25 Fla. L. Weekly Supp. 17a

Online Reference: FLWSUPP 2501PULTInsurance — Commercial general liability policy — Defective construction — Duty to defend — Insurer had duty to defend contractor which was listed as additional insured on CGL policy issued to subcontractor where complaint sought damages from contractor based on property damage resulting from subcontractor’s work — If complaint alleges facts which create potential coverage under policy, insurer has obligation to defend — Untimely notice of claim — Insurer waived right to object to coverage on basis of untimely notice where insurer received notice of claim at least three times over the course of a year, and each time the claim was denied on grounds other than late notice — Fact that no claim was directed against subcontractor is not determinative of whether allegations of underlying complaint were sufficient to trigger duty to defend — Allegations of complaint were sufficient to establish an “occurrence” and “property damage” which potentially were covered by policy

PULTE HOME CORPORATION, a Michigan Corporation, Plaintiff(s), vs. ALPHA INSULATION & WATER PROOFING COMPANY, INC., et al, Defendant(s). Circuit Court, 4th Judicial Circuit in and for Duval County. Case No. 16-2014-CA-004911-XXXX, Division CV-H. October 21, 2016. Kevin A. Blazs, Judge. Counsel: Mark A. Boyle, Amanda K. Anderson, and Ellen G. Smith, Boyle & Leonard, P.A., Fort Myers, for Plaintiff. Robert M. Darroch, Brett A. Smith, Goodman McGuffrey, LLP, Orlando, for FCCI Commercial Insurance Company.

ORDER ON PULTE HOME CORPORATION’SMOTION FOR PARTIAL SUMMARYDECLARATORY JUDGMENT

THIS CAUSE came on to be heard at the October 26, 2015 hearing on Pulte Home Corporation’s Motion for Partial Summary Declaratory Judgment as to the Duty to Defend Against Defendant, FCCI Commercial Insurance Company as to Premier Painting, Inc (PPI), and Incorporated Memorandum of Law, as filed with the Clerk on July 20, 2015, and this Court, having taken judicial notice of the court file per Section 90.202(6),Florida Evidence Code, and having heard argument of counsel and being otherwise fully advised of the premises therein, makes the following findings of fact and conclusions of law:

1. Pulte and Premier entered into a subcontract in 2000 for painting and stucco work to include the project at issue. The subcontract requires PPI to list Pulte as an additional insured, pursuant to the general liability policy. Given the language in the underlying Complaint, this Court finds that there are allegations seeking damages from Pulte for painting and stucco work.

2. FCCI issued a commercial general liability policy to PPI for the period of March 29, 2005 through March 29, 2006, along with an excess liability policy for the same time period. The commercial general liability policy provides coverage for bodily injury and property liability, “occurrence” and “property damage” are defined, and Pulte Homes Corporation is listed as an additional insured. Pulte tendered its claim to FCCI on April 1, 2013, although Pulte notified PPI in February of 2010. On August 22, 2013, FCCI denied the claim.

3. Partial summary judgment is appropriate where there is no material issue of disputed fact. Southern American Fire Insurance Company v. IBH Liquor Corporation, 242 So.2d 731 (Fla. 3rd DCA 1971). To determine a duty to defend, the court must look to the “eight corners” of the contract and underlying complaint. National Union Fire Insurance Company v. Lennox Liquors, Inc., 358 So.2d 533 (Fla. 1977). Because an insurance policy is an adhesion contract, the language is construed against the drafter. Westmoreland v. Lumbermens Mutual Casualty Company, 704 So.2d 176 (Fla. 4th DCA 1997) [23 Fla. L. Weekly D150a]. While coverage clauses are construed broadly, per Westmoreland, exclusionary clauses are narrowly construed against the insurer. Demshar v. AAA Con. Auto Transport, Inc., 337 So.2d 963 (Fla. 1976). If coverage is to be excluded by definition or policy exclusion, the language should be clear and unmistakable. Progressive Insurance Company v. Estate of Wesley, 702 So.2d 513 (Fla. 2nd DCA 1997) [22 Fla. L. Weekly D2277c]. When the terms of a policy may be subject to reasonable interpretations which would provide coverage or exclude coverage, any ambiguities are interpreted in favor of the insured. Prudential Property and Casualty Company v. Swendall, 622 So.2d 467 (Fla. 1993). With respect to the duty to defend, the allegations of the Complaint control. C.A. Fielland, Incorporated v. Fidelity and Casualty Company, 297 So.2d 122 (Fla. 2nd DCA 1974). Furthermore, the duty to defend is broader than the duty to indemnify and is based exclusively on the allegations of the Complaint. U.S. Fire Insurance Company v. J.S.U.B., Inc., 979 So.2d 871(Fla. 2007) [32 Fla. L. Weekly S811a]. Also, if the complaint alleges facts that are partly within coverage and partly outside coverage, the insurer must defend the entire lawsuit. Tropical Park, Inc. v. U.S. Fidelity and Guarantee Company, 357 So.2d 253 (Fla. 3rd DCA 1978). Finally, the duty to defend is distinct from the duty to indemnify and the insurer must defend the suit even if the actual facts subsequently demonstrate no coverage. Grisham v. Commercial Union Insurance Company, 610 So.2d 1299 (Fla. 1st DCA 1992).

