Injured Subcontractor Employee Asserts Premise Liability Claim Against General Contractor

David Adelstein | Florida Construction Legal Updates

In an interesting opinion, an injured employee of an electrical subcontractor sued the general contractor of a parking garage project under a premise liability theory after being injured when stepping on an uncovered floor drain at the project site.  There is no discussion in the opinion as to workers compensation immunity.  Rather, the discussion centers on the injured employee’s premise liability claim as to whether the general contractor “breached its duty to maintain the premises in a reasonably safe condition by leaving the drain uncovered and failing to warn of the danger of the uncovered drain.”  Pratus v. Marzucco’s Construction & Coatings, Inc., 46 Fla.L.Weekly D186a (Fla. 2d DCA 2021)

The trial court granted summary judgment in favor of the general contractor finding that the drain was open and obvious on the site.  The Second District Court of Appeal reversed the summary judgment with a discussion as to premise liability claims, particularly as it pertains to a business invitee, which is what the injured employee of the electrical subcontractor was.

First, the Second District held that as a business invitee, the general contractor owed the injured employee two duties: “(1) the duty to use reasonable care in maintaining the property in a reasonably safe condition; and (2) the duty to warn of dangers of which the owner has or should have knowledge and which are unknown to the invitee and cannot be discovered by the invitee through the exercise of reasonable care. ”  Pratus, supra (internal quotations and citation omitted).

Second, the Second the Second District held that “[t]he obvious danger doctrine provides that an owner or possessor of land is not liable for injuries to an invitee caused by a dangerous condition on the premises when the danger is known or obvious to the injured party, unless the owner or possessor should anticipate the harm despite the fact that the dangerous condition is open and obvious.”  Pratus, supra (internal quotations and citations omitted).

Third, the Second District held that the issue was not whether the floor drain was open and obvious, but whether the uncovered floor drain—the alleged dangerous condition—was open and obvious and involves a consideration of “all of the facts and circumstances surrounding the accident and the alleged dangerous condition.”   Pratus, supra (internal quotations and citations omitted).

And fourth, the Second District held irrespective of whether the alleged dangerous condition was open and obvious, the general contractor “still had a duty to maintain the premises in a reasonably safe condition if it could have anticipated the harm to [the injured employee] as a result of the uncovered drain.” Pratus, supra (internal quotations and citations omitted).  This required the contractor to establish “it should not have anticipated the potential harm to [the injured employee] as a result of the uncovered drain, notwithstanding his knowledge of the danger.”  Id.

Does this case open the door for premise liability claims against a general contractor as a possessor of the construction site?  It is uncertain because of the lack of discussion of workers compensation immunity.  Perhaps this was an issue in the case because there was no workers compensation to cover the inured employee.  Or, perhaps this was an argument around workers compensation immunity.  Regardless, this case highlights the significance in ensuring there are safety protocols and training in place on every project, no matter how big or small!

No Coverage for Home Damaged by Falling Boulders

Tred R. Eyerly | Insurance Law Hawaii

    The policy’s earth movement exclusion barred coverage for the home damaged by large boulders rolling down from the hillside above. Sullivan v. Nationwide Affinity Ins. Co. of Am., 2021 U.S. App. LEZXIS 628 (10th Cir Jan. 11, 2021). 

    Plaintiffs’ home sustained extensive damage when two or three large builders rolled down a steep hillside and struck the home. The insurer, Nationwide, hired an engineering firm that determined the boulders were not influenced by meteorological conditions such as torrential rain or high winds. The report noted that rockfall hazards existed primarily due to an undercut sandstone outcrop, and evidenced by numerous rocks from rockfall events that scattered Plaintiffs’ property. 

    Based on the report, Nationwide denied coverage under the earth movement exclusion. The exclusion provided Nationwide did “not insure for loss caused directly or indirectly by . . . Earth Movement” and regardless of “whether or not the loss event results in widespread damage or affects a substantial area.” The policy further defined “earth movement” to include “landslide . . . or any other earth movement including earth sinking, risking or shifting.”

    Plaintiffs sued and Nationwide moved for summary judgment. Plaintiffs submitted their own report which stated that a rockfall was not a landslide and the term “earth” meant soil and not rock. But the report also quoted sources suggesting that a rockfall was a type of landslide. The district court granted summary judgment to Nationwide. 

