Southern-Owners Insurance Company v. MAC Contractors of Florida, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

FORT MYERS DIVISION

SOUTHERN-OWNERS INSURANCE

COMPANY,

Plaintiff,

v. Case No: 2:18-cv-21-JES-MRM

MAC CONTRACTORS OF FLORIDA,

LLC, PAUL S. DOPPELT,

Trustee of Paul S. Doppelt

Revocable Trust dated

12/08/90, and DEBORAH A.

DOPPELT, Trustee of Deborah

A. Doppelt Revocable Trust

dated 12/08/90,

Defendants.

OPINION AND ORDER

This matter comes before the Court on defendant MAC

Contractors of Florida, LLC’s Motion for Summary Judgment (Doc.

#134) and plaintiff Southern-Owners Insurance Company’s Fourth

Motion for Summary Judgment (Doc. #135). Plaintiff and defendant

each filed a Response in Opposition (Docs. #140, #141) to the

other’s motion, and both also filed Replies (Docs. #142, #143).

Defendant also filed a Notice of Supplemental Authority (Doc.

#148). The Court heard oral argument on March 21, 2023. (Doc.

#154.)

I.

There are two operative pleadings in this case. In the Second

Amended Complaint For Declaratory Judgment (Doc. #84), Southern-

Owners Insurance Company (Southern-Owners) seeks declarations that

it has no duty to defend and no duty to indemnify defendants in

1

connection with a since-resolved state court lawsuit. Defendants

filed an Amended Counterclaim [for Declaratory Relief] (Doc. #132)

which asserts that Southern-Owners breached two insurance policies

by not providing a defense in a certain state court case and not

indemnifying defendants.

Two prior motions for summary judgment filed by Southern-

Owners have been granted by the Court and reversed by the Eleventh

Circuit Court of Appeals. See S.-Owners Ins. Co. v. MAC

Contractors of Fla., LLC, 768 F. App’x 970 (11th Cir. 2019) and

S.-Owners Ins. Co. v. MAC Contractors of Fla., LLC, 819 F. App’x

877 (11th Cir. 2020). The second appellate decision sets forth

the basic background facts:

On December 19, 2014, KJIMS [MAC Contractors]

entered into a contract with Paul and Deborah

Doppelt, as trustees of their respective

trusts, to serve as the general contractor for

the construction of a custom residence in

Marco Island, Florida. An exhibit to the

1

The state court lawsuit was resolved pursuant to a

settlement agreement for $70,000 and was dismissed in September

2019.

contract outlined various specifications for

the residence.

Problems arose between KJIMS and the Doppelts

after construction began, and KJIMS eventually

left the job site before completing the

project and before the issuance of a

certificate of occupancy. After serving KJIMS

with a notice of defects, see Fla. Stat. §

558.004, the Doppelts sued KJIMS in state

court in August 2016. In the operative amended

complaint, they alleged, among other things,

that KJIMS and its subcontractors had left the

residence “replete with construction

defects.”

In the Doppelts' notice of defects, which the

amended complaint incorporated by reference,

the claimed “defects” included the following:

“[r]epair loose, broken or chipped pavers in

driveway and walkways and install edge

restraints”; “[r]epair underside of lap siding

– inconsistent paint finish at bottom of

boards”; “[r]epair chatter marks on T&G

ceilings”; “repair damage to all exterior

doors” and “[r]epair all pocket doors”;

“[r]eplace damaged top stair tread”; “[r]emedy

damage to hardwood floors, includ[ing] damage

resulting from use of blue tape and dirt”;

“[r]epair metal roof dents, scratches and

hems”; “[c]lean wall and ceiling paint on

cabinets”; “[r]emove paint spots on baseboards

throughout the house”; “[r]emedy scratches in

granite”; and “[p]atch and paint all holes in

ceilings and walls and twin holes in exterior

hardi plank.” The Doppelts sought to recover

damages for “having to repair and remediate

all defective work performed by KJIMS,” among

other things.

At all relevant times, KJIMS was insured by a

commercial general liability (“CGL”)

insurance policy issued by Southern-Owners. []

KJIMS tendered the Doppelts' lawsuit to

Southern-Owners, which initially agreed to

defend KJIMS but later withdrew the defense

and filed this lawsuit in November 2017

seeking a declaration that it owed no duty to

defend or indemnify KJIMS.

