Last year, the Eleventh Circuit Court of Appeals issued a key opinion in Carithers v. Mid-Continent Casualty Company, 782 F.3d 1240 (11th Cir. 2015), in which the court applied Florida law to determine the scope of coverage available under a post-1986 CGL policy issued by Mid-Continent Casualty Company (Mid-Continent) to a homebuilder, Cronk Duch. The Carithers sued Cronk Duch for the following construction defects: faulty electrical systems, incorrect application of exterior brick coatings, improperly installed tile, and a faulty balcony that permitted extensive water intrusion. Mid-Continent refused to defend defendant Cronk Duch. As a result, the Carithers and Cronk Duch entered into a consent judgment, which assigned Cronk Duch’s rights to the Carithers so the homeowners could pursue the judgment amount from Mid-Continent.
The Carithers filed an action against Mid-Continent, where the parties ultimately filed cross-motions for summary judgment on the issue of whether Mid-Continent owed a duty to defend Cronk Duch in the underlying, initial litigation. That issue turned on what the proper trigger for determining whether property damage occurred during the policy period. The district court granted summary judgment in favor of the Carithers, finding that the proper “trigger” is the date of the actual damage (“injury-in-fact”), rather than when the damage is discovered or could have been discovered by reasonable inspection, as argued by Mid-Continent (“manifestation”). The Eleventh Circuit affirmed the district court's ruling that Mid-Continent owed a duty to defend. The question of the proper “trigger” on coverage, however, appears to still be in doubt in Florida as the Eleventh Circuit limited its decision “to the facts of this case, and express[ed] no opinion on what the trigger should be where it is difficult (or impossible) to determine when the property was damaged.” Id. at 1247. Simply put, the court held that the district court “did not err in applying the injury-in-fact trigger in this case.” Id. at 1246.
After the duty to defend determination, the coverage issue was decided following a bench trial. The trial court found that, among other things, Mid-Continent was liable for the “rip and tear” costs to repair a defectively installed balcony (which was not property damage because it was the defective work of a subcontractor) because the balcony had to be replaced in order to repair damage to the garage (which was property damage). Essentially, the Carithers were entitled to the “rip and tear” damage of the balcony to get to the property damage.
The Eleventh Circuit held that the district court did not err in awarding damages for the cost of repairing the balcony, finding that under Florida law the Carithers had a right to “the costs of repairing damage caused by the defective work.” Id. at 1249 (citing United States Fire Insurance Co. v. J.S.U.B., 979 So. 2d 871 (Fla. 2008)). The Eleventh Circuit was not persuaded by Mid-Continent’s contention that the Carithers should not be able to recover for any defective work, even where repairing that work is a necessary cost of repairing work for which there is coverage.
Although Carithers is another decision pointing toward injury-in-fact trigger analysis, litigants will have to rip and tear their way through the next decision to find out for sure.