June 15th, 2018

California Supreme Court holds that commercial general liability policy covers employer for negligent hiring, retention, and supervision of employee who intentionally injures third party

By, Mark A. Boyle, Esq.

In Liberty Surplus Insurance Corporation vs. Ledesma & Meyer Construction Company, Inc. (L & M), the California Supreme Court found that the standard commercial general liability (“CGL”) policy provides coverage when a third-party sues an employer for negligent hiring, retention, and supervision of an employee who intentionally injured that third-party.

L & M was sued by a third-party who alleged that they have been abused by an employee of L & M.  Specifically, L & M was sued for negligence by hiring, retaining, and supervising the employee that conducted the abuse.

The legal issue involved in the case was whether under the CGL policy issued to L & M, the claims constituted and “occurrence“ and “accident“ within the meaning of the CGL policy.  The CGL policy provided coverage for “bodily injury” caused by an “occurrence.”  The policy defines an occurrence as an “accident.”

The court found coverage even though the acts of one of the employees was clearly intentional, specifically noting:

Because liability insurance is a contract between an insurer and insured, and the policy is read in light of the parties’ expectations, the relevant viewpoint is of the insured rather than the injured party.

Thus, California, consistent with most jurisdictions, held that coverage is available under a CGL policy to an insured as long as the damages are not subjectively intended or expected from the standpoint of the insured.

In this respect, California law is in conformity with the overwhelming majority of jurisdictions who have decided this issue.  See Carylye King vs. Dallas Fire Ins. Co., 85 S.W. 3d 185 (Tex. 2002); Lamar Homes, Inc. v Mid-Continent Cas. Co., 242 S.W. 3d 1 (Tex. 2007); State Farm Fire and Casualty Co. v CTC Development Corp., 720 So.2d 1072 (Fla. 1998);  George Koikos v Travelers Ins. Co., 849 So. 2d 263 (Fla. 2003); and Travelers Indemnity Co. v PCR Inc., 889 So. 2d 779 (Fla. 2004) All of these cases hold that bodily injury and property damage claims are covered under the CGL policy unless the damage was intended or expected from the standpoint of the insured.  This is true even if the insured intend the conduct giving rise to liability.

The California ruling affirms the broad coverage which was intended to be provided under the standard commercial general liability policy.

March 6th, 2018

The Court of Appeals holds that loss of use of real property constitutes “property damage” under CGL Policy

By, Mark A. Boyle, Esq.

Many lawsuits involving real property and defective construction claims include claims for damages that do not constitute physical damage to tangible property. Generally, COMMERICAL GENERAL LIABALITY (“CGL”) carriers eschew coverage for such claims.  The recent decision in Mid-Continent Cas. Co. v Adams Homes of Northwest Florida, Inc., No. 17-12660, 2018 WL 834896 (11 Cir. Feb. 13, 2018) clearly makes loss of use claims—even where no physical damage to tangible property occurs—potentially covered claims under CGL policies in Florida.

Adams Homes of Northwest Florida (“ADAMS”) was sued by a series of homeowners in an integrated community in which the residents were allotted common access to amenities including golf courses, restaurants, a marina, and shops. ADAMS built a series of homes within the development. The homeowners in the development eventually sued ADAMS claiming “homes, the streets adjacent to the homes, and the common areas they have access to, are now prone to flooding “which has made “[Homeowners’] ordinary use or occupation of their property physically uncomfortable” and “disturb[ed] the [Homeowners’] free use … of their property.” Homeowners sued ADAMS in state court seeking damages for ADAMS’ alleged negligence in failing to ensure the installation of adequate drainage.

Mid-Continent Casualty Company (“MCC”) insured ADAMS under a series of commercial general liability policies which included the standard INSURANCE SERVICES OFFICE’s (“ISO”) CGL property damage definition. Under those policies, MCC had the “right and duty to defend the insured against any ‘suit’ seeking damages because of ‘bodily injury’ or ‘property damages’ covered thereunder.” The policy defined property damage as follows:

  1. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
  2. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the ‘occurrence’ that caused it.


MCC began defending ADAMS under a reservation of rights but also asserted a declaratory relief action in which MCC attempted to disclaim both the duty to defend and the duty to indemnify. The trial court agreed with MCC that the claims of the Plaintiff did not constitute “property damage” as that terms was defined under the CGL policy.

