Case: 20-10840 Date Filed: 07/29/2020 Page: 1 of 16
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 20-10840 Non-Argument Calendar ________________________
D.C. Docket No. 2:18-cv-00021-JES-MRM
SOUTHERN-OWNERS INSURANCE COMPANY,
Plaintiff - Counter Defendant Appellee,
versus
MAC CONTRACTORS OF FLORIDA, LLC, d.b.a. KJIMS Construction,
Defendant - Counter Claimant Appellant,
PAUL S. DOPPELT, Trustee of Paul S. Doppelt Revocable Trust dated 12/08/90, et al.,
Defendants. Case: 20-10840 Date Filed: 07/29/2020 Page: 2 of 16
________________________
Appeal from the United States District Court for the Middle District of Florida ________________________
(July 29, 2020)
Before ROSENBAUM, BRANCH, and FAY, Circuit Judges.
PER CURIAM:
When several problems arose during the construction of a custom residence,
the property owners sued the general contractor, MAC Contractors of Florida, LLC,
doing business as KJIMS Construction (“KJIMS”), for damages. KJIMS asked its
commercial liability insurer, Southern-Owners Insurance Company (“Southern-
Owners”) to defend it, but after initially agreeing to do so, Southern-Owners
withdrew the defense and then filed this lawsuit seeking a declaration that it owed
no duty to defend or indemnify KJIMS. The district court determined that Southern-
Owners had no duty to defend because the complaint against KJIMS did not allege
“property damage” within the meaning of the insurance policy or Florida law. We
disagree and, accordingly, vacate and remand for further proceedings.
I.
On December 19, 2014, KJIMS entered into a contract with Paul and Deborah
Doppelt, as trustees of their respective trusts, to serve as the general contractor for
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the construction of a custom residence in Marco Island, Florida. An exhibit to the
contract outlined various specifications for the residence.
Problems arose between KJIMS and the Doppelts after construction began,
and KJIMS eventually left the job site before completing the project and before the
issuance of a certificate of occupancy. After serving KJIMS with a notice of defects,
see Fla. Stat. § 558.004, the Doppelts sued KJIMS in state court in August 2016. In
the operative amended complaint, they alleged, among other things, that KJIMS and
its subcontractors had left the residence “replete with construction defects.”
In the Doppelts’ notice of defects, which the amended complaint incorporated
by reference, the claimed “defects” included the following: “[r]epair loose, broken
or chipped pavers in driveway and walkways and install edge restraints”; “[r]epair
underside of lap siding – inconsistent paint finish at bottom of boards”; “[r]epair
chatter marks on T&G ceilings”; “repair damage to all exterior doors” and “[r]epair
all pocket doors”; “[r]eplace damaged top stair tread”; “[r]emedy damage to
hardwood floors, includ[ing] damage resulting from use of blue tape and dirt”;
“[r]epair metal roof dents, scratches and hems”; “[c]lean wall and ceiling paint on
cabinets”; “[r]emove paint spots on baseboards throughout the house”; “[r]emedy
scratches in granite”; and “[p]atch and paint all holes in ceilings and walls and twin
holes in exterior hardi plank.” The Doppelts sought to recover damages for “having
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to repair and remediate all defective work performed by KJIMS,” among other
things.
At all relevant times, KJIMS was insured by a commercial general liability
(“CGL”) insurance policy issued by Southern-Owners.1 KJIMS tendered the
Doppelts’ lawsuit to Southern-Owners, which initially agreed to defend KJIMS but
later withdrew the defense and filed this lawsuit in November 2017 seeking a
declaration that it owed no duty to defend or indemnify KJIMS.
On cross-motions, the district court granted summary judgment to Southern-
Owners. The court concluded that Southern-Owners owed KJIMS no duty to defend
against the Doppelts’ lawsuit based on a policy exclusion for “Damage to Your
Work.” We vacated that decision on appeal, concluding that the underlying
complaint could fairly be construed to allege damages that fell outside the exclusion.
See Southern-Owners Ins. Co. v. MAC Contractors of Fla., LLC, 768 F. App’x 970,
973–74 (11th Cir. 2019). In remanding, we noted that the court had not addressed
whether the Doppelts alleged “property damage” within the meaning of the CGL
policy, though we declined to address that issue for the first time on appeal. Id.
1 Southern-Owners issued two commercial general liability policies to KJIMS (each covering one year of the period between October 2014 and October 2016), which for our purposes are materially identical. Because it does not matter to the result which policy applies, we refer to both policies as a singular “policy.” 4 Case: 20-10840 Date Filed: 07/29/2020 Page: 5 of 16
On remand, the district court again granted summary judgment to Southern-
Owners, this time concluding that the underlying complaint did not allege “property
damage” within the meaning of the CGL policy. The court reasoned that the
underlying complaint did not allege any damage beyond the faulty workmanship or
defective work, which did not qualify as “property damage” under Florida law.