    There was no definitive Colorado law on whether damage caused by the rockfall was excluded under the earth movement provision. The court surveyed case law from other jurisdictions and concluded the Colorado Supreme Court would follow the cases which held that a rockfall was excluded. Further, dictionaries defined “landslide” to include the movement of rock alone. Therefore, a reasonably objective insured would read the earth movement exclusion as excluding coverage for the event here, either as a “landslide” or as “another earth movement including earth sinking, risking or shifting.” 

In Brief: Commercial General Liability Policies in USA

Mary Beth Forshaw | Simpson Thacher

Standard commercial general liability policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

CGL policies generally provide coverage for bodily injury or property damage sustained by third parties (rather than the policyholder) as a result of an occurrence.

Insurance coverage litigation frequently centres on whether the underlying claims against the policyholder allege bodily injury or property damage within the meaning of the applicable insurance policy, and whether the events giving rise to the injury or damage were caused by an occurrence.

The phrase ‘bodily injury’ in insurance contracts generally connotes a physical problem. However, a number of courts have ruled that the term also encompasses non-physical or emotional distress, either standing alone or accompanied by physical manifestations.

The question of whether bodily injury exists may also arise where an underlying complaint alleges non-traditional or quasi-physical harm, such as biological or cellular level injury or medical monitoring claims. Courts addressing these and other analogous bodily injury questions have arrived at mixed decisions. Bodily injury determinations are often case-specific, turning on the particular factual record presented.

Property damage

What constitutes property damage under a standard CGL policy?

Property damage typically requires injury to or loss of use of tangible property. Therefore, the mere risk of future damage is generally insufficient to constitute property damage. Similarly, it is generally held that the inclusion of a defective component in a product, standing alone, does not constitute property damage. Numerous other allegations of harm or potential harm to property have generally been deemed to fall outside the scope of covered property damage, including the following:

  • injury to intangible property (such as computer data);
  • injury to goodwill or reputation;
  • pure economic loss; and
  • diminished property value.

However, although economic loss is not equated with property damage, courts may use a policyholder’s economic loss as a measure of damages for property damage where physical damage is found to exist.

Occurrences

What constitutes an occurrence under a standard CGL policy?

Virtually all modern-day general liability insurance policies provide coverage for an occurrence that takes place during the policy period. The insurance term ‘occurrence’ is typically equated with or defined as an accident or an event that results in damage or injury that was unexpected and unintended by the policyholder.

Insurance litigation frequently involves several issues relating to the occurrence requirement:

  • whether intentional conduct that results in unexpected or unintended harm constitutes an occurrence;
  • whether negligent conduct that results in expected or intended harm constitutes an occurrence;
  • whether an event or series of events constitutes a single occurrence or multiple occurrences;
  • whether the occurrence falls within a given policy period (ie, what is the operative event that triggers a policy?); and
  • how insurance obligations should be divided among multiple insurers (or the policyholder) when an occurrence spans multiple policy periods (ie, allocation).

Although it is a widely accepted principle that insurance policies provide coverage only for fortuitous events, and cannot insure against intentional or wilful conduct, it is less clear whether (and under what circumstances) intentional conduct that results in unexpected and unforeseen damage can constitute a covered occurrence. This question has arisen in a multitude of factual contexts, including claims arising out of faulty workmanship, pollution and fax blasting in violation of federal statutes. In evaluating the occurrence issue, some courts focus on the initial conduct of the policyholder, while other courts look to whether the resulting harm was unexpected or unintended.

How is the number of covered occurrences determined?

The determination of whether damage or injury is caused by a single occurrence or by multiple occurrences has significant implications for available coverage. The number of occurrences may impact both the policyholder’s responsibility for deductible payments and the per occurrence policy limits that are available. Thus, it is a hotly contested issue in insurance litigation. Most courts utilise a cause-based analysis to determine the number of occurrences. Under the cause-oriented approach, if there is one proximate cause of the injury, there is one occurrence, regardless of the number of claims or incidents of harm.

In contrast, under an effects-oriented analysis, the focus is on the number of discrete injury-causing events.

A number of occurrences disputes arise in virtually all substantive areas of insurance litigation, including claims arising out of asbestos, environmental harm, natural disasters, and the manufacture or distribution of harmful products.

Coverage

What event or events trigger insurance coverage?

Litigation that centres on whether a given policy period has been implicated by an occurrence is generally referred to as a ‘trigger of coverage’ dispute. ‘Trigger’ describes what must happen within the policy period for an insurer’s coverage obligations to be implicated. In cases involving ongoing or continuous property damage or personal injury, the question of what triggers policy coverage may be complex. From a legal perspective, courts employ several different methods to resolve trigger disputes. For bodily injury claims, the operative trigger event has been held to be:

  • at the time of exposure to a harmful substance;
  • at the time the injury manifests itself;
  • at the time of actual ‘injury in fact’; or
  • a combination or inclusion of all of the above.