The 11th Circuit disagreed relying both on the plain language of the policy and a Florida intermediate appellate court decision, McCreary v. Florida Residential Prop. and Cas. Joint Underwriting Ass’n, 758 So.2d 692, 693 (4th Dist. Ct. App. 1999).  In McCreary, the court determined that the actions of the defendant ultimately rendered the Rebalko’s property unsafe and unsecure; thereby resulting in loss of use. Id. at 695. In response to MCC’s response argument that the water was “relatively harmless” and not likely to cause “an immediate danger”, the Court noted:

“But the absence of allegations that the storm water run­off is placing Homeowners in immediate danger does not counsel a different result. Physical discomfort in the use of property, like insecurity and unsafety in the use of property, raises the specter of loss of use. Although it is unclear whether the physical discomfort caused by the run-off is severe enough to prevent Homeowners from using their property, the same was true of Rebalko’s allegations in McCreary. Rebalko did not allege he stopped using his property because of the McCrearys’ dogs; rather, Rebalko alleged he felt insecure and unsafe in its use. Like Rebalko, Homeowners are entitled to have any ambiguity about whether the physical discomfort caused by the run-off was severe enough to cause loss of use resolved in their favor. “If the allegations of the complaint leave any doubt as to the duty to defend, the question must be resolved in favor of the insured.” Lime Tree Vill.Cmty., 980 F.2d at 1405.

Thus, the Court held that there was a duty to defend.

In addition to its holding that a potential loss of use claim required a defense under the CGL policy the 11th Circuit held that the fact that the damages in questions were “purely economic” did not bar the claims under the circumstances of this case noting “We have not found any support for applying the principle that general-liability policies do not cover purely economic damages in a case like this one.”

Until the ADAMS v MCC decision, most of the focus in insurance litigation for defective construction involved the question of whether or not the “property damage” definition had been met by a showing of physical injury to tangible property.  See U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007), Auto-Owners Ins. Co. v Pozzi Windows Co., 984 So. 2d 1241 (Fla. 2008). The ADAMS v MCC decision now gives a potential claimant under a CGL policy two avenues for pleading into coverage: 1. physical damage to tangible property; and/or 2. loss of use.  Practitioners who wish to plead their claims into coverage should plead either or both elements as applicable.



May 16th, 2017

Additional Insured Authorized to Sue for Bad Faith under South Carolina Law

By, Mark A. Boyle, Esq.

Under the law of South Carolina, a tort action for an insurer’s bad faith refusal to pay benefits does not extend to third parties who are not insureds under the policy. Kleckley v. Nw. Nat. Cas. Co., 526 S.E.2d 218, 219 (S.C. 2000). The South Carolina Supreme Court has not yet addressed whether a party who is not a named insured, but is an additional insured, is entitled to proceed in bad faith against an insurer which fails to honor its obligations under the insurance contract. In UFP Eastern Division, Inc. vs. Selective Insurance Company of South Carolina, 2017 WL499083 (SDSC 2017) the Court held that South Carolina law does permit an additional insured to bring a claim for bad faith. In so doing the Court noted:

“The South Carolina Court of Appeals addressed an additional insured’s bad faith claim in BMW of N. Am.,LLC v. Complete Auto Recon Services, Inc., 731 S.E.2d 902, 907 (S.C. Ct. App. 2012). The Court of Appeals held that defendant Colony Insurance Company was entitled to summary judgment on the bad faith claim brought by BMW, an additional insured under a policy issued by defendant, because the subject matter of the claim was not covered by the insurance agreement. There is no suggestion that BMW lacked standing to bring a bad faith claim against Colony Insurance at all. Further, this Court can discern no apparent reason why a party identified as an insured in the insurance contract should not be able to bring a bad faith claim regarding the handling of its claim for insurance benefits brought under the insurance contract. The many cases Selective cites to support its position are inapposite because they concern claims by third-party tort victims suing tortfeasors’ liability providers for coverage of underlying tort claims, not additional-insured tortfeasors suing their own insurers for breach of contract.”

Certainly, the ability of an additional insured to bring a bad faith claim should represent a powerful legal deterrent to insurers shirking their obligation to defend additional insureds under South Carolina Law.

November 12th, 2015

Does the CGL Cover “Preventative Medicine?”

By, Mark A. Boyle, Esq.

Does the Commercial General Liability (“CGL”) cover the cost to mitigate against future property damage?  In other words, does the CGL cover “preventative medicine?”  The answer in Florida appears to be yes.

