979 So.2d 871 (Fla. 2007), SC05-1295, United States Fire Ins. Co. v. J.S.U.B., Inc.

Docket Nº:SC05-1295.
Citation:979 So.2d 871, 32 Fla. L. Weekly S 811
Opinion Judge:PARIENTE, J.
Party Name:UNITED STATES FIRE INSURANCE COMPANY, etc., Petitioner, v. J.S.U.B., INC., etc., et al., Respondents.
Attorney:Ronald L. Kammer and Sina Bahadoran of Hinshaw and Culbertson, LLP, Miami, Florida; June Galkoski Hoffman of Fowler, White, and Burnett, P.A., Miami, FL; Joseph R. Miele, Jr. of Marshall, Dennehey, Warner, Coleman, and Goggin, Fort Lauderdale, FL; and Donna M. Greenspan of Edwards, Angell, Palmer...
Case Date:December 20, 2007
Court:Supreme Court of Florida
 
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Page 871

979 So.2d 871 (Fla. 2007)

32 Fla. L. Weekly S 811

UNITED STATES FIRE INSURANCE COMPANY, etc., Petitioner,

v.

J.S.U.B., INC., etc., et al., Respondents.

No. SC05-1295.

Florida Supreme Court

December 20, 2007

Application for Review of the Decision of the District Court of Appeal - Direct Conflict of Decisions Second District - Case No. 2D03-134 (Lee County)

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[Copyrighted Material Omitted]

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Ronald L. Kammer and Sina Bahadoran of Hinshaw and Culbertson, LLP, Miami,

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Florida; June Galkoski Hoffman of Fowler, White, and Burnett, P.A., Miami, FL; Joseph R. Miele, Jr. of Marshall, Dennehey, Warner, Coleman, and Goggin, Fort Lauderdale, FL; and Donna M. Greenspan of Edwards, Angell, Palmer and Dodge, LLP, West Palm Beach, FL, for Petitioners.

Mark A. Boyle, Sr., Michael G. Fink and Geoffrey H. Gentile, Sr. of Fink and Boyle, P.A., Fort Myers, FL, for Respondents.

Denise V. Powers, Coral Gables, FL, on behalf of National Association of Mutual Insurance Companies; William D. Horgan of Fuller, Johnson, and Farrell, P.A., Tallahassee, FL, on behalf of Complex Insurance Claims Litigation Association; Pamela A. Chamberlin of Mitrani, Rynor, and Adamsky, P.A., Miami, FL, on behalf of Mid-Continent Casualty Company; John Bond Atkinson, Rebecca A. Brownell, and Ellie A. Levy of Atkinson and Brownell, P.A., Miami, FL, and Shaun McParland Baldwin and Donald E. Elder of Tressler, Soderstrom, Maloney and Priess, Chicago, IL, on behalf of Amerisure Mutual Insurance Company; Perry N. Bass, Houston, TX, and Christopher W. Martin and Levon G. Hovnatanian of Martin, Disiere, Jefferson and Wisdom, LLP, Houston, TX, on behalf of Hartford Fire Insurance Company; and David K. Miller and Ginger L. Barry of Broad and Cassel, Tallahassee, FL, and Keith Hetrick, Florida Home Builders Association, Tallahassee, FL, and R. Hugh Lumpkin and Michael F. Huber of Ver Ploeg and Lumpkin, P.A., Miami, FL, on behalf of Florida Home Builders Association, National Association of Home Builders, Arvida/JMB Partners, L.P., Arvida Managers, Inc., Arvida/JMB Management, L.P. and Mercedes Home Corporation; Warren H. Husband of Metz, Husband, and Daughton, P.A., Tallahassee, FL, and Patrick J. Wielinski of Cokinos, Bosien, and Young, P.C., Arlington, TX, on behalf of Associated General Contractors of America, Florida Associate General Contractors Council, Inc., the Associated General Contractors of Greater Florida, Inc., South Florida Chapter of the Associated General Contractors, Florida East Coast Chapter of the Associated General Contractors of America, Inc., American Subcontractors Association, Inc., and American Subcontractors of Florida, Inc.; Stephen A. Marino, Jr. of Ver Ploeg and Lumpkin, P.A., Miami, FL, on behalf of the Academy of Florida Trial Lawyers; Duane A. Daiker and Steven G. Schember of Shumaker, Loop, and Kendrick, LLP, Tampa, FL, on behalf of Amwest Surety Insurance Company; Daniel J. Santaniello and Paul Stephen Jones of Luks, Santaniello, Perez, Petrillo, and Gold, Orlando, FL, James P. Waczewski of Luks, Santaniello, Perez, Petrillo and Gold, Tallahassee, FL, and Joseph L. Oliva of Oliva and Associates, ALC, San Diego, CA, on behalf of Poole and Kent Company, for Amici Curiae

PARIENTE, J.