Property damage claims have also given rise to multiple trigger approaches, some of which focus on the initial event that set the property damage into motion, while others look to the time that physical damage became evident. From a factual perspective, parties are often required to submit voluminous evidence in support of their position as to when property damage or bodily injury actually occurred. Expert witnesses are often retained to address trigger issues.

How is insurance coverage allocated across multiple insurance policies?

When an occurrence triggers multiple policy periods, disputes frequently arise as to how indemnity costs should be allocated among various insurers. The emerging trend in courts in the United States is a pro rata approach, which apportions loss among triggered policies based on insurers’ proportionate responsibilities. In applying pro rata allocation, courts have considered:

  • the time that each insurer is on the risk;
  • the policy limits of each triggered policy;
  • the proportion of injuries during each policy; or
  • a combination of these and other factors.

Pro rata allocation also typically contemplates policyholder responsibility for periods of no coverage or insufficient coverage. The pro rata allocation approach stems from policy language that limits insurers’ obligations to damage ‘during the policy period’. Some jurisdictions that utilise a pro rata approach recognise an ‘unavailabilty’ exception. The unavailability exception provides that apportionment to the insured for uninsured periods is not warranted if insurance was unavailable in the marketplace during the relevant time frame. If this unavailability is established, losses during the uninsured periods are allocated among the insurers.

A minority of courts endorse a joint and several liability approach, under which a policyholder is entitled to select a single policy from multiple triggered policies from which to seek indemnification. This approach stems from common policy language requiring an insurer to pay ‘all sums’ that the policyholder becomes legally obligated to pay. Notably, even courts that endorse all sums allocation typically allow a targeted insurer to pursue contributions from other triggered insurers.

Law stated date

Correct on

Give the date on which the information above is accurate.

18 December 2019

Does a CGL Policy’s “Business Description” or “Class Code” Limit Coverage?

Farrell Miller | Cozen O’Connor

One way a CGL insurer can narrow otherwise broad bodily injury and property damage coverage is by activity. Activities that face similar risk can be grouped using an activity classification code, which can be incorporated into the policy through a class limitation endorsement.

For instance, a policy issued to an individual (for any business of which he is a sole owner) could include an “accounting” class code and a class limitation endorsement, effectively narrowing coverage to accounting activities. Courts routinely enforce such endorsements.[1]

Suppose that, instead of a class limitation endorsement for accounting, the policy’s declarations page merely said “business description: accounting” and “Class Code: 7619—Accounting.” Now suppose the individual also owns a non-accounting business and is sued for liability in connection with that business. Would that be covered? In other words, what effect should a court give to a class code or business description that isn’t incorporated into the policy by endorsement? This question underpins two divergent Circuit Court decisions.

In Smith v. Burlington Ins. Co., Smith owned and operated a courier service and a security service.[2] One of Smith’s armed security guards shot an unarmed teen while on duty at an Oklahoma apartment complex. The teen later died. His mother brought a wrongful-death action against Smith d/b/a Smith and Son Security. On Smith’s CGL policy with Burlington, the declarations designate “Form of Business” as “Individual,” and “Business Description” as “Courier Service.” The Policy section defining “who is an insured” says “If you are designated . . . as [a]n individual, you and your spouse are insureds, but only with respect to the conduct of a business of which you are the sole owner.” Within the policy was a “Schedule of Classification and Rates” listing “94099—Express Companies” (i.e. a Class Code).

Burlington denied coverage, saying that the policy was intended to cover Smith only for his courier service business. The district court sided with Burlington and the Tenth Circuit affirmed.[3] The district court held that two standard policy provisions effectively incorporated the business description into the policy itself. The first provision, a merger clause, says “declarations together with the common policy conditions and coverage form(s) and any endorsement(s), complete the above numbered policy.”[4] The second provision, in the “Representations” section, says “By accepting this policy, you agree: (a) The statements in the Declarations are accurate and complete; (b) Those statements are based upon representations you made to us; and (c) We have issued this policy in reliance upon your representations.”[5] The district court also held that using the Class Code “94099—Express Company” “rather than a code that could conceivably cover any armed security guard business confirms that there was no intent to cover Smith’s security business.”[6] The court concluded by stating that it refused to adopt a “strained interpretation that the ‘courier service’ policy covers any business Smith might choose to pursue.”[7]

