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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF FLORIDA

GAINESVILLE DIVISION

THE BARTRAM, LLC, a Delaware

limited liability company,

Plaintiff,

v. CASE NO.: 1:10cv28-SPM/GRJ

LANDMARK AMERICAN INSURANCE

COMPANY, an Oklahoma corporation;

ROCK HILL INSURANCE COMPANY,

an Arizona corporation; and 

WESTCHESTER SURPLUS LINES

INSURANCE COMPANY, a Georgia

corporation,

Defendants.

_________________________________/

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

This case presents an insurance coverage dispute over damages that 

resulted from faulty workmanship in the construction of the Bartram Apartments,

located in Gainesville, Florida. The insurance contracts between Plaintiff, who

owns the Bartram Apartments, and the Defendant insurers provides primary

coverage and three layers of excess coverage.1

 They use standard builder’s all

1

 The primary policy issued by Defendant Landmark Insurance Company

has a limit of $5,000,000.00 per occurrence. The first layer excess policy issued

by Defendant Rockhill Insurance Company has a limit of $5,000,000.00 per

occurrence. The second layer excess policy issued by Defendant Westchester

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risk insurance forms. Each contract contains a coverage exclusion for faulty

workmanship. Each contract also contains an ensuing loss exception that

provides coverage when “an excluded cause of loss . . . results in a Covered

Cause of Loss.”2 Both sides agree that the faulty workmanship exclusion applies

in this case. They do not agree, however, about the ensuing loss exception. 

The insurance contracts contain other exclusions for wear and tear or

deterioration, water damage, cracking, mold, expenses and lost rents, and failure

to protect property. Defendants contend that these exclusions bar coverage for

Plaintiff’s claims. Defendants also contend that Plaintiff did not comply with

notice and examination requirements for submitting its claim as specified in the

contracts, thus forfeiting coverage. Both sides have filed motions for summary

judgment.

I. Standard for Summary Judgment

Summary judgment is appropriate when “there is no genuine dispute as to

Surplus Lines Insurance Company has a limit of $10,000,000.00 per occurrence. 

The third layer of excess coverage by Landmark Insurance Company has a limit

of $5,000,000.00 per occurrence.

2

 This is how the ensuing loss exception is stated in the Rockhill excess

policy. See Statement of Material Facts in Support of Defendants’ Motion for

Summary Judgment, Doc. 116-1 at 15. In the primary and excess policies issued

by Landmark and the excess policy issued by Westchester, the exception reads:

“But if loss or damage by a Covered Cause of Loss results, we will pay for that

resulting loss or damage.” Id. at 14-15. Despite the slight variance in wording,

the exceptions are substantively the same. No one has argued that their

meanings are different.

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any material fact and the movant is entitled to judgment as a matter of law.” Fed.

R. Civ. P. 56(a). The interpretation of an unambiguous insurance contract

presents a pure issue of law that is appropriately determined on summary

judgment. Saraqama India Ltd. v. Mosley, 635 F3d 1284, 1290 (11th Cir. 2011); 

Acosta, Inc. v. Nat’l Union Fire Ins. Co., 39 So. 3d (Fla. 1st Dist. Ct. App. 2010). 

Disputed factual issues may nevertheless exist about how an unambiguous

contract term should be applied given the circumstances of the case, thus

precluding summary judgment. Certain Interested Underwriters at Lloyd’s v.

Chabad Lubavitch of Greater Ft. Lauderdale, Inc., 65 So. 3d 67, 70 (Fla. 3d Dist.

Ct. App. 2011). In interpreting the insurance contracts, the Court will apply

Florida law because the Bartram Apartments are located in Florida.3

 See

LeFarge Corp. v. Travelers Indem. Co., 118 F.3d 1511, 1515-16 (11th Cir. 1990)

(in diversity action, applying choice of law provisions of Florida as forum state

and substantive law of Florida as the state where insured risk was located). 

II. Ensuing Loss Exception

The primary policy issued by Landmark Insurance Company (“Landmark”)

and the second and third layer excess policies issued by Westchester Surplus

Lines Insurance Company (“Westchester’) and Landmark contain the same

ensuing loss exception. The policies state: “We will not pay for a loss or damage

3

 In apparent recognition that Florida law applies the parties rely

predominately on Florida law in their arguments.