J.S.U.B., Inc. seeks review of the decision of the Second District Court of Appeal in J.S.U.B., Inc. v. United States Fire Insurance Co., 906 So.2d 303 (Fla. 2d DCA 2005), which is in express and direct conflict with the decision of the Fourth District Court of Appeal in Lassiter Construction Co. v. American States Insurance Co., 699 So.2d 768 (Fla. 4th DCA 1997).1 The conflict issue is whether a post-1986 standard form commercial general liability (CGL) policy with products-completed operations hazard coverage, issued to a general contractor, provides coverage when a claim is made against the contractor for

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damage to the completed project caused by a subcontractor's defective work.

We answer this question in the affirmative. We conclude that defective work performed by a subcontractor that causes damage to the contractor's completed project and is neither expected nor intended from the standpoint of the contractor can constitute "property damage" caused by an "occurrence" as those terms are defined in a standard form commercial general liability policy. Accordingly, a claim made against the contractor for damage to the completed project caused by a subcontractor's defective work is covered under a post-1986 CGL policy unless a specific exclusion applies to bar coverage. In this case, the terms of the policy included an exception to the "Your Work" exclusion for faulty workmanship by a subcontractor and did not include a breach of contract exclusion. We therefore approve the Second District's decision in J.S.U.B. and disapprove the Fourth District's decision in Lassiter.

FACTS AND PROCEDURAL HISTORY

J.S.U.B., Inc., and Logue Enterprises, Inc., as partners of First Home Builders of Florida ("J.S.U.B."), contracted to build several homes in the Lehigh Acres area of Lee County, Florida. After completion and delivery of the homes to the homeowners, damage to the foundations, drywall, and other interior portions of the homes appeared. It is undisputed that the damage to the homes was caused by subcontractors' use of poor soil and improper soil compaction and testing. The homeowners demanded that J.S.U.B. repair or remedy the damages, asserting breach of contract, breach of warranty, negligence, strict liability, and violation of the Florida Building Code.

During the period in which the homes were built, J.S.U.B. was insured under a commercial general liability policy and renewal policy issued by United States Fire Insurance Company ("U.S. Fire"). The policies provide coverage for the "sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' " caused by an "occurrence" within the "coverage territory" during the policy period. As defined in the policies, an "occurrence" is "an accident, including continuous or repeated exposure to substantially the same general harmful conditions," and "property damage" includes "[p]hysical injury to tangible property, including all resulting loss of use of that property." The policies also contain "products-completed operations hazard" coverage that

[i]ncludes all "bodily injury" and "property damage" occurring away from premises you own or rent and arising out of "your product" or "your work" except

....

(2) Work that has not yet been completed or abandoned.2

The coverage provisions are limited by numerous exclusions. Of particular relevance are those exclusions, with their exceptions, that exclude coverage for damage to the insured's property and work:

j. Damage To Property

"Property damage" to:

....

(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf

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are performing operations, if the "property damage" arises out of those operations; or

(6) That particular part of any property that must be restored, repaired or replaced because "your work" was incorrectly performed on it.

....

Paragraph (6) of this exclusion does not apply to "property damage" included in the "products-completed operations hazard".... .

l. Damage To Your Work

"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.

(Emphases supplied.)3

J.S.U.B. sought coverage under the policies for the structural damage to the homes and the damage to the homeowners' personal property. U.S. Fire agreed that the policies provided coverage for damage to the homeowners' personal property, such as the homeowners' wallpaper. However, U.S. Fire asserted that there was no insurance coverage for the costs of repairing the structural damage to the homes, such as the damage to the foundations and drywall.

J.S.U.B. made the necessary repairs to the homes and filed a declaratory judgment action to determine whether coverage existed for the cost of repairing the structural damage. The circuit court entered judgment in favor of U.S. Fire. Citing to LaMarche v. Shelby Mutual Insurance Co., 390 So.2d 325 (Fla. 1980), the circuit court found that the CGL policies did not provide

coverage for faulty workmanship and that the damages alleged by [J.S.U.B.] and caused by [J.S.U.B.'s] subcontractors' use of poor soil, improper soil compaction and testing are the faulty workmanship for which no coverage exists under the subject policies.

J.S.U.B. appealed and the Second District Court of Appeal reversed. The Second District held that LaMarche did not control. The Second District further concluded that the policies contained "broad policy language" that provided coverage to J.S.U.B. in light of this Court's subsequent decision in State Farm Fire & Casualty Co. v. CTC Development Corp., 720 So.2d 1072 (Fla. 1998), and that none of the exclusions in the policies applied. See J.S.U.B., 906 So.2d at 309, 311.

Construing a CGL policy similar to those at issue in this case, the Fourth District Court of Appeal came to a contrary conclusion in Lassiter. In that case, the contractor argued that because exclusions (j)(6) and (l) "do not exclude work performed by subcontractors, there is coverage for the defective work performed by subcontractors." Lassiter, 699 So.2d at 770. The Fourth District disagreed, summarily concluding that "[t]he insured has failed to demonstrate that there are any

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provisions in the coverage section of the policy which would...

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