Case: 17-11504 Date Filed: 12/28/2017 Page: 1 of 20
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-11504 Non-Argument Calendar ________________________
D.C. Docket No. 1:15-cv-21777-KMW
ADDISON INSURANCE COMPANY,
Plaintiff-Appellant,
versus
4000 ISLAND BOULEVARD CONDOMINIUM ASSOCIATION, INC., a not-for-profit corporation, et al.,
Defendants.
WINDSOR METAL SPECIALTIES, INC., a Florida corporation,
Defendant-Appellee.
________________________
Appeals from the United States District Court for the Southern District of Florida ________________________
(December 28, 2017) Case: 17-11504 Date Filed: 12/28/2017 Page: 2 of 20
Before HULL, WILLIAM PRYOR and ANDERSON, Circuit Judges.
PER CURIAM:
In this declaratory judgment action, plaintiff Addison Insurance Company
(the insurer “Addison”) appeals from three orders of the district court, which,
collectively, declared as a matter of law that insurer Addison was obligated to
defend its insured, defendant Windsor Metal Specialties, Inc. (“Windsor”), in an
underlying action in Florida state court. Addison argues on appeal that the
underlying complaint against Windsor falls outside Windsor’s insurance coverage,
and that it is entitled to a jury trial on the veracity of certain factual allegations in
the underlying complaint. After review, we affirm.
I. BACKGROUND
We discuss first the underlying dispute in the Florida state court, and second
the relevant proceedings in this declaratory judgment action in the district court.
A. The Underlying Florida Action
This dispute arose from a construction project on a high-rise residential
condominium building in Florida. In August 2010, non-party 4000 Island
Boulevard Condominium Association, Inc. (“Owner Island”), an association of
owners of condominiums in the building, contracted with nonparty Poma
Construction Corp. (contractor “Poma”) to replace the building’s aging concrete
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balcony railings with new aluminum and glass railings. Poma then subcontracted
with defendant Windsor to paint the new railings.
Contractor Poma and subcontractor Windsor completed work on
February 24, 2012. Poma issued a 10-year limited warranty covering its
installation of the railings. Windsor issued a 20-year limited warranty covering the
paint job.
In October 2014, Owner Island filed an action in Florida state court against
contractor Poma and its subcontractor Windsor, alleging that the new railings were
defective and would need to be removed and replaced. Owner Island further
alleged that both Poma and Windsor had refused to perform the repair under
warranty. Accordingly, Owner Island asserted claims for breach of contract
against Poma (Count I), breach of implied warranty against Poma (Count II), and
breach of express warranty against Windsor (Count III).
Owner Island’s original Florida complaint did not allege that any property
damage had resulted from the defective railings, or that any damage would occur
when the railings were removed and replaced. However, Owner Island amended
its complaint on May 27, 2015, and again on March 16, 2016. In each new version
of the complaint, Owner Island added more allegations regarding damage to the
surrounding property.
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In the operative second amended complaint, Owner Island alleged that the
defective railing system, including Windsor’s defective paint finishes on the
railings, caused “damage to other property” such as “the railing post pockets, the
balcony concrete slabs and finishes on the balcony concrete slabs.” Specifically in
connection with Count III, the sole count asserted against Windsor, Owner Island
alleged:
Damage to other property has manifested during the filing of this action including but not limited to other property – concrete balcony surfaces and flooring areas. It is anticipated that the removal and replacement of the railing system will cause damage to other property, including but not limited to the concrete balconies, surfaces on the concrete balconies and other areas requiring substantial repairs. The defective railing system, including the defective paint finish, has caused and will continue to cause damage to other property including but not limited to the railing post pockets, the balcony concrete slabs and finishes on the balcony concrete slabs. Defendant, Poma, utilized the services of a subcontractor, Windsor, to fabricate the paint finishes on the railings that were delivered and installed at the project. Because of the defective condition of the railing system caused by Poma’s subcontractor, Windsor, damage has occurred to other property, including but not limited to the railing post pockets, the balcony concrete slabs and finishes on the balcony concrete slabs.
B. The Declaratory Judgment Action in the District Court
On May 11, 2015—that is, after Owner Island filed the original complaint in
the Florida action, but before Owner Island amended its complaint for the first
time—plaintiff insurer Addison commenced this action for declaratory judgment in 4 Case: 17-11504 Date Filed: 12/28/2017 Page: 5 of 20
the district court.1 In sum, insurer Addison sought a declaration that it was not
obligated to defend any party, including its insured, Windsor, in the Florida action.
