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.
I. Standard for Summary Judgment
Summary judgment is appropriate when “there is no genuine dispute as to 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. Saregama India Ltd. v. Mosley,
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 caused by or resulting from: ... [defective 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. LaFarge, 118 F.3d at 1516; Fla. Windstorm Underwriting v. Gajwani
The principle Florida case interpreting the ensuing loss exception, which both parties cite to, is Swire Pacific Holdings, Inc. v. Zurich Ins. Co.,
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 а 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 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 poliсy excludes coverage for fixing the faulty workmanship, the ensuing losses that resulted from water intrusion are covered. Plaintiffs 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.,
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 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 prоximate 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,
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
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,
This means that ensuing losses, if they resulted from a covered cause, are covered under the policy rеgardless 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.
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 Plaintiffs ensuing losses are nevertheless not coverеd because they fall within other policy exclusions. Each exclusion will be 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 nоt 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 Plaintiffs 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.,
The burden is upon Defendants to show that Plaintiffs loss arose from an excluded cause. Royale Green Condo. Ass’n Inc. v. Aspen Specialty Ins. Co., Case No. 07-21404-CIV,
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 Plaintiffs 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,
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: ... [cjontinuous 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 supply line of a vacant home. Hoey v. State Farm Fla. Ins. Co.,
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 Plaintiffs 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,
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 Plaintiffs 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 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 reasonablе 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
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 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 рroperty.
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 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 beyоnd 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
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 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 Plaintiffs argument.
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 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 оf 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 post-loss 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.
IY. Conclusion
Plaintiffs 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:
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 mоtion is denied.
2. Plaintiffs 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.
Notes
. 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 Surplus Lines Insurance Company has a limit of $10,000,000.00 per occurrence. The third layer of excess coverage by Landmark Insurance Company hаs a limit of $5,000,000.00 per occurrence.
. 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.
. In apparent recognition that Florida law applies the parties rely predominately on Florida law in their arguments.
. 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 Plaintiffs 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.
. Assuming water intrusion is not excluded elsewhere in the policy, which will be discussed in the next section.