Know Your Insurance Policy

Know Your Insurance Policy

As attorneys representing members of the construction industry, we are constantly emphasizing to our clients the importance of reviewing and understanding their insurance policies. Often times, a client knows that the company is insured, but does not understand what is covered, and sometimes more importantly, what is not covered by the policy.

In Nova Casualty Company vs. Willis, 2010 WL 2594801 (Fla. 3rd DCA June 30, 2010), a property owner hired a general contractor to trim mangroves on a waterfront parcel near the John Pennekamp Coral Reef State Park in the Florida Keys. The general contractor hired a landscaping subcontractor to perform that work. The landscaping contractor was insured under a commercial general liability policy ("CGL") by Nova Casualty. Since Mangroves are protected trees, the work in question required a special permit from the Florida Department of Environmental Protection. The owner obtained such a permit, which contained two key restrictions: (1) the mangroves could not be trimmed to a height of less than ten feet, and (2) only mangroves on the landward side of the mean high-water mark could be trimmed. The mangroves on the seaward side of the mean high-water mark were on land owned by the State of Florida and were not authorized to be cut.

In violation of both of these permit restrictions, the landscaping subcontractor mistakenly cut the owner's mangrove trees below the ten-foot level, and also cut mangroves on the State property. The Florida Department of Environmental Protection brought, but later dropped, criminal charges against the owner and contractor. The owner however was required to pay for a remediation program to mitigate the damage to the mangroves, and proceeded to sue the contractor and landscaping subcontractor for damages. The landscaping subcontractor made a claim under its CGL policy issued by Nova Casualty. The insurer filed a lawsuit asking the Court to determine whether such a claim was covered under the insurance policy.

The Court analyzed the language of the insurance policy and determined that, although the policy did provide coverage for "negligence", there were certain exclusions to the general coverage for negligence under the policy. Specifically, the policy did not provide coverage for damages caused by negligence to the property upon which the insured or its subcontractor's were contractually furnishing work. Applying that exclusions to the general coverage, the Court concluded that while the policy provided coverage for the negligent trimming of mangroves on the State's property, there was no such coverage for the mangroves trimmed below the ten-foot mark on the owner's property. This is because the contractors were specifically prohibited from performing trimming work on the State's property.

This ruling means that the landscaping subcontractor's insurance policy will have to pay for the damage to the State's property. However, the landscaping subcontractor will be responsible for paying the damages caused to owner's property (including penalties, fines, remediation program, attorney's fees, etc.). This case shows how a mistake by a contractor's employee can expose the company to tremendous liability. In today's economy, such liability can be disastrous if the company is not adequately insured. As such, it is important to know and understand your insurance policy.