The U. S. District Court for the Middle District of Florida was confronted with determining whether Florida would follow the manifestation or injury in fact trigger in Axis Surplus Ins. Co. v. Contravest Constr. Co., 2012 U.S. Dist. LEXIS 104502 (D. Fla. June 5, 2012).
The homeowner's association sued the insureds for alleged negligent construction and development of individual dwelling units and common areas of their condominium. Due to this negligence, severe damage was caused by water intrusion. The Association's members only became aware of the defects through the retention of construction experts.
The insured had CGL coverage with Axis, with policies issued from 2003 to 2007. Coverage was denied for the periods 2003-2004 and 2004-2005. Axis provided a defense under the policies issued for 2005-2006 and 2006-2007, but under a reservation of rights. Axis sought a declaration that it had no duty to defend or indemnify because the damage manifested before its policy periods.
For coverage to exist, "property damage" must have "occurred" during Axis' policy period. Axis argued damage occurred when it was discovered. The underlying complaint alleged that damage was not discovered until 2008, after the Axis policy periods. The insured agreed damage occurred when it was discoverable but, based upon the allegations of the underlying complaint, the damages may have been discoverable during the Axis policy periods. The Court noted that each of these approaches were variations of the "manifestation" trigger theory. The Association argued that the proper theory under Florida law was the "injury in fact" theory, under which damage "occurs" at the moment that there is actual damage, making the date of discovery irrelevant.
The Florida Supreme Court had not yet decided which trigger was applicable. The federal district court believed the Florida court would adopt the "injury in fact" trigger. The underlying complaint suggested that the damage occurred at some point after the buildings were completed but before the experts inspected the property. This time period included the time that Axis's policies were in effect. Therefore, Axis had a duty to defend.
