State Farm Fire & Cas. Co. v. CTC Development Corp., No. 91717

• Court: United States State Supreme Court of Florida
• Writing for the Court: PARIENTE; HARDING
• Citation: 720 So.2d 1072
• Parties: 23 Fla. L. Weekly S527 STATE FARM FIRE AND CASUALTY COMPANY, Petitioner, v. CTC DEVELOPMENT CORPORATION, Respondent.
• Decision Date: 08 October 1998
• Docket Number: No. 91717

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720 So.2d 1072 23 Fla. L. Weekly S527 STATE FARM FIRE AND CASUALTY COMPANY, Petitioner,
v.
CTC DEVELOPMENT CORPORATION, Respondent. No. 91717. Supreme Court of Florida. Oct. 8, 1998.

Michael D. Hook and Charles F. Beall, Jr., of Moore, Hill, Westmoreland, Hook & Bolton, P.A., Pensacola, for Petitioner.

Louis K. Rosenbloum, Pensacola, and Stephen H. Echsner of Levin, Middlebrooks, Thomas, Mitchell, Green, Echsner, Proctor & Papantonio, P.A., Pensacola, for Respondents.

PARIENTE, Judge.

We have for review CTC Development Corp. v. State Farm Fire & Casualty Co., 704 So.2d 579 (Fla. 1st DCA 1997), based on express and direct conflict with this Court's opinion in Hardware Mutual Casualty Co. v. Gerrits, 65 So.2d 69 (Fla.1953). We have jurisdiction. See art. V, § 3(b)(3), Fla. Const. For the reasons stated below, we recede from our earlier decision in Gerrits and hold that when the term "accident" is undefined in a liability policy, the term includes not only "accidental events," but also damages or injuries that are neither expected nor intended from the viewpoint of the insured.

I. FACTS

Gregory Uzdevenes is a professional architect and sole owner of the construction company CTC Development Corporation, Inc. (CTC). Both Uzdevenes and CTC were the insureds under a "Contractor's Policy" issued by State Farm Fire and Casualty Company

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(State Farm), paying a premium of $5,926.92 per year. The contractor's policy described the insureds' business as including "the construction of residential property." The policy provided various types of coverage, including liability coverage of up to $500,000 for damages caused by "occurrences."

The damages in this case resulted from Uzdevenes' construction of a residence for John and Annette Bray (the Brays) on their property, in violation of restrictive covenants requiring that the house be at least fifteen feet from each side lot line. Uzdevenes admitted that he constructed the house knowing it was beyond the easterly setback, but asserted that he was under the mistaken impression that the homeowners' association had approved his request for a variance from the setback requirements.

According to Uzdevenes, a day or two after he submitted the plans to the homeowners' association for approval, he called the association president to "formally" request a variance to place the house beyond the easterly setback. Uzdevenes claimed that the association president did not ask for a written request. A week to ten days later, Uzdevenes received a letter from the association president approving the "plans submitted." Unsure whether this approval included the variance request, Uzdevenes again called the president who told him that the variance would be "no problem."

Uzdevenes proceeded with the construction. It was only after the construction was sixty percent complete that he learned of a possible problem with the variance. According to Uzdevenes, at this point it would have cost him approximately $275,000 to tear down the home and reconstruct it within the setback. Subsequently, the neighboring property owners, Finley and Judy Holmes, filed suit against Uzdevenes, CTC, the Brays, and the Brays' lender, seeking an injunction and compensatory damages.

Uzdevenes called upon State Farm to defend and indemnify him and CTC for the damages claimed, but State Farm denied coverage and declined to defend. Uzdevenes and CTC ultimately settled the suit with the Holmeses for $22,500. Uzdevenes and CTC then brought suit against State Farm seeking damages for State Farm's failure to defend and indemnify them in the Holmeses lawsuit. In addition to seeking the settlement amount of $22,500, Uzdevenes and CTC claimed they incurred $29,400 in attorneys' fees and costs in defending the suit.

Section II of the contractor's policy, entitled "Comprehensive Business Liability," included coverage for:

[T]hose sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury to which this insurance applies.... This insurance applies only:

1. to bodily injury or property damage caused by an occurrence which takes place in the coverage territory during the policy period....

(Emphasis supplied.) "Occurrence" is broadly defined by the policy as:

a. An accident, including continuous or repeated exposure to substantially the same general harmful conditions which result in bodily injury or property damage; or

b. The commission of an offense, or a series of similar related offenses, which results in personal injury or advertising injury.

For purposes of this definition, bodily injury or property damage resulting from the use of reasonable force to protect persons or property will be considered an accident.

(Emphasis supplied.) One of the policy exclusions provides that coverage does not apply to:

1. bodily injury or property damage:

a. expected or intended from the standpoint of the insured; or

b. to any person or property which is the result of willful and malicious acts of the insured.

(Emphasis supplied.)

State Farm moved for summary judgment, relying on Gerrits, which it claimed was "identical" in terms of the facts of the case and the policy language at issue. State Farm contended that, as a matter of law, the construction of the home beyond the setback,

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even if built based on the mistaken assumption that a variance had been granted, did not constitute an "occurrence" within the meaning of its policy. Based on Gerrits, the trial court granted summary judgment, which was reversed by the First District. See CTC Development Corp., 704 So.2d at 581.

II. ANALYSIS

The issue to be decided in this case is whether the term "accident" in a liability policy, which term is not otherwise defined, should be defined to include not only "accidental events," but also injuries or damages that are neither expected nor intended from the standpoint of the insured. To so hold requires that we recede from Gerrits.

A. Gerrits

In Gerrits, the insured (a professional contractor and builder) constructed a home on his own property, which home partially encroached on his neighbor's property. The insured knowingly built the home at the location but did not intend to encroach on the neighboring property, relying on a faulty survey. The insured's policy provided for reimbursement of all sums the insured became obligated to pay by virtue of an "accident." The policy did not define the term "accident."

This Court reasoned in Gerrits that the insured's construction of the home over the property line could not be considered an accident because the insured "deliberately and designedly (although erroneously) located the building on a part of the adjoining property and he intended to build it at that particular site." 65 So.2d at 71. The Court reasoned that:

When a person understands facts to be other than they are and is free from negligence, a "mistake of fact" occurs. An effect which is the natural and probable consequence of an act or course of action is not an...