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caused by or resulting from: . . . [d]efective materials, faulty workmanship, error,

omission or deficiency in designs, plans or specifications. But if loss or damage

by a Covered Cause of Loss results, we will pay for that resulting loss or

damage.” Doc. 145-1 at 15 (emphasis supplied). The first layer excess policy

issued by Rockhill Insurance Company (“Rockhill’) contains an analogous

provision, which states: “We will not pay for a loss or damage caused by or

resulting from [faulty workmanship]. But if an excluded cause of loss . . . results

in a Covered Cause of Loss, we will pay for the loss or damage caused by that

Covered Cause of Loss.” Id. (emphasis supplied). The wording of the policies

are not identical, but the parties do not argue that they differ in meaning from

each other. 

Under Florida law, the insured bears the burden to establish that an

exception to an exclusion applies. LeFarge, 118 F.3d at 1516; Fla. Windstrorm

Underwriting v. Gajwami, 934 So. 2d 501, 506 (Fla. 3d Dist. Ct. App. 2005). So

here, the burden is upon Plaintiff to establish that coverage is provided through

the ensuing loss exception.

The principle Florida case interpreting the ensuing loss exception, which

both parties cite to, is Swire Pacific Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d

161 (Fla. 2003). Swire involved design defects to a condominium project,

requiring the insured to spend approximately $4.5 million to alter the plans and

correct structural deficiencies to bring the building in compliance with codes. Id.

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at 163. The builders all-risk policy in Swire contained a design defect exclusion

with an ensuing loss exception. The policy language stated that this exclusion

applies to: 

Loss or damage caused by fault, defect, error or omission in

design, plan or specification, but this exclusion shall not apply to

physical loss or damage resulting from such fault, defect, error or

omission in design, plan or specification.

Id. at 165. To fix the design defect, the insured was required to damage other

portions of the property and the insured sought coverage for those damages. Id.

at 164. In construing the policy language, the Swire court found that “loss or

damage” as used in the first part of the exclusion “means loss caused directly by

the design defect.” Id. at 166. The court found that “physical loss or damage” in

the ensuing loss exception in the second part of the provision means “damage

that occurs subsequent to, and as a result of, a design defect.” Id. The Swire

court held that the insured could not recover under the policy because “[n]o loss

separate from, or as a result of, the design defect occurred.” Id. at 168. The

insured’s sole claim was to recover expenses incurred in repairing a design

defect, and thus “[n]o ensuing loss resulted to invoke the exception to the [design

defect] exclusionary provision.” Id. at 167. 

In this case, Plaintiff contends that it has suffered losses that are separate

from and the result of the faulty workmanship, thus triggering the ensuing loss

exception. Specifically, water intrusion that occurred because of the faulty

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workmanship caused damage to the buildings’ exterior and interior finishes, wood

sheathing, framing, balcony systems, drywall ceilings, and stuccoed walls. 

These damages are separate from the work needed to simply fix the faulty

workmanship, and Plaintiff contends that while the policy excludes coverage for

fixing the faulty workmanship, the ensuing losses that resulted from water

intrusion are covered. Plaintiff’s position is consistent with the Florida Supreme

Court’s holding in Swire. The loss Plaintiff is seeking coverage for resulted from

water intrusion, which is separate from repair of the faulty construction.

Defendants, however, argue for a different reading of the exclusion and

the ensuing loss exception. Citing to language from a Florida appellate court,

Defendants contend that “an ensuing loss exception is not applicable if the

ensuing loss is directly related to the original excluded risk.” Nat’l Union Fire Ins.

Co. v. Texpak Group N.V., 906 So. 2d 300, 302 (Fla. 3d Dist. Ct. App. 2005).4

Defendants go on to explain that principles of proximate cause should be read

into the ensuing loss exception, citing to TMW Enterprises, Inc. v. Fed. Ins. Co.,

619 F.3d 574, 576 (6th Cir. 2010) and Chabad, 65 So.3d at 70. According to

4

 The Texpak case is distinguishable on the facts because the court found

that the loss resulted from the excluded peril and not the “minimal and

concomitant” failure of a felt belt. Texpak, at 302, n.2. Here, there is evidence to

support Plaintiff’s claim that the water intrusion resulted in major loss apart from

the costs of fixing the faulty construction. The damage occurred subsequent to

the faulty construction. The damage, moreover, was not the direct result of the

faulty construction, but rather the direct result of water intrusion.

