Defining Occurrence – When Policy Definitions Do Not Apply To All Coverages
September 24, 2020
For many years, Florida courts appeared to say that general liability insurance policies did not cover a subcontractor’s faulty work that damaged other parts of a general contractor’s work. That all changed with the Supreme Court of Florida’s decision in United States Fire Insurance Company v. J.S.U.B., Inc., in 2007. In J.S.U.B. the court found that present GL policies covered the faulty work of a subcontractor that damaged other parts of a general contractor’s work. The reasoning used by the J.S.U.B. court to reach that conclusion would seem to also apply to claims for property damage to a subcontractor’s work that resulted from the subcontractor’s faulty work. However, courts applying Florida law have not yet found this to be so, and in fact, say just the opposite.
In J.S.U.B., a subcontractor’s bad soil preparation resulted in cracks and other damages to a house. The policy defined property damage as physical injury to tangible property. The court reviewed the language of the policy and found that the policy definition of “occurrence” did not limit coverage to damaged property other than the general contractor’s work. The court found that no exclusion applied to the claim. Because the claim fell within the coverage grant, the claim against the general contractor for damage to the house was covered.
This analysis appears straightforward:
Courts applying Florida law nonetheless seem reluctant to reach this result. One court has said that property damage to a subcontractor’s work, which results from the subcontractor’s faulty work, is not property damage in the first case. That court found that the term “property damage” necessarily connotes damage to property other than the subcontractor’s faulty work. It’s not clear to me that J.S.U.B. makes this distinction; however, and I wonder if this distinction is compatible with the reasoning of J.S.U.B.
I’m not sure how to reconcile all of this. The Supreme Court of Florida’s 2014 decision in Intervest Const. of Jax, Inc. v. General Fidelity Ins. Co. may also play into this. In Intervest, the court found that a policy that required payment of self-insured retention by the insured (“by you”) failed to sufficiently state that such payment could not use funds received from others. Thus, the notion that the policy term “by you” meant only by the insured did not prevail: There were better ways to say that.
Intervest suggests that Florida’s Supreme Court is not presently receptive to arguments that policy terms necessarily mean something that they don’t expressly say, especially when such unexpressed terms would preclude coverage. From a general contractor’s point of view, I expect to hear that the argument that property damage necessarily means damage to property other than the work of the subcontractor doesn’t comport with either J.S.U.B. or Intervest.