Insurance Coverage for Construction Damages

I recently authored a blog on insurance coverage triggers for construction defects under Florida law. Insurance coverage for residential and commercial construction projects and understanding when coverage is implicated (triggered) is critical.  In many cases, the applicable insurance policies are commercial general liability (CGL) policies.  These policies are occurrence based and only provide for indemnification for property damage or personal injury that takes place during the policy period.   In many situations, these CGL policies are the only possible avenue of recovery for damages.

There has been some debate that, for purposes of determining an “occurrence” under the applicable insurance policy, it is the “manifestation” trigger and not the “injury in fact” trigger that determines the insurance policy that applies.  A recent Middle District of Florida case addressed the “injury in fact” and “manifestation” trigger debate.  St. Paul & Marine Insurance Co. v. Cypress Fairway Condominium Association, Inc., et al. Under the “manifestation” trigger, the relevant inquiry for insurance coverage is when the damages were discovered or could have been discovered.  Under the “injury-in-fact” trigger, the relevant inquiry to determine the applicable insurance policy is when the property is damaged.

In Cypress, St. Paul, the insurer for the general contractor, moved for summary judgment in a case involving construction defects and water intrusion on a condominium project.  St. Paul issued several commercial general liability policies to the general contractor. The defendants, the original owner and its general partner, argued they were covered under the St. Paul polices.  One of the counts in this lawsuit included a claim for negligent supply of information.  St. Paul argued and sought a declaration that it had no coverage obligations for the underlying suit or for a consent judgment.

The court in Cypress held that the injury in fact rule was the appropriate trigger for insurance coverage.  The court went on to say that St. Paul had the burden to show that the property damage did not occur during the policy period to prevail at summary judgment.  Since the damages could have occurred during the applicable periods of the policies, the court denied St. Paul’s motion for summary judgment.

The Cypress case is yet another indication that Florida courts will apply the injury in fact rule as the applicable trigger for insurance coverage, rather than the manifestation rule.