The Florida Supreme Court Expanded Insurance Coverage ff Construction Defects Under CGL Policies

In 2007, the Florida Supreme Court issued its opinion in United States Fire Insurance Company v. JSUB, Inc. The case involved allegations that the site work subcontractor used improper computation and testing methods which caused damage to foundations, drywall, and other parts of the project. The question before the Court was whether an insured general contractor had coverage for damages caused by the faulty workmanship of the site work subcontractor under a standard CGL policy.  The question was answered in favor of the insured. Pursuant to the Court’s reasoning, the defective work performed by the subcontractor that damaged the general contractor’s completed work constituted “property damage”. The Court held that the faulty workmanship by the subcontractor which was neither intended nor expected was an “occurrence” and that therefore the cost of repairing the damage caused by the defective workmanship was “property damage” within the meaning of the CGL policy. Although the Court found coverage under the CGL policy for the damage which resulted from the subcontractor’s defective work, it left open the question of whether coverage existed for the defective work itself. In 2008, the Florida Supreme Court applied the JSUB reasoning in the case of Auto-Owners Insurance Company v. Pozzi Window Company and determined that a CGL policy provided coverage for repairing or replacing the defective work of a negligent subcontractor. The Pozzi case involved allegations of defective installation of windows in a commercial building. In keeping with its opinion in JSUB, the Court held that if the windows were not defective prior to installation but were damaged by the defective installation by the subcontractor, coverage would exist for the cost of repair or replacement of the windows. However, a different result would follow if the windows were defective themselves before being installed and the damage to the completed project was therefore caused by defective windows rather than defective workmanship or installation. The JSUB and Pozzi decisions have provided a greater level of clarity for construction defect insurance claims. Although these Court opinions have lead to changes in CGL policy forms, they have the potential to expand insurance coverage of construction defects under comprehensive general liability or CGL policies.

Construction DefectContractorsInsurance Coverage