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Defendants, since the faulty workmanship naturally and foreseeably led to water

intrusion without any new, independent cause, there was no ensuing loss and

coverage is barred by the faulty workmanship exclusion. TMW, 619 F.3d at 579.

The cases relied upon by Defendants are distinguishable from the instant

case because the exclusions in those cases were written so as to require a break

in proximate cause to make sense of the policy language. For example, in TMW,

the insured made a claim for losses from water intrusion that resulted from faulty

workmanship and construction. TMW, 619 F.3d at 575. The policy contained an

exclusion, which stated: “This insurance does not apply to loss or damage

(including the costs of correcting or making good) caused by or resulting from

any faulty, inadequate, or defective . . . workmanship . . . [or] construction . . . .” 

Id. at 575 (emphasis supplied). The policy also contained an ensuing loss

exception, which stated the “exclusion does not apply to ensuing loss or damage

caused by or resulting from a peril not otherwise excluded.” Id. The insured

argued that the faulty workmanship exclusion should only be applied to the costs

of fixing the faulty workmanship, but the loss from water intrusion should be

excepted as an ensuing loss because water intrusion is a peril not otherwise

excluded. Id. at 576.

The court reasoned that “[i]f the ensuing loss clause provides coverage for

water damage to TMW’s walls, the only role left for the faulty workmanship

exclusion is to block coverage for remedying the defects that allowed water to

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infiltrate in the first place.” Id. at 579. The court rejected that reading because it

made superfluous the exclusion’s parenthetical reference to “‘the costs of

correcting or making good’” the faulty workmanship. Id. at 579-80. There would

be no need to have the parenthetical if the exclusion were construed to

encompass only “the costs of correcting or making good” the defects, as

proposed by the insured. Id. Thus the TMW court ruled that the faulty

workmanship exclusion should encompass the costs for fixing the faulty

workmanship and all losses proximately caused by the faulty workmanship; that

is, losses that naturally and foreseeably resulted from the faulty workmanship. 

Id. With this reading, the ensuing loss exception was left to cover any

“independent, non-foreseeable losses” that broke the chain of proximate cause

flowing from the faulty workmanship. Id. at 578. The court reasoned that

“because defective wall construction naturally and foreseeably leads to water

intrusion, the language of the exclusion, not the exception to the exclusion, ought

to apply.” Id. at 579.

Similarly, in Chabad, the policy contained a windstorm exclusion that

excluded coverage for loss or damage “[c]aused directly or indirectly by

Windstorm or Hail, regardless of any other cause or event that contributes

concurrently or in any sequence to the loss or damage . . . .” Chabad, 65 So.3d

at 68. The wording of the exclusion is specially crafted to counteract Florida’s

efficient proximate cause doctrine. See Empire Indem. Ins. Co. v. Winsett, 325

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Fed. Appx 849, 851 (11th Cir. 2003). Under Florida’s efficient proximate cause

doctrine, if the efficient proximate cause (i.e. a cause that sets other causes in

motion) is covered, then the resulting loss will be covered even if the other

causes that are not covered contribute to the loss. Id. Given the language in the

Chabad policy against applying the efficient proximate cause doctrine to

windstrorm claims, the only meaningful way to read the ensuing loss exception is

to require an intervening cause to break the chain of proximate cause to trigger

coverage. 

In contrast to the exclusions in TMW and Chabad, the policy exclusions in

the instant case do not require reading in a proximate cause element to make

sense of the policy. Unlike TMW, Defendant can cite to no language in the policy

that would be rendered superfluous by taking it to mean that the policy excludes

coverage for fixing the faulty workmanship, but the ensuing loss that resulted

from water intrusion is covered. Unlike Chabad, there is no language in the

exclusion that requires a break in proximate cause. To the contrary, the policies

in this case plainly provide that if an excluded cause of loss “results” in a covered

cause of loss, then “we will pay.” Doc. 145-1 at 15. 

The exclusions here are similar to the one in Swire, which the Florida

Supreme Court found applied to “loss caused directly by the design defect” with

the ensuing loss exception allowing coverage for loss or damage “that occurs

subsequent to, and as a result of, a design defect.” Swire, 845 So. 2d at 166. 

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The Swire court did not apply a requirement that the chain of proximate cause be

broken for the ensuing loss exception to apply. Only that the ensuing loss

“occur[] subsequent to, and as a result of, a design defect.” Id.