S.-Owners Ins. Co., 819 F. App’x at 878. The Eleventh Circuit

then summarized the first set of summary judgment motions and their

results:

On cross-motions, the district court granted

summary judgment to Southern-Owners. The court

concluded that Southern-Owners owed KJIMS no

duty to defend against the Doppelts' lawsuit

based on a policy exclusion for “Damage to

Your Work.” We vacated that decision on

appeal, concluding that the underlying

complaint could fairly be construed to allege

damages that fell outside the exclusion. See

Southern-Owners Ins. Co. v. MAC Contractors of

Fla., LLC, 768 F. App'x 970, 973–74 (11th Cir.

2019). In remanding, we noted that the court

had not addressed whether the Doppelts alleged

“property damage” within the meaning of the

CGL policy, though we declined to address that

issue for the first time on appeal. Id.

On remand, the district court again granted

summary judgment to Southern-Owners, this time

concluding that the underlying complaint did

not allege “property damage” within the

meaning of the CGL policy. The court reasoned

that the underlying complaint did not allege

any damage beyond the faulty workmanship or

defective work, which did not qualify as

“property damage” under Florida law.

Id. at 878–79. The Eleventh Circuit found this to be error,

stating:

. . . we conclude that the underlying

operative complaint can fairly be construed to

allege “property damage” within the meaning of

the CGL policy and Florida law. Accordingly,

the district court erred in granting summary

judgment to Southern-Owners on this basis.

Id. at 882. The Eleventh Circuit continued:

In the alternative, Southern-Owners argues

that, even if “property damage” was alleged,

we should still affirm the judgment in its

favor based on several policy exclusions

which, in its view, clearly preclude coverage.

We have already concluded that one of these

exclusions — a completed-operations hazard

exclusion — did not eliminate the duty to

defend. Southern-Owners, 768 F. App'x at 973–

74.

With regard to exclusions j(6) and j(7) of the

policy, the other exclusions on which

Southern-Owners relies, these provisions

exclude coverage for “property damage” to the

following:

(6) That particular part of real property on

which any insured or any contractors or

subcontractors working directly or indirectly

on your behalf are performing operations, if

the “property damage” arises out of those

operations; or

(7) That particular part of any property that

must be restored, repaired or replaced because

“your work” was incorrectly performed on it.

Southern-Owners asserts that the phrase

“[t]hat particular part” refers to the “entire

project at issue (i.e. the Subject Property in

its entirety),” so in its view, these

exclusions apply to any damage caused by

defective work performed by or on behalf of

KJIMS on the residence. KJIMS, for its part,

points to authority indicating that these

exclusions would not apply to property damage

that occurred during operations on the

property as a whole “but at a moment in time

when neither KJIMS nor its subcontractors

specifically worked on” the “particular part

of [the] property” that was damaged or must be

restored, repaired, or replaced. See Br. of

Appellee at 15–17. The district court did not

reach this issue, however, and we decline to

address it for the first time on appeal,

“preferring that the district court address it

in the first instance.” Beavers v. Am. Cast

Iron Pipe Co., 975 F.2d 792, 800 (11th Cir.

1992).

Id. at 882–83.

II.

At the beginning of the oral arguments, the parties agreed

that there is no longer a case or controversy with respect to the

duty to indemnify. The underlying state lawsuit has been settled,

and defendants have withdrawn their claim for indemnification of

the $70,000 settlement. All outstanding issues regarding

indemnification are therefore moot.

The remaining focus of the current set of cross-motions for

summary judgment is on the duty to defend. In the first appeal,

the Eleventh Circuit outlined the Florida duty to defend law:

For the duty to defend to arise, the

underlying allegations must “fairly bring the

case within the scope of coverage.” State Farm

Fire & Cas. Co. v. Tippett, 864 So. 2d 31, 35–

36 (Fla. 4th DCA 2003). “If the complaint

alleges facts partially within and partially

outside the scope of coverage, the insurer is

obligated to defend the entire suit.” Trizec

Props., Inc. v. Biltmore Constr. Co., Inc.,

767 F.2d 810, 811–12 (11th Cir. 1985). Any

doubt about whether the insurer owes a duty to

defend must be resolved against the insurer

and in favor of the insured. Id. at 812.

