Florida Appellate Court Determines Faulty Workmanship Exclusion in Homeowner’s Policy Is Not Ambiguous and Thus Damage Caused by Contractor’s Conduct Is Not a Covered Loss

Matthew Lewis | PropertyCasualtyFocus

In Saunders v. Florida Peninsula Insurance Co., a Florida appellate court recently determined whether a faulty workmanship exclusion in a homeowner’s policy applied to a property loss caused by a contractor.

The insured, Veronica Saunders, hired a contractor to install a new addition to her home, which was insured by Florida Peninsula Insurance Co. During the construction process, the contractor took off a portion of the roof and only covered the exposed area with tarps. The home eventually sustained damage from rainfall after the house was left in this condition for several weeks.

Saunders filed a claim with her homeowner’s insurance carrier, Florida Peninsula. The insurer denied the claim because the policy excluded losses caused by “[f]aulty, inadequate[,] or defective … [d]esign, specifications, workmanship, repair, construction, renovation, remodeling, grading, [and] compaction.” Following the denial, Saunders filed a declaratory action in Miami-Dade County seeking a determination of the coverage under her policy with Florida Peninsula.

Florida Peninsula moved for summary judgment based on its position that the contractor’s conduct, which caused the damage, was excluded under the faulty workmanship provision in the policy. In opposition to summary judgment, Saunders argued that the policy’s faulty workmanship provision was ambiguous because it could refer to either the faultiness of the finished product or the faultiness of the contractor’s process. As such, any ambiguity in the policy should be held against the insurer. The trial court disagreed and granted Florida Peninsula’s motion, entering summary judgment in favor of the insurer.

On appeal, the Florida Third District Court of Appeal affirmed the trial court’s ruling. The court noted that it would be inappropriate, as Saunders argued, to interpret the faulty workmanship exclusion on its own. Instead, Florida case law required that the interpretation of the exclusion provision be made in the context of the entire insurance policy. The court further explained that the meaning of a term within a policy should only be ascertained by reading that term in conjunction with the entire policy, which included the other terms associated with it.

In this case, the district court determined that because the term “workmanship” was listed between the phrases “design and specifications” and “repair, construction, renovation, remodeling, grading, and compaction,” it was meant to apply to both the faultiness of the finished product as well as to the faultiness of the process itself. Because the workmanship exclusion was not ambiguous, the loss fell under the provision and the trial court did not err in granting summary judgment to Florida Peninsula.

Florida Appellate Court Determines Faulty Workmanship Exclusion in Homeowner’s Policy Is Not Ambiguous and Thus Damage Caused by Contractor’s Conduct Is Not a Covered Loss

Matthew Lewis | PropertyCasualtyFocus

The Florida Third District Court of Appeal recently ruled that an insurer did not waive its right to appraisal after choosing to cover only part of a property damage loss claimed by its insured. The case, People’s Tr. Ins. Co. v. Farua Portuondo, No. 3D20-266 (Fla. 3d DCA Oct. 7, 2020), involved a property damage claim regarding alleged damage sustained to the insured’s home following Hurricane Irma in September 2017.

In December 2018, Farua Portuondo first reported roof and interior damage to his property insurance carrier, People’s Trust Insurance Company (“People’s Trust”). Following an inspection of the purported damage, People’s Trust agreed to cover only the interior damage and not the claim for roof damage.

On July 30, 2019, Portuondo filed suit against People’s Trust based on the insurer’s denial of coverage related to the roof damage claim. On August 26, 2019, People’s Trust demanded appraisal, as allowed under its policy with Portuondo, and proceeded with the appraisal process.

On September 16, 2019, People’s Trust was served with the lawsuit filed by Portuondo. Following service of the lawsuit, People’s Trust halted the appraisal process and filed a motion to compel appraisal, along with several other motions to compel related to the claim. The trial court denied the motion to compel appraisal. As such, People’s Trust appealed the ruling to the Third District Court of Appeals.

The district court reviewed the transcript of the hearing from the trial court and determined that the motion to compel appraisal was denied by the lower court because People’s Trust only provided partial coverage to the Portuondo claim. In support of the denial of the motion to compel appraisal, Portuondo had argued that People’s Trust waived its right to appraisal by choosing to cover only part of the loss.