This means that ensuing losses, if they resulted from a covered cause, are

covered under the policy regardless of whether the loss was naturally set in

motion by an excluded cause of loss. Given the plain meaning of the policy

language, if the faulty workmanship resulted in water intrusion that subsequently

resulted in ensuing losses, the cost to repair the faulty workmanship is excluded

but the ensuing losses from the water intrusion are covered.5 This interpretation

is consistent with Swire and the weight of authority interpreting the ensuing loss

exception. See Harbor Communities, LLC v. Landmark Am. Ins. Co., No. 07-

14336-CIV, 2008 WL 298624 (S.D. Fla. Aug. 4, 2008); Eckstein v. Cincinnati Ins.

Co., 469 F.Supp.2d 455 (W.D. Ky 2007); Alton Ochsner Med. Found. v. Allendale

Mut. Ins. Co., 219 F.3d 501, 505-06 (5th Cir. 2000).

III. Other Exclusions

Although the bulk of Defendants’ summary judgment argument rested on

the inapplicability of the ensuing loss exception, Defendants cite to a variety of

policy exclusions to argue that Plaintiff’s ensuing losses are nevertheless not

covered because they fall within other policy exclusions. Each exclusion will be

5

 Assuming water intrusion is not excluded elsewhere in the policy, which

will be discussed in the next section.

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addressed in turn.

A. Wear and Tear

Each of the policies specifically excludes coverage for wear and tear and

deterioration. The exclusions in the Landmark and Westchester policies contain

the same wording: “We will not pay for loss or damage caused by or resulting

from . . . [w]ear and tear, any quality in the property that causes it to damage or

destroy itself, hidden or latent defect, gradual deterioration, corrosion, rust,

dampness or dryness, heat or cold.” Doc. 145-1 at 16. The Rockhill policy has a

similar exclusion: “We will not pay for loss or damage caused by or resulting

from any of the following . . . [w]ear and tear; [r]ust or other corrosion, decay,

deterioration, hidden or latent defect or any quality in the property that causes it

to damage or destroy itself.” Id. at 16-17. 

Despite their identification of this exclusion, Defendants provide no facts to

explain how the exclusion applies to Plaintiff’s claim in this case. The cases

Defendants cite to are likewise unhelpful. They deal with mechanical failure of

aircraft engines. Arawak Aviation, Inc. v. Indem. Ins. Co. of N. Am., 285 F.3d

954 (11th Cir. 2002); Little Judy Indus., Inc. v. Fed. Ins. Co., 280 So. 2d 14 (Fla.

3d Dist. Ct. App. 1973). Defendants cite to no cases where the exclusion was

found applicable to new construction damaged by water intrusion due to faulty

workmanship. 

The burden is upon Defendants to show that Plaintiff’s loss arose from an

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excluded cause. Royale Green Condo. Ass’n Inc. v. Aspen Specialty Ins. Co.,

Case No. 07-21404-CIV, 2009 WL 799429 at *2 (S.D. Fla. Mar. 24, 2009). 

Defendants have not met this burden with regard to the wear and tear exclusion.

B. Rain

The Landmark and Westchester policies, but not the Rockhill policy,

contain a rain exclusion. The wording of the exclusion is the same for the

Landmark and Westchester policies: “We will not pay for loss or damage caused

by or resulting from . . . [r]ain, snow, sand or dust, whether driven by wind or not,

to the interior of any building or structure or the property inside the building or

structure, unless the building or structure first sustains damage from a covered

peril to its roof or walls through which the rain, snow, sand or dust enters.” Doc.

145-1 at 17. Defendants argue that Plaintiff’s loss is not covered because the

damage to the roof and walls through which rain entered was caused by faulty

workmanship, not a covered cause of loss. 

The cases Defendants cite to are not particularly helpful because of

differences in the facts and policy provisions. See New Hampshire Ins. Co. v.

Carter, 359 So. 2d 52 (Fla. 1st Dist. Ct. App. 1978); Fla. Windstorm Underwriting

v. Gajawani, 934 So. 2d 501 (Fla. 3d Dist. Ct. App. 2005). Nevertheless,

Defendants’ argument here relies on its previous argument, rejected by the court,

that the faulty workmanship exclusion extends to all losses proximately caused

by the faulty workmanship. Defendants do not acknowledge that ensuing losses

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(losses that occur subsequent to and as a result of the faulty workmanship) are

covered. Nor do they acknowledge that this is an “all risk” policy where all perils

are covered unless excluded, and that the faulty workmanship exclusion is limited

by the ensuing loss exception. Moreover, by its plain terms the rain exclusion

applies to losses to the interior of the building and the property inside it, not to the

exterior of the building or the structure of the building, which appears to be the

bulk of the damage claimed by Plaintiff. For these reasons, Defendants have

failed to show that the rain exclusion bars Plaintiff’s claim.