An issue that regularly appears in construction defect litigation is the question of whether or not a commercial general liability insurer is required to pay for repairs to areas of the project which have not yet sustained physical damage, but are likely or virtually certain to sustain such damage in the future.  Florida had no specific answer to whether such claims were covered in the past, until, the recent decision of Pavarini Construction Co. v. ACE American Insurance Company, case no.: 1:14-cv-20524-JLK (Amended Order dated 10-30-15).  In Pavarini, ACE was the commercial general liability insurer for Pavarini Construction Co.  Pavarini was seeking coverage for a series of defective construction conditions.  ACE was an excess CGL insurer, whose following form policy necessarily imported the standard CGL property damage definition found in the underlying policy issued by AIG.  In relevant part, the property damage definition in the CGL policy provides:

Property damage means:

  1. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
  2. Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the occurrence that caused it.

In addressing this issue, the Pavarini court noted the relatively recent Florida Supreme Court decision in J.S.U.B. recognizing that defective construction conditions could constitute both a covered “occurrence” and “property damage” within the meaning of a CGL policy.  ACE took the position that the mere existence of defective conditions did not trigger coverage and thus, they had very limited obligations.  Citing the recent 11thCircuit Court of Appeals decision in Carithers v. Mid-Continent Casualty Co., 782 F. 3d 1240 (11th Cir. 2015), the Pavarini Court noted:

There, a balcony that had been defectively installed by a subcontractor was causing runoff and resulting water damage to an adjacent garage.  See Id.Although the balcony itself did not constitute independent “property damage” under the terms of the policy, its replacement was necessary in order to effectively repair the garage.  See Id. At 1251.  “In other words, to repair the garage, it was necessary to completely replace the defectively constructed balcony.”  Memorandum and Order, Carithers v. Mid-Continent Cas. Co., No. 12-008890 (M.D. Fla. Mar. 11, 2014), DE 126 at 8.  Similarly here, in order to adequately repair the non-defective project components, the building had to be stabilized.  Even if the predominant objective of the repair effort was to fix the instability caused by the defective subcontractor work, it is undisputed that the same effort was required to put an end to ongoing damage to otherwise non-defective property, e.g. damage to stucco, penthouse enclosure, and critical concrete structural elements.  See DE 128 at 2-3; DE 131 at 52-63.  Thus, the ACE policy provides for complete indemnification.

In addition to these holdings, the Court noted the following in a footnote.

Citing J.S.U.B, Defendant argues somewhat incidentally that mitigation of damages is not covered.  Nowhere in J.S.U.B. is mitigation of damages mentioned.  On the contrary, J.S.U.B.stands for the proposition that claims for repairing structural damage caused by the defective work of subcontractors may be covered.  As a natural corollary, coverage may exist for costs to repair defective work in order to prevent further structural damage and covered loss.  See, e.g. Carithers v. Mid-Continent Cas. Co., 782 F. 3d 1240, 1251 (11th Cir. 2015). [Emphasis Added]

The Court’s holding is consistent with numerous decisions across the country, finding that damage mitigation, once the property damage threshold has been established as an initial matter, are covered.  See, e.g., AIU Ins. Co. v. Super. Ct., 799 P.2d 1253, 1272 (Cal. 1990) (coverage for “remedial and mitigative actions”); Globe Indem. Co. v. State, 118 Cal. Rptr. 75, 79 (Ct. App. 1974) (explaining that it would “seem strangely incongruous” to the insured “that his policy would cover him for damages to tangible property destroyed through his negligence in allowing a fire to escape but not for the sums incurred in mitigating such damages by suppressing the fire”); Am. Econ. Ins. Co. v. Commons, 552 P.2d 612, 613-14 (Or. Ct. App. 1976) (adopting rationale of Globe Indem.); Aronson Assocs., Inc. v. Pa. Nat’l Mut. Cas. Ins. Co., 14 Pa. D. & C.3d 1, 7 (C.P. 1977), aff’d 422 A.2d 689 (Pa. Super. 1979) (per curiam) (“preventive measures can be recovered where they are required to protect against a third person being harmed.”).

Indeed, “[t]o find otherwise would require the insured to intentionally allow property damage or bodily harm to occur for the damages to be covered.” Big-D Constr. Corp. v. Take it for Granite Too, 917 F. Supp. 2d 1096, 1109 (D. Nev. 2013).  As explained by one court: It is folly to argue that if a policy owner does nothing and thereby permits the piling up of mountainous claims at the eventual expense of the insurance carrier, he will be held harmless of all liability, but if he makes a reasonable expenditure and prevents a catastrophe he must do so at his own cost and expense.

Leebov v. U.S. Fid. & Guar. Co., 165 A. 2d 82, 84 (Pa. 1960).

So, for now, in Florida, mitigation damages are here to stay.

