidents during the extension of the policy with an increased $250,000 per occurrence deductible:

Accordingly, under the Policies’ definition of “occurrence,” the leaks at issue together constituted one occurrence. For damage from leaks that occurred prior November 30, 2019, therefore, a single deductible of $50,000 applies. The result is different, however, for leaks after that date, because the parties expressly modified the Policies at that point. The original policy term ended on November 30, 2019. Plaintiffs were only entitled to purchase an extension of coverage beyond that date on the same terms as before if no “risk aggravating situation” was present at the time of the extension. But such a situation was present, because Plaintiffs had reported multiple leaks, and that was obviously the reason the parties changed the water damage deductible to $250,000 when they extended coverage to January 30, 2020. It is clear that the increased deductible was intended to apply to similar water damage events occurring during the extended policy period. Therefore, the increased deductible applies to water damage from leaks occurring after November 30, 2019, notwithstanding the definition of “one occurrence.”

KT State, supra, at *5.

TWO WORTHY INSURANCE TOPICS: (1) BAD FAITH, AND (2) SETTLING WITHOUT INSURER’S CONSENT

Posted on February 5, 2023February 6, 2023 by David Adelstein

The recent Eleventh Circuit Court of Appeals’ decision, American Builders Insurance Company v. Southern-Owners Insurance Company, 56 F.4^th 938 (11^th Cir. 2023), is an insurer versus insurer case that touches on two important insurance topics: (1) common law bad faith against an insurance company, and (2) an insurer’s affirmative defense that an insured settled a claim without its consent. The Eleventh Circuit provides invaluable legal discussion on these topics that any insured (and an insured’s counsel) need to know and appreciate. While this article won’t go into the granular facts as referenced in the opinion, it will go into the law because it is the law the facts of a case MUST cater to and address.

In this case, a person performing subcontracting work fell from a roof without fall protection and became paralyzed from the waist down. The general contractor had a primary liability policy and an excess policy. The general contractor’s primary liability insurer investigated the accident and assessed the claim. The subcontractor’s liability insurer, which was the primary insurance policy (the general contractor was an additional insured for work the subcontractor performed for the general contractor), did little to investigate and assess the claim and then refused to pay any amount to settle the underlying claim or honor its defense and indemnity obligation to the general contractor.

Both the general contractor’s primary insurer and excess insurer each tendered policy limits to settle the claim and avoid a bad faith claim by exposing the general contractor to more than policy limits, which was the determination had the matter proceeded to a trial.

The general contractor’s primary liability insurer then sued the subcontractor’s liability insurer for common law bad faith (based on equitable subrogation). The subcontractor’s liability insurer, among other things, argued it should be absolved because its policy was breached when payment was made to the claimant without its consent. The case proceeded to trial and a jury found in favor of the general contractor’s primary liability insurer. The subcontractor’s liability insurer appealed…and lost.

Common Law Bad Faith

[T]he critical inquiry in a bad faith [action] is whether the insurer diligently, and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment. Additionally, any damages claimed by an insured in a bad faith case must be caused by the insurer’s bad faith. That is, the bad faith conduct must directly and in natural and continuous sequence produce[] or contribute[] substantially to producing such [damage], so that it can reasonably be said that, but for the bad faith conduct, the [damage] would not have occurred.

The bad faith inquiry is determined under the ‘totality of circumstances’ standard, and we focus not on the actions of the claimant but rather on the insurer in fulfilling its obligations to the insured. That said, a claimant’s actions –such as a decision not to offer a settlement-remain relevant in assessing bad faith. Insurers have obligations to advise the insured of settlement opportunities, to advise to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid [the] same,” as well as to investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so. These obligations … are not a mere checklist, however, and, as the Florida Supreme Court has explained, [a]n insurer is not absolved of liability simply because it advises its insured of settlement opportunities, the probable outcome of the litigation, and the possibility of an excess judgment.

Moreover, insurance companies occasionally have an affirmative duty to offer settlements. Bad faith may be inferred from a delay in settlement negotiations which is willful and without reasonable cause. Thus, [w]here liability is clear, and injuries so serious that a judgment in excess of the policy limits is likely, the insurer must initiate settlement negotiations. In such a case, where [t]he financial exposure to [the insured] [i]s a ticking time bomb and [s]uit c[an] be filed at any time, any delay in making an offer under the circumstances of this case even where there was no assurance that the claim could be settled could be viewed by a fact finder as evidence of bad faith.

