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EXCLUDED OR COVERED? PITFALLS IN CONSTRUCTION INSURANCE
Construction Law Section
Continued from page 16
on other buildings was still ongoing, Tropical Storm Eta caused damage to some of the completed structures. 5
After the storm, JM Family held Kaufman responsible for the damage. 6 In response, Kaufman filed a claim with Liberty seeking indemnification under the CGL policy. 7 Liberty denied the claim, citing the COCE, which excluded coverage for“ property damage at or to any project insured under this policy during the course of construction until the project is completed.” 8 Liberty then filed a declaratory judgment action, seeking a ruling that the COCE absolved it of any duty to defend or indemnify Kaufman. 9 In turn, Kaufman filed a counterclaim, including a claim for reformation based on mutual mistake, arguing that the policy’ s project description did not reflect the plan it had provided to Liberty, as it omitted several structures and failed to acknowledge the phased construction. 10
The trial court dismissed Kaufman’ s counterclaim and granted Liberty’ s motion for summary judgment, ruling that coverage was excluded under the COCE until the entire project was complete based on the exclusion’ s plain language. 11 The lower court also ruled that Kaufman lacked standing to seek reformation, as it failed to demonstrate a cognizable injury since Kaufman was not seeking coverage for any omitted structures, and even with policy reformation, the COCE would preclude coverage. 12
On appeal, the Eleventh Circuit affirmed the lower court’ s interpretation of the COCE, holding that it precluded coverage and affirming that the undefined policy terms should be given their plain and ordinary meaning. 13 However, the Eleventh Circuit reversed the lower court’ s decision on Kaufman’ s reformation claim, ruling that Kaufman had standing to seek contract modifications because the policy description did not align with the phased construction plan it initially provided to Liberty, resulting in a policy that differed from that for which it bargained. 14 Id. at * 3.
The Eleventh Circuit’ s decision serves as a reminder to insurers and insured parties alike of the necessity to ensure policy language accurately reflects the agreed-upon terms, especially in complex, phased construction projects. Ultimately, clearly drafted policies and careful attention to coverage exclusions are essential to preventing costly disputes. �
1
Liberty Surplus Ins. Corp. v. Kaufman Lynn Constr., Inc., 2025 WL 704327( 11th Cir. 2025).
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Id. at * 1.
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Id. at * 2.
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Id. at * 5.
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Id. at * 3.
Authors: Brian Allen – Carlton Fields & Conner Smedberg – Foley & Lardner LLP
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