Theresa A. Guertin | SDV Insights
In June 24, 2021, the Champlain Towers South in Surfside, Florida collapsed, killing nearly 100 individuals (the “Collapse”). As experts uncover more information regarding the cause of the Collapse, those individuals who have filed lawsuits as well as the potentially culpable defendants are looking to insurers for coverage of their bodily injury and property damage claims.
Contractors, engineers, and other professionals are or anticipate being sued for their roles in the Collapse. Those professionals have professional liability policies and/or director and officer liability policies. Likewise, the condominium association’s commercial general liability (CGL) policies and its business property policy may have a duty to defend and/or indemnify their insureds as well. Finally, individual unit owners/renters may look to their homeowners’ insurance, auto insurance, health insurance, and/or life insurance policies for coverage.1
The potential breadth of insurance coverage issues raised by the Collapse is beyond the scope of this article. The article will consider some concerns that could impact insurance coverage under a standard CGL policy in the case of a building collapse.
I. Coverage under a Standard CGL Policy
The standard CGL policy is written on ISO Form CG 00 01 04 13. It provides that the insurer “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” Coverage under a standard CGL policy is triggered only if an “occurrence” causes the bodily injury or property damage, and if said injury or damage occurs during the policy period. Additionally, policy exclusions may impact coverage depending on the circumstances.
A. Defining an “Occurrence”
The standard CGL definition of occurrence means an “accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The Florida Supreme Court has defined “accident” as “injuries or damage neither expected nor intended from the standpoint of the insured.”2 In other words, the Collapse should be considered an occurrence under the standard CGL policy because it caused injuries and damage neither expected nor intended from the insured’s standpoint.3
In support of this conclusion, Florida has adopted the “cause” theory, which defines “occurrence” by examining the cause of the injury.4 Thus, under Florida law, an occurrence is defined by the immediate injury-producing act.5 Here, the Collapse was the immediate injury-producing act for the wrongful death and injury claims. Thus, those claims will likely be considered a single occurrence.6 However, there could be more than one occurrence for the property damage claims if there was more than one immediate cause of the Collapse.7
B. Trigger of Coverage
Generally, there are four trigger of coverage theories: manifestation theory, exposure theory, injury-in-fact theory, and continuous trigger theory.8 In states that have adopted the “manifestation theory,” coverage is triggered under the CGL policy in effect when the injury or damage manifests itself, i.e., when it is discovered or discoverable. The “exposure theory” states that the CGL policy in effect during exposure to the injurious or harmful condition is triggered, or, in the case of property damage, when the installation of a defective product occurs. The “injury-in-fact theory” provides that the CGL policy in effect when the damage actually took place is the triggered policy for coverage. Finally, the “continuous trigger” theory states that all CGL policies are triggered if in effect during any exposure, actual injury, or manifestation. In other words, under a continuous trigger theory, multiple policies may be triggered.
Florida law is unsettled on what trigger theory applies to determine when an occurrence takes place for purposes of coverage under a CGL policy. While many courts have applied the manifestation theory, more recently, several Florida courts have applied the injury-in-fact trigger, unless the timing of the damages cannot be ascertained.9 In the context of the Collapse, the CGL policy or policies that are triggered would most likely be the policy or policies in place at the time of the Collapse under either the manifestation or injury-in-fact trigger theories. Further, more than one policy may be triggered for the property damage claims to the building and interior of the individual units if the damage to the building itself took place over a period of years.
However, if defective construction, negligent inspections, or other improper events took place prior to the collapse, which events caused, for example, settling of the foundation, cracks, water leaks, etc., then the settling of the foundation, cracks, water leaks and other damage could be considered the occurrence, and the policy (or policies) in effect at those times could be triggered. It is likely that the insurers, plaintiffs, and defendants will litigate what trigger of coverage theory should apply. If we are lucky, the Florida Supreme Court may have an opportunity to weigh in on the issue.
