Addison Insurance Company v. Windsor Metal Specialties, Inc.

Case: 17-11504 Date Filed: 12/28/2017 Page: 1 of 20

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________

No. 17-11504
Non-Argument Calendar
________________________

D.C. Docket No. 1:15-cv-21777-KMW

ADDISON INSURANCE COMPANY,

Plaintiff-Appellant,

versus

4000 ISLAND BOULEVARD CONDOMINIUM
ASSOCIATION, INC.,
a not-for-profit corporation, et al.,

Defendants.

WINDSOR METAL SPECIALTIES, INC., a Florida corporation,

Defendant-Appellee.

________________________

Appeals from the United States District Court
for the Southern District of Florida
________________________

(December 28, 2017)
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Before HULL, WILLIAM PRYOR and ANDERSON, Circuit Judges.

PER CURIAM:

In this declaratory judgment action, plaintiff Addison Insurance Company

(the insurer “Addison”) appeals from three orders of the district court, which,

collectively, declared as a matter of law that insurer Addison was obligated to

defend its insured, defendant Windsor Metal Specialties, Inc. (“Windsor”), in an

underlying action in Florida state court. Addison argues on appeal that the

underlying complaint against Windsor falls outside Windsor’s insurance coverage,

and that it is entitled to a jury trial on the veracity of certain factual allegations in

the underlying complaint. After review, we affirm.

I. BACKGROUND

We discuss first the underlying dispute in the Florida state court, and second

the relevant proceedings in this declaratory judgment action in the district court.

A. The Underlying Florida Action

This dispute arose from a construction project on a high-rise residential

condominium building in Florida. In August 2010, non-party 4000 Island

Boulevard Condominium Association, Inc. (“Owner Island”), an association of

owners of condominiums in the building, contracted with nonparty Poma

Construction Corp. (contractor “Poma”) to replace the building’s aging concrete

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balcony railings with new aluminum and glass railings. Poma then subcontracted

with defendant Windsor to paint the new railings.

Contractor Poma and subcontractor Windsor completed work on

February 24, 2012. Poma issued a 10-year limited warranty covering its

installation of the railings. Windsor issued a 20-year limited warranty covering the

paint job.

In October 2014, Owner Island filed an action in Florida state court against

contractor Poma and its subcontractor Windsor, alleging that the new railings were

defective and would need to be removed and replaced. Owner Island further

alleged that both Poma and Windsor had refused to perform the repair under

warranty. Accordingly, Owner Island asserted claims for breach of contract

against Poma (Count I), breach of implied warranty against Poma (Count II), and

breach of express warranty against Windsor (Count III).

Owner Island’s original Florida complaint did not allege that any property

damage had resulted from the defective railings, or that any damage would occur

when the railings were removed and replaced. However, Owner Island amended

its complaint on May 27, 2015, and again on March 16, 2016. In each new version

of the complaint, Owner Island added more allegations regarding damage to the

surrounding property.

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In the operative second amended complaint, Owner Island alleged that the

defective railing system, including Windsor’s defective paint finishes on the

railings, caused “damage to other property” such as “the railing post pockets, the

balcony concrete slabs and finishes on the balcony concrete slabs.” Specifically in

connection with Count III, the sole count asserted against Windsor, Owner Island

alleged:

Damage to other property has manifested during the
filing of this action including but not limited to other
property – concrete balcony surfaces and flooring areas.
It is anticipated that the removal and replacement of the
railing system will cause damage to other property,
including but not limited to the concrete balconies,
surfaces on the concrete balconies and other areas
requiring substantial repairs. The defective railing
system, including the defective paint finish, has caused
and will continue to cause damage to other property
including but not limited to the railing post pockets, the
balcony concrete slabs and finishes on the balcony
concrete slabs. Defendant, Poma, utilized the services of
a subcontractor, Windsor, to fabricate the paint finishes
on the railings that were delivered and installed at the
project. Because of the defective condition of the railing
system caused by Poma’s subcontractor, Windsor,
damage has occurred to other property, including but not
limited to the railing post pockets, the balcony concrete
slabs and finishes on the balcony concrete slabs.

