Assurance Co. of America v. Lucas Waterproofing

• Decision Date: 01 May 2008
• Docket Number: No. 07-14084-CIV.,07-14084-CIV.
• Parties: ASSURANCE COMPANY OF AMERICA, Plaintiff, v. LUCAS WATERPROOFING COMPANY, INC., Robert K. Lucas, individually, and Transcontinental Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Florida

581 F.Supp.2d 1201

ASSURANCE COMPANY OF AMERICA, Plaintiff, v. LUCAS WATERPROOFING COMPANY, INC., Robert K. Lucas, individually, and Transcontinental Insurance Company, Defendants.

No. 07-14084-CIV.

United States District Court, S.D. Florida.

May 1, 2008.

COPYRIGHT MATERIAL OMITTED

Donna M. Greenspan, John David Dickenson, Edwards Angell Palmer & Dodge LLP, West Palm Beach, FL, for Plaintiff.

Bard Daniel Rockenbach, Burlington & Rockenbach PA, West Palm Beach, FL, Eric Harris Luckman, Boynton Beach, FL, Lazaro Jesus Mur, Cyril E. Smith, Nixon Peabody LLP, Palm Beach Gardens, FL, Aidan M. McCormack, R. Brian Seibert, Nixon Peabody LLP, New York, NY, Anthony Anderson Benton Dogali, Forizs & Dogali, Tampa, FL, Stephen A. Aschettino, Nixon Peabody LLP, Jericho, NY, John H. Dannecker, Shutts & Bowen, Orlando, FL, for Defendants.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT BY ASSURANCE CORPORATION OF AMERICA; GRANTING IN PART AND DENYING IN PART TRANSCONTINENTAL INSURANCE COMPANY'S MOTION FOR SUMMARY JUDGMENT; AND DENYING LUCAS WATERPROOFING COMPANY AND ROBERT K. LUCAS' MOTION FOR SUMMARY JUDGMENT

K. MICHAEL MOORE, District Judge.

THIS CAUSE came before the Court upon Plaintiff Assurance Company of America's Motion for Partial Summary Judgment (dkt # 88); Defendants Lucas Waterproofing Company, Inc. and Robert K. Lucas' Motion for Partial Summary Judgment as to Transcontinental Insurance Company's Sixteenth Affirmative Defense to Count II of the Cross-Claim (dkt # 90); and Defendant/Cross-Defendant Transcontinental Insurance Company's Motion for Summary Judgment (dkt # 92).

UPON CONSIDERATION of the Motion, the Responses, the pertinent portions of the record, and being otherwise fully advised in the premises, the Court enters the following Order.

I. BACKGROUND

This case involves an insurance coverage dispute arising out of construction defects in work performed at the Ocean Club at Orchid Island Condominium (the "Condominiums"), a five building, 36-unit luxury condominium complex located in Vero Beach, Florida. Defendant Orchid Island Properties, Inc. ("Orchid") was the developer, and W.G. Mills, Inc. ("Mills") was the general contractor. Mills entered into two subcontracting agreements with Lucas Waterproofing Company, LLC ("LWC"), wherein LWC agreed to install membrane waterproofing under approximately 25,000 square feet of cast stone pavers on porches and to waterproof certain walls under stone caps. LWC completed work on Buildings "A" and "B" and applied for payment under the first subcontract on November 20, 1997. LWC completed work on Buildings "C," "D" and "E" in March of 1999 and applied for payment under the second subcontract on July 25, 1999. LWC was paid in full for both subcontracts. On or about September 15, 1999, the Condominiums experienced wind and rain due to Hurricane Floyd. On or about October 15, 1999, the Condominiums experienced wind and rain due to Hurricane Irene.

During and after the period of construction, LWC was covered by a series of Commercial General Liability ("CGL") policies. From February 1, 1998, to February 1, 1999, LWC was covered under a policy (the "Assurance Policy") issued by Assurance Company of America ("Assurance"). From February 1, 1999, to February 1, 2000, LWC was covered by a policy ("the Transcontinental Policy I") issued by Transcontinental Insurance Company ("Transcontinental"). From February 1, 2000, to February 1, 2001, LWC was covered under a second Transcontinental policy (the "Transcontinental Policy II," together, the "Transcontinental Policies," and collectively with the "Assurance Policy," the "Policies").