C. Identifying Property Damage
Under Florida law, the insured’s own defective work is not property damage. Only damage caused by defective work constitutes property damage for purposes of insurance coverage under a standard CGL policy.10 In other words, an occurrence causes property damage only if the faulty workmanship causes physical injury to some “otherwise non-defective” component of the project.11 Typically, only the resulting property damage will be covered by an insurer. The cost to fix or replace the faulty or defective work itself is not considered property damage and, therefore, is not covered under a standard CGL policy.
Notwithstanding the general rule, in one Eleventh Circuit decision, the court analyzed the scope of covered property damage where defective work had to be destroyed in order to repair the resulting damage.12 In Carithers, a defectively constructed balcony allowed water to seep in and cause property damage to the garage underneath. Although the defective balcony did not constitute property damage, the cost to demolish and replace the defective balcony was covered under the insurance policy because the “rip and tear” costs were necessary to repair the damaged garage. The Court held that this was part of the cost of repairing damage caused by the defective work. Thus, in Carithers, the insurer was required to indemnify the contractor for the cost to demolish and repair the defective balcony.
Following the Collapse, many condominium associations are having their buildings inspected and are discovering major issues that require significant and costly repairs. Whether these claims constitute property damage will be a hotly contested issue as insurance claims are made.
D. Policy Exclusions
While an extensive discussion of all the potential policy exclusions would be beyond the scope of this article, one important exclusion to discuss is the “your work” exclusion, which states that insurance coverage does not apply to “‘property damage’ to ‘your work’ arising out of it or any part of it and included in the ‘products-completed operations hazard’. This exclusion does not apply if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.”13
Many Florida cases have interpreted the “your work” exclusion to mean that insurance coverage does not apply to damages “arising” from the insured’s work.14 In other words, depending on the scope of work, the exclusion could be interpreted broadly. On the other hand, the subcontractor exception provides coverage for damage to the insured’s work arising from the faulty work of the insured’s subcontractors. Where a subcontractor’s faulty work damages the contractor’s work, the contractor’s insurance should indemnify the contractor for damage to its work.
II. Statute of Repose
Even if the victims in the Collapse can prove that an occurrence took place and that it caused property damage and/or bodily injury, they will have to contend with Florida’s statute of repose.15 Florida Statute §95.11(3)(c) states,
[a]n action founded on the design, planning, or construction of an improvement to real property. . . must be commenced within 10 years after the date of actual possession by the owner, the date of issuance of a certificate of occupancy, the date of abandonment of construction if not completed, or the date of completion of the contract or termination of the contract. . . whichever date is latest.16
Because the building involved in the Collapse was decades old, if the plaintiffs file counts against the original architects and builders based on the design, planning, or construction of the condominium (which plaintiffs have not done), then the claims could be barred, and the victims could be prevented from recovering from those defendants’ insurance carriers.17
What constitutes “design, planning, or construction” may be a source of debate. For example, one appellate court held that negligently inspecting newly completed construction was not founded on the design, planning, or construction of improvements to real property.18 In the Collapse litigation, one issue is the negligent inspection of the property, but not as newly completed construction.
Likewise, in a recent case, the Florida Fifth District Court of Appeal reversed the trial court’s grant of summary judgment, finding a genuine issue of material fact as to when the time began to run for purposes of the statute of repose.19 In Spring Isle, the contractor and subcontractor had entered into a “master agreement” with no specific duration, payment amount, or scope of work, but it provided that the contractor would issue written job orders. Schedule “A” of the master agreement provided certain information relating to the project at issue in the case. The trial court found that because the agreement did not require the subcontractor to perform work, the contract was complete upon the contractor’s payment for each unit. Based on the payment dates, the trial court used the date of the certificate of occupancy as the trigger date for the statute of repose.