Furthermore, “[b]ecause they tend to limit or

avoid liability, exclusionary clauses are

construed more strictly than coverage

clauses.” Category 5 Mgmt. Grp., LLC v.

Companion Prop. & Cas. Ins. Co., 76 So. 3d 20,

23 (Fla. 1st DCA 2011). Nevertheless, if the

complaint clearly shows “the applicability of

a policy exclusion, the insurer has no duty to

defend.” Keen v. Fla. Sheriffs’ Self-Insurance

Fund, 962 So. 2d 1021, 1024 (Fla. 4th DCA

2007).

S.-Owners Ins. Co., 768 F. App'x at 971–72. In the second appeal,

the Eleventh Circuit noted the potential for coverage and the

resulting duty to defend:

Here, the language of the underlying

complaint, “at least marginally and by

reasonable implication, could be construed” to

create potential coverage under the policy.

Trizec Props., 767 F.2d at 813. The operative

amended complaint alleged that KJIMS used

subcontractors for work on the residence and

that the residence was “replete with

construction defects” and various damage. It

did not further allege which subcontractors

performed which work or how the damage

occurred. Given these ambiguities, the

complaint's allegations are broad enough to

allow KJIMS to prove that one subcontractor

negligently damaged nondefective work

performed by another subcontractor. See id. If

KJIMS could establish that at least some of

the damage arose in this way, there would be

“damage apart from the defective work itself”

and therefore “property damage.” See Carithers

[v. Mid-Continet Cas Co., 782 F.3d 1240, 1250–

51 (11th Cir. 2015)]. Because there is a

potential for coverage, the duty to defend was

triggered. See Trizec Props., 767 F.2d at 813.

S.-Owners Ins. Co., 819 F. App'x at 882. See also Westchester

Gen. Hosp., Inc. v. Evanston Ins. Co., 48 F.4th 1298, 1302 (11th

Cir. 2022); Travelers Indem. Co. of Connecticut v. Richard Mckenzie

& Sons, Inc., 10 F.4th 1255, 1261 (11th Cir. 2021).

III.

2

The insuring agreement of the Policy provides, in pertinent

part, that Southern-Owners “will pay those sums that the insured

becomes legally obligated to pay as damages because of . . .

‘property damage’ to which this insurance applies.” (Doc. #84-1,

pp. 46, 65, 132.) As discussed above, the Eleventh Circuit has

already decided that Southern-Owners had a duty to defend unless

one or more of the remaining exclusions preclude coverage.

Southern-Owners argues that three applicable Policy

3

exclusions cumulatively cover all the damages alleged in the

4

Underlying Complaint. “When an insurer relies on an exclusion to

deny coverage, it has the burden of demonstrating that the

allegations of the complaint are cast solely and entirely within

the policy exclusion and are subject to no other reasonable

interpretation. Exclusionary clauses are generally disfavored.”

2

The Court will use the singular “Policy” since the relevant

language is the same in each of the two Commercial General

Liability (CGL) policies.

3

At oral argument counsel for Southern-Owners acknowledged

that there are no other unresolved exclusions which Southern-

Owners is asserting applies to this case.

4

The parties seem to quibble over what constitutes the state

court “underlying complaint” which is to be examined. The

undersigned has previously held that the pertinent “underlying

complaint” is the Amended Complaint, which includes the statutory

notice of defects. See Doc. #111, pp. 15-17. This remains the

Court’s view.

Hartford Acc. & Indem. Co. v. Beaver, 466 F.3d 1289, 1296 (11th

Cir. 2006) (quoting Northland Cas. Co. v. HBE Corp., 160 F. Supp.

2d 1348, 1359 (M.D. Fla. 2001) (internal citations omitted).

Southern-Owners acknowledges that it bears this burden of proof.

(Doc. #135, p. 11.)