American Builders Insurance Company, supra, at 944-45 (internal quotation and citation omitted).

Here, the jury reasonably found that the subcontractor’s liability insurer “acted in bad faith because it delayed acting on its duty to investigate and settle [the claimant’s] claim.” American Builders Insurance Company, supra at 945. The facts “could lead a reasonable jury to conclude that the [subcontractor’s liability insurer] delayed its investigation instead of attempting ‘to resolve the coverage dispute promptly’ or using ‘diligence and thoroughness.’” Id. at 946 (internal quotation and citation omitted).

Here, a reasonable jury could also find that the subcontractor’s liability insurer caused the general contractor’s liability insurer damages. The subcontractor’s liability insurer wanted to focus on the claimant and his attorney’s action. This was shot down. “Of course, there’s a difference between focusing on a claimant’s actions, which would be improper, and factoring a claimant’s actions into the totality of circumstances analysis, which is not improper. In this case, though, [the subcontractor’s liability insurer] flipped Florida law on its head and exclusively focused on [the claimant and his attorney’s] actions.” American Builders Insurance Company, supra, at 947 (internal quotation and citation omitted).

Insurer “Consent” Affirmative Defense

The subcontractor’s liability insurer argued that the general contractor’s primary liability insurer breached the subcontractor’s liability insurance contract “by failing to receive its consent before settling with [the claimant].” American Builders Insurance Company, supra, at 944. This was also shot down.

Subcontractor’s liability insurance contract provided:

[N]o insured will, except at the insured’s own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent. [T]his language required the insured to obtain the insurer’s consent before settling. That is, while an insured is free to enter into a reasonable settlement when its insurer has wrongfully refused to provide it with a defense to a suit, … the insured is not similarly free to independently engage in such settlements where, as here, the insurer had not declined a defense to suit.

The Florida Supreme Court requires an insurer to establish three things in order to succeed on this affirmative defense: (1) a lack of consent; (2) substantial prejudice to the insurer; and (3) diligence and good faith by the insurer in attempting to receive consent. The first element has a few exceptions. The insured may settle without obtaining consent if the insurer wrongfully refused to provide [the insured] with a defense to a suit, or offers a conditional defense that the parties cannot agree upon. Moreover, even if the insured was obliged to obtain consent, the failure to do so is not an affirmative defense unless the insurer also establishes substantial prejudice and evinces good faith in bringing about the cooperation of the insured.

American Builders insurance Company, supra, at *947-48.

Here, the issue of whether the general contractor’s primary liability insurer needed consent was not at-issue. It did. But the subcontractor’s liability insurer still needed to establish substantial prejudice and good faith, and the jury could find it proved neither, which it did. American Builders Insurance Company, supra, at *948.

UNDERSTANDING LIABILITY INSURER’S TWO DUTIES: TO DEFEND AND TO INDEMNIFY

Posted on December 10, 2022December 10, 2022 by Edward Garber

A liability insurer has two duties that are the crux of a liability policy: the duty to defend the insured in legal actions and the duty to indemnify the insured from losses covered under the policy. Many times, policyholders (insureds) do not fully understand or appreciate these two important duties. They need to and this is why having private counsel assist with coverage-related considerations is an absolute must.

An insurers’ duty to defend is separate from its duty to indemnify. A recent opinion out of the Middle District of Florida in Progressive Express Ins. Co. v. Tate Transport Corp., 2022 WL 16963815 (M.D.Fla. 2022) clarifies the distinction between these duties with a focus on an insurer’s initial duty — the duty to defend. Please read below so you can have more of an appreciation of these duties. The court does a good job discussing Florida law with the emphasis on when an insurer’s initial duty to defend kicks-in:

Duty to Defend

Under Florida law, “an insurer’s duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage.” The duty to defend is a broad one, broader than the duty to indemnify, and “[t]he merits of the underlying suit are irrelevant.” We determine whether an insurer has a duty to defend its insured based only on “the eight corners of the complaint and the policy,” and only as the complaint’s alleged facts are “fairly read[.]” The “facts” we consider in evaluating the duty to defend come solely from the complaint, regardless of the actual facts of the case and regardless of any later developed and contradictory factual record. “Any doubts regarding the duty to defend must be resolved in favor of the insured,” and “where a complaint alleges facts that are partially within and partially outside the coverage of an insured’s policy, the insurer is not only obligated to defend, but must defend that entire suit[.]” But of course, because the lawsuit must be for something covered by the insurance policy, “the insurer has no duty to defend” when “the pleadings show the applicability of a policy exclusion.”

