Florida Rules Developer Not Entitled to Additional Insured Coverage for Negligent Misrepresentation

A Florida court has determined that a project owner’s (Cypress) general partner was not an additional insured under an insurance policy issued to the Genral Contractor (WPC) who constructed the project. The ruling was made in conjunction with a lawsuit brought by a homeowners association for construction defects, maintenance issues and failure to disclose material facts. WPC’s insurer (St. Paul) was not obligated to defend or indemnify General Partner (Vineland) for damages arising from alleged construction defects. St. Paul Fire & Marine Ins. Co. v,. Cypress Fairway Condo. Ass’n (M.D. Fla. July 20, 2015).

It should be noted for factual understanding that Cypress and Vineland were both named additional insureds on three policies issued to WPC. These policies were issued in 1999-2001 by St. Paul to WPC. Cypress and Vineland were named as separate defendants and alleged to have mismanaged the property and negligently omitted information allegedly relied upon by buyers making up the Plaintiff association.

Defective Construction

While it conceded a duty to defend Cypress, St. Paul argued on summary judgment the policies did not include Vineland as an additional insured because it was not an owner of the property. The policies covered, “[a]ll owners, contractors . . . who require that you add them as an Additional Protected Person in a specific written contract entered into by you.” The construction contract required WPC to indemnify the owner, officers, directors, shareholders, partners and many others. This broad and general indemnification provision did not convert all the indemnitees into additional insureds. Therefore, St. Paul had no duty to defend or indemnify Vineland.

Negligent Misrepresentation

As insurer for the general contractor, St. Paul argued it had no duty to defend or indemnify Vineland or Cypress as developer/sellers because the negligent supply of information did not cause property damage. The court agreed.

Misresentations about the condition of the buildings might have induced Plaintiffs to purchase units, but these misrepresentations did not cause water intrusion and the resultant property damage. Further, representations were not accidents and could not be “events” within the meaning of the policies. While the Association may have suffered economic damage based on Cypress and Vineland’s representations, it did not suffer property damage caused by an event as defined in the policy.

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