The district court disagreed with Portuondo’s argument, holding that a motion to compel appraisal should be granted when an insurer has agreed to repair a covered loss, but the parties disagreed as to the scope of the repairs. The district court cited to a case it decided earlier in 2020, Baptiste v. People’s Tr. Ins. Co., 299 So. 3d 1148 (Fla. 3d DCA 2020), which involved the same policy language in a similar situation where the insurer and insured disagreed on the “amount of loss” and “scope of repairs.” Because People’s Trust did not wholly deny coverage for Portuondo’s claim, the district court held that the trial court should have granted the motion to compel appraisal as allowed under the policy.

In addition, the district court rejected arguments made by Portuondo that People’s Trust waived its right to appraisal by abating the original appraisal and filing the motion to compel with the trial court. Because People’s Trust did not “actively” participate in the lawsuit or engage in conduct inconsistent with its right to appraisal, the district court held that People’s Trust did not waive its right to appraisal. Once People’s Trust received service of the lawsuit, it merely paused appraisal and sought an order from the trial court to require the parties to go through the appraisal process.

The district court reversed the order of the trial court and remanded back to the trial court with instructions to grant the motion to compel appraisal.

Address ‘Your Work’ Exposure Within CPrL Policies With Faulty Workmanship Coverage

Joseph Reynolds | Construction Executive

New faulty workmanship coverage forms have emerged to potentially address the “your work” exposure found in most contractors professional liability (CPrL) policies. Once offered by only a single carrier, several insurers have recently entered the marketplace to cover the cost to repair or replace faulty work or the related material costs associated with the “self-performed work” of general and trade contractors. 

Commonly serving as a separate insuring agreement and offered in carrier-specific CPrL policies, faulty workmanship coverage forms are designed to protect contractors from the “your work” claims triggered by project owners and other third parties. This includes the contractor’s workmanship as well as the equipment, parts and materials such as steel beams, epoxy activators and anchor bolts used to perform construction work.

Insureds should be aware that exclusions and strict conditions apply. For instance, faulty workmanship policies typically do not cover resulting bodily injury and property damage and some policies even exclude project delays and other business risks that can arise from the claims of unhappy customers. Another potentially confusing issue is the scope of coverage offered under a ‘faulty work’ endorsement. While some faulty workmanship enhancements are specifically-designed to cover “your work,” claims, others may only cover the products manufactured or fabricated by the insured and not the work they perform or install.

Another issue is that contractors often are so focused on the potential value of faulty workmanship coverage that they neglect to consider other prevailing exposures such as professional liability and pollution liability. For instance, the moment a contractor subs out work, performs construction management or delegates or performs in-house design, the risk management or coverage emphasis may shift towards professional liability exposures rather than the value of faulty workmanship coverage. In other words, the quality and breadth of the professional liability coverage may be even more critical to a general contractor or large trade contractor than that of a faulty workmanship insuring agreement covering only self-performed work, particularly those professional liability policies that provide carvebacks for coverage of faulty workmanship claims that arise out of negligent provision of professional services (e.g., construction management). 

Contractors should always assess what professional services (e.g. design assist, value engineering, management of subs, etc.) and construction activities they are performing during the course of their business as well as the overlaying exposures presented with the coverage grants provided under a faulty workmanship or professional liability policy. 

Here are some examples of where a typical faulty workmanship policy could benefit the insured: 

  • An electrical contractor installed the entire electrical and audio-visual systems for a large office building, but failed to see that the plans/specs require (per the building code) that all of the wiring must run through conduits as opposed to running freely through the wall cavities. All of the wiring had to be torn out and replaced to comply with code. The cost to repair and replace is in the hundreds of thousands of dollars. 
  • A flooring contractor installed exotic hardwood flooring. After installation, the hardwood floors started to warp and pop as a result of the contractor failing to acclimate the wood to the humidity and temperature of the building. All of the floors had to be ripped out and replaced.
  • A masonry contractor failed to properly compact the underlying sand and gravel base of a bluestone dining patio install at a restaurant. Further, the drainage layout was improperly laid out and installed. Over the course of a wet winter, the patio heaved and caused cracking and undulations in the patio. As a result, the entire patio had to be torn out, appropriate drainage and compaction applied and stone re-laid costing tens of thousands of dollars. 

True faulty work coverage forms are currently available from nearly five carriers as part of a blended contractor’s errors and omissions product or totally separate insuring agreement via an endorsement to CPrL policies. This includes capacities ranging from $250,000 to $5,000,000 and premiums starting as low as $2,500-3,500. Know that carriers can be selective when it comes to the types of exposures and projects they cover. 