An insurance policy can, without creating a conflict or ambiguity, both provide coverage and exclude some things that might otherwise fall within that coverage. On the other hand, an insurance policy’s coverage becomes illusory if it grants coverage in one provision and completely takes it away in another provision.

Because [insurer] relies on an exclusion to deny coverage, “it has the burden of demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation.”

***

An insurer’s duty to defend an insured in a legal action under Florida law “arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage.” Even if the allegations in the complaint are meritless, the duty to defend nonetheless arises. All doubts about whether the duty to defend applies are resolved in favor of the insured. “If an examination of the allegations of the complaint leaves any doubt regarding the insurer’s duty to defend, the issue is resolved in favor of the insured.”

Progressive Express Insurance, supra, at *3-5 (internal citations omitted).

Duty to Indemnify

“While the duty to defend is broad and based on the allegations in the complaint, the duty to indemnify is determined by the facts adduced at trial or during discovery.”

Therefore, unlike the duty to defend, the trial court must look beyond the allegations in the underlying complaint to decide whether an insurer has a duty to indemnify. The duty to indemnify arguably may not become fully ripened until the merits of the underlying litigation are resolved.

Progressive Express Insurance, supra, at *6 (internal citations omitted)

PROFESSIONAL SERVICES EXCLUSION IN CGL POLICIES

Posted on November 12, 2022November 12, 2022 by Edward Garber

A professional services exclusion in a commercial general liability policy means something. It’s an exclusion an insurer will rely on to avoid insurance coverage based on “professional services” performed or rendered by the insured. Don’t take it from me. Take it from the recent opinion in Colony Insurance Company v. Coastal Construction Management, LLC, 2022 WL 16636697 (M.D.Fla. 2022) where the trial court granted a commercial general liability insurer’s motion for judgment on the pleadings based on the professional services exclusion.

Here, an owner sued, among other parties, an entity performing only construction management services based on construction defects at its project. The construction manager did not perform any design or physical construction. It was hired to make site inspections of the construction, review construction quality and finish standards, ensure workmanship quality, coordinate the punchlist process, and supervise management and administration of the project.

The construction manager’s commercial general liability insurer sued for declaratory relief claiming it owed no duty to defend or indemnify based on the professional services exclusion.

The professional services exclusion stated that the commercial general liability insurance did not apply to property damages:

[A]rising out of the rendering or failure to render any professional service. This includes but is not limited to:

(3) inspection, supervision, quality control, architectural or engineering activities done by or for you on a project on which you serve as a construction manager;

(4) engineering services, including related supervisory or inspection services.”

Colony Insurance, supra, at *3.

While the words “professional” or “professional services” were not a defined term in the policy, the court found they do have commonly understood meanings: “professional services are those that require a high degree of training or proficiency or involve specialized knowledge, skill, or labor that is primarily mental rather than physical.” Colony Insurance, supra, at *3. (Just because a word or term is not defined in the policy does not make the word or term ambiguous. Id.)

The court found that the professional services exclusion applies to bar coverage. This means the construction manager’s commercial general liability insurer owed no duty to defend the construction manager in the underlying case and no duty to indemnify the construction manager for damages.

As a matter of common sense, the management, supervision, and quality control activities alleged in the complaint in the context of a construction project of the size and scope alleged are not activities a layperson could take. Therefore, reading the exclusion in context and from the perspective of an ordinary person, the Court has no difficulty concluding without extensive analysis that these duties and tasks by their nature require specialized skill, training, and/or experience. As such, the only reasonable conclusion is that the [owner’s underlying] claims against [the construction manager] fall within the [professional services exclusion].

***

Finally, paragraph (3) [in the exclusion above], if anything, supports the application of the exclusion here because ‘inspection, supervision [and] quality control’ are precisely the types of activities [owner’s] complaint alleges [the construction manager] undertook to perform. The fact that those activities are listed in the exclusion are linked to [the construction manager] acting as ‘construction manager’ does not mean that the activities themselves would change their character if [construction manager] where somehow acting solely as a “construction consultant’ or an ‘owner’s representative.’ In any event, the nature of the activities themselves controls, and the activities alleged in the complaint plainly required specialized training and experience.