Southern-Owners argues that any reasonable interpretation of

the allegations in the Underlying Complaint establish they are

“cast solely and entirety” within the cumulative scope of the three

Policy exclusions. (Id.) Southern-Owners asserts that to the

extent the Underlying Complaint involves a claim related to

completed operations, any work on the Subject Property entirely

meets the definition of “your work” in Exclusion l. Southern-

Owners further asserts that to the extent the Underlying Complaint

advances any claim related to damages occurring during ongoing

operations, such damages are excluded from coverage by Exclusions

j(6) and j(7). (Id., pp. 8-9.) Thus, according to Southern-Owners,

the cumulative effect of these exclusions is to preclude coverage

and the duty to defend.

KJIMS does not dispute that it is permissible to use multiple

exclusions to defeat a duty to defend if the cumulative effect

satisfies the appropriate legal standard. KJIMS argues, however,

that the evidence does not establish that the allegations in the

Underlying Complaint are “cast solely and entirety” within the

cumulative scope of the three exclusions.

A. Your Work Exclusion

Exclusion l states that insurance coverage does not apply to

“‘property damage’” to “‘your work’ arising out of it or any part

of it and included in the ‘products-completed operations hazard.’”

(Doc. #84-1, p. 51.) It is the law of the case that this exclusion

does not apply to property damage caused during ongoing operations.

S.-Owners Ins. Co., 768 F. App'x at 973 (“For its part, Southern-

Owners agrees with KJIMS that the Your Work exclusion does not

apply to property damage caused during ongoing operations.”) The

Eleventh Circuit held: “Construing the Your Work exclusion

narrowly and resolving all doubts in favor of KJIMS, we conclude

that the underlying allegations can fairly be construed to allege

damages during ongoing operations.” Id. at 973 (citations

omitted).

Nonetheless, in its current motion, Southern-Owners asserts

that any work which involves a damage claim relate to completed

operations on the Subject Property meets the definition of “your

work” in Exclusion l. Therefore, Southern-Owners argues, there is

no duty to defend that portion of the claim relating to defective

work by subcontractors such as roofs, windows, and doors. (Doc.

#135, pp. 11-12.). Southern-Owners relies heavily on J.B.D. Const.

Inc. v. Mid-Continent Cas. Co., 571 F. App’x 918 (11th Cir. 2014),

an unpublished decision which found there was a duty to defend.

(Doc. #135, pp. 11-13.)

Southern-Owners argues that the portion of the Court’s prior

determination that the ‘your work’ exclusion entirely precludes

coverage for completed operations remains valid. (Id., pp. 13-14.)

This seems unlikely. The Court has twice found that the “your

work” exclusion precluded coverage and a duty to defend, and the

Eleventh Circuit has twice vacated these decisions. In any event,

viewing the Underlying Complaint in the manner dictated by the

Eleventh Circuit, the Court finds that the allegations pertaining

to both ongoing operations and completed operations are not “cast

solely and entirety” within the “your work” exclusion in the

Policy. Southern-Owners’ request for summary judgment on this

ground is therefore denied.

B. “That Particular Part” Exclusions

There are two exclusions under the paragraph “j. Damage to

Property” which Southern-Owners asserts preclude a duty to defend.

5

These exclusions exclude coverage of certain “property damage ”:

5

“Property damage” means:

a. Physical injury to tangible property, including all

resulting loss of use of that property. All such loss of

use shall be deemed to occur at the time of the physical

injury that caused it; or

(6) That particular part of real property on

which any insured or any contractors or

subcontractors working directly or indirectly

on your behalf are performing operations, if

the “property damage” arises out of those

operations; or

(7) That particular part of any property that

must be restored, repaired or replaced because

“your work” was incorrectly performed on it.

(Doc. #84-1, p. 50.) Southern-Owners argues these exclusions apply

because the Underlying Complaint states that property damage began

while MAC Contractors was performing operations and the claimed

damages are only for the repair, removal, or replacement of MAC

Contractors’ work.

“[I]f a subcontractor is hired to install a project component

and, by virtue of his faulty workmanship, installs a defective

component, then the cost to repair and replace the defective

component is not ‘property damage.’” S.-Owners Ins. Co, 819 F.

App'x at 880 (citing Auto-Owners Ins. Co. v. Pozzi Window Co., 984

So. 2d 1241, 1306 (Fla. 2008)). On the other hand, “a claim for

the costs of repairing damage to other property caused by defective

work does qualify as a claim for ‘property damage.’” J.B.D.

b. Loss of use of tangible property that is not physically

injured. All such loss shall be deemed to occur at the

time of the “occurrence” that caused it.