August 19th, 2015


Recently, Florida’s Second District Court of Appeal in Florida Farm Bureau Gen. Ins. Co. v. Peacock’s Excavating Serv., Inc., 2015 WL 4497721 (Fla. 2d DCA 2015) addressed the issue of what constitutes a final appealable order under Rule 9.110(k), Florida Rules of Appellate Procedure.  There, the insurer, Florida Farm Bureau Insurance Company (“Florida Farm Bureau”), and insured, Peacock’s Excavating Service, Inc., (“Peacock”), both filed competing declaratory actions that requested a determination of Florida Farm Bureau’s duty to defend and indemnify Peacock under several commercial general liability policies (“CGL” policy(ies)). The dispute centered on what triggered coverage under the CGL policy. Florida Farm Bureau contended that the manifestation of the injury triggered coverage whereas Peacock argued that the injury itself triggered coverage under the CGL policies. The trial court ultimately entered a partial final judgment that declared Florida Farm Bureau had a duty to defend Peacock under certain CGL policies. The partial final judgment did not address Florida Farm Bureau’s duty to indemnify Peacock under the CGL policies. Nevertheless, Florida Farm Bureau filed an appeal of the partial final judgment.



On appeal, the Second District dismissed the appeal for lack of jurisdiction. Because Florida Farm Bureau appealed from a partial final judgment, the appellate court’s jurisdiction hinged on whether Florida Farm Bureau could appeal the partial final judgment under Rule 9.110(k), Florida Rules of Appellate Procedure. Rule 9.110(k) provides:


Except as otherwise provided herein, partial final judgments are reviewable either on appeal from the partial final judgment or on appeal from the final judgment in the entire case. A partial final judgment, other than one that disposes of an entire case as to any party, is one that disposes of a separate and distinct cause of action that is not interdependent with other pleaded claims. If a partial final judgment totally disposes of an entire case as to any party, it must be appealed within 30 days of rendition.



Fla. R. App. P. 9.110(k). The court started its analysis by providing the framework with which litigants can use to determine whether a partial final judgment possesses the requisite finality to constitute an appeal order. Specifically, the court stated that the following three factors guide its jurisdiction analysis:


  1. Whether the claim disposed of by the partial final judgment could be maintained independently of the remaining claims;


  1. Whether one or more parties were removed from the action when the partial final judgment was entered; and


  1. Whether the claims could be separately disposed of based on the same or different facts.


With this framework in mind, the court proceeded to analyze each factor. As to the first factor, the court concluded that Florida Farm Bureau’s duty to defend was not a separate and independent cause of action from its duty to indemnify. In support of this reasoning, the court noted that the very function of a count for declaratory relief “is to afford an opportunity to obtain a final resolution of all aspects of a controversy between litigants in a single action.” Id. at *2. To bolster this conclusion, the court pointed to how both Florida Farm Bureau and Peacock file a single count of declaratory relief that encompassed Florida Farm Bureau’s duty to defend and indemnify. Accordingly, the court concluded the first factor did not weigh in favor of accepting jurisdiction.


The court easily determined the second factor did not weigh in favor of accepting jurisdiction because the partial final judgment did not “effectively remove[]” any party from the underlying trial court litigation. Finally, with regard to the third factor, the court concluded that facts necessary to Florida Farm Bureau’s duty to defend and duty to indemnify overlapped. As such, the duty to defend and duty to indemnify, while being separate legal duties, were not amenable to separate dissolution.


Accordingly, the court concluded the partial final judgment failed to meet the threshold indicators of finality and dismissed the appeal for lack of jurisdiction.


Peacock is significant for several of reasons. First, it clarified the law within the Second District Court of Appeal. Prior to Peacock, a split existed within the Second District. Some cases had held that a partial final judgment as to an insurer’s duty to defend was a final appealable order. Accord Transcontinental Ins. Co. v. Jim Black & Associates, Inc., 888 So. 2d 671 (Fla. 2d DCA 2004); Aetna Commercial Ins. Co. v. American Sign Co., 687 So. 2d 834 (Fla. 2d DCA 1996). Peacockclarified the applicability of Transcontinental and American Sign to scenarios where a partial judgment exists only as to an insurer’s duty to defend. Second, it removed the conflict that previously existed with the Fourth District Court of Appeal, which in Nationwide Mut. Ins. Co. v. Harrick, 763 So. 2d 1133 (Fla. 4th DCA 1999), held a partial final judgment that determines only an insurer’s duty to defend is not an appealable order. Id. at 1134. Finally, the Court noted that a partial final judgment addressing only an insurer’s duty to defend is neither reviewable under Rule 9.1130, Florida Rules of Appellate Procedure, nor by certiorari review.