Colony Insurance, supra, at *4 (internal citations omitted).

NOTIFICATION TO INSURER AND THE “UNTIMELY NOTICE” FIGHT

Posted on July 2, 2022July 2, 2022 by Edward Garber

Notice, notice, notice. This should be your mindset when it comes to notifying your insurance carrier of a potential claim or loss. I get it. Notice means opening up a claim number and the potential increase in insurance premiums. Yet, untimely notice could mean fighting with your insurance carrier as to whether you provided them prompt notice. Thus, I operate with the “notice, notice, notice” mindset in providing notice of a potential claim or loss that could trigger duties or obligations under the policy. It is the better safe than sorry approach and avoids the needless notice fight.

The property insurance opinion in SFR Services, LLC v. Hartford Insurance Company of the Midwest, 2022 WL 2340519 (S.D.Fla. 2022) illustrates this “untimely notice” fight and, importantly, how certain policy language can change the dynamics of this fight. Here, notification of a hurricane roof damage claim was provided by the insured to the property insurer almost three years after the hurricane. In the interim, the insured had their roof repaired on multiple occasions. Finally, the insured notified the property insurer and the claim was denied. The insured sued the property insurer for coverage and the insurer moved for summary judgment arguing the insured failed to provide it timely notice as required by the policy.

“[N]otice is a condition precedent to coverage, and an insured’s failure to provide ‘timely notice of loss in contravention of a policy provision is a legal basis for the denial of recovery under the policy.” SFR Services, supra, at *2 (citation omitted).

However, just because an insurer claims it did not receive timely notice does not end the discussion. There is a two-step process. “First, the Court must determine ‘whether the insured provided timely notice.’ Second, ‘if notice was untimely, prejudice to the insurer is presumed, but that presumption may be rebutted.’” SFR Services, supra, at *2 (citations omitted).

Step 1- Whether the Insured Provided Timely Notice

Whether the insured provided timely notice employs a reasonable person standard. “[N]otice is necessary when there has been an occurrence that should lead a reasonable and prudent man to believe that a claim for damages would arise.” SFR Services, supra (citation omitted).

Step 2- If Notice is Untimely and Prejudice is Presumed, that Presumption may be Rebutted

If notice is untimely, prejudice is presumed; but, this presumption may be rebutted by the insured.

To carry this burden, an insured must show that the insurer was able to inspect the property in the same condition it was in right after the loss by presenting evidence creating a genuine dispute of fact as to ‘(a) whether better conclusions could have been drawn without the delay in providing notice, (b) whether those conclusions could have been drawn more easily, (c) whether the repairs to the affected areas that took place in the interim would complicate and evaluation of the extent of the damage or the insured’s efforts to mitigate its damages, or (d) whether an investigation conducted immediately following the occurrence would not have disclosed anything materially different from that disclosed by the delayed investigation.’”

SFR Services, supra, at *3 (citations omitted).

The Twist

But in this case, there is a twist. And it is a crucial twist to this two-step process.

The Court looked at language in the property insurance policy that provided the insurer had “no duty to provide coverage under this policy if the [Insureds’] failure to comply” with their duties “is prejudicial to [Defendant].” SFR Services, supra.

The insured argued that this policy language removes the presumption of prejudice in favor of the insurer and shifts the burden on the insurer to PROVE prejudice, i.e., that the insured’s failure to comply is prejudicial to the insurer. There is a huge difference between prejudice being presumed because of untimely notice (which has to be rebutted by the insured) and the insurer required to prove the prejudice. The Court found that under this language in the policy, the insurer is actually required to show prejudice:

Upon careful consideration, the Court must reject the body of precedent within this district that a presumption of prejudice may arise when a policy provision requires that an insured’s failure to comply with an enumerated duty be prejudicial to the insurer. Because there is no presumption of prejudice, a genuine issue of material fact remains as to whether the Insureds’ failure to timely notify Defendant was prejudicial, and the Motion must be denied. To hold otherwise would create a regime under which an insurer may obtain a different result in federal court than that required by the new line of cases in Florida state court.

SFR Services, supra.