In Mount Vernon Fire Ins. Co. v. Belize NY, Inc., a general contractor (GC) hired Belize NY, Inc. to perform demolition work at a church in Harlem. A few months later, the GC again hired Belize solely to supervise a subcontractors’ work at the church.[8] Months later, a person entered the church, shot and killed several people, and started a fire before taking his own life. A wrongful death suit was commenced against Belize, alleging that the GC unlawfully shut off the church’s sprinkler system and “bricked over” or eliminated several church exits.[9] On Belize’s CGL policy with Mount Vernon, the declarations designated Belize’s “Form of Business” as “Corporation,” and “Business Description” as “Carpentry.”[10] Two classifications were listed under “Premium Computation” on the Declarations Page: “Carpentry-Interior-001” and “Carpentry-001.”[11]

Mount Vernon denied coverage for the wrongful-death action, arguing that Belize was acting in a supervisory capacity rather than performing carpentry work at the time of the shooting.[12] The district court sided with Belize and the Second Circuit affirmed. The Second Circuit held that under New York law, exclusions “must be set forth clearly and unmistakably.”[13] But the policy didn’t do that, since there was no “specific language indicating that the classifications [or the business description] determine the scope of the coverage.”[14] “Were we to accept [Mount Vernon’s] argument, insurers would be permitted to argue for limitations of all kinds by invoking the stand-alone words of classification not otherwise referred to in a policy. If Mount Vernon wished to limit coverage based on classifications, it should have done so specifically.”[15]

The Smith and Mount Vernon courts appear to disagree about whether a standalone business description or class code can narrow coverage. Can Smith and Mount Vernon be harmonized? Here’s some guidance. If an insured has a CGL policy with a business description and/or class code suggesting a small risk, and seeks coverage for an activity that involves a completely different, larger, and perhaps more exotic risk (e.g. armed security service), then a court is likely to find that the insurer did not intend to cover the larger risk. To decide otherwise would unfairly blindside the insurer. On the other hand, if the insured has a policy with a business description and/or class code that suggest a risk that is similar to the actual claim (e.g. carpentry vs. construction supervision) then a court is likely to say “close enough” and find coverage. To decide otherwise would be unfair to the insured, since the policy wouldn’t clearly and unmistakably limit coverage. In the end, the safest course is to ensure that the policy accurately reflects both parties’ understanding of the risk.


[1] See, e.g.Evanston Ins. Co. v. Heeder, 490 Fed. Appx. 215 (11th Cir. 2012) (no coverage where classification limitation endorsement narrowed coverage to residential roofing, and claim arose from a commercial roofing project); Ruiz v. State Wide Insulation & Constr. Corp., 269 A.D.2d 518 (N.Y. App. Div. 2000) (no coverage where classification limitation endorsement narrowed coverage to painting and the insured party was hurt during a roof repair); Princeton Excess and Surplus Lines Ins. Co. v. US Global Security Incorporated, et al., Case 4:18-cv-02705 (S.D. Tex. Sept. 24, 2019) (no coverage where designated operations exclusion narrowed coverage to exclude injuries arising out of any work at or in bars, restaurants, taverns or other establishments selling or providing alcoholic beverages, and exception to exclusion did not apply as there were no allegations of an injury arising out of parking lot security operations).

[2] 2019 U.S. App. Lexis 19175, 2019 WL 2635725, at *1 (10th Cir. 2019) (interpreting Oklahoma law).

[3] Smith v. Burlington Ins. Co., 2018 U.S. Dist. Lexis 54403 (N.D. Okla. 2018), aff’d 2019 U.S. App. Lexis 19175, 2019 WL 2635725 (10th Cir. 2019).

[4] Id. at *11

[5] Id.

[6] Id. at *7.

[7] Id. at *15.

[8] 277 F.3d 232, 235 (2d Cir. 2002) (interpreting New York law).

[9] Id.

[10] Id. at 234.

[11] Id.

[12] Id. at 236.

[13] Id. at 237.

[14] Id.

[15] Id. at 239.

Plaintiffs’ Bar Hits A Wall When It Comes to “Access” Damages

Jorge Cruz-Bustillo | Chartwell Law

In Florida, for years, the plaintiffs’ bar has been filing first-party property law suits for ensuing water damages caused by the failure of cast-iron pipes. In those cases, in which there is no evidence of interior water damages, the plaintiffs’ bar has been claiming repair costs associated with “access” (i.e., tear out and replacement) through the flooring to repair a plumbing drain line. Of course, with this “access,” the plaintiffs’ bar seeks recovery for damages based on matching which could include continuous flooring, baseboards, drywall, painting, etc.

