Case Name:
Mid-Continent Cas. Co. v. Basdeo
Date:
June 12, 2012
Court:
United States Court of Appeals for the Eleventh Circuit
Citation:
477 Fed. Appx. 702
Factual Summary:
In October 2005 Hurricane Wilma struck South Florida and damaged some of Southgate Gardens Condominium Association’s (“Southgate”) buildings. Southgate hired building contractor First State Development Corporation (“First State”) to repair the damage, and at the time First State was insured by Mid-Continent Casualty Company (“Mid-Continental”). During the repair, First State did not adequately place tarps over the roof, First State caused holes to be made in the roofs of buildings at Southgate, and the peeled-back condition of the roofing left the interior of the buildings exposed which allowed rain to enter.
On or about July 18, 2007, Basdeo and other residents of Southgate filed a lawsuit against First State in Florida state court. Basdeo contended that First State damaged her roofs, the interior of her unit, and her personal possessions. On September 19, 2007, Southgate also filed suit against First State. In April 2008, the state court entered a final default judgment against First State in both the Basdeo and Southgate cases. On April 17, 2008, Mid-Continent formally informed First State of its decision to deny coverage for both the Basdeo and Southgate cases. In September 2008, Mid-Continent filed a declaratory judgment action to determine if it is obligated to indemnify or cover First State’s damage to Southgate’s properties.
Mid-Continent challenges on three issues: (1) whether Mid-Continent may deny coverage based on the fact that First State never requested a defense; (2) whether Mid-Continent may deny coverage based on First State’s failure to cooperate pursuant to the terms of the insuring agreement; (3) what the number of “occurrences” that fall under the commercial general liability (“CGL”) insurance policy.
The court determined that Mid-Continent is not allowed to deny coverage merely because First State never requested a defense. The court found that Mid-Continent did not comply with the Florida Claims Administration Statute (“FCAS”) when it failed to send First State a notice of its reservation of rights within thirty days of the time it should have known of its coverage defense.
The court determined that Mid-Continent was estopped from denying coverage to First State as a result of First State’s failure to cooperate pursuant to the terms of the insuring agreement. Mid-Continent was aware that First State was failing to cooperate and that First State’s failure to cooperate was material, but Mid-Continent did not assert the proper defense within the thirty-day period outlined in the FCAS.
Finally, the court defined the term “occurrence” as “an accident, including continuous or related exposure to substantially the same general harmful conditions.” Under this definition, the court determined that there were three separate occurrences of damage resulting from First State’s faulty repair work and that each occurrence was properly awarded $1 million in damages for a total of $3 million.
Legal Holding:
Mid-Continent was not allowed to deny Fist State coverage under their CGL insurance policy for First State’s failure to request Mid-Continent’s defense in state court against Southgate’s suit alleging First State’s faulty repair work caused damage. Mid-Continent could not be granted a waiver of its obligation to indemnify First State under the “coverage defense” assertion because Mid-Continent did not meet the guidelines set forth in the FCAS.
The court found that there were three separate occurrences that each caused damage to Southgate’s property because Mid-Continent did not establish a causal link between each occurrence or demonstrate that the damages were foreseeable. The Court then determined that each occurrence should be considered by itself and that each occurrence was entitled to the maximum of $1 million dollars of insurance recovery totaling $3 million dollars.
Insurance Policy Type:
Commercial General Liability
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