A U.S. District Court in Florida recently found that the “Your Work” exclusion in a CGL policy barred coverage for a contractor and developer of a condominium project where the only property damage alleged as a result of the insured’s defective and deficient work was to other portions of the insured’s work.
The insurer, Evanston Insurance Company, sought a declaration that it had no duty to defend or indemnify its insured, DiMucci Development Corp. of Ponce Inlet, Inc. DiMucci constructed a 132 unit condominium complex, the Towers Grande, in Volusia County Florida. DiMucci acted as the owner, builder, developer, and seller of the Towers Grande.
In 2012, subsequent to the completion of the project, the Towers Grande Condominium Association filed a construction defect case against DiMucci in state court in Florida, alleging, among other things, defects and deficiencies in the roof, exhaust pipe, HVAC system, and water intrusion and other decking/structural issues at the condominium complex. The underlying complaint also brought claims against DiMucci’s roofing subcontractor, who performed roofing work at the site. The complaint asserted claims for negligence, breach of implied warranties, and violations of Florida Building Code.
After determining that Florida law applied to the action before it, the District Court first looked at whether or not the underlying complaint alleged an “occurrence” and “property damage,” which would trigger Evanston’s duty to defend under the policies. The court held that there were sufficient allegations of an “occurrence” under the policy because DiMucci neither expected nor intended structural damage to the property caused by the alleged defects. The court also held that there were sufficient allegations of “property damage” under the complaint, because DiMucci’s allegedly defective work damaged otherwise non-defective portions of the Towers Grande.
The District Court went on, however, to analyze whether coverage for the alleged damages was excluded pursuant to the “Your Work” exclusion in the policy. In holding that the “Your Work” exclusion barred coverage, the court noted that DiMucci’s work at the project encompassed the entire project, with the exception of the roof. The court held that because the allegations of the underlying complaint alleged only that DiMucci’s defective work on a portion of the project resulted in damage to other parts of the project also constructed by DiMucci, the “Your Work” exclusion barred coverage and Evanston had no duty to defend the underlying complaint. The court distinguished the situation before it from a situation where an insured’s defective work causes damage to other portions of a project that were not constructed by the insured.
The District Court’s interpretation of the “Your Work” exclusion is similar to interpretations by South Carolina’s courts. The case also highlights the importance of understanding the effect that “Your Work” and other “business risk” exclusions may have on coverage in a given case.
The case is Evanston Insurance Company v. DiMucci Development Corp. of Ponce Inlet, Inc., case no. 6:15-cv-486-Orl-37DAB, in the U.S. District Court for the Middle District of Florida. Please contact us if you would like a copy of the order or would like to discuss the case further.