C. Water Seepage

The Rockhill policy contains a water seepage exception, which reads: “We

will not pay for loss or damage caused by or resulting from any of the following: .

. . [c]ontinuous or repeated seepage or leakage of water, or the presence of

condensation or humidity, moisture or vapor, that occurs over a period of 14 days

or more.” Doc. 145-1 at 19-20. Plaintiff contends that this exclusion should not

apply because a separate section of the policy defines “water damage” as

“accidental discharge or leakage of water or steam as the direct result of the

breaking apart or cracking of a plumbing, heating, air conditioning, or other

system or appliance (other than a sump system including its related equipment

and parts), that is located on the described premises and contains water or

steam.” Doc. 132 at 19-20. And in fact, the sole case Defendants rely upon for

application of this exclusion involved damages caused by a leak from a toilet

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supply line of a vacant home. Hoey v. State Farm Fla. Ins. Co., 988 So. 2d 99

(Fla. 4th Dist. Ct. App. 2008). Moreover, unless the water seepage is coming

from a fixed source, such as plumbing, heating, or air conditioning, it is difficult to

make sense of the language in the policy stating that the excluded water

seepage must occur “continuous[ly] or repeated[ly]” for “14 days or more” since

seepage from rain would seem to be an intermittent occurrence. 

 Given the limited argument provided and the uncertainty about the 

damages excluded by the water seepage exclusion, the Court cannot conclude

as a matter of law that the Rockhill policy excludes Plaintiff’s claims.

D. Cracking

The Rockhill policy also contains an exclusion for cracking, which reads:

“We will not pay for loss or damage cause by or resulting from any of the

following . . . [s]ettling, cracking, shrinking, or expansion.” Doc. 145-1 at 17. 

Defendants note that the exclusion does not limit the exclusion for cracking or

settling to certain causes, and thus any losses by Plaintiff resulting from cracking

or settling should be excluded.

Plaintiff contends that this exclusion applies to cracking associated with

settlement or moving of the foundation, not to cracking that results from water

intrusion of the building envelope. Plaintiff notes that the only Florida case relied

upon by Defendants, Fla. Residential Prop. and Cas. Joint Underwriting Ass’n v.

Kron, 721 So. 2d 825, 827 (Fla. 3d Dist. Ct. App. 1998), construed the exclusion

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against the insurers because of ambiguity about whether the exclusion applies

“where the cause of the crack is an external penetrating force, as opposed to the

gradual shifting of a structure.” Kron, 721 So. 2d at 827. The other cases

Defendants rely upon deal with cracking that results from the settlement or

movement of the foundation. See Montee v. State Farm Fire, 782 P.2d 435 (Or.

Ct. App. 1989); Gen. Ins. Co. v. Hallmark, 575 S.W.2d 134 (Tex. Civ. App. 1978);

Bentley v. Nat’l Standard Ins. Co., 507 S.W.2d 652 (Tex. Civ. App. 1974). 

Furthermore, Defendants do not cite to any facts to explain how the exclusion

applies to Plaintiff’s claim in this case.

Given the limited argument provided and the uncertainty about the factual

application of the exclusion to this case, the Court cannot conclude as a matter of

law that the Rockhill policy’s cracking exclusion applies to Plaintiff’s claims.

E. Mold Related Damage

All of the policies contain mold exclusions. The exclusion in the Landmark

policies read: 

We will not pay for a loss or damage caused directly or indirectly by

the presence, growth, proliferation, spread or any activity of

“fungus,” wet or dry rot or bacteria. Such cause of loss or damage

is excluded regardless of any other cause or event that contributes

concurrently or in any sequence to the loss. But if “fungus,” wet or

dryrot or bacteria results in a covered cause of loss, we will pay for

the loss or damage caused by that ‘covered cause of loss.’