August 18th, 2015


In Cypress Point Condominium Ass’n v. Adria Towers, L.L.C., et al. —A. 3d —, 2015 WL 4111890 (N.J. App. Div. July 9, 2005), the court held that defective construction which resulted in unintended and unexpected consequential damages caused by the work of subcontractors constituted both property and an occurrence under a post 1986 CGL Form.  In so holding, the court recognized that the New Jersey court system had historically held such risks were “business risks” and not covered.   More specifically, the Cypress Point Court distinguished two decisions: Weedo v. Stone-E-Brick, Inc.405 A.2d 788 (N.J. 1979) and Firemen’s Ins. Co. of Newark v. Natl. Union Fire Ins. Co., 904 A.2d 754 (N.J. Super. App. Div. 2006). In distinguishing Weedo and Firemen’s Ins. Co., the Cypress Point court noted that both of those opinions, and many others in New Jersey involved interpretation of the 1973 ISO Form.


In evaluating the prior decision of the New Jersey Supreme Court Weedo, the court made two specific notations. First, the court noted that under the 1973 Form, the work of subcontractors was equated to the work of the general contractor for the purpose of determining whether there was property damage and coverage.  However, the court noted the changes to the subject policy in 1986, by including the subcontractor exception, “treated consequential damages from faulty workmanship of subcontractors differently than damages cause by the work of general contractors.”  The court also specifically noted that the Weedo court had not resolved whether consequential damages resulting from subcontractors’ faulty work constituted either “property damage” or “occurrence.” Rather, theWeedo court focused only on issues related to the exclusions in the policy.  The court specifically noted, that the insurer had conceded that “but for the exclusions in the policy, coverage would obtain.”  Second, the Cypress Point Court rejected insurers’ argument that the insured’s requested at holding in the case would transform the policy into a performance bond, noting, “A performance bond guarantees the completion of a construction contractor if a contractor defaults and unlike an insurance policy, it benefits the project owner rather than the contractor.  Assuredly, unlike a liability insurer, it is also entitled to indemnification from the contractor.”


The court went on to note the intentional changes made by the Insurance Services Organization culminating in the 1986 ISO Form and the addition of the so-called subcontractor exception. The court noted that in recent years the majority rule had become that consequential damages caused by construction defects were covered citing Christopher C. French, Construction Defects: Are They “Occurrences”?, 47 Gonz. L. Rev. 1, 8–9 (2011).  Further the Court cited to the Florida Supreme Court decision in  U.S. Fire Ins. Co. v. J.S.U.B., Inc., which decision explicitly referenced circulars issued by the ISO setting forth the intended scope of coverage.  See J.S.U.B., 9379 So. 2d 871, 879 (Fla. 2007) (quoting ISO Circular, Commercial General Liability Program Instructions Pamphlet, No. GL–86–204 (July 15, 1986). Finally, the court distinguished prior decisions purporting to interrupt New Jersey law as holding that defect construction was not an occurrence cited Pennsylvania Nat’l Mut.Cas. Ins. Co. v. Parkshore Dev.Corp., 403 Fed. Appx. 770 (3d Cir. 2010).


The decision in Cypress Point is particularly important because of where it was decided.  The New Jersey Supreme Court’s decision in Weedo, was the seminal cases deciding that defective construction claims were not covered.  While these decisions were eminently correct under the 1973 ISO CGL Form, the broad business risk concepts recognized in Weedo were dependent on the then existing policy language.  The Weedocourt also cited influential articles by  G.H. Tinker,Comprehensive General Liability Insurance Prospective and Overview, 23 Fed’n Ins. Coun. Q. 217, 218-21 (1975), and Dean Henderson, Insurance Protection for Products Liability and Completed Operations What Every Lawyer Should Know, 50 Neb. L. Rev. 415, 418 (1971).  The Combination of the Weedodecision and these articles “informed” and impacted the interpretation of CGL policies for many years beyond their intended scope.  The Weedo decision and these articles all correctly informed how the 1973 ISO CGL Policy Form was intended to be interpreted.  However, when the policy changed, first by broad form property damage endorsements in the late 1970s, and later by incorporation of the broad form property damage concepts into the main line 1986 ISO CGL Form, the court systems across the country were somewhat slow to recognize the intended changes to the CGL.  That New Jersey has finally done so, shows that the “occurrence” revolution is almost complete.  As of the dictation of this posting, virtually all jurisdictions have considered the questions recognize, either by court decision, or statutory change, the defective construction can constitute an occurrence.

July 1st, 2013


By Mark A. Boyle, Esquire

Boyle & Leonard P.A.

