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Southern District of Florida: Corrosion to insured property is not property damage under a CGL policy

December 13
2012

Granting the defendants’ motion for summary judgment, Federal District Judge Kenneth Ryskamp of the United States District Court for the Southern District of Florida, West Palm Beach Division, found that  corrosion caused by the addition of a powdered coating to railings does not constitute “property damage” within the meaning of a CGL policy as there must be damage to tangible property other than the railings themselves.

Is corrosion “property damage” caused by an “occurrence?”

The CGL policies in issue provided coverage for “property damage” caused by an “occurrence.” The parties did not dispute that the defective fabrication and installation of the railings  constituted an occurrence. The sole dispute is whether the damage caused by the defective coating applied to the railings constitutes “property damage.”

Citing the Florida Supreme Court’s decisions in Auto-Owners Insurance Co. v. Pozzi Window Co., 984 So. 2d 1241 (Fla. 2008) and U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, (Fla. 2007), the district court highlighted the following distinction drawn by the Florida Supreme Court:

[F]aulty 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 of the policy. If there is no damage beyond the faulty workmanship or defective work, then there may be no resulting “property damage.”

The district court further highlighted this explanation from the Florida Supreme Court:

[T]here is a difference between a claim for the costs of repairing or 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.”

Where A Contractor’s Claim Is for the Cost of Repairing the Subcontractor’s Defective Work, It Is Not Covered by the CGL Policy.

The district court concluded:

Thus, where a contractor’s claim is for the cost of repairing the subcontractor’s defective work, it is not covered under a CGL policy. Where a contractor’s claim is for the cost of repairing damage to property outside of the subcontractor’s defective work (caused by the subcontractor’s work), it is covered under a CGL policy.

11-CV-81339-Structural Group, Inc. v. FCCI Comm. Ins. Co., et al (S.D. Fla. Dec. 11, 2012)

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