As an exhibit to its declaratory judgment complaint, Addison attached the
commercial general liability policy issued to Windsor (the “Policy”). 2 The Policy
provided coverage for “property damage” caused by an “occurrence”:
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.
....
b. This insurance applies to “bodily injury” and “property damage” only if:
1 The insurer Addison originally named Windsor, Poma, and Owner Island as defendants in the declaratory judgment action. However, the district court subsequently dismissed Poma and Owner Island from the action, after adopting two Joint Stipulations from the parties agreeing to the dismissal of those defendants. In its October 2016 dismissal orders, the district court ordered that insurer Addison was not obligated to defend Poma in the Florida action, and that Owner Island would be bound by all coverage determinations in the declaratory judgment action. Because Addison and Windsor are the only remaining parties to the declaratory judgment action and the only parties to this appeal, we limit our discussion to facts and proceedings relevant to those parties, except where context or clarity requires otherwise. 2 The insurer Addison actually issued three policies, each providing one year of coverage. Because each policy included the same relevant terms, we refer to them collectively as the “Policy.” 5 Case: 17-11504 Date Filed: 12/28/2017 Page: 6 of 20
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory.”
The Policy provided that Windsor’s coverage did not apply to, among other
things, property damage to Windsor’s own work product or to that particular
property that must be repaired because Windsor’s work “was incorrectly
performed on it.” The Policy listed the following coverage exclusions:
j. Damage To Property
“Property damage” to: (6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
k. Damage To Your Product
“Property damage” to “your product” arising out of it or any part of it.
l. Damage To Your Work
“Property damage” to “your work” arising out of it or any part of it and included in the “products-completed operations hazard.”
m. Damage to Impaired Property or Property Not Physically Injured
“Property damage” to “impaired property” or property that has not been physically injured, arising out of:
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(1) A defect, deficiency, inadequacy or dangerous condition in “your product” or “your work”; or (2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
Finally, the Policy contained the following relevant definitions:
13. “Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
17. “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 cause it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.
21. “Your product”: a. Means: (1) Any goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by: (a) You; (b) Others trading under your name; or (c) A person or organization whose business or assets you have acquired.
b. Includes:
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(1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your product.”
22. “Your work”: a. Means: (1) Work or operations performed by you or on your behalf; and (2) Materials, parts or equipment furnished in connection with such work or operations. b. Includes: (1) Warranties or representations made at any time with respect to the fitness, quality, durability, performance or use of “your work.”
The insurer Addison amended its declaratory judgment complaint on June 8,
2015, and again on September 11, 2015. In Addison’s operative second amended
complaint, Addison sought the following declarations: (1) Owner Island’s first
amended complaint (dated May 27, 2015), which was the operative Florida
complaint at the time, did not allege “property damage” caused by an “occurrence”
under the Policy; (2) the damages alleged by Owner Island were excluded from
coverage under the Policy, due to one or more coverage exclusions; and (3)
Addison had no duty to defend or indemnify any insured or other party in the
Florida action.
C. Addison’s Motion for Summary Judgment
In June 2016, after Owner Island filed the operative second amended
complaint in the Florida state action, Addison moved for summary judgment in the 8 Case: 17-11504 Date Filed: 12/28/2017 Page: 9 of 20
federal declaratory judgment action. Addison argued that because Owner Island
had sued Windsor for breach of warranty, rather than for property damage,
Windsor was not covered under the Policy. Addison further argued that Owner
Island’s allegations of property damage were unsupported by evidence, and were
thus insufficient to create an issue of fact that would defeat summary judgment.
Windsor opposed summary judgment. 3 Windsor argued that a genuine issue
of material fact existed as to whether the damage alleged in Owner Island’s
operative complaint constituted “property damage” to which no Policy exclusion
applied. To support this argument, Windsor relied on an affidavit from an
employee of Owner Island, together with accompanying photographs, which
Owner Island had submitted in support of its own opposition to summary
judgment. The affidavit described the photos as showing “railing failure and
damage to the areas where the railings were installed.”
On September 22, 2016, the district court denied Addison’s motion for
summary judgment. The district court compared the allegations in Owner Island’s
operative complaint with the language of the Policy, and concluded that Addison
had not shown, as a matter of law, that it had no duty to defend Windsor in the
Florida action. In a footnote, the district court pointed to “a number of material
disputes between the Parties regarding the relationship between the allegations in
3 Contractor Poma and Owner Island each filed a separate opposition to summary judgment. 9 Case: 17-11504 Date Filed: 12/28/2017 Page: 10 of 20
the complaint and the insurance policy at issue.” The district court continued:
“Though these factual disputes go primarily to Addison’s duty to indemnify, the
Court notes that some of them—such as Poma’s coverage under the policy and
potential exclusions for the damage—could also implicate Addison’s duty to
defend.”