This “twist” changes the dynamic of the “untimely notice” fight all due to policy language that basically says that the insurer has no coverage obligations if the insured’s failure to comply with his/her/its duties is prejudicial to the insurer. The Court’s ruling is ultimately saying that the insurer cannot hide behind the presumption of prejudice requiring the insured to rebut the prejudice because the policy, itself, puts that burden on the insurer. Big difference.

QUICK NOTE: PHYSICAL LOSS OR DAMAGE UNDER PROPERTY INSURANCE POLICY = ACTUAL, TANGIBLE ALTERATION TO PROPERTY

Posted on May 30, 2022May 30, 2022 by Edward Garber

In one of Florida’s first appellate opinions dealing with business interruption losses and COVID-19, the appellate court found COVID-19 was not covered under the terms of the commercial property insurance policy to cover business interruption losses. In this case, a restaurant/bar suffered losses due to emergency measures imposed by Miami Dade due to COVID-19. Such emergency measures restricted the occupancy of restaurant/bars and undeniably resulted in business interruption. Occupancy and patrons are the lifeline of restaurant/bars. So why weren’t business interruption losses covered? Because there was no direct physical loss of or damage to the property at the restaurant/bar. The appellate court, affirming the trial court, explained direct physical loss of or damage to the property means there needs to be actual tangible alteration to property. COVID-19 did not cause actual tangible alteration to property which caused the restaurant/bar to suffer business interruption losses. Moreover, any COVID-19 particles that got on property could be cleaned. The analogy the appellate court provided, as cited here, is as follows: “The difference “between [the restaurant/bar’s] loss of use theory and something clearly covered—like a hurricane—is that property did not change. The world around it did. And for the property to be useable again, no repair or change can be made to the property—the world must change.”

As with any insurance coverage dispute, the terms of the policy matter, fairly or unfairly. When dealing with an insurance coverage dispute, make sure you work with counsel that best frame your coverage arguments. In this case, the insured’s counsel tried to maximize coverage with creative arguments. But in the end, the lack of actual tangible alteration to property to support direct physical loss or damage doomed its claim.

ENDORSEMENT TO INSURANCE POLICY CONTROLS

Posted on March 20, 2022March 20, 2022 by Edward Garber

I’ve said this before, and I’ll say it again: an insurance policy is a complicated reading and this reading gets compounded with endorsements that modify aspects of the policy.

What you think may be covered may in fact not be covered by virtue of an endorsement to the insurance policy. This is why when you request an insurance policy you want to see the policy PLUS all endorsements to the policy. And when you analyze a policy, you need to do so with a full reading of the endorsements.

An endorsement to an insurance policy will control over conflicting language in the policy. Geovera Speciality Ins. Co. v. Glasser, 47 Fla.L.Weekly D436a (Fla. 4^th DCA 2022) (citation omitted).

The homeowner’s insurance coverage dispute in Glasser illustrates this point. Here, the policy had a water loss exclusion. There was an exception to the exclusion for an accidental discharge or overflow of water from a plumbing system on the premises. But there was an endorsement. The endorsement modified the water loss exclusion to clarify that the policy excluded water damage “in any form, including but not limited to….” Examples were then given which did not include the accidental discharge or overflow of water from a plumbing system.

The homeowner filed an insurance coverage dispute against the property insurance carrier for a water damage claim. Specifically, a pipe in a bathroom burst causing water damage. The insured claimed this was covered because of the accidental discharge or overflow of water from a plumbing system exception. The trial court agreed. The appellate court did not. Why?

The answer is simple. The endorsement. “The insurer’s endorsement language…expressly excludes damages caused by water in any form, including plumbing system accidents. Although the policy’s ‘Exception [t]o c.(6)’ expressly covers accidental discharges of water from a plumbing system, it is superseded by the endorsement which excludes water loss in any form.” Glasser, supra.

The insured argued, as it should, that the endorsement did not explicitly identify that water damage included accidental discharges of water from a plumbing system indicating that such was covered under the policy. While true, the appellate court disagreed with this sentiment. “‘[T]he mere fact that a provision in an insurance policy could be more clearly drafted does not necessarily mean that the provision is otherwise inconsistent, uncertain or ambiguous.’ While this policy may require the reading of multiple policy provisions, it is unambiguous and simply does not cover the water loss suffered by the insured.” Glasser, supra (internal citation omitted).

