Insurer's Motion for Judgment on the Pleadings for Construction Defect Claim Rejected

The magistrate judge recommended that the insurer's motion for judgment on the pleadings be denied in a case involving coverage for the insured subcontractor's alleged faulty workmanship. Evanston Ins. Co. v. Sonny Glasbrenner, Inc., 2023 U.S. Dist. LEXIS 190019 (M.D. Fla. Oct. 20, 2023).

Cone & Graham (C&G), the general contractor, subcontracted with Sonny Glasbrenner, Inc. (SGI) to work on the project. The project involved the rehabilitation of a bridge due to deterioration of the existing concrete bridge deck by adding additional cross bracing to further stiffen the steel girders and using special lightweight concrete. C&G contracted SGH to demolish the existing concrete bridge deck. SGI completed the work.

Thereafter, C&G made a demand to SGI for alleged damaged caused by SGI's work. C&G alleged that SGI was negligent in performing the demolition work, causing substantial damage to the existing bridge girders. C&G sued SGI.

SGI was insured under a CGL policy issued by Everest Denali Insurance Company. SGI also had an excess policy from Evanston Insurance Company. Everest agreed to a settlement with C&G for $1,000,000 per occurrence policy limit while reserving rights against Evanston. Evanston denied coverage based on the Contractor's Services Exclusion in its policy and exclusions to coverage j (5) and j (6) in the Everest policy.

Evanston filed suit against SGI and C&B seeking a declaratory judgment that it had no duty to defend or indemnify. The suit concerned whether the underlying action properly alleged "property damage" as defined in the policies and whether the exclusions barred coverage.

Evanston implied that because the underlying action did not allege "property damage" as defined in the Everest policy, there was no coverage under the Everest policy and thus, no coverage under the Evanston policy. The pleadings reflected that SGI was contracted to demolish and remove the existing concrete bridge deck and the scope of work did not include any work on the existing beams, girders, spliced plates, or structural bolts, all of which were to be left untouched. According to the allegations, SGI's negligence led to physical injury to otherwise non-defective property. There were no allegations of damage to the concrete bridge which SGI had been contracted to demolish. Rather, SGI allegedly caused property damage to areas outside its intended scope. Thus, although there was no coverage for faulty workmanship, there could be coverage if the faulty workmanship damaged some otherwise non-defective component of the project.

Evanston next argued that the Everest policy excluded coverage for "property damage" to "[t]hat 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." Because this exclusion applied, Evanston argued its policy was not triggered.

To the extent that Evanston implied that property damage that occurred while the insured was performing its contractual duties was excluded, this was not a reasonable interpretation of the exclusion. Under this interpretation, all property damage that occurred during the insured's work would be excluded, which would include property damage to adjacent areas.

The contract between SGI and C&G referenced demolishing the concrete bridge deck up to the girders. The contract did contemplate any actual work on the girders and nothing in the pleadings suggested that working on the girders or beams was contemplated. Further, the contract stated that SGI would be responsible for damage to beams, which supported the fact that SGI was not supposed to work on the beams.

Evanston then turned to the Damage to Property exclusion it its policy, arguing it was not limited to SGI's scope of work or damage arising from SGI's operations. Rather, the Evanston policy precluded coverage for "property damage" to real property on which any insured was performing work regardless of th cause.

C&G argued that the scope of the Damage to Property exclusion was the same scope of exclusions j (5) and j (6) in the context that coverage was excluded for "property damage" to the "particular part of real property' on which the insured's 'work' is being performed" (Damage to Property Exclusion) or on which the insured was performing "operations" (Exclusion j (5)). Evanston did not rely on any authority in support of its argument that its Damage to Property exclusion was in some way broader than j (5) and j (6). The exclusion to property damage to "[t]hat particular part of real property on which work is being performed by or for any issued" did not apply to the property damage to the beams and girders, spliced plates, and structural bolts because according to the allegations, SGI was performing work on the bridge deck, not the entire bridge.