The Appellate Court reversed, stating that the work orders were not part of the record, and it could not determine whether each work order was a separate contract or whether they were part of a larger contract. Further, there was no indication that the contractor’s payments were “final” as opposed to progress payments. In other words, the Court found that the subcontractor presented insufficient evidence to determine the contract completion date. Therefore, the Court reversed and remanded the trial court’s ruling.
III. Other Potential Avenues of Recovery
In any collapse case, the maintenance of the building, or lack thereof, may affect liability and insurance coverage. Thus the Condo Board’s director and officer liability policy may be implicated despite those policies typically containing exclusions for property damage and bodily injury claims. Further, the individual unit owners who voted against assessments to repair the building could have some culpability, if such facts are present. Likewise, contractors who repaired the building, building inspectors, and property management companies may have liability exposure for their roles in the Collapse. Finally, attorneys who advised the Condo Board could face lawsuits.
Each of the insurance policies implicated by the Collapse may be required to provide additional coverage to the Board or to other defendants pursuant to litigation claims, depending on who is named as an additional insureds under each policy, and depending on the claims made against each defendant.20
As any practitioner can readily see, the insurance coverage issues raised by a building collapse are far-reaching. Not only must the involved parties determine the cause of the collapse, they must also identify what insurance policies could be triggered.. Other considerations will include whether the insurance policies provide additional insured coverage, and if so, to what extent, and also what umbrella or excess policies, if any, are triggered, since it is apparent that the lawsuits will exceed almost any primary CGL policy. Finally, if multiple policies indemnify the insureds, there may be disputes as to priority of coverage and apportioning liability.
Given the plenary and cumbersome considerations, it is important that any attorney assessing claims arising out of the Collapse be well-versed in insurance coverage litigation in Florida and be prepared to tackle each of these issues as they arise.
1Aside from homeowners seeking coverage for property damage and bodily injuries, the homeowners who lived in the building may face individual liability if they voted against an assessment to repair the failing building.
2State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1076 (Fla. 1998)
3Depending on the causes of action in the underlying litigations, what courts consider to be the “occurrence” may change. For example, in an automobile accident caused by an insured’s employee, an insurer’s duty to defend and indemnify under a CGL policy may be triggered if the accident victim files a count of negligent hiring. See, e.g., Smith v. Gen. Acc. Ins. Co. of Am., 641 So. 2d 123 (Fla. 4th DCA 1994). But see Am. Surety & Cas. Co. v. Lake Jackson Pizza, Inc., 788 So. 2d 1096 (Fla. 1st DCA 2001) (holding that insurer had no duty to defend where CGL policy contained an exclusion for all injury or damage “arising out of” the ownership of any auto).
4Koikos v. Travelers Ins. Co., 849 So. 2d 263 (Fla. 2003) (holding that each shooting constituted a separate occurrence). Compare the “effect” theory, followed in a minority of states, whereby the number of occurrences is calculated by analyzing the effects or injuries resulting from an event.
5Port Consolidated, Inc. v. Int’l Ins. Co. of Hannover, PLC, 826 Fed. Appx. 822 (11th Cir. 2020) (concluding that multiple fuel thefts from cardlock fuel facility constituted multiple occurrences).
6See, e.g., Prieto v. Reserve Ins. Co., 340 So. 2d 1282 (Fla. 3d DCA 1977) (holding that the building collapse was the accident and denying coverage where the collapse took place outside the policy period).
7See Mid-Continent Cas. Co. v. Basdeo, 477 Fed. App’x 702, 708 (11th Cir. 2012) (finding there had been three occurrences where contractor performed faulty tarping, faulty work on the flat roofs, and faulty work on the mansards).
8See, e.g., Auto Owners Ins. Co. v. Travelers Cas. & Surety Co., 227 F. Supp. 2d 1248, 1265 (M.D. Fla. 2002) (discussing each trigger theory and stating, “it is the bodily injury or property damage that must occur during the policy period in order for there to be coverage; and an ‘occurrence’ need not take place during the policy period.”).