The district court further concluded that the issue of Addison’s duty to
indemnify Windsor would not ripen unless and until Windsor was actually held
liable in the underlying Florida action.
Having denied Addison’s motion for summary judgment, the district court
scheduled a jury trial on the issue of Addison’s duty to defend, which the district
court set to begin on December 12, 2016.
D. Windsor’s Motion for Clarification
As the declaratory judgment action proceeded toward trial, the district court
dismissed contractor Poma and Owner Island from the case, pursuant to joint
stipulations by the parties. Shortly after Poma was dismissed, Windsor filed a
motion for clarification of the district court’s order denying Addison’s motion for
summary judgment.
In its motion for clarification, Windsor noted that the district court, in
denying summary judgment, had identified disputed issues of material fact.
Windsor now asked the district court to clarify that those disputed facts had
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pertained only to Poma. Windsor argued that, because Poma had since been
dismissed from the action, those disputed facts “no longer exist[ed].” As there
were no disputed facts pertaining to Windsor or Addison—the only remaining
parties—Windsor asked the district court to declare as a matter of law that Addison
had the duty to defend Windsor in the Florida state court action. Windsor
described this conclusion as a “corollary” to the district court’s denial of Addison’s
motion for summary judgment on the same issue.
At a November 1, 2016 hearing on Windsor’s motion for clarification and
other pretrial motions, the district court indicated its intention to grant the motion
for clarification, and, accordingly, removed the declaratory judgment action from
the trial calendar. Addressing Addison’s argument that it was entitled to a trial on
the factual basis for Owner Island’s allegations, the district court advised:
[W]hat you are talking about is not necessarily a query as to whether the policy requires you to defend when a complaint advances certain allegations.
What you are alleging—or at least it seems like you are suggesting—fraud, absolute fraud, which is a different situation than what is ordinarily contemplated in a dec action.
In response, Addison’s counsel assured the district court that Addison was
not contending that the allegations were fraudulent: “I apologize if I indicated that
what we were accusing them of rises to the level of fraud; I would never want to
saddle my client with that burden to establish fraud.” 11 Case: 17-11504 Date Filed: 12/28/2017 Page: 12 of 20
On December 23, 2016, the district court entered a written order granting
Windsor’s motion for clarification. The district court concluded that a sua sponte
grant of summary judgment in favor of Windsor was appropriate, because “the
underlying complaint in the present case clearly alleges facts that would bring the
occurrence within the ambit of coverage under Addison’s policy.” The district
court left undisturbed its prior conclusion that a determination about Addison’s
duty to indemnify was premature until the underlying Florida state court action
concluded. To that end, the district court stayed the declaratory judgment action
pending resolution of the Florida action.
E. Addison’s Motion for Reconsideration or Certification
On January 19, 2017, insurer Addison moved the district court to reconsider
its order granting the insured Windsor’s motion for clarification. In the alternative,
Addison requested that the district court “certify this matter for appeal—to the
extent this Court’s ruling is deemed nonfinal and not otherwise subject to appeal as
a matter of right—pursuant to Federal Rule of Civil Procedure 54(b) and/or 28
U.S.C. [§] 1292(b).”
On March 8, 2017, the district court granted in part and denied in part
Addison’s motion. The district court declined to reconsider its prior orders, but
agreed to certify, under Rule 54(b), its order on the motion for clarification “as a
partial final judgment in favor of Windsor on Addison’s duty to defend.”
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F. Addison’s Appeal
Addison now appeals from three orders of the district court: (1) the
September 22, 2016 order denying Addison’s motion for summary judgment;
(2) the December 23, 2016 order granting Windsor’s motion for clarification; and
(3) the March 8, 2017 order denying Addison’s motion for reconsideration.
II. JURISDICTION
Before turning to the merits, we address our jurisdiction to consider this
appeal. See Reaves v. Sec’y, Fla. Dep’t. of Corr., 717 F.3d 886, 905 (11th Cir.
2013) (the court of appeals has an obligation to review sua sponte whether it has
jurisdiction at any point in the appellate process).