The benefits for construction firms ranging from electricians, plumbers, HVAC and mechanical contractor to interior finishers, masons, utility contractors and flooring contractors are many. They include the ability to potentially protect contractors from the “your work” faulty workmanship claims of third-parties with reasonably affordable coverage forms provided in an uncertain environment that can be litigious. 

Business Risk Exclusions Bar Faulty Workmanship Claim

Tred R. Eyerly | Insurance Law Hawaii

    The manufacturer of roofing and waterproofing systems was unsuccessful in securing coverage for alleged faulty workmanship due to the “your work” and “your product” exclusions. Siplast, Inc. v. Emplrs Mut. Cas. Co., 2020 U.S. Dist. LEXIS 176539 (N.D. Texas Sept. 25, 2020). 

    Siplast was sued in New York by the Archdiocese for work done at Cardinal Spellman High School. The Archdiocese purchased a Siplast Roof System for the high school. Vema Enterprises installed the roof system. The roof system was covered by a guarantee. 

    After completion, school officials noticed water damage in the ceiling tiles throughout the school. A consultant hired by the Archdiocese concluded that the leaks were caused by the workmanship and the materials that were compromising the entire roof membrane and system. Siplast determined the guarantee was not applicable. The Archdiocese informed Siplast that it would repair the roof and hold Siplast liable for the costs. Siplast gave notice of the claim to Employers, but coverage was denied.

    The Archdiocese sued. The complaint alleged that the only way to remediate the leak issue was to replace the failed membrane and system with a new one. The consultant estimated the total cost of remediation would be $5,000,000. 

    Siplast sued Employers. Siplast maintained that the Archdiocese had alleged claims based on an “occurrence” because they alleged they sustained damage due to faulty work and products. The Archdiocese did not allege that Siplast expected or intended any damage. The court agreed with Siplast that there was an occurrence. The origin of the property damage was alleged to be defects with the workmanship and materials that comprised the roof membrane and system. There were no allegations that Siplast intended or expected its roofing system to fail. 

    However, the next inquiry was whether the business risk exclusions applied. The policy did not apply to “‘property damage’ to ‘your product’ arising out of it or any part of it.” Nor did the policy apply to “‘property damage” to ‘your work’ arising out of it or any part of it.” The “your work” exclusion reflected the intent of the insurer to avoid the possibility that coverage under a CGL policy would be used to repair and replace the insured’s defective products and faulty workmanship.

    Employers argued that the Archdiocese was seeking to recover from Siplast only the cost of a replacement roofing system, not any damage that resulted to the school from the defective roof. Siplast contended that because the interior damage to the school was separate from any damage to the Siplast materials on the school roof, Employers would not meet its burden to show the “Your Product/Your Work” exclusions applied. 

    The court concluded that although the underlying complaint mentioned damage to school property other than the Siplast roofing products, the Archdiocese did not make any allegations to recover from Siplast for any damage to the building caused by the leaky roof that was separate from the damage to Siplast’s product. Siplast was sued based on its failure to replace the roof as required by the guarantee. The Archdiocese did not allege that Siplast’s breach caused other damage. 

    Therefore, Employer did not have a duty to defend Siplast because the damages sought in the underlying suit fell within the “Your Work’Your Product” exclusions.

Contractor Haunted by “Demonized” Flooring

Garret Murai | California Construction Law Blog

The most un-Halloween of Halloweens has come and gone. If you ask me though, between COVID, protests, fires, hurricanes, the passing of a Supreme Court Justice, and one of the most hotly contested elections in U.S. history, we’ve had enough scares this year to make up for it and then some.

In the next case, Sieg v. Registrar of Contractors, Case No. A156089 (September 28, 2020), 1st District Court of Appeal, one contractor, haunted by “demonized” flooring, and who couldn’t catch a break even with the talisman of a release of liability signed by the homeowner, can add one more to his list of reasons why 2020 needs to be relegated to the history books.

The Sieg Case

In January 2012, homeowners Dennis and Ana Torchia purchased wood flooring for their home in Windsor, California. Specifically, they selected Brazilian Ebony, an exotic species of unusually hard wood, for its appearance and durability.

The company from whom the Torchias purchased their flooring, Lumber Liquidators, referred them  to George Sieg a sole proprietor doing business as B & G Hardwood Flooring for the installation. When the Brazilian Ebony hardwood flooring was received, Sieg and his crew delivered the flooring to the Torchias.