II.
We review de novo the district court’s grant of summary judgment, applying
the same standards as the district court. Southern-Owners Ins. Co. v. Easdon Rhodes
& Assocs. LLC, 872 F.3d 1161, 1163 (11th Cir. 2017). We also review de novo the
district court’s interpretation of contract language. Id. at 1164.
Under Florida law, which applies in this diversity case, an insurer’s duty to
defend “is determined solely from the allegations” in the “most recent amended
pleading” against the insured, “not by the true facts of the cause of action against the
insured, the insured’s version of the facts or the insured’s defenses.” State Farm
Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004). “[I]f the
complaint alleges facts which create potential coverage under the policy, the duty to
defend is triggered.” Trizec Props., Inc. v. Biltmore Constr. Co., Inc., 767 F.2d 810,
812 (11th Cir. 1985). Any doubt about whether the insurer owes a duty to defend
must be resolved against the insurer and in favor of the insured. Id. Thus, if “the
language of the complaint, at least marginally and by reasonable implication, could
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be construed” to create potential coverage under the policy, the insurer owes a duty
to defend. Id. at 813 (quotation marks omitted). In other words, an insurer is
“required to offer a defense in the underlying action unless it [is] certain that there
[is] no coverage for the damages sought.” Carithers v. Mid-Continent Cas. Co., 782
F.3d 1240, 1246 (11th Cir. 2015).
KJIMS maintains that the Florida Supreme Court’s two decisions, United
States Fire Insurance Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007), and Auto-
Owners Insurance Co. v. Pozzi Window Co., 984 So. 2d 1241 (Fla. 2008), govern
this case and dictate that there was a duty to defend under the CGL policy. While
noting that this Court interpreted these decisions narrowly in Amerisure Mutual
Insurance Co. v. Auchter Co., 673 F.3d 1294 (11th Cir.2012), KJIMS contends that
the dissenting opinion in Auchter more accurately reflects Florida law. KJIMS also
asserts that, even under Auchter, there is still potentially “property damage” within
the scope of the CGL policy. We begin our analysis with the relevant law.
A.
In J.S.U.B., the Florida Supreme Court addressed whether a subcontractor’s
defective soil preparation, which caused structural damage to several homes, had
caused “property damage” within the meaning of a standard CGL policy. J.S.U.B.,
979 So. 2d at 875, 889. In concluding that the structural damage was “property
damage,” the court drew a distinction between “a claim for the costs of repairing or
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removing defective work, which is not a claim for ‘property damage,’ and a claim
for the costs of repairing damage caused by the defective work, which is a claim for
‘property damage.’” Id. at 889. Thus, “faulty workmanship or defective work that
has damaged the otherwise nondefective completed project has caused ‘physical
injury to tangible property’ within the plain meaning of the definition in the policy.”
Id. But “[i]f there is no damage beyond the faulty workmanship or defective work,
then there may be no resulting ‘property damage.’” Id. Because the claim in that
case was “for repairing the structural damage to the completed homes caused by the
subcontractor’s defective work”—not for “the cost of repairing the subcontractor’s
defective work”—it was covered as “property damage.” Id. at 900.
Then, in Pozzi Window, the Florida Supreme Court considered whether
“property damage” resulted from a subcontractor’s defective installation of custom
windows. See Pozzi Window, 984 So. 2d at 1247–48. The court reiterated the
distinction drawn in J.S.U.B., explaining it in these terms: “In essence, the mere
inclusion of a defective component, such as a defective window or the defective
installation of a window, does not constitute property damage unless that defective
component results in physical injury to some other tangible property.” Id. at 1248.
A claim in which the sole damages are for replacement of a defective component or
correction of faulty installation is not a claim for “property damage.” Id. But if the
claim is for the cost of repairing damage caused by defective work—e.g., “if the
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claim is for the repair or replacement of windows that were not initially defective
but were damaged by the defective installation”—then there is physical injury to
tangible property and therefore “property damage.” Id. at 1249. The court
ultimately did not resolve whether the windows were covered, however, because the
record contained a factual issue—whether the “defective work” was limited to the
faulty installation or whether the windows themselves were also defective—that the
court said was “determinative of the outcome.” Id.
We interpreted these cases in Auchter, which is binding on us here. See
EmbroidMe.com, Inc. v. Travelers Prop. Cas. Co., 845 F.3d 1099, 1105 (11th Cir.