B. The Declaratory Judgment Action in the District Court

On May 11, 2015—that is, after Owner Island filed the original complaint in

the Florida action, but before Owner Island amended its complaint for the first

time—plaintiff insurer Addison commenced this action for declaratory judgment in
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the district court.1 In sum, insurer Addison sought a declaration that it was not

obligated to defend any party, including its insured, Windsor, in the Florida action.

As an exhibit to its declaratory judgment complaint, Addison attached the

commercial general liability policy issued to Windsor (the “Policy”). 2 The Policy

provided coverage for “property damage” caused by an “occurrence”:

a. We will pay those sums that the insured becomes
legally obligated to pay as damages because of “bodily
injury” or “property damage” to which this insurance
applies. We will have the right and duty to defend the
insured against any “suit” seeking those damages.
However, we will have no duty to defend the insured
against any “suit” seeking damages for “bodily injury” or
“property damage” to which this insurance does not
apply. We may, at our discretion, investigate any
“occurrence” and settle any claim or “suit” that may
result.

....

b. This insurance applies to “bodily injury” and “property
damage” only if:

1
The insurer Addison originally named Windsor, Poma, and Owner Island as defendants
in the declaratory judgment action. However, the district court subsequently dismissed Poma
and Owner Island from the action, after adopting two Joint Stipulations from the parties agreeing
to the dismissal of those defendants. In its October 2016 dismissal orders, the district court
ordered that insurer Addison was not obligated to defend Poma in the Florida action, and that
Owner Island would be bound by all coverage determinations in the declaratory judgment action.
Because Addison and Windsor are the only remaining parties to the declaratory judgment action
and the only parties to this appeal, we limit our discussion to facts and proceedings relevant to
those parties, except where context or clarity requires otherwise.
2
The insurer Addison actually issued three policies, each providing one year of coverage.
Because each policy included the same relevant terms, we refer to them collectively as the
“Policy.”
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(1) The “bodily injury” or “property damage” is
caused by an “occurrence” that takes place in the
“coverage territory.”

The Policy provided that Windsor’s coverage did not apply to, among other

things, property damage to Windsor’s own work product or to that particular

property that must be repaired because Windsor’s work “was incorrectly

performed on it.” The Policy listed the following coverage exclusions:

j. Damage To Property

“Property damage” to:
(6) That particular part of any property that must be
restored, repaired or replaced because “your work” was
incorrectly performed on it.

....

k. Damage To Your Product

“Property damage” to “your product” arising out of it or
any part of it.

l. Damage To Your Work

“Property damage” to “your work” arising out of it or
any part of it and included in the “products-completed
operations hazard.”

....

m. Damage to Impaired Property or Property Not
Physically Injured

“Property damage” to “impaired property” or property
that has not been physically injured, arising out of:

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(1) A defect, deficiency, inadequacy or dangerous
condition in “your product” or “your work”; or
(2) A delay or failure by you or anyone acting on your
behalf to perform a contract or agreement in accordance
with its terms.

Finally, the Policy contained the following relevant definitions:

13. “Occurrence” means an accident, including
continuous or repeated exposure to substantially the same
general harmful conditions.

....

17. “Property damage” means:
a. Physical 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 cause it; or
b. Loss of use of tangible property that is not
physically injured. All such loss of use shall be deemed
to occur at the time of the “occurrence” that caused it.

....

21. “Your product”:
a. Means:
(1) Any goods or products, other than real
property, manufactured, sold, handled, distributed
or disposed of by:
(a) You;
(b) Others trading under your name; or
(c) A person or organization whose business
or assets you have acquired.

