Homeowners and commercial property owners may find themselves in situations where a contractor or subcontractor performed construction on the property that was defective or faulty and may have resulted in additional loss to the property. Are these damages covered by insurance?

Florida courts have drawn a distinction between the faulty construction itself and any damage resulting from the faulty construction. Amerisure Mutual Insurance Company v. Auchter Company, is a case in which Auchter Company, a general contractor, entered into a contract with Amelia Island Company to construct various buildings.1 After completion of the construction, the roof on one building began to show damage. However, the defective roof caused no other damage to the building interior or otherwise. The issue arose as to whether Amelia Island Company’s damage was covered by its insurance policy.

Insurance policies typically use the term “property damage” to refer to the loss resulting from an event. It is important to define what qualifies as “property damage.” Florida courts have distinguished “between a claim for the costs of repairing or removing defective work, which is not a claim for ‘property damage’, and a claim for the cost of repairing damage caused by the defective work, which is a claim for ‘property damage.’”2 In Amerisure, the roof damage caused by the defective construction was not considered property damage since additional damage did not result from the faulty construction. Therefore, Amelia Island Company’s damage was not covered under its insurance policy. The court concluded, “if there is no damage beyond the faulty workmanship or defective work, then there may be no resulting ‘property damage.’”

Should a construction defect occur, property owners should look to their policies to determine what damage, if any, is covered. As discussed above, often times, any ensuing damage caused by the construction defect will be covered, but the cost of replacing or fixing the faulty workmanship will not be.
1 Amerisure Mut. Ins. Co. v. Auchter Co., 3:08-CV-645-J-32HTS, 2010 WL 457386, at *3 (M.D. Fla. Feb. 4, 2010), aff’d, 673 F.3d 1294 (11th Cir. 2012).
2 U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So.2d 871 (Fla.2007).