2017) (“[W]hen we have issued a precedential decision interpreting that state law,
our prior precedent rule requires that we follow that decision, absent a later decision
by the state appellate court casting doubt on our interpretation of that law.”). In
Auchter, a subcontractor negligently installed barrel roof tiles on an inn, causing
them to dislodge in high winds and damage other tiles or become lost, and requiring
total reconstruction of the roof. Auchter, 673 F.3d at 1296–97. The plaintiff argued
that the defective installation of tiles caused property damage to the roof. Id. at
1307–08.
In rejecting this argument, we interpreted J.S.U.B. as holding that there is no
coverage for “property damage” “[i]f there is no damage beyond the faulty
workmanship, i.e., unless the faulty workmanship has damaged some ‘otherwise
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nondefective’ component of the project.” Id. at 1306 (quotation marks omitted). We
further stated that, under Pozzi Window, “if a subcontractor is hired to install a
project component and, by virtue of his faulty workmanship, installs a defective
component, then the cost to repair and replace the defective component is not
‘property damage.’” Id. “In other words, unless th[e] defective component results
in physical injury to some other tangible property, i.e., other than to the component
itself, there is no coverage.” Id. at 1306–07 (quotation marks omitted).
Reasoning that the “defective component” at issue in Auchter was the “roof
as a whole,” not the “roofing tiles themselves,” we concluded that there was no
“property damage” because the defective roof had not “resulted in physical injury to
some other tangible property.” Id. at 1308 (emphasis in original) (quotation marks
omitted). Because the plaintiff simply sought to remedy the “the defect itself”—the
defective roof—and “ha[d] never claimed . . . damage to any component of the Inn
other than the roof itself,” the claim was not for “property damage.” Id. at 1309–10.
Rather, we concluded, the “claim is . . . simply a claim for the cost of repairing the
subcontractor’s defective work.” Id. at 1307. Although the defective work required
“total reconstruction” of the roof, we found that the damage to individual tiles, which
we described as “simply the materials used to construct the defective component,”
were “irrelevant to the ‘property damage’ determination.” Id. at 1308. Because the
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plaintiff’s “only alleged damage is the defect itself,” there was no “property damage”
“under the language of the CGL [policy] or Florida law.” Id. at 1309.
Then-Chief Judge Ed Carnes dissented, criticizing the majority for
misinterpreting Pozzi Window. See id. at 1310–13 (Carnes, C.J., dissenting).
According to Judge Carnes, “The Pozzi Window formula is: non-defective
components damaged by defective installation equals physical injury to tangible
property, which is property damage.” Id. at 1312. And in Auchter, because the
roofing tiles were not defective before installation but were damaged by defective
installation—resulting in the total loss of all original tiles, which had been bought
by the plaintiff—there was “property damage” to the tiles just like there was
“property damage” to the windows in Pozzi Window. Id. at 1311–12. Pozzi Window,
Judge Carnes observed, does not require damage to some other “nondefective
component” where, as in Auchter and Pozzi Window, a nondefective component was
damaged by defective installation. Id.
Then, in Carithers, we applied Auchter’s “narrow[]” interpretation of Pozzi
Window to reject several claims for damages asserted by homeowners, as assignees
of the insured, for various construction defects. See Carithers, 782 F.3d at 1249–50
(“The Auchter court interpreted Pozzi Window narrowly”). We stated that “Auchter
held that there is no coverage for a defective installation where there is no damage
beyond the defective work of a single sub-contractor.” Id. at 1250. Applying this
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rule, we held that the plaintiffs could not recover for damage to brick caused by the
negligent application of brick coating or damage to tile caused by defective
installation because the damage to the brick and the tile was “part of the sub-
contractor’s work, and this defective work caused no damage apart from the
defective work itself.” Id. at 1250–51.
Importantly, however, we reasoned that the Auchter rule applies only when
the defective work is performed by “the same sub-contractor.” Id. at 1251. We
explained that if defective work performed by one subcontractor damages work
performed by another subcontractor, then there is “damage apart from the defective
work itself” and therefore “property damage.” See id. at 1250–51 (“[I]f the bricks
were installed by one sub-contractor, and a different sub-contractor applied the brick
coating, then the damage to the bricks caused by the negligent application of the
brick coating was not part of the sub-contractor’s defective work, and constituted
property damage.”). So under Carithers, whether “property damage” occurred may
depend on whether the damaged property was part of the subcontractor’s defective
work or was the work of a separate subcontractor. See id.
B.