. . . To the extent that coverage is provided in the Additional

Coverage – Limited Coverage for ‘Fungus,’ Wet Rot, Dry Rot And

Bacterial with respect to loss or damage by a cause of loss other

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than fire or lightening . . . [t]he following Additional Coverage is

added:

ADDITIONAL COVERAGE – Limited Coverage for “Fungus,”

Wet Rot, Dry Rot And Bacteria . . . .This limited coverage applies

only when the “fungus” . . . is the result of one or more of the

following causes that occurs during the policy period and only if all

reasonable means were used to save and preserve the property

from further damage at the time of and after the occurrence, and

only if any loss resulting from the following is reported to us within

60 days of the occurrence. . . . A “covered cause of loss” other

than fire or lightening . . . .

Doc. 145-1 at 18. The Westchester exclusion reads: 

We will not pay for loss or damage caused directly or indirectly by

any of the following. Such loss or damage is excluded regardless

of any cause or event that contributes concurrently or in any

sequence to the loss:

“Fungus,” Wet Rot, Dry Rot and Bacteria – Presence, growth

proliferation, spread or activity of “fungus,” wet rot, or dry rot, or

bacteria. But if “fungus,” wet rot, dry rot, or bacteria results in a

“specified cause of loss,” we will pay for the loss or damage caused

by that “specified cause of loss.” This exclusion does not apply

when “fungus,” wet rot or dry rot or bacteria results from fire or

lightening.

Enforcement of any ordinance or law which required the demolition,

repair, replacement, reconstruction, remodeling or remediation of

property due to contamination by “pollutants” due to the presence,

growth, proliferation, spread or any activity of “fungus,” wet or dry

rot or bacteria; or

The cost associated with the enforcement of any ordinance or law

which requires any insured or others to test for, monitor, clean up,

remove, contain, treat, detoxify or neutralize, or in any way respond

to, or assess the effects of “pollutants,” “fungus,” wet or dry rot or

bacteria.

Id. at 18-19. The mold exclusion in the Rockhill policy reads:

ABSOLUTE FUNGUS, MOLD OR SPORES EXCLUSION

The following cluases are added to this policy and take precedence

over any other wording contained in this policy. This policy does

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not apply to loss or damage caused by or resulting from the actual

or threatened existence, growth, release, transmission, migration,

dispersal, or exposure to “mold,” “spores,” or “fungus.”

“Fungus,” “mold,” or “spores” means any type ir form of fungus,

including mold or mildew, and any mycotoxins, spores, scents or

by-products produced or released by fungi. Nor does this policy

apply to the cost of removal, disposal, decontamination or

replacement of insured property which has been contaminated by

fungus, mold, or spores and by law or civil authority must be

restored, disposed of, or decontaminated.

Id. at 19. Defendants argue that each of the mold exclusions preclude coverage

for mold, especially given the anti-concurrent cause language in the provisions. 

Plaintiff responds that it is not seeking payment for loss caused by mold or

fungus, and not seeking payment for loss that was concurrently caused by mold

and other cause. Accordingly, this issue is deemed moot.

F. Rents, Loan Expenses, Consultants, Diminution of Value

All of the policies contain an exclusion for consequential losses caused by

delay, loss of use, or loss of market. The policies also contain an endorsement

that provides limited coverage for soft costs. Defendants argue that the

exclusion for consequential loss bars coverage for lost rents, loan expenses,

retention of consultants, and diminution in the value of the insured property. 

The exclusions in the Landmark and Westchester policies read: “ We will

not pay for a loss or damage caused by or resulting from . . . [d]elay, loss of use,

loss of market or any other consequential loss.” Doc. 145-1 at 20. The exclusion

in the Rockhill policy reads: “We will not pay for loss or damage caused by or

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resulting from any of the following . . . [d]elay, loss of use or loss of market.” Id.

The soft cost endorsement of the Landmark and Westchester policies

read:

1. Additional Expense – Soft Cost Coverage

We cover your additional expense as indicated below which results

from a delay in the completion of the project beyond the date it

would have been completed had no loss or damage occurred. The

delay must be due to direct physical loss or damage to Covered

Property and be caused by or result from a Covered Cause of loss. 

We will pay covered expenses when they are incurred.

. . . 

4. Special Exclusions

The following Exclusions apply to this Additional Coverage in

addition to the Exclusions contained in the Builders’ Risk Coverage

Form. We will not pay for loss or damage or expense caused by or

resulting from: 

. . . 

b. Additional time that would be required to repair or replace

any part of the building’s property or equipment due to:

(1) the enforcement of any ordinance or law that requires the

use of material or equipment different from the property

destroyed.

