Opinion ID: 794236
Heading Depth: 3
Heading Rank: 3

Heading: LaMarche v. Shelby Mutual Insurance Co.

Text: 66 Viewing the language of the Policies in isolation, the district court's conclusion that coverage exists arguably would seem to be proper. The Policies clearly cover PCOH property damage caused by occurrences in the coverage territory during the coverage period. Defective construction is an occurrence under Florida law, see State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072, 1076 (Fla.1998), and it is undisputed that the defective work here occurred in the coverage territory and during the coverage period. Thus, according to Pozzi, the costs of repair or replacement are covered under the PCOH provision because it is a sum the insureds Coral and Irby were legally obligated to pay as damages because of property damage (damaged, incorrectly installed windows) arising out of the subcontractor Scott's work. 67 However, the Florida Supreme Court in LaMarche v. Shelby Mutual Insurance Co., 390 So.2d 325, 326 (Fla.1980), concluded that CGL policies do not cover the costs of repair and replacement of defective work, but only cover any damage or injury resulting from the defective work. In LaMarche, the LaMarches entered into a building contract for the construction of their home. The general contractor's work proved to be deficient, and the LaMarches sought payment from the contractor's CGL insurance company for the replacement and repair of the defective work. The Florida Supreme Court concluded that the policy covered personal injury or property damage as a result of faulty work, but that no coverage existed for the replacement and repair costs: To interpret the policy as providing coverage for construction deficiencies, as asserted by the petitioners and a minority of states, would enable a contractor to receive initial payment for the work from the homeowner, then receive subsequent payment from his insurance company to repair and correct deficiencies in his own work. We find this interpretation was not the intent of the contractor and the insurance company when they entered into the subject contract of insurance, and the language of the policy clearly excludes this type of coverage. Rather than coverage and payment for building flaws or deficiencies, the policy instead covers damage caused by those flaws. 68 LaMarche, 390 So.2d at 326. The Florida Supreme Court then adopted the following reasoning of the Supreme Court of New Jersey in Weedo v. Stone-E-Brick, Inc., 81 N.J. 233, 405 A.2d 788 (1979): 69 An illustration of this fundamental point may serve to mark the boundaries between business risks and occurrences giving rise to insurable liability. When a craftsman applies stucco to an exterior wall of a home in a faulty manner and discoloration, peeling and chipping result, the poorly-performed work will perforce have to be replaced or repaired by the tradesman or by a surety. On the other hand, should the stucco peel and fall from the wall, and thereby cause injury to the homeowner or his neighbor standing below or to a passing automobile, an occurrence of harm arises which is the proper subject of risk-sharing as provided by the type of policy before us in this case. 70 LaMarche, 390 So.2d at 326-27 (quoting Weedo, 405 A.2d at 791-92) (quotation marks omitted). 71 The particular policy language and exclusions at issue in LaMarche were different from those at issue here. However, the broad language and reasoning of LaMarche does not seem to be dependent on the precise terms of the policy. Rather, LaMarche indicates that CGL policies (as opposed to warranty policies, for instance) generally do not cover the costs of repair or replacement of defective work. 72 While the Florida Supreme Court has not reviewed the policy language here, the majority of Florida intermediate appellate courts have applied LaMarche broadly and concluded that CGL policies do not cover repair or replacement costs. See, e.g., Auto-Owners Ins. Co. v. Marvin Dev. Corp., 805 So.2d 888, 892-93 (Fla.Dist.Ct. App.2001) (We also note that the Auto-Owners' insurance policies were not warranty policies providing coverage for construction defeciencies or defective workmanship. Comprehensive liability policies generally do not provide coverage to a contractor for deficiencies in its own work.); Auto Owners Ins. Co. v. Tripp Constr., Inc., 737 So.2d 600, 601 (Fla.Dist. Ct.App.1999) (CGL policies protect against only personal injury or property damage resulting from defective work, not for the repair of the work itself); Aetna Cas. & Sur. Co. of Am. v. Deluxe Sys., Inc., of Fla., 711 So.2d 1293, 1296 (Fla.Dist.Ct. App.1998) (quoting LaMarche, 390 So.2d at 326, for the proposition that the `purpose of ... comprehensive liability insurance coverage is to provide protection for personal injury or for property damage caused by the completed product, but not for the replacement and repair of that product'); Lassiter Constr. Co. v. Am. States Ins. Co., 699 So.2d 768, 769 n. 1 (Fla.Dist.Ct.App.1997) (same); Home Owners Warranty Corp. v. Hanover Ins. Co., 683 So.2d 527, 529 (Fla.Dist.Ct.App. 1996) (concluding, based on LaMarche, that the CGL policy, which was similar to the Policies here, did not provide coverage for repair or replacement of defective work, and rejecting argument that exclusion identical to exclusion ( l ) created such coverage); Tucker Constr. Co. v. Michigan Mut. Ins. Co., 423 So.2d 525, 528 (Fla.Dist. Ct.App.1982) (same); see also Auto Owners Ins. Co. v. Travelers Cas. & Sur. Co., 227 F.Supp.2d 1248, 1262 (M.D.Fla.2002) (applying Florida law to similar policy and concluding that, while the policy language was different from those in LaMarche, Florida courts examining the same CGL policies . . . in this case continue to hold that CGL policies do not cover the costs to repair and/or replace defective construction performed by subcontractors). 73 Most of the post- LaMarche cases are distinguishable in that the courts rested their decisions, at least in part, on specific policy language or factual circumstances that do not exist here. See Marvin Dev. Co., 805 So.2d at 891-92 (policy excluded PCOH coverage); Deluxe Sys., 711 So.2d at 1296-97 (claims fell within two different exclusions); Lassiter, 699 So.2d at 770 (no coverage for repair or replacement of subcontractor's faulty work because claim fell within exclusion for work on real property by the insured or any other contractors or subcontractors working directly or indirectly on [the insured's] behalf); Tucker, 423 So.2d at 528-29 (claims fell within exclusion for property damage to work performed by the named insured). However, in each case cited above, the courts nevertheless went beyond the language of the particular policies in issue and reaffirmed the LaMarche holding that repair or replacement costs for defective work are not the type of costs covered by CGL policies generally. Further, at least one of those cases, the district court's decision in Travelers, 227 F.Supp.2d at 1263, involves policy language identical to the Policies here and similar factual circumstances.