....

b. Includes:

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(1) Warranties or representations made at any
time with respect to the fitness, quality, durability,
performance or use of “your product.”

....

22. “Your work”:
a. Means:
(1) Work or operations performed by you or on
your behalf; and
(2) Materials, parts or equipment furnished in
connection with such work or operations.
b. Includes:
(1) Warranties or representations made at any
time with respect to the fitness, quality, durability,
performance or use of “your work.”

The insurer Addison amended its declaratory judgment complaint on June 8,

2015, and again on September 11, 2015. In Addison’s operative second amended

complaint, Addison sought the following declarations: (1) Owner Island’s first

amended complaint (dated May 27, 2015), which was the operative Florida

complaint at the time, did not allege “property damage” caused by an “occurrence”

under the Policy; (2) the damages alleged by Owner Island were excluded from

coverage under the Policy, due to one or more coverage exclusions; and (3)

Addison had no duty to defend or indemnify any insured or other party in the

Florida action.

C. Addison’s Motion for Summary Judgment

In June 2016, after Owner Island filed the operative second amended

complaint in the Florida state action, Addison moved for summary judgment in the
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federal declaratory judgment action. Addison argued that because Owner Island

had sued Windsor for breach of warranty, rather than for property damage,

Windsor was not covered under the Policy. Addison further argued that Owner

Island’s allegations of property damage were unsupported by evidence, and were

thus insufficient to create an issue of fact that would defeat summary judgment.

Windsor opposed summary judgment. 3 Windsor argued that a genuine issue

of material fact existed as to whether the damage alleged in Owner Island’s

operative complaint constituted “property damage” to which no Policy exclusion

applied. To support this argument, Windsor relied on an affidavit from an

employee of Owner Island, together with accompanying photographs, which

Owner Island had submitted in support of its own opposition to summary

judgment. The affidavit described the photos as showing “railing failure and

damage to the areas where the railings were installed.”

On September 22, 2016, the district court denied Addison’s motion for

summary judgment. The district court compared the allegations in Owner Island’s

operative complaint with the language of the Policy, and concluded that Addison

had not shown, as a matter of law, that it had no duty to defend Windsor in the

Florida action. In a footnote, the district court pointed to “a number of material

disputes between the Parties regarding the relationship between the allegations in

3
Contractor Poma and Owner Island each filed a separate opposition to summary
judgment.
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the complaint and the insurance policy at issue.” The district court continued:

“Though these factual disputes go primarily to Addison’s duty to indemnify, the

Court notes that some of them—such as Poma’s coverage under the policy and

potential exclusions for the damage—could also implicate Addison’s duty to

defend.”

The district court further concluded that the issue of Addison’s duty to

indemnify Windsor would not ripen unless and until Windsor was actually held

liable in the underlying Florida action.

Having denied Addison’s motion for summary judgment, the district court

scheduled a jury trial on the issue of Addison’s duty to defend, which the district

court set to begin on December 12, 2016.

D. Windsor’s Motion for Clarification

As the declaratory judgment action proceeded toward trial, the district court

dismissed contractor Poma and Owner Island from the case, pursuant to joint

stipulations by the parties. Shortly after Poma was dismissed, Windsor filed a

motion for clarification of the district court’s order denying Addison’s motion for

summary judgment.

In its motion for clarification, Windsor noted that the district court, in

denying summary judgment, had identified disputed issues of material fact.

Windsor now asked the district court to clarify that those disputed facts had

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pertained only to Poma. Windsor argued that, because Poma had since been

dismissed from the action, those disputed facts “no longer exist[ed].” As there

were no disputed facts pertaining to Windsor or Addison—the only remaining

parties—Windsor asked the district court to declare as a matter of law that Addison

had the duty to defend Windsor in the Florida state court action. Windsor

described this conclusion as a “corollary” to the district court’s denial of Addison’s

motion for summary judgment on the same issue.