. . . 

(3) Improvements necessary to correct deficiencies of original

construction or design.

(4) Damages for breach of contract, late or non-compliance of

orders or penalties of any nature.

Id. at 21. The soft cost endorsement of the Rockhill policies read:

BUILDERS RISK

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SOFT COST AND RENTAL INCOME ENDORSEMENT

. . .

Delay means a delay in the construction, erection or fabrication of a

building or structure as a direct result of a Covered Cause of Loss

and that the project must be delayed beyond the policy expiration

date.

COVERAGE

1. Soft Costs – We pay for soft cost expenses that arise out of

a delay resulting from direct physical loss or damage to a

building or structure described on the Soft Cost Schedule

that is caused by a Covered Cause of Loss.

. . . 

Additional Exclusions

In addition to the Exclusions stated in the Builders’ Risk Policy, the

following Exclusions shall apply to this Endorsement.

1. Additional Time – We do not pay for any increase in expense

or loss resulting from additional time that would be required

to replace or repair any party of the covered property due to:

. . . 

d. improvements necessary to correct deficiencies of original

construction, erection, or fabrication.

Id. at 22.

Plaintiff contends that its losses for lost rents, loan expenses, retention of

consultants, and diminution of value are not the kinds of losses excluded under

the exclusions. With regard to the costs for retention of experts, Plaintiff

contends that this loss is the result of the water intrusion from the faulty

construction, not from delay, loss of use, or loss of market. It is different in kind

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from the other losses because it flows directly from the water damage. The

Court agrees.

With regard to the rents, loan expenses, and diminution of value, it is

difficult to understand Plaintiff’s argument. Plaintiff states that “it is not seeking

damages associated with a delay to the completion of the Project . . . .” Doc. 132

at 18. Plaintiff goes on to argue, however, that delay is different from

consequential loss and that since these types of losses were within the

contemplation of the parties at the time the policies were issued, as evidence by

their inclusion in the soft costs endorsement, they should not be deemed to be

consequential losses. The consequential nature of loss, however, is not based

on the damages being unforeseeable by the parties. What makes a loss 

consequential is that it stems from relationships with third parties, while still

reasonably foreseeable at the time of contracting. See Hardwick Properties, Inc.

v. Newbern, 711 So. 2d 35, 40 (Fla. 1st Dist. Ct. App. 1998). “The most common

form of consequential damages is lost profits.” Id.

In this case, lost rents, loan expenses, and diminution of value are

consequential losses excluded by the policies. Accordingly, summary judgment

will be granted in favor of Defendants on this issue. 

G. Failure to Protect Property

Each of the policies requires the insured to take “all reasonable steps to

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protect the Covered Property from further damage.” Doc. 116 at 23. Defendants

contend that Plaintiff did not take reasonable steps to protect the property from

further damage because Plaintiff knew of the faulty workmanship problems and

did not require the contractor to make repairs immediately. 

Plaintiff contests this matter. Resolution of the issue involves disputed

material facts, thus precluding summary judgment.

H. Post-Loss Requirements

Finally, Defendants argue that Plaintiff failed to comply with various postloss requirements of the policies for notice and examination under oath and

refraining from filing legal action until all policy conditions have been satisfied.

Again, Plaintiff disputes these matters. Disputed issues of material fact

preclude resolution of these matters on summary judgment.

IV. Conclusion

Plaintiff’s ensuing losses resulting from the faulty workmanship are

covered under the policies. As to the mold exclusion, since Plaintiff is not making

a claim for losses for mold, this exclusion is not at issue. The consequential loss

exclusions bar coverage for lost rents, loan expenses, and diminution of value,

but not the costs of retaining experts. As to the other exclusions, neither side

has demonstrated an entitlement to judgment as a matter of law. Accordingly, it

is

ORDERED AND ADJUDGED:

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1. Defendants’ motion for summary judgment (doc. 116) is granted as

to the consequential loss exclusions but only for lost rents, loan expenses and

diminution of value. The motion is denied as moot as to he mold exclusion. In all

other respects, the motion is denied.

2. Plaintiff’s cross motion for partial summary judgment (doc. 132) is

granted as to liability for ensuing losses resulting from faulty workmanship. In all

other respects, the motion is denied.

DONE AND ORDERED this 30th day of March, 2012.

s/ Stephan P. Mickle 

Stephan P. Mickle

Senior United States District Judge

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