Over the last ten years, one of the biggest issues in insurance litigation across the country has been the question of whether construction defects constitute an occurrence.  A spate of recent opinions finding that defective construction can constitute an occurrence continues a trend favoring coverage on behalf of builders under their Commercial General Liability (CGL) policies.  Most businesses, including businesses involved in the construction trades such as general contractors and subcontractors, procure a standard form of insurance known as the CGL policy.  Most CGL policies are issued on a standard form promulgated by the Insurance Services Office (ISO).  Given that this CGL ISO form is in use throughout the country, one might think that the interpretation of this policy would be uniform throughout most jurisdictions.  This is definitely not the case.


The term “occurrence” is defined under the standard form CGL policy as follows:


[A]n accident, including continuous or repeated exposure to substantially the same general harmful conditions.


Crucially, the term “accident” is not defined.  The gist of the dispute between contracting insureds and their insurance carriers is whether defective construction is sufficiently “accidental” to constitute a covered loss.  Boiled to its essence, insurance carriers argue that defective construction events are merely faulty workmanship, the foreseeable result of which is eventual damage and other problems.  This argument holds that such foreseeability of damage makes construction defect losses non-accidental and therefore uninsurable under the CGL policy.


Thankfully, while this argument has maintained some traction (see Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317 (Pa. 2006)), the vast majority of jurisdictions which have considered the issue over the last ten years have correctly found coverage.  The most recent state Supreme Court to address the issue is the Supreme Court of Appeals of West Virginia.  See Cherrington, et al. v. Erie Ins. Property & Casualty Co., No. 12-0036, — S.E..2d — (W.V. June 18, 2013).   The Supreme Court of West Virginia explicitly held that the defective workmanship resulting in property damage constituted an occurrence and accident under a commercial general liability policy.  The court also noted that its decision in this regard was following the new “majority rule” based on decisions across the country.  Finally, the West Virginia Supreme Court noted that its decision in Cherrington overruled its prior decisions holding defective construction could not be covered under CGL policies.


Another very recent Supreme Court ruling on this issue comes from the Supreme Court of Connecticut.  In Capstone Bldg. Corp. v. American Motorist Ins. Co. 308 Conn. 760, — A.3d — (Conn. June 11, 2013), the insured general contractor, Capstone, was sued for defective construction.  The contractor submitted a claim for defective construction to its CGL insurance carrier, who denied the claim outright.  The Connecticut Supreme court specifically held:


Because negligent work is unintentional from the point of view of the insured, we find that it may constitute the basis for an “accident” or “occurrence” under the plain terms of the commercial general liability policy.


A similar result was reached in K & L Homes, Inc. v. American Family Mut. Ins. Co., 829 N.W. 2d 724 (N.D. April 5, 2013).  In K & L Homes, the builder, K & L, was sued by the owners of a newly-constructed house which had been purchased from K & L.  Not long after the purchase of the house from K & L, the owners claimed that they noticed cracks, unevenness and shifting in their home.  K & L submitted these claims to its insurance carrier, who denied them outright.  The North Dakota Supreme Court began its analysis of the issue by noting, “[c]urrently, the majority of state supreme courts who have decided the issue of whether inadvertent faulty workmanship is an accidental ‘occurrence’ potentially covered under the CGL policy have decided that it can be an ‘occurrence’.”  The court concluded that faulty workmanship may constitute an “occurrence” if the faulty work was “unexpected” and not intended by the insured, and the property damage was not anticipated or intentional, so that neither the harm was anticipated, intended, or expected.


Both the K & L and Capstone courts recognized that their decision was consistent with the Florida Supreme Court’s pronouncements on the same issue in U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007).  In J.S.U.B., the Florida Supreme Court held:


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.


The Florida Supreme Court’s ruling in this regard was a significant change.  (The change was, of course, made at the urging of our firm.  Boyle, Gentile, Leonard & Crockett, P.A. represented the contractor in J.S.U.B. at the claims presentation stage, before the trial court, before the intermediate appeals court, all the way through to our victory at the Florida Supreme Court.)  Reduced to its essence, insurance carriers argue that a contractor’s failure to perform its contract is always intentional – – essentially arguing that a contractor’s failure to perform its work in accordance with its contract necessarily makes the resulting problems arising from that work foreseeable.  While this argument may have some initial intuitive appeal, the argument fails upon closer analysis:


Yet, on even a moment’s reflection, we all understand that contracts are broken, many times, for reasons that we would call “accidental.”  The wrong number of boxes was shipped because someone made a mistake in the counting.  The lawsuit was filed in the wrong venue because someone made a mistake when reading the venue statute.  As one court explained, “at bottom, an occurrence is simply an unexpected consequence of an insured’s act, even if due to negligence or faulty work”.