At a November 1, 2016 hearing on Windsor’s motion for clarification and

other pretrial motions, the district court indicated its intention to grant the motion

for clarification, and, accordingly, removed the declaratory judgment action from

the trial calendar. Addressing Addison’s argument that it was entitled to a trial on

the factual basis for Owner Island’s allegations, the district court advised:

[W]hat you are talking about is not necessarily a query as
to whether the policy requires you to defend when a
complaint advances certain allegations.

What you are alleging—or at least it seems like you are
suggesting—fraud, absolute fraud, which is a different
situation than what is ordinarily contemplated in a dec
action.

In response, Addison’s counsel assured the district court that Addison was

not contending that the allegations were fraudulent: “I apologize if I indicated that

what we were accusing them of rises to the level of fraud; I would never want to

saddle my client with that burden to establish fraud.”
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On December 23, 2016, the district court entered a written order granting

Windsor’s motion for clarification. The district court concluded that a sua sponte

grant of summary judgment in favor of Windsor was appropriate, because “the

underlying complaint in the present case clearly alleges facts that would bring the

occurrence within the ambit of coverage under Addison’s policy.” The district

court left undisturbed its prior conclusion that a determination about Addison’s

duty to indemnify was premature until the underlying Florida state court action

concluded. To that end, the district court stayed the declaratory judgment action

pending resolution of the Florida action.

E. Addison’s Motion for Reconsideration or Certification

On January 19, 2017, insurer Addison moved the district court to reconsider

its order granting the insured Windsor’s motion for clarification. In the alternative,

Addison requested that the district court “certify this matter for appeal—to the

extent this Court’s ruling is deemed nonfinal and not otherwise subject to appeal as

a matter of right—pursuant to Federal Rule of Civil Procedure 54(b) and/or 28

U.S.C. [§] 1292(b).”

On March 8, 2017, the district court granted in part and denied in part

Addison’s motion. The district court declined to reconsider its prior orders, but

agreed to certify, under Rule 54(b), its order on the motion for clarification “as a

partial final judgment in favor of Windsor on Addison’s duty to defend.”

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F. Addison’s Appeal

Addison now appeals from three orders of the district court: (1) the

September 22, 2016 order denying Addison’s motion for summary judgment;

(2) the December 23, 2016 order granting Windsor’s motion for clarification; and

(3) the March 8, 2017 order denying Addison’s motion for reconsideration.

II. JURISDICTION

Before turning to the merits, we address our jurisdiction to consider this

appeal. See Reaves v. Sec’y, Fla. Dep’t. of Corr., 717 F.3d 886, 905 (11th Cir.

2013) (the court of appeals has an obligation to review sua sponte whether it has

jurisdiction at any point in the appellate process).

Our jurisdiction is ordinarily limited to final orders of the district courts. 28

U.S.C. § 1291. However, we have jurisdiction to review nonfinal orders under

certain circumstances. One such circumstance is our jurisdiction to review an

order granting or denying an injunction. 28 U.S.C. § 1292(a)(1). We have held

that a district court order granting an insured’s motion for partial summary

judgment, and ordering an insurer to pay the insured’s defense costs in underlying

litigation, is an appealable injunction under § 1292(a)(1). Nat’l Union Fire Ins. Co.

of Pittsburgh, Pennsylvania v. Sahlen, 999 F.2d 1532, 1535 (11th Cir. 1993).

Because the district court’s orders here are reviewable under § 1292(a)(1),

we need not consider the propriety of the district court’s purported certification

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under Rule 54(b). See Ebrahimi v. City of Huntsville Bd. of Educ., 114 F.3d 162,

165 (11th Cir. 1997) (noting that even when the district court makes the required

express determinations for a Rule 54(b) certification, we must review the propriety

of the certification sua sponte because it implicates our jurisdiction); see also

Grayson v. Warden, 869 F.3d 1204, 1212 n.10 (11th Cir. 2017) (finding that a

district court’s characterization of an order as being certified under Rule 54(b) is

not dispositive, and that an order certified as appealable under Rule 54(b) may be

appealable on another basis).