9See Id. (in a construction defect case, applying manifestation theory to interpretation of a CGL policy); see also Mid-Continent Cas. Co. v. Frank Casserino Const., Inc., 721 F. Supp. 2d 1209 (M.D. Fla. 2010) (manifestation theory); Assurance Co. of America v. Lucas Waterproofing Co., Inc., 581 F. Supp. 2d 1201 (S.D. Fla. 2008) (manifestation theory); but see Carithers v. Mid-Continent Cas. Co., 782 F. 3d 1240 (11th Cir. 2015) (applying injury-in-fact theory and expressly rejecting the manifestation theory in homeowner’s coverage suit under CGL policy) (citing Trizec Properties, Inc. v. Biltmore Const. Co., Inc., 767 F. 2d 810 (11th Cir. 1985)); Ohio Cas. Ins. Co. v. Timber Development Corp., 2013 WL 12148856 at *10 (M.D. Fla. Sept. 23, 2013) (injury-in-fact theory).
10U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007) (holding that the post-1986 standard CGL policy with products-completed operations hazard coverage provides coverage when a claim is made against the insured for damage to the completed project caused by a subcontractor’s defective work).
11Auto-Owners Ins. Co. v. Pozzi Window Co., 984 So. 2d 1241 (Fla. 2008); see also Amerisure Mut. Ins. Co. v. Auchter Co., 673 F.3d 1294 (11th Cir. 2012).
12Carithers v. Mid-Continent Cas. Co., 782 F. 3d 1240 (11th Cir. 2015). See also Pavarani Constr. Co. (SE), Inc. v. ACE Am. Ins. Co., 161 F. Supp. 3d 1227 (S.D. Fla. 2015) (determining that coverage existed to repair the defective work where doing so was necessary to stabilize the building and prevent ongoing damage to otherwise non-defective property).
13ISO Form CG 00 01 04 13, Section I, Coverage A.2.l. “Your work” is defined as work performed by you or on your behalf, including materials, parts, or equipment furnished in connection therewith.
14See, e.g., J.B.D. Constr. Inc., v. Mid-Continent Cas. Co., 572 Fed. Appx. 918 (11th Cir. 2014) (stating that because the insured undertook construction of the entire fitness center, the “your work” exclusion barred coverage for damages to the completed fitness center and its components). See also, Auto-Owners Ins. Co. v. Elite Homes, Inc., 676 Fed. Appx. 951 (11th Cir. 2017) (holding no duty to defend where complaint in underling litigation did not allege damage to any property other than the insured’s own work). But see, Southern Owners Ins. Co. v. Gallo Building Svcs., Inc., 2018 WL 6619987 at *6 (M.D. Fla. Dec. 18, 2018) (concluding insurer had duty to defend where underlying complaint alleged damages to other building components, damage to the work of other subcontractors, loss of use, and other resulting damages).
15Hess v. Philip Morris USA, Inc., 175 So. 3d 687 (Fla. 2015) (stating that the statute of repose is an affirmative defense).
16The statute provides a one (1) year savings clause for counterclaims, cross-claims, and third-party claims that arise out of the conduct, transaction, or occurrence set out in the pleadings.
17Although Florida litigants have disputed the interpretation of the statute of repose, such litigation likely has no impact on how the statute of repose will affect recovery in this case. See, e.g., Gindel v. Centex Homes, 267 So. 3d 403 (Fla. 4th DCA 2018) (tolling the statute of repose after service of a Chapter 558 pre-suit notice). In response to Gindel, the Florida Legislature added a provision to chapter 558 expressly stating that a notice of claim does not toll the statute of repose.
18Manney v. MBV Engineering, Inc., 273 So. 3d 214 (Fla. 5th DCA 2019).
19Spring Isle Community Assoc., Inc. v. Herme Enterprises, Inc., 2021 WL 4927602 at *1 (Fla. 5th DCA Oct. 22, 2021).
20Practitioners must also look at the contractual indemnification obligations between each defendant.
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