In 2001, the Ocean Club I and Ocean Club II Condominium Associations (collectively, the "Association") brought suit against Orchid, Mills, and the architects. The suit alleged construction and design defects in all five buildings, including property damage caused by water inside the decorative soffit beams under the balconies, resulting in peeling and bubbling paint and mildew growth, as well as stucco discoloration or efflorescence. Mills, in turn, filed a third-party complaint against certain subcontractors, including LWC, for breach of contract and indemnification. Mills also brought suit against Robert Lucas ("Lucas") personally, pursuant to a Guaranty of Performance of Subcontract, wherein Lucas provided a personal guaranty for the work. The Association ultimately reached a settlement with Orchid wherein the Association assigned its claims against Mills and the architects to Orchid. On September 16, 2003, a global settlement was reached concerning all remaining claims, except for Mills' third-party claims against LWC, Lucas, and the stucco applier. The claims against the stucco applier eventually settled as well. In connection with the global settlement, Mills assigned its claims against LWC and Lucas to Orchid.

On December 12, 2005, Orchid filed a three-count complaint against LWC and Lucas in state court, alleging breach of the subcontract agreement by LWC, breach of the personal guaranty by Lucas, and seeking indemnification. Assurance defended LWC and Lucas under a reservation of rights. On June 9, 2006, a jury awarded Orchid $579,862 in damages against LWC. On November 2, 2006, the court entered final judgment against LWC in the amount of $1,105,852, consisting of $579,682 in compensatory damages, $448,793 in attorneys' fees, and $77,197 in costs. The jury also found that Lucas did not breach the personal guaranty agreement.

On March 15, 2007, the court entered an Order on Motion for Judgment in Accordance with Motion for Directed Verdict, holding that the jury's finding that Lucas did not breach the personal guaranty agreement was inconsistent with the evidence and the jury's other findings. The court entered judgment against LWC for $1,417,605.70, consisting of the $1,105,852 verdict against LWC, plus $312,023.74 in prejudgment interest. LWC and Lucas subsequently demanded coverage under the Policies.

On March 22, 2007, Assurance filed a complaint in this action (dkt # 1) seeking a declaratory judgment that it has no duty to defend or indemnify LWC or Lucas, and if such duty exists, to determine the apportionment of such duty between itself and Transcontinental. A Second Amended Complaint (dkt # 6) was filed on April 12, 2007, and a Third Amended Complaint (dkt # 41) was filed on July 24, 2007. On August 3, 2007, LWC and Lucas filed an Answer and Counterclaim Against Assurance and Cross-claim Against Transcontinental (dkt # 50) seeking a declaratory judgment that Assurance and Transcontinental are liable to LWC and Lucas under the Policies.

II. STANDARD OF REVIEW

The applicable standard for reviewing a summary judgment motion is unambiguously stated in Rule 56(c) of the Federal Rules of Civil Procedure:

The judgment sought should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.

Summary judgment may be entered only where there is no genuine issue of material fact. Twiss v. Kury, 25 F.3d 1551, 1554 (11th Cir.1994). The moving party has the burden of meeting this exacting standard. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). An issue of fact is "material" if it is a legal element of the claim under the applicable substantive law which might affect the outcome of the case. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir.1997). It is "genuine" if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party. Id.

In applying this standard, the district court must view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion. Id. However, the nonmoving party "may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). "The mere existence of a scintilla of evidence in support of the [nonmovant's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

III. ANALYSIS

A. Assurance's Motion for Summary Judgment

Assurance argues that it is entitled to summary judgment because any accident or injury triggering coverage occurred after the Assurance Policy expired. "It is well-established that in order to trigger coverage under an insurance policy, the accident or injury must occur during the time period of coverage." North River Ins. Co. v. Broward County Sheriff's Office, 428 F.Supp.2d 1284, 1289-90 (S.D.Fla. 2006) (quotation marks omitted). Florida courts follow the general rule that potential coverage under an insurance policy is triggered when property damage manifests itself, not when the negligent act or omission giving rise to the damage occurs. Id.; Essex Builders Group, Inc. v. Amerisure Ins. Co., 485, F.Supp.2d 1302, 1309 (M.D.Fla.2006); contra Commercial Union Ins. v. R.H. Barto Co., 440 So.2d 383 (Fla. 4th DCA 1983) (finding that the date of the negligent act triggered coverage). There are, however, four generally accepted theories governing when coverage is triggered. Auto Owners Ins. Co. v. Travelers Cas. & Surety Co., 227 F.Supp.2d 1248, 1266 (M.D.Fla.2002) (stating that the four generally accepted theories are "(1) exposure; (2) manifestation; (3) continuous trigger; and (4) injury-in-fact"). The application of these theories varies based on the occurrence for which coverage is sought. Id.

Under the exposure theory, property damage occurs upon installation of the defective product. Under the manifestation theory, property damage occurs at the time damage...