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Page 474 DEFENSE COUNSEL JOURNAL–October 2012LaMarche as binding precedentin this case. 21The problem with this transparentjustification is that it fails to explain howconsidering the language of an exclusioncan aid in the determination of theinsuring agreement. In LaMarche, thecoverage grant was identical to that atissue in J.S.U.B., requiring an“occurrence” resulting in “propertydamage.” The exclusion at issue inLaMarche was the former exclusion (o),which equates to the current exclusion (l),or the damage to “your work” exclusion.The former provision stated that theinsurance did not apply:to property damage to workperformed by or on behalf of thenamed insured arising out of thework or any portion thereof, orout of materials, parts orequipment furnished inconnection therewith. 22By contrast, the current exclusion (l),excludes coverage for:“Property damage” to “yourwork” arising out of it or any partof it and included in the“products-completed operationshazard”.This exclusion does not apply if thedamaged work or the work out of whichthe damage arises was performed on yourbehalf by a subcontractor.21 J.S.U.B., 979 So. 2d at 882.22 LaMarche, 390 So. 2d at 326.So, the newer provision removeswork performed on the insured’s behalffrom the exclusion, whereas the olderversion expressly included workperformed on the insured’s behalf.Having recited the foregoingdifferences, the Court then resumed itsanalysis of whether defective constructionconstituted an “occurrence.” After citingto several other state decisions whichfound that such defects were“occurrences,” it then completely omittedany analysis of the issue and simply putforth the bold proposition that:If U.S. Fire intended to precludecoverage based on the cause ofaction asserted, it was incumbenton U.S. Fire to include clearlanguage to accomplish thisresult. ... In fact, there is abreach of contract endorsementexclusion, not present in the CGLpolicies at issue in this case, thatexcludes coverage for breach ofcontract claims. ... 23Of course, the court did not explainwhy U.S. Fire needed to include anendorsement to exclude coverage whichthe Florida Supreme Court had alreadyannounced did not exist. Analyzingwhether the insuring agreement of thepolicy is triggered in the first instance iscertainly different from analyzingwhether the exclusions bar coveragewhich otherwise exists. In other words,the Court put the proverbial cart beforethe horse by concluding that U.S. Firefailed to use clear language to precludecoverage.23 J.S.U.B., 979 So. 2d at 884.
Raising the Roof Page 475The question of whether defectiveconstruction is an “occurrence” askswhether the loss itself is the typecontemplated by the policy. Only if theanswer to that question is “Yes” is thereany need to consider whether any otherprovision of the policy precludes thatcoverage. Therefore, the Court’s relianceon U.S. Fire’s failure to use clearpreclusionary language in support of itsconclusion that defective constructionconstitutes an “occurrence” isnonsensical. Its analysis demonstratesthat the Court never really analyzedwhether defective construction isaccidental or fortuitous. Rather, it simplycited to changes in the relevant exclusionsto justify its departure from decades ofsettled precedent.E. Harmonization of theDecisionsDespite what appear to be a fairlysignificant divergence of views on thescope of coverage under the broad formgeneral liability policy, the reality is thatonly in a few states will builders have theequivalent of performance bond coverage(but without the insurer’s concomitantright to recoup any payments thereunderfrom the insured). Obviously, contractorsin Florida and Texas and the other stateswhich apply their rationale (see AppendixI) will enjoy broad coverage. Even inthose states, it is fair to assume that workdone by the contractor itself will not becovered. In J.S.U.B., the contractor subcontractedall of the work on the home.Therefore, all of the property damage wascovered. But even the J.S.U.B. decisionmakes it fairly clear that defective workthat is performed by the contractor itselfwill not be covered.As a result, we discern a broad themerunning through the great majority ofdecisions, such that several broadprinciples of law can be said to be theoverwhelming majority rule. First, claimsof defective construction, standing alone,do not meet the element of fortuitynecessary to constitute an accident andare therefore not covered. Second, wherethe work in question was performed by asubcontractor, the damage is eitherconsidered accidental from the standpointof the insured or fits within thesubcontractor exception to the “yourwork” exclusion. Third, to the extent theinsured’s defective work results indamage to other property not the subjectof the insured’s work, that damage islikely covered. In essence, after fortytwoyears of litigation, we end up at thesame place Dean Henderson described in1971. 24II. Other IssuesIn the aftermath of the constructiondefect litigation explosion, insurers,claims professionals and attorneyscontinue to struggle with other issues.While it is simple to say that damage tothe insured’s work is not covered,application of that principle is moredifficult, particularly in the context of theall-too-common water intrusion claimthat seems to define much of the currentlitigation. In the event the stucco isdefective, resulting in rotting of structuralframing members and damage to drywall,how do we parse the cost of removing24 See supra note 8.
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