MIDDLE DISTRICT OF
FLORIDA COURT CONTEMPLATES COVERED AND UNCOVERVED PROPERTY DAMAGE UNDER
EXCLUSIONS j(5) and j(6) IN DENYING INSURERS MOTION FOR SUMMARY JUDGMENT
By:
Justin M. Thomas, Esquire
Boyle,
Gentile & Leonard, P.A.
In Essex
Insurance Company v. Kart Construction, Inc., et al., 2015 WL 4730540 (M.D.
Fla. August 10, 2015), the Court, in denying the insurers summary judgment,
held that Section j(5) of the applicable commercial general liability (“CGL”)
policy only excluded coverage to “that
particular part” of the property that the insured is working on at the time an
accident occurs. Additionally, the Court
had occasion to consider whether the certain precautionary and preventative
work performed by the insured may be excluded under Section j(5) or j(6), which
is more fully discussed below. Essex
is of particular import given Judge Merryday’s thorough analysis of precisely
determining what is and isn’t excluded under the j(5) property damage
exclusion.
Kart
Construction was hired to weld stiffening parts onto a cell tower that was
approximately 127 feet tall. The welding
was performed by a capable and experienced welder, with all fire prevention
measures taken during the welding. Id.
Despite the foregoing safety measures, a fire occurred on “Sprint
antennas, T- Mobile antennas, tower lights, cabling, foundations, and other
equipment.” Id. It is important to note that the fire did not
occur on the ten-foot portion of the cell tower where the welding was taking
place.
Following
the fire, Kart Construction filed a claim with its insurer Essex Insurance
Company seeking indemnity from the fire loss.
Essex denied the claim and filed the instant action seeking a
declaration that Essex had no duty to indemnify Kart for this loss. Subsequent to the filing of the suit, Essex
moved for summary judgment based on the following exclusions:
2.
Exclusions
This
insurance does not apply to:
....
j.
Damage To Property
“Property
damage” to:
...
(5)
That particular part of real property on which you
or
any contractors or subcontractors working directly or
indirectly
on your behalf are performing operations, if
the
“property damage” arises out of those operations; or
(6)
That particular part of any property that must be
restored,
repaired or replaced because “your work” was
incorrectly
performed on it.
Id.
The
parties took opposing positions on exactly what “particular part” of the real
property Kart’s work took place on. Not
surprisingly, Essex maintained the position Kart “operated on” the entire
tower. Id. at 2. The position taken by Essex was rooted in a
separate agreement that required Kart to take preventative measures with
respect to fire prevention in conjunction with the welding activities. Conversely, Kart maintained a narrow reading
of j(5), in that the “particular part” of property excluded would only be on
the ten-foot portion of the tower where the welding actually took place.
In
Florida, the seminal case regarding the scope of j(5) exclusion, which was the
thrust of both parties’ arguments, is American Equity Ins. Co. v. Van
Ginhoven, 788 So.2d 388 (Fla. 5th DCA 2001). In Van Ginhoven, a contractor was
hired to perform repairs to an in ground swimming pool, which necessitated the
draining of the pool. Id. While draining the pool, the pool popped out
of the ground causing damage to not only the pool but also to the “pump,
heating system, deck, screen enclosure and the surrounding landscaping and
sprinkling system.” Id. at 391. Van Ginhoven held that the j(5)
exclusion only excludes coverage for the pool, whereas the policy covered the
damage to the pump, heating system, deck, screen enclosure and the surrounding
landscaping and sprinkling system.
Stated more concisely, in Florida, the “j(5) excludes from coverage only
damage to the part of the real property on which the insured is operating at
the moment of the accident.” Essex,
2015 WL 4730540 at 3.
Moreover,
the Court in Essex, was careful and thorough in dispelling the overbroad
approach that the insurer asserted in applying the j(5) exclusion to preclude
coverage for property damage caused by the insured across the entire project. One recent case rejecting the project-wide
definition of the insured’s “work” expressly and intelligently rejected a
similar argument, giving the Court in Essex support to reject the
insurer’s position. Liberty Mutual
Fire Insurance Co. v. Mark Yacht Club on Brickell Bay, Inc., 2009 WL
2633064 (S.D. Fla. August 25, 2009). It
is now clear, following Essex, that j(5) excludes property damage to
“that particular part” of the property “on which the insured is operating at
the time of the accident….” Essex
at 5.
In
conclusion, Van Ginhoven and now Essex, give clarity to the
timing and scope concerns that are often central to an insurer’s decision to
cover or exclude property damage claims that occur during and insured’s
operations. Furthermore, Essex,
in denying the insurer’s motion for summary judgment precludes the chilling
effect that the encouraged interpretation of the j(5) exclusion would have on CGL
policy holders throughout Florida.
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