Eleventh Circuit Affirms Broad Pleading Standards Triggering Insurers’ Duty to Defend under Commercial General Liability Insurance Policies

by: Chadd L. Reynolds

On July 29, 2020, the 11th Circuit Court of Appeals in Southern-Owners Insurance Company v. MAC Contractors of Florida, LLC reaffirmed the lax pleading standards required to trigger an insurance company’s duty to defend the insured for “property damage” under commercial general liability policies.

MAC Contractors of Florida, LLC d/b/a KJIMS Construction (“KJIMS”) was hired by the Doppelts to construct a private residence. Problems arose during construction and KJIMS eventually left the project before issuance of a certificate of occupancy. The Doppelts sued KJIMS for leaving the project “replete with construction defects,” including chipped pavers in the driveway, repair chatter marks on ceilings, damaged doors, stair treads, hardwood floors, metal roof dents, and scratches in granite, among others.

KJIMS tendered the lawsuit to its insurer Southern-Owners Insurance Company (“Southern-Owners”) under its commercial general liability (“CGL”) insurance policy. Southern-Owners initially agreed to defend but later withdrew its defense arguing that it had no duty to defend under the “Damage to Your Work” policy exclusion. Southern-Owners argued that none of the Doppelts’ allegations amounted to “property damage” under the GCL policy – specifically that the Doppelts did not allege any damage beyond the faulty workmanship or defective work. The district court agreed with Southern-Owners and granted its motion for summary judgment.

On appeal, the 11th Circuit reiterated that under its previous interpretation of Florida law, if the claim is simply for the cost of repairing the insured’s defective work, then the claim was not for “property damage” and there would be no duty for the insurer to defend. But if defective work performed by one subcontractor damages work performed by another subcontractor, then according to the Court there is “property damage” apart from the insured’s defective work itself, and the insurer should defend.

In this case, the 11th Circuit held that “the language of the underlying complaint, ‘at least marginally and by reasonable implication, could be construed’ to create potential coverage under the policy” and therefore Southern-Owners had a duty to defend. Southern-Owners argued that the complaint did not allege which subcontractors performed which work or how the damage occurred. But the 11th Circuit reasoned that the allegations, though not specific, were broad enough to allow KJIMS to prove one subcontractor negligently damaged nondefective work of another subcontractor. Accordingly, the complaint’s language allowed for potential coverage so Southern-Owners had a duty to defend.

Although this case suggests that such broad allegations are sufficient to survive pre-trial attacks from an insurer, claimants should be hesitant to use such general language. Instead, claimants should provide enough detail explaining the damages sought concerning completed work other than the insured’s own defective work.

Chadd Reynolds is an associate with WCZ’s construction law and commercial and civil litigation practice groups. If you have questions or would like more information, please contact him at creynolds@wczlaw.com.