KJIMS maintains that, under J.S.U.B. and Pozzi Window, the underlying
complaint potentially alleges “property damage” because it alleges “repair of items
that were not initially defective but damaged by the defective installation.” Br. of
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Appellant at 25. KJIMS further argues that, even under Auchter’s narrow
interpretation of these cases, there was a potential for coverage that triggered the
duty to defend.
Although KJIMS believes that Auchter was wrongly decided and that Judge
Carnes’s dissenting opinion “more accurately reflects the state of Florida law today,”
Br. of Appellant at 20, we are obliged to follow the majority opinion in Auchter and
its interpretation of Florida law, even if we are convinced that it is wrong. See
EmbroidMe.com, 845 F.3d at 1105; see also Carithers, 782 F.3d at 1249–51
(applying Auchter).
Under Auchter, “there is no coverage for a defective installation where there
is no damage beyond the defective work.” Carithers, 782 F.3d at 1250. The district
court reasoned that this rule covered all the damages asserted by the Doppelts in the
underlying lawsuit. But as we recognized in Carithers, application of this rule may
depend on which subcontractor performed which work. See Carithers, 782 F.3d at
1250–51 (“[I]f the bricks were installed by one sub-contractor, and a different sub-
contractor applied the brick coating, then the damage to the bricks caused by the
negligent application of the brick coating was not part of the sub-contractor’s
defective work, and constituted property damage.”).
Here, the language of the underlying complaint, “at least marginally and by
reasonable implication, could be construed” to create potential coverage under the
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policy. Trizec Props., 767 F.2d at 813. The operative amended complaint alleged
that KJIMS used subcontractors for work on the residence and that the residence was
“replete with construction defects” and various damage. It did not further allege
which subcontractors performed which work or how the damage occurred. Given
these ambiguities, the complaint’s allegations are broad enough to allow KJIMS to
prove that one subcontractor negligently damaged nondefective work performed by
another subcontractor. See id. If KJIMS could establish that at least some of the
damage arose in this way, there would be “damage apart from the defective work
itself” and therefore “property damage.” See Carithers, 782 F.3d at 1250–51.
Because there is a potential for coverage, the duty to defend was triggered. See
Trizec Props., 767 F.2d at 813.
Southern-Owners replies that this reasoning “ignores . . . what constitutes
covered ‘property damage,’ as well as the burden of alleging same to implicate
coverage.” Br. of Appellee at 12. But Southern-Owners fails to account for
Carithers. And while it’s ultimately KJIMS’s burden to prove that “the damaged
property was the work of a separate sub-contractor,” Carithers, 782 F.3d at 1250,
the question for purposes of the duty to defend is simply whether there is a potential
for coverage based solely on the allegations of the operative pleading against the
insured, see Trizec Props., 767 F.2d at 811–13. As we explained above, there is.
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For these reasons, we conclude that the underlying operative complaint can
fairly be construed to allege “property damage” within the meaning of the CGL
policy and Florida law. Accordingly, the district court erred in granting summary
judgment to Southern-Owners on this basis.
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C.
In the alternative, Southern-Owners argues that, even if “property damage”
was alleged, we should still affirm the judgment in its favor based on several policy
exclusions which, in its view, clearly preclude coverage. We have already
concluded that one of these exclusions—a completed-operations hazard exclusion—
did not eliminate the duty to defend. Southern-Owners, 768 F. App’x at 973–74.
With regard to exclusions j(6) and j(7) of the policy, the other exclusions on
which Southern-Owners relies, these provisions exclude coverage for “property
damage” to the following:
(6) That particular part of real property on which any insured or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or
(7) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
Southern-Owners asserts that the phrase “[t]hat particular part” refers to the “entire
project at issue (i.e. the Subject Property in its entirety),” so in its view, these
exclusions apply to any damage caused by defective work performed by or on behalf
of KJIMS on the residence. KJIMS, for its part, points to authority indicating that
these exclusions would not apply to property damage that occurred during operations
on the property as a whole “but at a moment in time when neither KJIMS nor its
subcontractors specifically worked on” the “particular part of [the] property” that
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was damaged or must be restored, repaired, or replaced. See Br. of Appellee at 15–
17. The district court did not reach this issue, however, and we decline to address it
for the first time on appeal, “preferring that the district court address it in the first
instance.” Beavers v. Am. Cast Iron Pipe Co., 975 F.2d 792, 800 (11th Cir. 1992).
III.
In sum, we hold that the allegations in the underlying operative complaint
potentially create coverage for “property damage” under the CGL policy and Florida
law. We therefore vacate the district court’s grant of summary judgment on that
basis, and we remand for further proceedings consistent with this opinion.
VACATED AND REMANDED.