See Ellen S. Pryor, The Economic Loss Rule and Liability Insurance, 48 Ariz. L. Rev 905, 917 (2006) (quoting Anthem Elecs., Inc. v. Pac. Employers Ins. Co., 302 F.3d 1049, 1056 (9th Cir. 2002)).


Certainly, if foreseeability of injury were the test for whether or not something was insurable, nothing would be insured, as all forms of liability that give rise to actionable damages are premised on the foreseeability of damages.  If this argument were to be accepted, it would make CGL policies a Seinfeld-esque insurance policy about nothing.


            In future blog entries, I will explore (1) how the “property damage” definition in the CGL policy interacts with the “occurrence” definition in defective construction cases, (2) how changes to the CGL policy, beginning with the broad form property damage endorsement in the 1970s, expanded the availability of coverage for defective construction, and (3) how the CGL product differs from performance bonds.

September 20th, 2012

An Insurance Company’s Duty to Defend…and Why it Might be the Most Important Duty the Insurance Company Owes You

By Mark A. Boyle

When you are sued, that’s when you really need your insurance company … especially to defend you. Most modern liability policies issued to individuals and businesses have two requirements. The first, and the one we usually think about when we think about insurance, is the duty to indemnify – meaning pay for any judgment up to the limit of the policy that you purchased. The second duty, which most of us don’t always appreciate, is often even more important. It is the duty to defend. This duty to defend requires that the insurance company retain and pay for a competent attorney to defend you from a lawsuit. This duty also requires the insurer to pay for the associated cost involved in litigation — such as deposition fees, expert witnesses and the like. Most individuals and small businesses cannot afford to defend themselves due to the high cost of lawyers and associated court costs.

The rules regarding the duty to defend are very clear. The duty to defend is separate and apart from the duty to indemnify, and the insurer is required to defend the suit even if true facts later show there is no coverage. Importantly, the duty to defend is much broader than the duty to indemnify, as it is based solely upon the allegations in the complaint against the insured. If the complaint alleges facts which are partially within and partially outside of coverage of the policy, the insurance company is obligated to defend the entire lawsuit. All doubts as to whether the duty to defend exists in a particular case must be resolved in favor of the insured and against the insurer. It has also been stated that so long as the complaint alleges facts which create potential coverage under the policy, the insurer must defend the suit. An insurer must defend if the allegations in the complaint could bring the allegations of the complaint within coverage under the subject policy. If the language of the complaint “at least marginally and by reasonable implication” can be construed to invoke a duty to defend, the duty to defend exists. It has also been said that the court must not only look to the facts alleged in the complaint but their implications as well as determining whether the complaint may represent a covered occurrence.

One of our favorite cases which discuss the scope of the duty to defend isBiltmore Construction Co., Inc. v. Owners Insurance Co., 842 So. 2d 947 (Fla. 2d DCA 2003). In that case, and as the rules existed at the time, the insurance company’s policy only covered water damage to personal property and no coverage existed for the actual work of the insured or its subcontractors.[1] The complaint against the insured in Biltmore generally alleged water damage, but did not specify whether it was damage to the general contractor’s work, the subcontractor’s work, or third party property, such as table or wallpaper, which were added after construction. The court held that under these facts, the insurer was required to defend. Relying on the duty to defend rules cited above, the court held that there was at least a potential that some of the damages were covered and thus, the insurer was required to defend the entire suit. This is a very common mistake by insurers. The Biltmore case shows a very common mistake by insurers. Often when insurers see uncovered or excluded damages in a case, they refused to defend even though there is a possibility some covered damages exist. If there are both covered and uncovered damages an insurer should offer to defend under reservation of rights.

Commonly, our firm is asked to represent individuals where the insurance company has denied the insured a defense when it has been requested. In most of the cases we evaluate, the insurance companies’ claim that they are not required to defend is unfounded. If you have sought a defense from an insurance company and they have not agreed to defend your interests, please feel free to contact us.

August 28th, 2012

So Hurricane Isaac has damaged your property – now what?

By Mark A. Boyle

Many of you reading this blog will have already sustained damage as a result of Hurricane Isaac. Some of you, those in the Mississippi, Louisiana, and Alabama area, are still awaiting its effects.

The question often arises, what do you do if your property has been damaged by a hurricane? Almost every homeowner’s insurance policy, property insurance policy, and flood insurance policy issued in America contains standard conditions requiring several things of the insured following the loss.

First, the insured is required to give timely notice to all insurers who are potentially at risk from the loss. This would include not only your homeowner’s or property insurer, but your flood insurer also.

