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:
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.
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.