Great Am. Fid. Ins. Co. v. JWR Constr. Servs., Inc.

• Decision Date: 02 November 2012
• Docket Number: No. 10–61423–CIV.,10–61423–CIV.
• Citation: 882 F.Supp.2d 1340
• Court: U.S. District Court — Southern District of Florida
• Parties: GREAT AMERICAN FIDELITY INSURANCE COMPANY, an Ohio corporation, and Great American E & S Insurance Company, an Ohio corporation, Plaintiffs, v. JWR CONSTRUCTION SERVICES, INC., a Florida corporation, Gulf Reflections Condominium Association, Inc.; et al., Defendants.

882 F.Supp.2d 1340

GREAT AMERICAN FIDELITY INSURANCE COMPANY, an Ohio corporation, and Great American E & S Insurance Company, an Ohio corporation, Plaintiffs,

v.JWR CONSTRUCTION SERVICES, INC., a Florida corporation, Gulf Reflections Condominium Association, Inc.; et al., Defendants.

No. 10–61423–CIV.

United States District Court,

S.D. Florida.

April 9, 2012.

Order Denying Reconsideration Nov. 2, 2012.

Mathai Jacob, Katz Barron Squitero Faust, Miami, FL, Robert Charles Grady, Katz Barron Squitero & Faust, Fort Lauderdale, FL, for Plaintiffs.

Michael Justin Yates, Law Offices of Michael J. Yates, P.L., Miami, FL, Christopher J. Lynch, Hunter Williams & Lynch, Coral Gables, FL, for Defendants.

ORDER ON CROSS–MOTIONS FOR SUMMARY JUDGMENT

PAUL C. HUCK, District Judge.

This matter is before the Court on the parties' cross-motions for summary judgment.Plaintiffs Great American Fidelity Insurance Company and Great American E & S Insurance Company (“Plaintiffs” or “Great American”) seek a declaration under two materially similar environmental liability insurance policies (the “Policy”) ¹ issued by Great American, as insurer, to Defendant JWR Construction Inc. (“JWR”), as insured, that Great American has no duty to defend nor indemnify JWR in an underlying state court action ² relating to the use of defective Chinese drywall in condominium units where JWR, as general contractor, is being sued by the non-JWR Defendants in this action, referred to herein as the Gulf Reflections Plaintiffs (together with JWR, the “Defendants”).³See D.E. ¶ 135. JWR, on the other hand, seeks summary judgment that Great American has a duty to defend JWR in the underlying state court action.⁴See D.E. ¶ 138. The Gulf Reflections Plaintiffs separately seek summary judgment that Great American's Policy provides coverage to JWR for the claims set forth in the underlying state court action. See D.E. ¶ 141. Both JWR and the Gulf Reflections Plaintiffs maintain that the duty to defend is ripe for adjudication in this action, but that the duty to indemnify is premature as it would depend on the outcome of the underlying state court action, which is ongoing. See, e.g., D.E. ¶ 138 at ¶ 2 and D.E. # 155 at p. 9, 1. Each party has filed its respective response and reply and the cross-motions are thus ripe for adjudication. On April 3, 2012, this Court heard oral argument on the issues presented in the cross-motions. Since the parties' cross-motions for summary judgment present significantly overlapping issues, the Court will analyze the motions in tandem and decide whether the respective movants are entitled to judgment as a matter of law. For the reasons set forth below, the Court grants summary judgment in favor of the Defendants with respect to the two exclusions discussed herein and denies summary judgment with respect to the Plaintiffs in connection with Great American's duty to defend. The Court declines to decide at this time whether there is a duty to indemnify as that issue is premature.

I. Background⁵

The insured, JWR, is a corporation organized and existing under the laws of the State of Florida. The Gulf Reflections Plaintiffs own real property located at 11001 Gulf Reflections Drive, Fort Myers, Florida 33908. JWR was the general contractor for the Gulf Reflections Condominium units. In June of 2009, JWR began to suspect a problem with the Chinese drywall in the units. Consequently, JWR notified its insurance agent, Great American, of an occurrence/claim in writing on June 23, 2009 and on July 2, 2009. On January 27, 2010, the Gulf Reflections Plaintiffs filed the underlying class action complaint against JWR and a number of other defendants in the Circuit Court for Lee County, Florida. Recently, the complaint in such action (the “TAC” or “underlying complaint”) was amended for a third time to add defendants and amend the causes of action plead. See D.E. ¶ 130–1. The Gulf Reflections Plaintiffs, in the underlying complaint, allege that, after they purchased the condominium units in the Gulf Reflections development, they discovered a latent defect with respect to the drywall used to construct the inside of the unit. See TAC ¶ 31. This latent defect, they allege, caused monetary damages, including (1) the need to replace the defective drywall with new drywall, (2) damage to other property including ceiling materials, electrical systems, air conditioning, insulation, certain copper and/or brass plumbing components, and studs, (3) damage to personal property including electrical devices, computers, appliances, jewelry, plumbing fixtures and silverware, and (4) the loss of use and enjoyment of the unit as well as additional living expenses while forced to live away from the unit and loss of market value of the unit. See TAC ¶ 32.