Our jurisdiction is ordinarily limited to final orders of the district courts. 28
U.S.C. § 1291. However, we have jurisdiction to review nonfinal orders under
certain circumstances. One such circumstance is our jurisdiction to review an
order granting or denying an injunction. 28 U.S.C. § 1292(a)(1). We have held
that a district court order granting an insured’s motion for partial summary
judgment, and ordering an insurer to pay the insured’s defense costs in underlying
litigation, is an appealable injunction under § 1292(a)(1). Nat’l Union Fire Ins. Co.
of Pittsburgh, Pennsylvania v. Sahlen, 999 F.2d 1532, 1535 (11th Cir. 1993).
Because the district court’s orders here are reviewable under § 1292(a)(1),
we need not consider the propriety of the district court’s purported certification
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under Rule 54(b). See Ebrahimi v. City of Huntsville Bd. of Educ., 114 F.3d 162,
165 (11th Cir. 1997) (noting that even when the district court makes the required
express determinations for a Rule 54(b) certification, we must review the propriety
of the certification sua sponte because it implicates our jurisdiction); see also
Grayson v. Warden, 869 F.3d 1204, 1212 n.10 (11th Cir. 2017) (finding that a
district court’s characterization of an order as being certified under Rule 54(b) is
not dispositive, and that an order certified as appealable under Rule 54(b) may be
appealable on another basis).
Having concluded that we have jurisdiction over this appeal, we now turn to
the merits.
III. DISCUSSION
A. Standard of Review
We review a district court’s grant of summary judgment de novo. Hegel v.
First Liberty Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015). A district court
properly grants summary judgment when there is no genuine dispute as to any
material fact and the moving party is entitled to judgment as a matter of law. Id.;
Fed. R. Civ. P. 56(a). A district court also possesses the authority to grant
summary judgment sua sponte, so long as the losing party was on notice that it had
to come forward with all of its evidence. Celotex Corp. v. Catrett, 477 U.S. 317,
326, 106 S. Ct. 2548, 2554 (1986).
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We review de novo a district court’s interpretation of an insurance contract.
Hegel, 778 F.3d at 1219.
B. The Law
The parties have stipulated that Florida law applies to all substantive issues.
Under Florida law, the determination of an insurer’s duty to defend falls under the
so-called “eight corners rule,” the name of which refers to the four corners of the
insurance policy and the four corners of the underlying complaint. Mid-Continent
Cas. Co. v. Royal Crane, LLC, 169 So. 3d 174, 182 (Fla. Dist. Ct. App. 2015). Put
simply, the eight corners rule provides that an insurer’s duty to defend its insured
against a legal action “arises when the complaint alleges facts that fairly and
potentially bring the suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n,
Inc., 908 So. 2d 435, 442-43 (Fla. 2005).
If the complaint alleges facts that bring the injury within the policy’s
coverage, the insurer must defend as a matter of law, “regardless of the merits of
the lawsuit.” State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th
Cir. 2004) (applying Florida law). Indeed, the duty to defend attaches “even if the
allegations in the complaint are factually incorrect or meritless.” Jones, 908 So. 2d
at 443. Moreover, the insurer must defend the entire lawsuit, even if the complaint
“alleges facts partially within and partially outside the scope of coverage.” Trizec
Prop., Inc. v. Biltmore Constr. Co., Inc., 767 F.2d 810, 811-12 (11th Cir. 1985)
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(applying Florida law). Any doubts regarding the duty to defend are resolved in
favor of the insured. Jones, 908 So. 2d at 443.
This Court has recognized a limited exception to the eight corners rule, in
which a court may consider extrinsic facts “if those facts are undisputed, and, had
they been pled in the complaint, they clearly would have placed the claims outside
the scope of coverage.” Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1323
(11th Cir. 2014). This exception, however, is limited to “exceptional cases in
which courts have crafted an equitable remedy when it is manifestly obvious to all
involved that the actual facts placed the claims outside the scope of coverage.” Id.
(quotation omitted).
The Florida Supreme Court has shed additional light on the “property
damage” and “occurrence” terms in commercial general liability insurance
policies. The term “property damage” does not include an insured’s faulty
workmanship, but it does include physical injury to otherwise nondefective
property that results from that faulty workmanship. U.S. Fire Ins. Co. v. J.S.U.B.,
Inc., 979 So. 2d 871, 889 (Fla. 2007). Damage to otherwise nondefective property
that is caused by faulty workmanship constitutes an “occurrence,” so long as the
faulty workmanship was unintentional. Id. at 888.