Following delivery, Sieg gave the Torchias a work order proposal estimating the cost of installation. Included with the work order was a document entitled “Conditions” which stated in part: “6 mil black polyethylene is recommended to cover 100% of the crawl space earth.” Sieg also gave the Torchias an installation order form which included a line stating “MOISTURE BARRIER NEEDED” and a line for the customers initials and language at the bottom of the form stating “[t]he above information has been explained to me in full by my installer, and I understand that the installer [is] not responsible for any damage caused by post-installation changes in the moisture levels.” Both documents were signed by the Torchias.

On the same day that the documents were signed, Sieg raised the need for a moisture barrier and his recommendation that installation wait a few days to allow the flooring to acclimate, but said that he would be willing to start installation immediately if the Torchias signed a disclaimer and release any claims for problems arising from the installation without a moisture barrier. The Torchias agreed and signed a disclaimer which stated that installation of the floor was inadvisable because the “Prefinished flooring [had a moisture difference of] over two points less than subfloor and no plastic covering the dirt under the house.”

Within weeks following installation of the Brazilian Ebony hardwood flooring, Torchia said that he noticed a “very loud popping sound, sounding like firecrackers going off in different parts of the house.” After the Torchias contacted Lumber Liquidators about the problem, Lumber Liquidators hired an expert, Richard King. King’s investigation revealed that, in addition to the fact that the flooring was installed without a plastic liner under circumstances in which there was a moisture differential between the hardwood floor and the subfloor,  there were issues with the workmanship, including:

  1. The flooring was installed tight against the walls with no expansion space provided;
  2. Some areas of the flooring had no fasteners;
  3. The flooring was generally fastened two to four inches from ends rather than one to three inches from ends as recommended by the manufacturer;
  4. The flooring fasteners were generally fastened eight to 11 inches apart, and in some places more than 12 inches apart, rather than six to eight inches apart as recommended by the manufacturer;
  5. Fasteners were driven through the subfloor;
  6. No underlayment was installed around registers and crawl space access.

According to testimony by King, “when you walk on the floor and it’s not fastened properly, the floor moves, buckles, wiggles, makes noises. But with Mr. Torchia’s floor . . . I could look into the alcove with nobody in there. And the floor continues to pop and make noises. It was like it was demonized.”

The Torchias later had a moisture barrier installed in the crawl space but the demon popping continued.

The CSLB Complaint, ALJ Hearing, and Writ of Administrative Mandamus

Ultimately, the Torchias filed a complaint with the Contractors State License Board. Following investigation, the CSLB filed an Accusation against Sieg seeking revocation or suspension of Sieg’s contractor’s license and restitution.

A hearing was held over the course of two days before an Administrative Law Judge (“ALJ”) and, due to the illness of Sieg’s counsel, closing arguments were submitted in writing by both parties. The ALJ later issued a proposed decision recommending a 65-day suspension, a three-year probationary period, and restitution in the amount of $27,884.21.

One interesting note for those who have not been involved in CSLB administrative hearings is that decisions by ALJ judges are only recommendations and the CSLB can choose to adopt, reject, or modify any decisions by an ALJ. This is exactly what happened here. The Registrar of the CSLB adopted the ALJ’s proposed decision, but instead adopting the 65-day suspension recommended by the ALJ, recommended that Sieg obtained a disciplinary bond in the amount of $30,000.

Following the decision, Sieg filed a writ of administrative mandamus with the Superior Court in accordance with Code of Civil Procedure section 1094.5. The Superior Court, after hearing oral argument by the parties, issued an order denying writ relief. Sieg, in turn, appealed again to 1st District Court of Appeal.

The Appeal

On appeal, the 1st District Court of Appeal noted the appropriate standard of review by courts when reviewing appeals from administrative decisions. Superior Courts, explained the Court of Appeal, when considering a writ of administrative mandamus, apply what is known as the “Independent Judgment Test,” and will affirm an agency’s finding of fact if they are supported by the weight of the evidence, but reviews questions of law de novo (i.e., without weight being giving to one part or another) giving respectful consideration to an agency’s decision on legal questions to the extent its reasoning is persuasive.

Further, explained the Court of Appeal, under the Independent Judgment Test the findings of an agency come “with a strong presumption of their correctness, and the burden rests on the complaining party to convince the court that the board’s decision is contrary to the weight of the evidence.”

