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Essex Ins. Co. v. Kart Const., Inc., No. 8:14—CV—356—T—23, 2015 WL 4730540 (M.D. Fla. Aug. 10, 2015)
In Kart, the insured sought coverage after a cell tower caught fire following the insured’s welding operations. The cause of fire was unknown. The CGL insurer, Essex, declined coverage, relying on exclusions j(5) and j(6). Essex sued for declaratory judgment and moved for summary judgment. The court, Middle District Judge Steven D. Merryday, denied Essex’s summary judgment motion, holding that exclusion j(5) did not apply and that Essex did not prove that exclusion j(6) applied.
Kart had performed welding operations on a ten-foot section of the 127-foot tower, and a fire started “a short time” after the welding was completed. Kart had performed fire prevention efforts before the welding and the accident, and Kart was monitoring the tower when the fire started.
In Kart, exclusion j(5), contained in the standard Commercial General Liability Coverage Form, provided that the policy does not insure property damage to that particular part of real property on which the insured is performing operations if the property damage arises out of those operations.
Kart argued that the exclusion applied only to the ten-foot section of the tower on which it performed welding operations, whereas Essex argued that the exclusion applied to the entire tower because Kart performed fire prevention efforts, including debris removal and wetting, on the entire tower.
The court analyzed America Equity Insurance Co. v. Van Ginhoven, 788 So.2d 388 (Fla. 5th DCA 2001), in which a contractor drained a swimming pool in order to perform spot repairs to the pool and the pool popped out of the ground, damaging surrounding property. The Van Ginhoven court held that the j(5) exclusion barred coverage for the pool, rejecting both the argument that the exclusion applied only to the parts of the pool the contractor was to repair and the argument that the exclusion applied to the other damaged property, as well. The Kart court adopted Van Ginhoven’s reasoning, stating that the j(5) exclusion “excludes from coverage only damage to the part of the real property on which the insured is operating at the moment of the accident.”
The court then explained that three of the four fire prevention operations Kart performed finished before the welding and the accident, leaving only the monitoring of the tower after the welding. Essex argued that the exclusion barred coverage for the entire tower because Kart was monitoring the entire tower when the fire occurred. The court rejected this argument, declaring that Kart’s monitoring and other fire prevention efforts were “irrelevant” because they “caused no damage to the property.” The court relied on Liberty Mut. Fire Ins. Co. v. Mark Yacht Club on Brickell Bay, Inc., 2009 WL 2633064 (S.D. Fla. 2009), in which the court explained that an interpretation under which the entire property being managed by the insured property manager is considered the insured’s “work” would make the CGL policy a “nullity”.
The court then appears to contradict itself, stating that Kart was performing “(relevant) operations … only on a ten-foot portion of the tower.” However, the court had explained that the welding itself and all prevention efforts other than the post-welding monitoring had completed before the fire, and only the monitoring remained, an activity the court had described as irrelevant. Nonetheless, because the court determined that Kart was performing operations on a ten-foot section, rather than the entire tower, the exclusion did not apply to damage outside this ten-foot section, making a summary judgment for Essex inappropriate.
In sum, the court explained that exclusion j(5) applies only to “damage to the part of the real property on which the insured is operating at the moment of the accident”, thus interpreting the exclusion narrowly and with a temporal limitation. More importantly, the court held that monitoring, an operation designed to prevent damage, is not relevant to the application of exclusion j(5) because prevention efforts do not cause damage.
This interpretation means that the exclusion likely will not negate an insurer’s duty to defend when the complaint against the insured alleges property damage beyond the particular part on which the insured was performing operations when the accident occurred.