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
covered.
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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