The underlying complaint alleges five causes of action against JWR: (1) strict liability; (2) negligence; (3) breach of statutory implied warranty; (4) private nuisance; and (5) vicarious liability for the acts of its actual agent, C.A. Steelman, Inc. (the “Installer”). Allegations with respect to each count are reproduced below in pertinent part:

FACTS COMMON TO ALL COUNTS

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23. The Defendant JWR Construction Services, Inc. (hereinafter “General Contractor”), was at all times material hereto, a Florida for profit corporation. At all material times hereto, General Contractor was retained by Developer and/or the owner of the real property directly and acted in the capacity of a general contractor. As such, this general contractor was in the business of constructing a condominium building, retained the services of various subcontractors in order to complete the construction of a condominium building, and ensuring that the building was built reasonably, was built in accordance with the plans, was built with reasonable and non-defective building materials, was built in accordance with the applicable building codes, and pursuant to the contract.

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A. STRICT LIABILITY AGAINST GENERAL CONTRACTOR

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141. At all material times hereto, Defendant, General Contractor, was in the business of distributing, delivering, supplying, inspecting, marketing, and/or selling units for sale to the general public.

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157. The defects in the drywall ... as well as the Defendant, General Contractor, failing to warn of this defect rendered the drywall unreasonably dangerous and was the direct and proximate cause of damages to the Plaintiffs.

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B. NEGLIGENCE OF GENERAL CONTRACTOR

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161. At all times material hereto, Defendant owed plaintiffs a duty of reasonable care. Reasonable care being defined as that degree of care which a reasonably careful person would use under like circumstances. Depending on the circumstances, reasonable care could mean doing something that a reasonably careful person would do or not doing something that a reasonably careful person would not do.

162. Defendant breached this duty of reasonable care when [it] failed to reasonably inspect and/or warn of a product that is “inherently dangerous” and/or Defendant breached its duty of reasonable care when it installed defective Chinese drywall, despite the fact that the Defendant knew, or should have known, of the defective nature of this product, i.e. the smell and/or the abnormal elemental makeup of this product. Further, Defendant breached its duty of reasonable care when it failed to further investigate and test drywall that the defendant knew or should have known had an abnormal smell and that had for the very first time been imported from a foreign country, in this case China, and a product that had no proven track record here in the United States, and which was causing, on some occasions, physical symptoms, i.e. headaches, burning eyes, respiratory problems, sore throat, etc.

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C. BREACH OF STATUTORY IMPLIED WARRANTY BY GENERAL CONTRACTOR

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166. General Contractor, under F.S. § 718.203 and common law, impliedly warranted to the Plaintiffs that each parcel was reasonably fit for its intended purpose and merchantable, and that the Condominium's buildings, improvements and individual units were constructed in accordance with the plans and specifications filed as a matter of public record, the Florida Building Code, other local and national codes, and good design, engineering, supplies, materials, and construction practices.

167. General Contractor breached the aforesaid implied warranties in that the Condominium's buildings, improvements and individual units were not constructed in compliance with the requirements of the Florida Building Code and other local and national codes, in accordance with proper and approved construction plans and specifications and in accordance with good design, engineering, supplies, materials and construction practices.

168. General Contractor constructed the Condominium's buildings, improvements and individual units and caused the buildings, improvements and individual units to be sold to the Plaintiffs with the defects and deficiencies set forth herein.

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D. PRIVATE NUISANCE AGAINST GENERAL CONTRACTOR

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174. General Contractor used defective drywall to build the home in question. This tortuous or wrongful act or omission by the Defendant has unreasonably interfered, and continues to interfere, with the use and enjoyment of the property and caused potential health problems.

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E. VICARIOUS LIABILITY OF THE GENERAL CONTRACTOR FOR THE ACTS OF THEIR ACTUAL AGENT

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183. General Contractor was charged with the responsibility of providing the Plaintiffs with condominium units that were free of defects and met the ordinary and normal standards for a unit of comparable kind and quality.

184. In an attempt to meet this responsibility, General Contractor entered into various contracts with various contractors. One of these contracts was with the Installer, C.A. Steelman Inc. As a result of this contract, (A contract that the Plaintiff has a good faith belief exists but which is not in the...