QUICK NOTE: TYPES OF INSURANCE FOR CONSTRUCTION PROJECTS

Posted on January 2, 2022January 2, 2022 by Edward Garber

I did a presentation on types of insurance for construction projects outside of builder’s risk insurance. The presentation briefly discussed insurance beyond commercial general liability, commercial automobile liability, and workers compensation and employer’s liability insurance.

There are many other insurance products that are relied on and needed to cover the MANY risks that contractors face when dealing with a construction project. Insurance is a major part of construction to cover risk and making sure you have the RIGHT insurance to cover the risks you face on a construction project cannot be understated.

When drafting and negotiating a construction contract, it is important to spend time on the insurance requirements including consulting with your insurance broker and lawyer to make sure the right language is included and/or you have the requested insurance.

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KNOW WHETHER YOUR COURSE OF BUSINESS OPERATIONS ARE COVERED OR EXCLUDED BY YOUR INSURANCE

Posted on December 11, 2021December 11, 2021 by Edward Garber

It is a good idea to know what your insurance covers and does not cover. This way, if your course of business has you performing a certain (risky) operation, you know whether that operation is covered or excluded under your policy. If you are not sure, discuss with your insurance broker — this is important. There is little value performing an operation that is NOT covered by your insurance policy, as you are now performing a risk that is not covered by insurance. If you know it is not covered by insurance you may elect to change your operations or see if there is insurance to cover the risk. Below is a case study of this occurrence dealing with a commercial automobile liability policy where an insured’s operations using a crane mounted to a super duty truck was not covered under their automobile liability policy.

In People’s Trust Ins. Co. v. Progressive Express Ins. Co., 46 Fla. L. Weekly D262a (Fla. 3d DCA 2021), homeowners hired a company to install a shed. The company hired another company to deliver and install the shed using a crane; the company used a crane mounted to a Ford F-750 super duty truck. This company improperly operated the crane resulting in the shed falling and damaging the homeowner’s roof. The homeowners submitted a claim to their property insurer and their property insurer subrogated to their rights and sued. The company operating the crane’s commercial automobile liability insurer denied coverage, and thus, denied the duty to defend. As a result, a Coblentz-type agreement was entered into where the company operating the crane consented to a judgment in favor of the property insurer (subrogee) and assigned its rights under its commercial automobile liability policy to the property insurer. The property insurer then sued the automobile liability carrier for coverage. The trial court granted summary judgment in favor of the automobile liability insurer finding there was no coverage and this was affirmed on appeal. Why?

The coverage issue focused on whether a crane mounted to a super duty truck (Ford F-750) was covered or excluded by the commercial automobile liability policy.

The policy included a mobile equipment exclusion; however, mobile equipment did not include, “land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state or province where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicles are considered autos.” The Ford F-750 super duty truck would not constitute mobile equipment excluded by the policy because it would be a land vehicle subject to a compulsory or financial responsibility law or other motor vehicles insurance law.

However, the crux of the issue was the crane mounted to the Ford F-750 super duty truck. The policy also excluded coverage for, “Bodily injury, property damage…arising out of the operation of:…b. machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is principally licensed or principally garaged.”

Based on this exclusion, the Court held:

The truck, “used primarily to provide mobility to a mounted crane,” would be excluded “mobile equipment” under the relevant definition, but for the fact that it is subject to a compulsory or financial responsibility law. The contract contemplates this exact situation. Next, we look to the “13.b. exclusion” which directs us to exclude any claim for property damage “arising out of the operation of . . . machinery or equipment that is on, attached to, or part of, a land vehicle that would qualify under the definition of mobile equipment if it were not subject to a compulsory or financial responsibility law where it is licensed or principally garaged.” There is no dispute that the crane was in use at the time of the incident and that the property damage arose out of the operation of the crane. Where, as here, the record clearly established that the damage at issue was caused by the mounted crane, in operational use, on a vehicle that would otherwise qualify as mobile equipment, the trial court correctly granted summary judgment in favor of [the automobile insurer] on the policy exclusion and properly entered final judgment in accord with such findings.

People’s Trust Ins. Co., supra.

In other words, the company that used the crane mounted to its super duty truck performed an operation excluded by its commercial automobile liability insurance policy. The company would have been better to know whether this risk was covered or excluded under its policy, see if it could obtain coverage for this operation, or switch its operation appreciating the uninsured risk associated with performing the operation in this manner.