Duty to Defend Question

 

March 3, 2014

 

The insurer brought a declaratory judgment action against the insured, asserting that it had no duty to defend the insured under the general liability policy regarding a claim against the insured based on repair work. This case is Nationwide Mut. Fire Ins. Co. v. Advanced Cooling and Heating, Inc., 126 So.3d 385 (Fla. App. 4th 2013).

 

A customer hired Advanced because of a problem with a home air conditioning unit. They agreed orally to the installation of a compressor under warranty for $438. Upon completion of the work, the customer paid this amount with a check. However, by the next day, the customer realized that the problem had not been fixed and stopped payment on the check. Advanced then sued the customer, and the customer countersued. The customer's complaint alleged breach of contract and failure to complete the repair in a workmanlike manner.

 

Advanced had a general liability policy with Nationwide and gave notice about the claim. The insurer denied coverage and defense, contending that there was no coverage under the policy and that several exclusions precluded any coverage. Advanced retained its own counsel and defended against the claim. Advanced prevailed in that dispute and then sought a declaratory judgment against Nationwide as to whether Nationwide had a duty to defend Advanced. The trial court ruled in favor of the insured, and this appeal followed.

 

The District Court of Appeal of Florida, Fourth District, noted that the question of a duty to defend is answered based upon a review of the underlying pleadings filed against the insured as well as the insurance policy itself. Based on this, the court found that Nationwide owed Advanced no duty to defend since both the customer's breach of contract claim and the faulty workmanship claim fell outside policy coverage.

 

The court said that an insurer's duty to defend arises when a pleading alleges facts that fairly and potentially raise a claim against its insured within policy coverage. In this instance, the policy covered bodily injury or property damage resulting from an occurrence, pursuant to policy definitions. The customer's breach of contract claim alleges only that an improper or unneeded repair resulted in an unnecessary $438 expense to the customer. There are no allegations of bodily injury or property damage at all. Moreover, the complaint sought recovery for the costs of repair and removal of defective work and this is not property damage as defined.

 

The court found that the injury complained of by the customer was purely economic, and such a claim is not covered by the general liability policy. The ruling of the trial court was reversed and remanded.

 

Editor's Note: The Court of Appeal noted that while any doubt as to whether an insurer has a duty to defend must be resolved in favor of the insured, it is well settled that insurance policies are contracts construed according to their plain meaning. In this instance, the policy language required bodily injury or property damage (as defined) if a duty to defend were to arise, and the language of the customer's complaint did not match the definitions of either term.

 

The allegations in the pleadings against the insured did not set forth claims that were within policy coverage and accordingly, the insurer had no duty to defend.