When a property insurance policy covers a multi-story building or multi-building property, and a portion sustains damage, there is often a question regarding the extent to which undamaged property should be replaced to ensure matching and/or aesthetic uniformity throughout the property.  In Great American Insurance Company of New York v. The Towers of Quayside No. 4 Condominium Association, 15-CV-20056 (S.D. Fla. Nov. 5, 2015), a District Court recently determined that the answer to this question is dependent on whether the requested repairs to undamaged property concern “any continuous run of an item or adjoining area.”

Quayside Gets a Wet Side

The insured property included a 25-story condominium building.  In February 2013, a release of water from a broken valve on an air conditioning unit caused water damage to drywall, carpeting, baseboards, insulation, and wallpaper in the east hallways of floors one through eleven.  Great American paid for the water damaged components on the east side of these floors, but Quayside asserted that repairing only what had sustained water damage did not fully compensate it for the direct physical loss caused by the water damage.

Quayside Wants Coverage For the Dry Side

Floors three through twenty-five were designed to have a uniform appearance.  The carpeted hallways of the east side of the building were separated from the carpeted west hallways by a tiled elevator lobby.  “Quayside sought coverage to repair or replace undamaged carpeting, wallpaper, baseboards, and woodwork in 1) the west hallways and elevator landings of the eleventh floor and floors below and 2) floors twelve through twenty-five. Quayside contend[ed] it is entitled to repair or replacement of these undamaged components because 1) it will otherwise not be possible to achieve aesthetic uniformity between the new carpeting, wallpaper, baseboards, and woodwork installed in the area that suffered water damage and the rest of the building and 2) the loss of aesthetic uniformity devalues the building and constitutes a loss to the building.”

The policy included a Difference in Conditions (“DIC”) Coverage Form that provided: “We will pay for your ‘loss’ to Covered Property from a Covered Cause of Loss.”  The policy defined “Covered Cause of Loss” as “direct physical ‘loss’ to Covered Property, except those causes of ‘loss’ listed in the exclusions.” Through its Specified Cause of Loss Form, the policy excluded coverage for consequential loss, which it defined as “Delay, loss of use, loss of market, or any other consequential loss.”

Great American moved for summary judgment seeking a declaration that Quayside is not entitled to coverage for replacement of undamaged building components.  Quayside argued that “the measure of recovery under the policy must be determined from the perspective of damage to the building as a whole, that the building as a whole suffered direct physical damage from water, and that the policy covers all costs necessary to restore the building to its pre-loss, aesthetically uniform condition.”

The Question Is Whether They Are Two Sides of a Continuous Run or Adjoining Area

The Court did not accept Quayside’s argument that it is necessarily entitled to matching or aesthetic uniformity, stating “the policy plainly only provides coverage for ‘direct physical loss,’ specifically excludes coverage for consequential loss, and makes no mention of ‘matching’ or ‘aesthetic uniformity’ at all.”  However, the Court held that “coverage for matching, for the purpose of achieving aesthetic uniformity, is appropriate where repairs concern ‘any continuous run of an item or adjoining area’ for materials such as wallpaper, baseboards, woodwork, and carpeting, [but] it is plain that matching is not otherwise required under the policy.”  (Quoting Ocean View Towers Ass’n, Inc. v. QBE Ins. Corp., No. 11-60447, 2011 WL 6754063, at *12 n.4 (S.D. Fla. Dec. 22, 2011).)

Applying this standard to the facts, the Court determined that Great American was entitled to a declaration that it has no obligation to provide coverage for 1) undamaged components on floors twelve through twenty-five or 2) undamaged carpeting in the west hallways of floors three through eleven.  However, Great American failed to demonstrate that it was entitled to summary judgment with respect to Quayside’s claim for coverage for wallpaper, baseboards, and woodwork on floors three through eleven because it was unclear whether these components formed a continuous run from one side of the building to the other or whether the components were separated in a similar manner as the carpet, which was separated by the elevator lobby.