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Essex Insurance Co. v. Kart Construction, Inc.

United States District Court, M.D. Florida, Tampa Division

August 10, 2015

ESSEX INSURANCE COMPANY, Plaintiff,
v.
KART CONSTRUCTION, INC., et al., Defendants.

          ORDER

          STEVEN D. MERRYDAY UNITED STATES DISTRICT JUDGE.

         Kart Construction submitted to Essex Insurance a claim for indemnity. Essex denied the claim and sues (Doc. 117) Kart for a judgment declaring that Essex has no duty to indemnify Kart. Essex moves (Doc. 120) for summary judgment.

         BACKGROUND[1]

         On August 21, 2013, a 127-foot cell tower caught fire. The tower consisted of telescoped cylinders, that is, progressively smaller cylinders stacked vertically with the largest-diameter cylinder at the bottom. The fire occurred on the third day of a three-day operation in which Kart welded three “bridge stiffeners” and three plates to two cylinders that connected at an elevation of 100 feet. Kart welded the three “bridge stiffeners” across the intersection of the two cylinders and welded the three plates just above the intersection. The lowest welding occurred at an elevation of 97 feet; the highest welding occurred at an elevation of 107 feet.

         During the three-day welding operation, “there was no work being performed on anything other than the metal exterior of the” tower. (Doc. 125 ¶ 9) Kart's welder, an experienced welder who “adhered to all applicable welding procedures” and put “in place” “all fire prevention measures, ” noticed a fire a “short period of time” after “weld[ing] the last piece of metal to the exterior” of the tower. (Doc. 125 ¶¶ 11, 12, 21) The fire, which “occurred by chance from unknown or remote causes, ” damaged “Sprint antennas, T-Mobile antennas, tower lights, cabling, foundations, and other equipment.” (Doc. 124 ¶¶ 16) “The . . . cable is not part of the [tower] upon which the work was performed.” (Doc. 125 ¶ 16)

         At the time of the fire, Essex insured Kart under a standard “Commercial General Liability Coverage” policy, and the policy's coverage provision included the fire damage.[2] However, Sections I(2)(j)(5) and (j)(6), which exclude damage otherwise covered, state:

         2. Exclusions

This insurance does not apply to:
. . . .
j. Damage To Property
“Property damage” to:
. . .
(5) That particular part of real property on which you 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
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

(Doc. 120-1 at 13, 15-16)[3]

         Under the policy, Kart submitted a claim to Essex for the damage that the fire caused. Citing the exclusions in Sections (j)(5) and (j)(6), Essex denied Kart's claim. Essex sues for a declaration “finding [that Essex has] no duty to defend and no duty to indemnify Kart Construction.” (Doc. 120 at 16) Essex moves (Doc. 120) for summary judgment.[4]

         DISCUSSION

         “[C]onstruction of an insurance policy . . . is a question of law.” Washington Nat'l Ins. Corp. v. Ruderman, 117 So.3d 943, 948, 950 (Fla. 2013). “[I]nsurance contracts are construed according to their plain meaning.” Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So.2d 528, 532 (Fla. 2005). The parties agree that Kart's policy covers all the damage that the fire caused unless Section (j)(5) or (j)(6) excludes coverage. Essex argues and Kart disputes that Sections (j)(5) and (j)(6) exclude from coverage the damage to the tower.

         1. Section (j)(5)

         Section (j)(5) excludes from coverage “‘[p]roperty damage' to . . . [t]hat particular part of real property on which [Kart is] . . . performing operations, if the ‘property damage' arises out of those operations.” Columbia Mutual Insurance Co. v. Schauf, 967 S.W.2d 74, 77 (Mo. 1998), best explains the purpose of commercial general liability insurance and the exclusion in Section (j)(5):

[A commercial general liability] policy insures, among other things, certain property damage caused by accident to the property of others. The intent of [commercial general liability] policies . . . is to protect against the unpredictable, potentially unlimited liability that can be caused by accidentally causing injury to other persons or their property.
A commercial general liability policy . . . is not intended to protect business owners against every risk of operating a business. Some risks, termed “business risks, ” are considered the responsibility of the business owner, rather than the insurer; consequently, they are excluded from coverage. Business risks are those risks that are the normal, frequent, or predictable consequences of doing business, and which business management can and should control and manage. Excluding such risks from coverage lowers insurance rates and provides an incentive for business owners to manage their businesses more effectively. The business risk exclusions are based on the apparently simple premise that general liability coverage is not intended as a guarantee of the quality of an insured's product or work. In an attempt to give effect to the intent underlying both the coverage and exclusion provisions of commercial liability policies, courts have interpreted such policies as insuring the risk of the insured causing damage to other persons and their property, but not insuring the risk of the insured causing damage to the insured's own work.
[Section (j)(5)], an exclusion for property damage to “[t]hat particular part of real property on which [the insured] is performing operations, if the ‘property damage' arises out of those operations, ” is a business risk exclusion. The . . . exclusion denies coverage for more than just damage to the insured's work, however, by excluding from coverage damage to the particular part of property on which the insured is performing operations.

(footnote, citations, and internal quotation marks omitted).

         The parties' briefs appear to dispute the importance of Section (j)(5)'s use of “that particular part.” Under Kart's preferred interpretation, which contemplates the narrowest breadth to the exclusion from coverage, Kart “operated on” (or, more precisely, “welded on”) a ten-foot segment of the tower, so the segment is the “particular part” of the real property excluded from coverage. Under Kart's alternate interpretation, Section (j)(5) excludes from coverage only the damage to the tower “sleeve” but “not the damage to the coaxial cable, exterior antennas, tower mast, amplifier, components or other equipment.” (Doc. 126 at 8-9) Under Essex's interpretation, which contemplates the greatest breadth to the exclusion from coverage, Kart “operated on” the whole tower, so the whole tower is the “particular part” of the real property excluded from coverage.

         At a July 17, 2015 hearing (Doc. 150), Essex stipulated that if Kart's operations on the tower consisted only of the welding operations, Section (j)(5) would exclude from coverage only the damage to the ten-foot portion of the tower. Essex explained that a separate agreement (designed to prevent a fire) required Kart (1) to remove debris from the entire tower before welding, (2) to wet the entire tower before welding, (3) to wet any surrounding vegetation before welding, and (4) to monitor the area during the welding and for two hours after the welding for signs of a fire. According to Essex, these fire-prevention measures, along with the welding operation, constitute the “operations” identified in the Section (j)(5) exclusion, which encompasses the work performed on the entire tower and the surrounding area. Thus, Essex argues that Section (j)(5) excludes from coverage damage to any part of the tower.

         At the hearing (and in the briefs), the parties relied on America Equity InsuranceCo. v. Van Ginhoven, 788 So.2d 388 (Fla. 5th DCA 2001) (Pleus, J.), which is the Florida precedent most applicable to this action.[5 ...


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