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KB Home Jacksonville LLC v. Liberty Mutual Fire Insurance Co.

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

September 5, 2019

KB HOME JACKSONVILLE LLC, Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE COMPANY and IRONSHORE SPECIALTY INSURANCE COMPANY, Defendants.

          ORDER

          MARCIA MORALES HOWARD UNITED STATES DISTRICT JUDGE.

         THIS CAUSE is before the Court on Plaintiff KB Home Jacksonville LLC's Motion for Partial Summary Judgment Against Defendant Ironshore Specialty Insurance Company and Incorporated Memorandum of Law (Doc. 52; Motion), filed on December 14, 2018. Defendant Ironshore filed a response in opposition on January 22, 2019. See Defendant Ironshore Specialty Insurance Company's Response in Opposition of Plaintiff KB Home Jacksonville LLC's Motion for Partial Summary Judgment and Incorporated Memorandum of Law (Doc. 57; Response). With leave of Court, see Order (Doc. 59), KB Home replied on February 12, 2019. See Plaintiff KB Home Jacksonville LLC's Reply in Support of Motion for Partial Summary Judgment Against Defendant Ironshore Specialty Insurance Company (Doc. 60; Reply). Accordingly, the Motion is ripe for review.

         I. Background[1]

         In this action, KB Home seeks declarations that the defendant insurance companies have a duty to defend KB Home in Florida state-court actions (the Underlying Litigation) filed by individual homeowners against KB Home regarding its allegedly defective construction and development of 6 residential developments in St. Johns County and Clay County, Florida (the Project). See generally Amended Complaint (Doc. 14); Motion, Exhibit A: Declaration of Stephen S. Asay (Doc. 52-1; Asay Declaration) at 3-4. KB Home served as the general contractor for the Project and, in doing so, utilized various subcontractors. See Amended Complaint at 4. As relevant here, as part of the Project, in 2006, KB Home subcontracted with Florida State Plastering, LLC (FSP) to install stucco. See Asay Declaration, Exhibit 1: Subcontract (Doc. 52-2).

         A. The Underlying Litigation

         According to KB Home, 88 complaints in the Underlying Litigation implicate FSP's stucco work on the Project, 83 of which “contain materially identical counts/claims and allegations” (the Underlying Complaints) and are the subject of the instant Motion.[2] See Asay Declaration at 2-3. Rather than submit all 83 Underlying Complaints to the Court, KB Home has submitted two representative complaints, see id., Exhibit 3: Complaint, No. CA17-0247 (Doc. 52-4; Gilbert Complaint); id., Exhibit 4: Complaint, No. CA17-0536 (Doc. 52-5; Rowland Complaint), and has produced all 83 Underlying Complaints to Ironshore, id. at 2-3. KB Home has also provided a summary chart that lists all 83 Underlying Complaints and identifies the specific page number on which allegations relevant to Ironshore's duty to defend appear. See id., Exhibit 6: Underlying Complaint Summary (Doc. 52-7; Summary Chart).

         In the Underlying Complaints, the homeowner plaintiffs assert claims of vicarious liability against KB Home for the negligence of its stucco subcontractor. See Asay Declaration at 3-4; Summary Chart; Gilbert Complaint at 7-8; Rowland Complaint at 5-6. In particular, the plaintiffs allege that the stucco subcontractor's work failed to comply with the Florida building code and, as a result, the plaintiffs' homes suffer from construction defects. Id. They further allege that the stucco subcontractor's defective work caused “damages not only to the exterior stucco, but also the underlying wire lath, paper backing, house wrap, wood sheathing, interior walls, interior floors, and/or other property.” Gilbert Complaint at 7-8; see also Rowland Complaint at 5-6. Although the plaintiffs do not name FSP as a defendant in the Underlying Complaints or specifically state that FSP performed the stucco work at issue, KB Home has identified FSP as the stucco subcontractor that performed that work. See Asay Declaration at 3.

         Notably, in the Underlying Complaints the plaintiffs also do not allege when the property damage occurred or when it was discovered. Instead, the plaintiffs allege that “[s]ubsequent to construction of the Home, certain design and construction deficiencies were observed at the Home, which include, but are not limited to, an inadequately and improperly installed stucco system.” Gilbert Complaint at 3; see also Rowland Complaint at 3. The plaintiffs further allege that “[t]he existence or causes of the defects are not readily recognizable by [p]laintiffs, ” and that “[t]he defects are hidden by components or finishes, are latent in nature, and are defects that require special knowledge or training to ascertain and determine the nature and causes of the defects.” Gilbert Complaint at 3-4; see also Rowland Complaint at 3-4. Although the plaintiffs do not allege when FSP completed its work on the Project, KB Home has acknowledged that FSP completed its work in 2008. See Amended Complaint at 4.

         B. Ironshore's Policy

         Ironshore insured FSP under a commercial general liability (CGL) policy, which provided coverage from December 1, 2009, to December 1, 2010.[3] See Asay Declaration, Exhibit 2: 2009-10 Ironshore Policy (Doc. 52-2; Policy).[4] The Policy provides coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury' or ‘property damage' to which this insurance applies.” See Policy at 5. For the insurance to apply, the “property damage” must be “caused by an ‘occurrence' that takes place in the ‘coverage territory.'” Id. An “occurrence” is defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Id. at 17. In addition, the “property damage” must “occur[ ] during the policy period.” Id. at 5. The Policy defines “property damage, ” in relevant part, as “[p]hysical 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 caused it.” Id. at 17. The Policy provides that Ironshore “will have the right and duty to defend the insured against any ‘suit' seeking . . . damages for . . . “property damage.” Id. at 5.