However, explained the Court of Appeal, when reviewing a Superior Court’s decision on a writ of administrative mandamus, the Courts of Appeal review the Superior Court’s decision for substantial evidence but review questions of law de novo. Further, explained the Court of Appeal, on appeal before the Courts of Appeal, the burden is on losing party bringing the appeal.

I won’t go into all of the details of the appeal, but suffice to say that Court of Appeal upheld the Superior Court’s denial of the writ of the administrative mandate. More pertinent to contractors and their attorneys is one already well-established rule and another one that is new to me.

First, as to the well-established rule, the CSLB found that Sieg had violated Business and Professions Code section 7109 which provides:

(a) A willful departure in any material respect from accepted trade standards for good and workmanlike construction constitutes a cause for disciplinary action, unless the departure was in accordance with plans and specifications prepared by or under the direct supervision of an architect.

(b) A willful departure from or disregard of plans or specifications in any material respect, which is prejudicial to another, without the consent of the owner or his or her duly authorized representative and without the consent of the person entitled to have the particular construction project or operation completed in accordance with such plans or specifications, constitutes a cause for disciplinary action.

On appeal, Sieg argued that he could not be found to have violated Business and Professions Code section 7109 because did not “willful[ly]” depart from accepted trade standards since he did not intend for the floors to be possessed by demonic popping sounds. The Court of Appeal made short work of this argument explaining that well-established case makes clear that “7109’s willful requirement is satisfied by evidence fo a general intent to act:

In civil cases, the word “willful,” as ordinarily used in courts of law, does not necessarily imply anything blamable, or any malice or wrong toward the other party, or perverseness or moral delinquency, but merely that the thing done or omitted to be done was done or omitted intentionally. It amounts to nothing more than this: That the person knows what he is doing, intends to do what he is doing, and is a free agent.

In short, Sieg did not have to intend that something bad were to occur in order to be found to have engaged in a “willful” departure of accepted trade standards under Business and Professions Code section 7109.

Second, is the one that is new to me. On appeal, Sieg argued that by signing the disclaimer in which the Torchias released any claims against Sieg for problems arising from the installation of the flooring without a moisture barrier, a decision should have been in his favor “by simply enforcing the Disclaimer according to its plain terms.” The Court of Appeal disagreed on the ground that, while the disclaimer might be pertinent in a private action between Sieg and Torchia, the Accusation against Sieg was brought by the CSLB even though it may have been initiated by the CSLB complaint filed by the Torchias. Further, explained the Court, in disciplinary enforcement proceedings, a homeowner cannot consent to a contractor’s departure from accepted trade standards:

Because this is not a private action between Sieg and Torchia, we see no need to address matters of unconscionability or contract illegality. Whether the Disclaimer was valid and enforceable as a contract is beside the point, since we are dealing with a disciplinary enforcement proceeding brought by CSLB on behalf of the public. For purposes of licensing enforcement, a homeowner cannot consent to a contractor’s departure from accepted trade standards for good and workmanlike construction. (Civ. Code § 3513 [a law established for a public reason cannot be contravened by a private agreement].)

Whatever private arrangements may be made between a contractor and a client, the contractor has an independent obligation to the public to adhere to statutorily established standards of performance. (§ 7109, subd. (a); cf. Mickelson, supra, 95 Cal.App.3d at p. 635 [rejecting concrete contractor’s attempt to defeat willfulness finding in section 7109 enforcement proceeding on the ground that “he informed both [clients] that a pour over was an improper method of repair, that he read [to the clients] the contents of the contract absolving himself of responsibility before proceeding with the pour over”].) We base this reading of section 7109, subdivision (a), on the text and legislative history of the statute. As the CSLB correctly points out, the Legislature amended section 7109, subdivision (a), in 1988, to remove language which once made it possible for contractors facing discipline to defend accusations of departure from statutory trade standards by arguing client consent. (§ 7109, as amended by Stats. 1988, ch. 1619, § 4.) Thus, while the governing contract here established the benchmark for Sieg’s obligations to Torchia, in discharging those obligations he was bound to adhere to statutorily imposed standards of workmanship that could not be diluted, circumvented, or released away by private consent.


The CSLB can take enforcement action based on any one of numerous violations set forth under the Business and Professions Code. Where those statutory sections involve a “willful departure” or “willful or deliberate” act, the term “willful” simply means an intentional act not an intent that something bad will occur. Sieg also highlights that releases and disclaimers between a contractor and a consumer will not protect a contractor in a CSLB enforcement actions against the contractor.