The court determined there was no duty to defend because the underlying complaint alleged the contractor's breach of contract, but no property damage. Southern-Owners Ins. Co. v. Mac Contractors of Florida, 2020 U.S Dist. LEXIS 14611 (M.D. Fla. Jan. 29, 2020).

    KJIMS Construction contracted with the homeowners to construct their residence on a cost-plus basis. KJIMS did not perform substantial completion of the home, and either abandoned construction or was terminated from further performance by the homeowners. The homeowners served KJIMS with a Notice of Claim pursuant to Florida law, identifying 86 distinct defects that were caused by KJIMS and/or its subcontractors which KJIMS failed to correct.

    The homeowners filed suit against KJIMS, alleging breach of the cost-plus contract involving the repair and replacement of improper and/or defective materials, improper installation, and the use of materials that did not comport with building codes or plan specifications. The homeowners also alleged that they all incurred damages in having to complete the scope of work under the contract in amounts over and above the anticipated contract amount.

    Southern-Owners initially defended, but after an amended complaint was filed by the homeowners, Southern-Owners withdrew the defense. KJIMS retained its own counsel and eventually settled with the homeowners for $70,000. 

    Southern-Owners sued KJIMS for a declaratory judgment to establish it had no duty to defend or indemnify under the policy. The court noted that a claim for the cost of repairing or removing defective work was not a claim for property damage, while a claim for the costs of repairing damage caused by the defective work was a claim for "property damage." 

    Here, the underlying complaint asserted a claim for the costs of repairing or completing defective work, and not damages caused by the defects. Therefore, the court found that KJIMS had not proven that the underlying complaint brought the suit within the CGL policy's definition of "property damage." Therefore, Southern-Owners had no duty to defend or indemnify KJIMS.