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C. Analysis of Coverage
Here, Windsor’s Policy required the insurer Addison to defend its insured
Windsor against any suit seeking damages arising from “property damage,” which
included “[p]hysical injury to tangible property,” so long as that property damage
was caused by an “occurrence,” which included “continuous or repeated exposure
to substantially the same general harmful conditions.” The Policy excused
Addison from defending any action arising from property damage to Windsor’s
own work product, or to “[t]hat particular part of any property that must be
restored, repaired or replaced because ‘your work’ was incorrectly performed on
it.” For purposes of this exclusion, Windsor’s work product is the paint finishes on
the railings, and the railings are the particular part of the property on which
Windsor’s work was allegedly performed incorrectly.
The operative underlying complaint alleged that “[t]he defective railing
system, including the defective paint finish, has caused and will continue to cause
damage to other property . . . including but not limited to the railing post pockets,
the balcony concrete slabs and finishes on the balcony concrete slabs.”
Comparing the Policy with this complaint, the alleged damage to the railing
post pockets and balcony concrete slabs was “property damage,” caused by the
“occurrence” of Windsor’s allegedly faulty workmanship. J.S.U.B., 979 So. 2d at
888-89. Windsor’s work consisted only of painting the balcony railings, and the
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allegedly damaged property included the balcony concrete slabs and the finishes on
them. The coverage exclusions for repairs to Windsor’s own work, or the railing
parts on which Windsor’s work was incorrectly performed, therefore do not vitiate
Addison’s duty to defend Windsor.
The operative complaint fairly alleges facts that bring the action within
Windsor’s Policy. There are no “manifestly obvious” but unalleged facts that
would place the complaint outside of coverage. Stephens, 749 F.3d at 1323.
Under the eight corners rule, Addison’s duty to defend is triggered. Jones, 908 So.
2d at 442-43. Even if some of the alleged damage was also to Windsor’s own
work product and the railings, which would fall within one or more coverage
exclusions, Addison would be required to defend Windsor. Trizec, 767 F.2d at
811-12.
D. Duty to Defend
Addison argues that the relevant allegations in Owner Island’s complaint are
unsupported by evidence, and that this entitles Addison to a jury trial on the duty to
defend issue. Notably, however, Addison does not contend that Owner Island’s
allegations are untrue and fraudulent. Addison’s counsel disavowed that argument
at the hearing on the motion for clarification. Rather, Addison argues that more
factual verification is required before Owner Island may be allowed to “plead into
coverage.” But this is contrary to the eight corners rule. Where, as here, the
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complaint “alleges facts that fairly and potentially bring the suit within policy
coverage,” a district court properly applies the eight corners rule. Jones, 908 So.
2d at 442-43 (emphasis added). Even if the allegations of the complaint are
ultimately found to be without merit in the Florida state court action, Addison must
defend the lawsuit until that point. Id. at 443.
Addison emphasizes the Florida Supreme Court’s decision in Higgins v.
State Farm Fire Ins. and Cas. Co., 894 So. 2d 5 (Fla. 2004), but that decision does
not help Addison. In Higgins, the Florida Supreme Court, answering a certified
question from a lower state appellate court, held that Florida’s declaratory
judgment statutes “authorize declaratory judgments in respect to insurance policy
indemnity coverage and defense obligations in cases in which it is necessary to
resolve issues of fact in order to decide the declaratory judgment action.” Higgins,
894 So. 2d at 15. The Florida Supreme Court concluded, in other words, that a
declaratory judgment action does not become unavailable to an insurer merely
because some issue of fact is disputed. Id.
Higgins in no way abrogated the normal principles of summary judgment.
Nor did it hold, as Addison contends, that any time an insurer disputes a fact, the
insurer is “entitled to a determination of such facts . . . particularly where the
underlying allegations at issue appear baseless.” To the contrary, Higgins
expressly reaffirmed the eight corners rule: “[A]n insurer’s obligation to defend is
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determined solely by the complaint if suit has been filed.” Id. at 10. And the very
next year, the Florida Supreme Court reaffirmed the eight corners rule again in
Jones. 908 So. 2d at 442-43. We find no reason to disturb the district court’s
application of this settled Florida law.
IV. CONCLUSION
Based on the foregoing reasons, we conclude that the district court did not
err in granting summary judgment in favor of Windsor on the issue of Addison’s
duty to defend Windsor in the underlying Florida state court action. We therefore
affirm the orders on appeal.
AFFIRMED.