A typical homeowner’s insurance policy in Florida will have a “perils insured” provision similar to the following:

“We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property; however, we do not insure loss:***

2. caused by:***

h. (1) wear and tear . . . deterioration; ***

If any of these cause water damage not otherwise excluded, from a plumbing . . . system . .., we cover loss caused by the water including the cost of tearing out and replacing any part of a building necessary to repair the system or appliance. We do not cover loss to the system or appliance from which this water escaped.”

The last paragraph of the “perils insured” provision is referred to as the “ensuing loss” exception. This “ensuing loss” exception provides coverage for any resulting water damage caused by the discharge of water from a plumbing system or household appliance, that is not otherwise excluded under the policy. This “ensuing loss” exception also includes “the cost of tearing out and replacing any part of the building necessary to repair the system.”  The latter provision is known, in first-party property litigation, as “access.”  

In Homeowners Choice Property & Casualty v. Maspons, 211 So. 3d 1067,1069 (Fla. 3d DCA 2017) the Third District Court of Appeal clarified that a homeowner’s insurance policy does not cover “access” through the flooring unless the plaintiff can prove that there are ensuing water damages caused by a back-up covered under the Policy.

In Maspons, supra, the plaintiff furnished a video showing a “break” in the drain line. The insurance carrier retained a plumbing company that inspected and found a “large hole” in the drain line. The trial court entered summary judgment in favor of the insureds. Id. at 1068 (“Based upon this state of there cord, the trial court found there was no coverage under the insurance policy for the repair and replacement of the pipe, but that Homeowners Choice was responsible for the greater cost of tearing out and replacing the slab to make the repair.”)

The Third District reversed and remanded directing the trial court to enter summary judgment in favor of Homeowners Choice. Id. at 1070. The Third District held: “At the time of the summary judgment proceeding . . . There was no evidence that the water exiting the pipe had caused any damage to its surrounding.”  Id. Based on the plain language of the “perils insured” provision, the Third District concluded that ensuing water damages was a necessary condition precedent to coverage for “access” through the flooring (even though the camera inspection did in-fact show that the drain line was broken).

The Third District’s analysis is important for the defense bar to understand. Specifically, the Third District wrote: “Any analysis must begin with the language of the insurance contract.” Id. at 1069. “We give the undefined words of an insurance contract their ordinary meaning, just as we would with any other type of contract.” Id. “‘Direct’ and ‘physical’ modify loss and impose the requirement that the damage be actual.” Id. “Examining the plain language of the insurance policy in this case, it is clear that the failure[i.e. break and/or large hole identified in Maspons] of the drainpipe to perform its function constituted a ‘direct’ and ‘physical’ loss to the property within the meaning of the policy.” Id. The Third District continued:

“However, the last paragraph of the “perils insured” provision, often referred to the “ensuing loss” provision of the policy, cautions that we not prematurely abort our inquiry. That clause provides the homeowner with coverage for an‘ ensuing’ loss that is not specifically excluded. Thus, while the exclusion for“[w]ear and tear” or “deterioration” might mean, and this case does mean by virtue of the Maspons’ concession that Homeowners Choice is not obligated to compensate the Maspons for their corroded drain pipe, if the Maspons suffered consequential loss as a result of the corroded pipe and that consequential or “ensuing” loss is not excluded under another provision of the policy, the loss is covered.” (emphasis added) [citations omitted]. Id. at 1070.

“Happily, for us, we can quickly conclude the interpretative gymnastics in which we are engaged at this point.” Id. “There was no evidence that the water exiting the pipe had caused any damages to its surroundings.” Id. “Thus, the trial court erred by entering judgment against Homeowners Choice for the cost of the repair and replacement of the slab necessary to reach the broken pipe at this time.” Id. “For this reason, we reverse and remand this case for entry of judgment in favor of Homeowners Choice Insurance Company, but without prejudice to the Maspons filing another claim of loss at a later date, if appropriate.” Id.

In Maspons, ensuing water damages were covered. The Third District, however, found that there was no evidence of ensuing water damage. Since the necessary predicate condition precedent did not exist, the Third District directed the trial court to enter summary judgment in favor of Homeowners Choice. For those Florida policies which contain a “water back-up” exclusion, under Maspons “access ”damages would never be covered.