(Doc. #84-1, Exh. A, p. 65.)

Const., Inc. v. Mid-Continent Cas. Co., 571 F. App'x 918, 923 (11th

Cir. 2014) (citation omitted).

“Property damage occurs when the damage

happens, not when the damage is discovered or

discoverable.” Carithers v. Mid-Continent

Cas. Co., 782 F.3d 1240, 1247 (11th Cir. 2015)

(interpreting nearly identical policy

language). And where the underlying

allegations, even though silent as to the

timing of damages, can be reasonably construed

to allege property damage that occurred during

the policy period, “there is a potential for

coverage.” Trizec Props., 767 F.2d at 813.

S.-Owners Ins. Co., 768 F. App'x at 973.

The exclusions are “triggered only when the faulty work and

the damage are to the same part of the property.” Westfield Ins.

Co. v. Miller Architects & Builders, 949 F.3d 403, 405 (8th Cir.

2020). “The potential for coverage is triggered when an

‘occurrence’ results in ‘property damage.’ There is no requirement

that the damages ‘manifest’ themselves during the policy period.”

Trizec Props., Inc. v. Biltmore Const. Co., 767 F.2d 810, 813 (11th

Cir. 1985). “Here, although the underlying allegations are silent

as to the timing of the damages, the allegations can be reasonably

construed to allege damages that occurred during ongoing

operations.” S.-Owners Ins. Co., 768 F. App'x at 973.

Under paragraph j7, property damage to that “particular part of

any property that must be restored, repaired or replaced because

“your work” was incorrectly performed on it” is excluded from

coverage. Paragraph 7 does not apply to “property damage included

in the products-completed operations hazard”, (Doc. #84-1, pp. 50-

51), which excludes work that has not yet been completed or

abandoned (Id., pp. 64-65).

The defects listed in the Underlying Complaint run the gambit

from beams in the great room ceiling which are not aligned with

columns below on the balcony side and remedying damage to hardwood

floors to repairing metal roof dents, scratches, and hems. (Doc.

#132-7, Exh. A.) The Amended Complaint alleges that KJIMS

terminated subcontractors “that continued their scope of work at

the Property while demanding payment from Plaintiffs for Work not

completed, Work not performed in accord with specifications, plans

and/or for Work yet to be performed – a demand inconsistent with

the plain language of the Cost-Plus Contract.” (Doc. #132-8, p.

8, ¶ 37.) The allegations in the Amended Complaint include that

KJIMS “failed to achieve substantial completion”, and that KJIMS

effectively shut down construction for the 6 weeks preceding the

filing of the Complaint. (Id., ¶¶ 41-42.) The Amended Complaint

also alleges a failure to comply with “assurances of remediation

particularly with respect to the damage to wood floors and the

metal roof”. (Id., ¶ 54.) The implication is that the work was

otherwise complete but in need of repair. The Court cannot say

that these allegations are necessarily within the scope of the

allegations identified by Southern-Owners.

Accordingly, it is now

ORDERED :

1. MAC Contractors of Florida, LLC’s Motion for Summary

Judgment (Doc. #134) is GRANTED as to the duty to defend

and DENIED as moot as to the duty to indemnify.

2. Southern-Owners Insurance Company’s Fourth Motion for

Summary Judgment (Doc. #135) is DENIED as to the duty to

defend and DENIED as moot as to the duty to indemnify.

The declaratory relief sought in Doc. #84 is DENIED.

3. The Clerk of Court shall enter judgment accordingly

declaring that Southern-Owners Insurance Company had a

duty to defend MAC Contractors of Florida, LLC, d/b/a

KJIMS in the state court lawsuit filed against it by Paul

and Deborah Doppelt, as trustees.

4. The Clerk is further directed to terminate all pending

motions and deadlines, and to close the file.

DONE AND ORDERED at Fort Myers, Florida, this 30th day of

March 2023.

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JGHN E. STEELE

SHNIOR UNITED STATES DISTRICT JUDGE

Copies: Counsel of record