Florida Supreme Court Favorably Revises Its Prior Ruling That Certain Commercial General Liability Insurance Policies Cover Repair Or Replacement Of Property Damage That Results From The Defective Work Of Subcontractors

This is an update to our January 2008 Client Alert, informing

you about two important cases decided by the Florida Supreme Court.

These two decisions, U.S. Fire Ins. Co. v. J.S.U.B., Inc.

and Auto-Owners Ins. Co. v. PozziWindow Co., resolved

previously conflicting Florida law to provide coverage for

third-party property damage claims arising from the defective work

of subcontractors made pursuant the products-completed operations

hazard coverage of a general contractor's commercial general

liability ("CGL") insurance policy. On June 12, 2008, the

Florida Supreme Court issued yet another opinion in the

Pozzi case, to clarify the prior opinion. This most recent

opinion broadens coverage in cases of defective work by

subcontractors even further.

Despite the original "pro-coverage" resolution of

these cases, their effect was somewhat limited as it relates to

major property damage claims brought against general contractors

because potentially significant portions of the property damage

arising from the defective work were not provided coverage. For

example, in the case of a subcontractor performing a defective

residential window installation, the defectively installed windows

themselves did not constitute property damage covered by CGL

insurance. Therefore, coverage was limited to damages to other

property, such as wallpaper and flooring. In some cases, this

limitation could mean that the most costly damages arising from the

subcontractor's defective work may very well not be


Now, the Florida Supreme Court has revised the Pozzi

opinion in a manner that appreciably increases the potential

benefit provided to the general contractor who maintains products

completed operations hazard coverage on its CGL insurance policy

and/or is named as an additional insured on such a policy.

Specifically, the revised Pozzi opinion of June 2008 holds

that any property to which there is physical injury as a result of

a subcontractor's defective work is covered property damage

under the CGL insurance policy with completed-products operations

hazard coverage.

What does this mean to the general contractor? The revised

opinion illustrates how, under certain circumstances, coverage can

include the cost of repairing the subcontractor's defective

work, in addition to the property damage resulting from the

subcontractor's defective work. Using the Pozzi scenario, the

facts and contractual relations must be analyzed to determine

whether supplying the windows was...

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