The United States District Court for the Middle District of Florida recently granted summary judgment in favor of developer, KB Homes, ruling that Southern Owners Insurance Co. must defend KB Homes under various Commercial General Liability policies.
The action arises from the construction of the Willowbrook Condominium project, a 51-building, 270-unit condominium project located in Manatee County Florida. Gallo Building Services, Inc., a subcontractor, entered into a master subcontract with KB Home, the developer and contractor for the project. Following the completion of the project, the association retained an engineering firm who discovered several defects at the project. The association sued KB, which then sued multiple subcontractors, including Gallo, forming the underlying litigation.
Southern, Gallo’s insurer, then filed the coverage action seeking a declaration that it had no duty to defend or indemnify Gallo under its policies of insurance. After Gallo became insolvent, KB Home stepped in and moved for summary judgment on the duty to defend.
Southern opposed the motion, arguing that the “your work” exclusion and the Exterior Finishing and Stucco Exclusion barred coverage, and that the association’s underlying complaint failed to allege property damage. The Court rejected Southern’s arguments and held that the Southern’s duty to defend was triggered by the broad allegations of “damage to other building components,” “damage to other property,” “water intrusion,” and relocation of resident,” which encompassed damage besides the work completed by Gallo. Moreover, the Court rejected the application of the Exterior Finishing and Stucco Exclusion stating that “Southern does not describe how each defect relates to stucco or an exterior finishing system,” therefore, determining the exclusions did not do away with Sothern’s duty to defend.
Not only is the decision a substantive win for policyholders, the decision provides a firm example of the value that can be obtained from other people’s insurance. By obtaining insurance from Gallo’s insurers instead of its own, not only did KB Home secure a complete defense in the litigation, it did so without implicating coverage under its own insurance and potentially impairing its own policy limits and without impacting its own loss ratios. Policyholders should therefore consider all potentially applicable insurance and indemnity agreements when faced with a claim or potential liability.