Having concluded that we have jurisdiction over this appeal, we now turn to

the merits.

III. DISCUSSION

A. Standard of Review

We review a district court’s grant of summary judgment de novo. Hegel v.

First Liberty Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015). A district court

properly grants summary judgment when there is no genuine dispute as to any

material fact and the moving party is entitled to judgment as a matter of law. Id.;

Fed. R. Civ. P. 56(a). A district court also possesses the authority to grant

summary judgment sua sponte, so long as the losing party was on notice that it had

to come forward with all of its evidence. Celotex Corp. v. Catrett, 477 U.S. 317,

326, 106 S. Ct. 2548, 2554 (1986).

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We review de novo a district court’s interpretation of an insurance contract.

Hegel, 778 F.3d at 1219.

B. The Law

The parties have stipulated that Florida law applies to all substantive issues.

Under Florida law, the determination of an insurer’s duty to defend falls under the

so-called “eight corners rule,” the name of which refers to the four corners of the

insurance policy and the four corners of the underlying complaint. Mid-Continent

Cas. Co. v. Royal Crane, LLC, 169 So. 3d 174, 182 (Fla. Dist. Ct. App. 2015). Put

simply, the eight corners rule provides that an insurer’s duty to defend its insured

against a legal action “arises when the complaint alleges facts that fairly and

potentially bring the suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n,

Inc., 908 So. 2d 435, 442-43 (Fla. 2005).

If the complaint alleges facts that bring the injury within the policy’s

coverage, the insurer must defend as a matter of law, “regardless of the merits of

the lawsuit.” State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th

Cir. 2004) (applying Florida law). Indeed, the duty to defend attaches “even if the

allegations in the complaint are factually incorrect or meritless.” Jones, 908 So. 2d

at 443. Moreover, the insurer must defend the entire lawsuit, even if the complaint

“alleges facts partially within and partially outside the scope of coverage.” Trizec

Prop., Inc. v. Biltmore Constr. Co., Inc., 767 F.2d 810, 811-12 (11th Cir. 1985)

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(applying Florida law). Any doubts regarding the duty to defend are resolved in

favor of the insured. Jones, 908 So. 2d at 443.

This Court has recognized a limited exception to the eight corners rule, in

which a court may consider extrinsic facts “if those facts are undisputed, and, had

they been pled in the complaint, they clearly would have placed the claims outside

the scope of coverage.” Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1323

(11th Cir. 2014). This exception, however, is limited to “exceptional cases in

which courts have crafted an equitable remedy when it is manifestly obvious to all

involved that the actual facts placed the claims outside the scope of coverage.” Id.

(quotation omitted).

The Florida Supreme Court has shed additional light on the “property

damage” and “occurrence” terms in commercial general liability insurance

policies. The term “property damage” does not include an insured’s faulty

workmanship, but it does include physical injury to otherwise nondefective

property that results from that faulty workmanship. U.S. Fire Ins. Co. v. J.S.U.B.,

Inc., 979 So. 2d 871, 889 (Fla. 2007). Damage to otherwise nondefective property

that is caused by faulty workmanship constitutes an “occurrence,” so long as the

faulty workmanship was unintentional. Id. at 888.

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C. Analysis of Coverage

Here, Windsor’s Policy required the insurer Addison to defend its insured

Windsor against any suit seeking damages arising from “property damage,” which

included “[p]hysical injury to tangible property,” so long as that property damage

was caused by an “occurrence,” which included “continuous or repeated exposure

to substantially the same general harmful conditions.” The Policy excused

Addison from defending any action arising from property damage to Windsor’s

own work product, or to “[t]hat particular part of any property that must be

restored, repaired or replaced because ‘your work’ was incorrectly performed on

it.” For purposes of this exclusion, Windsor’s work product is the paint finishes on

the railings, and the railings are the particular part of the property on which

Windsor’s work was allegedly performed incorrectly.

