Damage Before Project is Complete Excluded by CGL
Post 5013
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Consolidated appeals required the Eleventh Circuit to (1) decide whether an insured has standing to seek reformation before it makes a claim on the portion of the policy that it wants reformed, (2) construe an exclusion in a commercial general liability policy under Florida law, and (3) determine whether the district court properly denied the insured’s motion for attorney’s fees.
In Liberty Surplus Insurance Corporation v. Kaufman Lynn Construction, Inc., United Glass Systems Corp. Liberty Surplus Insurance Corporation v. Kaufman Lynn Construction, Inc., Nos. 23-12715, 23-12835, United States Court of Appeals, Eleventh Circuit (March 5, 2025)
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FACTS
The case involves JM Family Enterprises hiring Kaufman to build a new corporate campus in South Florida. Kaufman obtained a commercial general liability policy from Liberty Surplus Insurance to insure itself and its subcontractors. After Tropical Storm Eta caused significant water damage to the completed buildings, Kaufman sought indemnification from Liberty, which was denied based on the policy’s Course of Construction Exclusion (COCE). Liberty then filed a declaratory judgment action, and Kaufman counterclaimed for declaratory relief, breach of contract, and reformation of the insurance policy due to mutual mistake.
JM Family Enterprises hired Kaufman to build its new corporate campus in South Florida. The campus was to consist of three office buildings, a training and conference center, a sports and recreation building, a dining hall, an amphitheater, a central energy plant, a parking garage, and various landscaping and water features. To insure itself and its subcontractors, Kaufman obtained a commercial general liability policy from Liberty Surplus Insurance.
The district court granted Liberty’s motion for summary judgment, concluding that the COCE excluded coverage until the entire project was completed. The court also dismissed Kaufman’s reformation counterclaim for lack of standing. On appeal, the Eleventh Circuit reversed the district court’s dismissal of the reformation counterclaim, affirming that Kaufman had Article III standing to seek reformation. However, the court affirmed the district court’s ruling that the COCE precluded coverage for the water damage and denied Liberty’s motion for attorney’s fees.
ANALYSIS
The Course of Construction Exclusion (COCE) in the insurance policy issued by Liberty Surplus Insurance Corporation to Kaufman Lynn Construction, Inc. was significant because it determines the scope of coverage during the construction phase of a project. The COCE states that the insurance does not apply to any property damage at or to any project insured under the policy during the course of construction until the project is completed.
A court of equity has the power to reform a written instrument where, due to a mutual mistake, the instrument as drawn does not accurately express the true intention or agreement of the parties to the instrument. A mistake is mutual when the parties agree to one thing and then, due to either a scrivener’s error or inadvertence, express something different in the written instrument. Reformation can correct a mutual mistake in the description of the premises or articles insured due to the fact that in the case of a mere mutual mistake in the description of the subject matter equity will correct it to conform to the intention of the parties
Florida law subjects reformation claims to a five-year statute of limitations. An insured in Florida may need to bring a reformation claim soon after the issuance of the policy containing the mistake or risk forever losing the ability to fix the error.
The policy issued by Liberty to Kaufman was a general commercial liability policy and not a builder’s risk policy. The critical language in the COCE is the phrase “until the project is completed,” but the terms “project” and “completed” are not separately defined in the policy.
The language “until the project is completed” means that the COCE precludes coverage until the entire project is finished. It would have been better, of course, for Liberty to draft the COCE to expressly state that there is no coverage unless and until the “entire project” is completed. But Liberty’s failure to adhere to the standards of impeccable draftsmanship here does not result in ambiguity. The mere fact that a provision in an insurance policy could be more clearly drafted does not necessarily mean that the provision is otherwise inconsistent, uncertain or ambiguous.
The Eleventh Circuit concluded that Kaufman has standing to seek reformation of the policy. The Eleventh Circuit reversed the district court’s dismissal of the reformation counterclaim and remanded to the District Court for further proceedings.
With respect to the parties’ dispute about the policy the Eleventh Circuit affirmed the district court’s ruling that the COCE precludes coverage for the water damage to the buildings caused by Tropical Storm Eta.
ZALMA OPINION
A course of construction policy is designed to protect the owner and contractors for fortuitous losses in the course of construction. A commercial general liability policy is not intended to, and has no wording similar language to, a course of construction policy. The claims were for damage to the property that would be the subject of a course of construction policy but not a Commercial General Liability policy, especially one with a COCE.
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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
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Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
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ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...