4. Determining if Pulte qualifies as an additional insured is one of the recognized exceptions to the “eight corners” rule. Nateman v. Hartford Casualty Insurance Company, 544 So.2d 1206 (Fla. 3rd DCA 1989). The question is whether the underlying Complaint alleges “property damage” as a result of PPI’s work on the project. Again, the underlying Complaint contains allegations of painting and stucco work. Because Pulte’s status as an additional insured and corresponding coverage depends on whether PPI’s work is included in the underlying Complaint allegations, this Court is allowed to look beyond the “eight corners” to make a determination. Based on record evidence in this case, PPI performed stucco work on the project and Pulte is being held liable for the alleged defective stucco work and resulting damages. The underlying Complaint and Exhibit B, as attached, reflect information relative to the damages allegedly resulting from the defective stucco work. The underlying Complaint also alleges “property damage” resulting from PPI’s stucco work. As to FCCI’s obligation to defend Pulte as an additional insured as previously indicated, FCCI has a duty to the extent the Complaint alleges acts partly in and partly outside of coverage. Tropical Park, Inc. v. U.S. Fidelity and Guarantee Company, 357 So.2d 253 (Fla. 3rd DCA 1978). If the Complaint alleges facts which create potential coverage under the policy, the insurer has an obligation to defend. McCreary v. Florida Residential, 758 So.2d 692 (Fla. 4th DCA 1999) [25 Fla. L. Weekly D380b]. There is a duty to defend if the allegations “at least marginally and by reasonable implication” may be construed to invoke a duty to defend. Klaesen Brothers, Inc. v. Harbor Insurance Company, 410 So.2d 611 (Fla. 4th DCA 1982). If FCCI desired to eliminate any defense obligation where there are claims for vicarious liability and additional insured negligence, it could have drafted such an endorsement. The Florida Supreme Court has found that defective construction constitutes an “occurrence” within the meaning of a CGL policy, per J.S.U.B., Inc., citing American Family Mutual Insurance Company v. American Girl, Inc., 673 N.W.2nd 65 (Wis. 2004). It is, per the Florida Supreme Court, incumbent on the drafter to include clear language to preclude a cause of action. J.S.U.B., Inc. citing Container Corporation of America v. Maryland Casualty Company, 707 So.2d 733 (1998) [23 Fla. L. Weekly S163a]. The business risk (j)(6) exclusion does not apply, consistent with Essex Insurance Company v. Kart Construction, Inc., Case Number: 8:14-CV-356-T-232GW, 2015 WL 4730540, at 1 (N.D. Fla. Aug. 10, 2015). Furthermore, the “your work” exclusion of the policy only operates to preclude coverage for damages to the subcontractor’s own work. Castillo v. State Farm Florida Insurance Company, 971 So.2d 820 (Fla. 3rd DCA 2007) [32 Fla. L. Weekly D2474a]. “The insurer must defend when the complaint alleges facts which fairly and potentially bring the suit within policy coverage”. Lime Tree Village Community Club Association, Inc. v. State Farm General Insurance Company, 980 F. 2nd 1402 (11th Cir. 1993). Also, the “your product” exclusion and the “contractual liability” exclusion are inapplicable. Liberty Mutual Fire Insurance Company v. MI Windows and Doors, Inc., 131 So.3d 15 (Fla. Dist. Ct. App. 2013) [38 Fla. L. Weekly D1890a]. Finally, the “contractual liability” exclusion is inapplicable because it contains an exception for “insured contracts”, which is the subcontract. Ewing Construction Company, Inc. v. Amerisure Insurance Company, 420 S. W. 3rd 30 (Tex. 2014).

5. As to the late notice defense of FCCI, summary judgment on the issue is typically denied when discovery is incomplete. Payne v. Cudjoe Gardens Property Owners Association, Inc., 837 So.2d 458 (Fla. 3rd DCA 2002) [28 Fla. L. Weekly D1b]. No discovery as to FCCI’s late notice defense has been done. However, discovery is irrelevant where there is no prejudice because of waiver. Although it is presumed that prejudice has occurred when late notice of claim happens in violation of the policy provisions, the insured may rebut that presumption by introducing evidence tending to show that the insurer was not actually prejudiced by the late notice. Keenan Hopkins Schmidt & Stowell Contractors, Inc. v. Continental Casualty Company, 653 F. Supp. 2nd 1255 (M.D. Fla. 2009). In Florida, where an insurer has enough information to enable it to deny the claim on other grounds, it waives its right to object to the coverage on the basis of untimely notice. Nationwide Mutual Fire Insurance Company v. Beville, 825 So.2d 999 (Fla. 4th DCA 2002) [27 Fla. L. Weekly D1808b]. In this case, FCCI received Notice of Claim from Pulte at least three times over the course of a year and each time the claim was denied on grounds other than late notice.

6. In contract disputes such as this, a general contractor’s duties are non-delegable and they are therefore liable for the failures of their subcontractors. Mills v. Krauss, 114 So.2d 817 (Fla. 2nd DCA 1959). The lack of any claim by the association directed against PPI is not determinative of whether the allegations of the underlying Complaint are sufficient to trigger a defense by FCCI. West Hills Development Company v. Chartis Claims, Inc., 2015 WL 4937481 (Or. Ct. App. 2015). This Court finds that the underlying Complaint seeks damages from Pulte for work performed on its behalf by its subcontractors. Even excluding the claim for stucco work, the underlying Complaint raise allegations related to painting which create a duty for FCCI to defend Pulte as an additional insured. This Court finds that the allegations of the underlying Complaint are sufficient for Pulte to establish an “occurrence” and “property damage”. The allegations of the Complaint are sufficient to trigger a defense obligation and Pulte must only show there is potential for coverage. It is, therefore,

ORDERED AND ADJUDGED:

1. Pulte Home Corporation’s Motion for Partial Summary Declaratory Judgment as to the Duty to Defend Against Defendant, FCCI Commercial Insurance Company as to Premier Painting, Inc. (PPI), and Incorporated Memorandum of Law, as filed with the Clerk on July 20, 2015, is hereby GRANTED.