Coverage for an insured contractor sued after hurricane related-damage to condominium units was the issue in Rolyn Companies, Inc. v. R & J Sales of Texas, Inc., No. 08-61618, 2009 U.S. Dist. LEXIS 106881 (S.D. Fla. Nov. 16, 2009). 

   In October 2005, Hurricane Wilma damaged Stonebridge Gardens, a condominium community.  The association hired Rolyn, a general contractor, to repair the buildings.  Building 2800 appeared to suffer little damage from the hurricane, and emphasis was placed on repairing other buildings.  By the summer of 2006, repairs had not yet commenced in Building 2800, but fungal growth, water stains and damage to interior finished surfaces was noted.  Further, asbestos was found in Building 2800.   

   Rolyn eventually retained a roofing subcontractor, Precision Restoration and Roofing.  Precision began work in June 2006.  In August 2006, heavy rains arrived.   Building 2800 suffered significant interior damage because portions of the roof had not been covered with a tarp during Precision's repairs.  Moreover, asbestos spread because of the rain, contaminating the building.  Each of the 24 units in Building 2800 now needed to be gutted and reconstructed.     

   Precision refused to make any further repairs.  Rolyn was sued by one homeowner and tendered the suit to Admiral, Precision's insurer.  Admiral determined Rolyn was not an additional insured under Precision's policy.   Rolyn also provided notice to its own liability insurer, Crum & Forster, which agreed to defend under a reservation of rights. 

   When additional condominium owners threatened to sue, Rolyn undertook the repairs of Building 2800 a year after the August 2006 rain storm.  Rolyn then sued Precision, Crum & Forster, and Admiral.  In this decision, the court addressed summary judgment motions of Rolyn against Crum & Forster and Admiral, and the insurers' cross-motions against Rolyn.  

   Crum & Forster's policy covered "those sums that the insured becomes legally obligated to pay as damages because of . . . 'property damage.'"  Crum & Forster, however, was not responsible for damages for which Rolyn was never liable for in the first place.

   Although Precision's faulty workmanship was an "occurrence" under the policy, Crum & Forster argued Rolyn was not legally obligated to pay for costs of gutting and rebuilding the interior of Building 2800.  Damage not due to the rain event was not "property damage" covered by the policy because it was not an "occurrence"; i.e., Precision's faulty workmanship. The building had to be gutted because after the hurricane, the units sat abandoned in hot, humid and rainy conditions, while the hurricane-damaged roof allowed continuing water intrusion into the building.  In addition, whether all mold was due to water intrusion or to the lack of air conditioning and other pre-event leaks was an open question.  Accordingly, there were disputed issues of fact regarding what damage was caused by Precision's faulty workmanship, the only damage for which Rolyn was legally obligated to pay.

   Moreover, Crum & Forster's policy restricted the insured from voluntarily making any payment or incurring any expense without the insurer's consent.  Here, Rolyn did not obtain Crum & Forster's consent before making repairs to various condominium units.  Therefore, Rolyn could not recover for these voluntary repairs.

   The court next considered whether Rolyn was entitled to coverage as an additional insured under Admiral's policy.  The policy defined an additional insured as "a contractor on whose behalf you are performing, but only if coverage as an additional insured is required by a written contract that is an 'insured contract.'"  There were no facts in the record to demonstrate that Precision assumed the tort liability of Rolyn, thereby creating an "insured contract."  Therefore, Rolyn had no coverage under Admiral's policy, either.