The operative underlying complaint alleged that “[t]he defective railing

system, including the defective paint finish, has caused and will continue to cause

damage to other property . . . including but not limited to the railing post pockets,

the balcony concrete slabs and finishes on the balcony concrete slabs.”

Comparing the Policy with this complaint, the alleged damage to the railing

post pockets and balcony concrete slabs was “property damage,” caused by the

“occurrence” of Windsor’s allegedly faulty workmanship. J.S.U.B., 979 So. 2d at

888-89. Windsor’s work consisted only of painting the balcony railings, and the

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allegedly damaged property included the balcony concrete slabs and the finishes on

them. The coverage exclusions for repairs to Windsor’s own work, or the railing

parts on which Windsor’s work was incorrectly performed, therefore do not vitiate

Addison’s duty to defend Windsor.

The operative complaint fairly alleges facts that bring the action within

Windsor’s Policy. There are no “manifestly obvious” but unalleged facts that

would place the complaint outside of coverage. Stephens, 749 F.3d at 1323.

Under the eight corners rule, Addison’s duty to defend is triggered. Jones, 908 So.

2d at 442-43. Even if some of the alleged damage was also to Windsor’s own

work product and the railings, which would fall within one or more coverage

exclusions, Addison would be required to defend Windsor. Trizec, 767 F.2d at

811-12.

D. Duty to Defend

Addison argues that the relevant allegations in Owner Island’s complaint are

unsupported by evidence, and that this entitles Addison to a jury trial on the duty to

defend issue. Notably, however, Addison does not contend that Owner Island’s

allegations are untrue and fraudulent. Addison’s counsel disavowed that argument

at the hearing on the motion for clarification. Rather, Addison argues that more

factual verification is required before Owner Island may be allowed to “plead into

coverage.” But this is contrary to the eight corners rule. Where, as here, the

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complaint “alleges facts that fairly and potentially bring the suit within policy

coverage,” a district court properly applies the eight corners rule. Jones, 908 So.

2d at 442-43 (emphasis added). Even if the allegations of the complaint are

ultimately found to be without merit in the Florida state court action, Addison must

defend the lawsuit until that point. Id. at 443.

Addison emphasizes the Florida Supreme Court’s decision in Higgins v.

State Farm Fire Ins. and Cas. Co., 894 So. 2d 5 (Fla. 2004), but that decision does

not help Addison. In Higgins, the Florida Supreme Court, answering a certified

question from a lower state appellate court, held that Florida’s declaratory

judgment statutes “authorize declaratory judgments in respect to insurance policy

indemnity coverage and defense obligations in cases in which it is necessary to

resolve issues of fact in order to decide the declaratory judgment action.” Higgins,

894 So. 2d at 15. The Florida Supreme Court concluded, in other words, that a

declaratory judgment action does not become unavailable to an insurer merely

because some issue of fact is disputed. Id.

Higgins in no way abrogated the normal principles of summary judgment.

Nor did it hold, as Addison contends, that any time an insurer disputes a fact, the

insurer is “entitled to a determination of such facts . . . particularly where the

underlying allegations at issue appear baseless.” To the contrary, Higgins

expressly reaffirmed the eight corners rule: “[A]n insurer’s obligation to defend is

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determined solely by the complaint if suit has been filed.” Id. at 10. And the very

next year, the Florida Supreme Court reaffirmed the eight corners rule again in

Jones. 908 So. 2d at 442-43. We find no reason to disturb the district court’s

application of this settled Florida law.

IV. CONCLUSION

Based on the foregoing reasons, we conclude that the district court did not

err in granting summary judgment in favor of Windsor on the issue of Addison’s

duty to defend Windsor in the underlying Florida state court action. We therefore

affirm the orders on appeal.

AFFIRMED.

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