Second, most policies require you to take appropriate temporary measures to avoid further damage.

In addition to these basic steps, we recommend the following additional activities:



  • Review your insurance policy to make sure you are adequately protected. Make sure that your policy is up to date.
  • Does your policy include coverage for additional living expenses if you home becomes uninhabitable?
  • Do you have enough coverage for your valuables?
  • Do you have flood insurance?

Protect Yourself and Your Property-Being Prepared May Reduce Your Risk and Damage/Loss

  • Safeguard your property by removing damaged or loose branches from the trees so it does not become an extra wind hazard. This will help keep them from blowing around during a storm.
  • Use a garage or carport to park your car in. If you do not have a garage or carport, try to park your car on higher ground in case of flooding.
  • Bring all lawn furniture, outdoor decorations, trash cans, hanging plants and anything else that could be picked up by the wind inside. Anchor objects that cannot be brought inside.

Take Inventory For Your Claim

  • Document your damage. Take as many photographs as you can and create an inventory of your losses.  Be detailed by having reciepts and serial numbers. A video camera may also be used.
  • Try to maintain or retrieve as much damaged property as you can so that the insurance company can review it.

     Contact your insurance company to start the claims process.  If your property have significant damage you may want to consider hiring a public insurance adjuster.


Boyle, Gentile, Leonard & Crockett, P.A. focuses its practice on insurance policy disputes. Virtually any injury, financial or physical, covered by an insurance policy, can generate an insurance dispute. Our firm can assist individual and business policyholders in three main areas: (1) claim presentation, (2) litigation, and (3) appeals.


Contact our Florida policyholder insurance coverage dispute attorneys at 239-337-1303 if you are having issues with your insurance company or want to know about your legal rights.

August 7th, 2012

Appraisal … What is it good for?

Appraisal … What is it good for?

By Mark A. Boyle



(Sung to the tune of Edwin Starr’s song ‘War, What Is It Good For?”)

Most standard homeowner’s policies (including windstorm and flood policies) and many commercial property insurance forms, contain appraisal provisions. A sample appraisal provision provides:
Appraisal-If you and we fail to agree on the amount of loss; either may demand an appraisal of the loss. In this event, each party will choose a competent appraiser within 20 days after receiving a written request from the other. The two appraisers will choose an umpire. If they cannot agree upon an umpire within 15 days, you or we may request that the choice be made by a judge of a court of record in the state where the “residence premises” is located. The appraisers will separately set the amount of loss. If the appraisers submit a written report of an agreement to us, the amount agreed upon will be the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will set the amount of loss.

Each party will:

  1. Pay its own appraiser; and
  1. Bear the other expenses of the appraisal and umpire equally.

The theoretical purpose of an appraisal provision is to avoid litigation and use a cheaper, less formalistic method of loss valuation than a lawsuit. The real hope is that appraisal will resolve the matter more quickly than litigation.

Under these appraisal provisions, any party who is in compliance with its obligations under the policy may demand appraisal. The party demanding appraisal generally gives notice to the other party that appraisal has been demanded and the demanding party’s designated appraiser. Once an appraisal has been demanded by one party, the other party is required to designate an appraiser. Two appraisers, often informally, try to work out the amount of loss together. If the appraisers cannot agree on the amount of loss, they are required to designate a tie-breaking appraiser, generally referred to as an “umpire”. If at any stage the parties are not complying with their appraisal obligations, or the parties cannot agree on an umpire, the parties can seek court intervention to enforce the appraisal process.

The scope of what issues are subject to appraisal differs in different states. In some states, like Florida, appraisers can only determine the amount of loss – as contrasted with whether the loss is covered or excluded –. Johnson v. Nationwide Mut. Ins. Co., 828 So. 2d 1021 (Fla. 2002). Thus, if there is a dispute about whether a loss is either covered or excluded, you likely will have to go to court. A more complicated question arises where there is agreement that both covered and uncovered/excluded damages exists. Who then decides the “scope” of covered damages – the appraiser or the court? Florida law does not provide an absolutely clear answer to this question. At least one intermediate appeals court in Florida has suggested that where the insurance carrier agrees that there is a covered loss, but disagrees as to the amount; it is permissible for an appraisal panel to decide causation issues when causation is not a coverage question but rather an amount – of – loss question. In some jurisdictions, it is already clear that appraisers are entitled to determine the scope of covered damages.

If your insurance company has demanded appraisal, or if you are considering demanding appraisal and would like to discuss these issues with an attorney, please feel free to contact us at (239) 337-1303. The question of whether appraisal is good for you or your business is dependent on many factors, and generally is very fact specific.







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