In construction defect claims, various insurance policies are often implicated. These policies can span many years, so it is critical to determine what policy or policies may provide insurance coverage for the damages that ensue. The insurance policies at play, for general contractors, subcontractors and suppliers, are typically comprehensive general liability policies.  Assuming these parties have such policies, the question then becomes what policies apply and do the policies cover the claims.

In Florida, parties have argued there are various triggers for determining whether property damage occurs during a policy period.  One such trigger is manifestation (when the damage is discovered or could have been discovered by reasonable inspection).  Another trigger is injury-in-fact (when the property is damaged). A recent Florida federal appellate court found that, given the facts of the case, it was injury-in-fact, not manifestation, that determined the applicable insurance policy.  Carithers v. Mid-Continent Casualty Company.

Under the injury-in-fact trigger, the sole inquiry is the date of the property damage.  If the date of actual damage is during the policy period, then that policy applies. Under the manifestation trigger, the applicable policy is the one in place at the time of the discovery of the property damage.

In Carithers, the homeowner filed suit for construction defects associated with their home.  The complaint alleged the defects could not have been discovered until 2010. The insurance company for the general contractor issued insurance policies for the contractor until 2008.  Therefore, the insurance company argued it had no duty to defend the claims because it issued no policies to the contractor when the damage manifested (in 2010).

The federal district court in Carithers determined the proper trigger for determining if property damage occurred during the policy period is the date of actual damage (injury-in-fact).  While the insurance company argued that property damage occurred when it is discovered or when it could have been discovered by reasonable inspection (i.e. manifestation), the district court rejected that argument.

The Eleventh Circuit Court of Appeals agreed that it was injury-in-fact, not manifestation, that applied. In doing so, the court examined the applicable insurance policy. The insurance policy applied to property damage that “occurs during the policy period” and defined an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The plain language of the applicable insurance policy provided that property damage occurs when the damage happens, not when it is discovered or discoverable. The court, however, limited its holding to the facts of the case and expressed no opinion on what trigger applies where it is difficult or impossible to determine when the property was damaged.

The Carithers case sheds light on the proper trigger for determining when property damage occurs for purposes of insurance coverage. The keys for determining coverage will be the language of the insurance policy and determining when the damage occurred.  If the policy language mirrors that of Carithers, and the damage date can be ascertained, the likely trigger will be injury-in-fact and not manifestation.