         KB Home is an additional insured under the Policy, see Policy at 53, ‘but only with respect to liability for ‘bodily injury' or ‘property damage' caused, in whole or in part, by ‘your work' at the location designated and described in the schedule of this endorsement performed for that additional insured and including in the ‘products-completed operations hazard.'”[5] Id. at 54. The Policy defines “your work” to include “[w]ork or operations performed by you or on your behalf” where “[t]hroughout this policy the words ‘you' and ‘your' refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy.” Policy at 5, 18.

         Of particular significance to the instant dispute, the Policy includes a Continuous or Progressive Injury or Damage Exclusion (CP Exclusion) which provides as follows:

         This insurance does not apply to any “bodily injury” or “property damage”:

1. which first existed, or is alleged to have first existed, prior to the inception of this policy. “Property damage” from “your work”, or the work of any additional insured, performed prior to policy inception will be deemed to have first existed prior to the policy inception, unless such “property damage” is sudden and accidental and takes place within the policy period); or
2. which was, or is alleged to have been, in the process of taking place prior to the inception date of this policy, even if the such “bodily injury” or “property damage” continued during this policy period; or
3. which is, or is alleged to be, of the same general nature or type as a condition, circumstance or construction defect which resulted in “bodily injury” or “property damage” prior to the inception date of this policy.

Id. at 31.

         C. The Instant Action

         On March 19, 2018, KB Home initiated the instant declaratory judgment action seeking, among other things, declarations that Liberty Mutual and Ironshore are obligated to defend KB Home in the Underlying Litigation.[6] See Original Complaint (Doc. 1). Specifically, KB Home contends that because the plaintiffs in the Underlying Litigation allege that FSP's defective stucco installation resulted in property damage to other parts of the Project, both insurers have a duty to defend KB Home as an additional insured. See Amended Complaint at 2. On August 20, 2018, the parties informed the Court that Liberty Mutual “agree[d] that its defense obligation was triggered” by the allegations of the underlying complaints.[7] See Joint Notice at 2. However, in its motion for partial summary judgment, Liberty Mutual argued that its duty to defend KB Home ended on June 2, 2017, when Liberty Mutual offered its policy limits to settle an unrelated class action against other insureds in South Carolina state court. See Defendant Liberty Mutual Fire Insurance Company's Motion for Partial Summary Judgment on the Duty to Defend (Doc. 44; Liberty Mutual's Motion). The Court denied Liberty Mutual's Motion in a separate order also dated September 5, 2019.

         In the instant Motion, KB Home asks “that the Court enter an order finding, as a matter of law, that the allegations in the Underlying Complaints trigger Ironshore's duty to defend KB HOME in the Underlying [Litigation].” Motion at 16. In response, Ironshore argues that KB Home is not entitled to partial summary judgment because there are material facts in dispute and therefore the Motion is premature. See Response at 10-12. Additionally, Ironshore maintains that it has no duty to defend KB Home because Liberty Mutual has already agreed to do so, id. at 12-13, and because the Policy's CP Exclusion bars coverage, id. at 14-17.[8]

         II. Standard of Review

         Under Rule 56 of the Federal Rules of Civil Procedure (Rule(s)), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a). The record to be considered on a motion for summary judgment may include “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Rule 56(c)(1)(A).[9] An issue is genuine when the evidence is such that a reasonable jury could return a verdict in favor of the nonmovant. See Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (quoting Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 919 (11th Cir. 1993)). “[A] mere scintilla of evidence in support of the non-moving party's position is insufficient to defeat a motion for summary judgment.” Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d 1243, 1247 (11th Cir. 2004) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).

         The party seeking summary judgment bears the initial burden of demonstrating to the court, by reference to the record, that there are no genuine issues of material fact to be determined at trial. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). “When a moving party has discharged its burden, the non-moving party must then go beyond the pleadings, and by its own affidavits, or by depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir. 1995) (internal citations and quotation marks omitted). Substantive law determines the materiality of facts, and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. In determining whether summary judgment is appropriate, a court “must view all evidence and make all reasonable inferences in favor of the party opposing summary judgment.” Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995) (citing Dibrell Bros. Int'l, S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578 (11th Cir. 1994)).

         III. Applicable Law

         Under Nevada law, [10] insurance contracts are interpreted “from the perspective of one not trained in law or in insurance, with the terms of the contract viewed in their plain, ordinary and popular sense.” Century Sur. Co. v. Casino W., Inc., 329 P.3d 614, 616 (Nev. 2014) (internal quotation marks and citation omitted). When interpreting an insurance policy, courts should “consider the policy as a whole to give reasonable and harmonious meaning to the entire policy. . . .” Id. Moreover, because insurance policies are contracts of adhesion, they “should be interpreted broadly, affording the greatest possible coverage to the ...


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