The Florida Supreme Court recently granted rehearing and issued a revised opinion in Auto-Owners Ins. Co. v. Pozzi Window Co., No. SC06-779 (Fla. June 12, 2008), six months after issuing its original opinion.
In Pozzi, the owner of a multimillion dollar home brought suit for damage caused by water leakage around the windows. The homeowner alleged that the builder had urged him to purchase the windows from a certain retailer, which in turn hired a subcontractor to perform the installation. Pozzi, the window manufacturer, settled with the homeowner and builder. As the builder’s assignee, the window manufacturer sought coverage under the builder’s commercial general liability (“CGL”) policy. The Pozzi opinion did not address the fact that the manufacturer sought coverage under the builder’s policy for work performed by the subcontractor hired by the retailer, not the builder. The insurer paid for personal property damage caused by the leaking windows, but refused to pay for the cost of repair or replacement of the windows themselves.
The U.S. Court of Appeals for the Eleventh Circuit certified the following question:
DOES A STANDARD FORM [COMMERCIAL] GENERAL LIABILITY POLICY WITH PRODUCT[S] COMPLETED OPERATIONS HAZARD COVERAGE, SUCH AS THE POLICIES DESCRIBED HERE, ISSUED TO A GENERAL CONTRACTOR, COVER THE GENERAL CONTRACTOR’S LIABILITY TO A THIRD PARTY FOR THE COSTS OF REPAIR OR REPLACEMENT OF DEFECTIVE WORK BY ITS SUBCONTRACTOR?
In its original opinion, the Supreme Court answered the certified question in the negative. In its revised opinion, the court found that it could not answer the question because the record contained a material factual issue, i.e., whether only the installation was defective or whether the windows also were defective.
In its analysis, the Pozzi court reviewed its decision in U.S. Fire v. J.S.U.B., No. SC05-1295 (Fla. Dec. 20, 2007), which involved identical policy language and posed a similar question. In J.S.U.B., the court found that faulty workmanship can constitute an “occurrence” under a CGL policy. The court further held that faulty workmanship or defective work that has damaged the completed project has caused “physical injury to tangible property” within the CGL policy’s definition of “property damage.” The court noted that the CGL policy contains exclusion (j)(6) for damage to property caused by the work of the contractor or subcontractor performed on it, but this exclusion does not apply to property damage included in the “products-completed operations hazard.” Similarly, exclusion (l) excludes property damage to “your work”, but not if the subcontractor performed the work.
The Pozzi court reasoned that a claim for the repair or replacement of windows that were detective both prior to installation and as installed is merely an uncovered claim to replace a “defective component” in the project. Conversely, a claim for the repair or replacement of windows that were not initially defective but were damaged by the defective installation is a claim for physical injury to tangible property. Since the record was conflicting as to this outcome-determinative factual issue, the court returned the case to the Eleventh Circuit without answering the certified question.
The J.S.U.B. decision was previously reported here.