Coverage Limited to What the Insured Pays For at Inception
Post 4691
The Eleventh Circuit Court of Appeals was asked to resolve whether two
residential homes destroyed by a fire while under construction were
covered under an insurance policy (the "Policy") issued by Travelers
Property Casualty Company of America ("Travelers") to its named insured,
Talcon Group LLC ("Talcon"). Talcon is an underground utility
contractor for sewer, storm drains, and treatment plants and never told
Travelers it was building two residential buildings.
In Travelers Property Casualty Company Of America v. Talcon Group LLC,
No. 22-13547, United States Court of Appeals, Eleventh Circuit (December
20, 2023) the Eleventh Circuit decided the extent of the coverage
available to Talcon.
TWO RESIDENTIAL HOMES
Talcon was to benefit from the sale of the two residential homes by
becoming a "local vendor" in the county where the homes were being
constructed, entitling it to a 5% advantage with other contractors when
bidding on future projects in the county.
Wildfire Peril
In May 2020, a wildfire completely destroyed the two residential homes.
At that time, the residential homes were mostly complete but did not
have certificates of occupancy.
THE POLICY
In 2019 Talcon, through an insurance agent, submitted a '"Commercial
Insurance Application" with Travelers. Talcon's application was for a
renewal of a 2018 policy with Travelers. In an application field titled
"Description of Primary Operations," Talcon listed "[u]nderground
utility contractor."
Travelers covered "Installation" property from direct physical loss or
damage. The Policy "Definitions" section defined "Installation" as
"[p]roperty described in the Declarations under 'Installation' owned by
you or property of others for which you are legally liable, that you or
your subcontractors will install, erect or fabricate at the job site.'"
DISCUSSION
Under Florida law every insurance contract shall be construed according
to the entirety of its terms and conditions as set forth in the policy
and as amplified, extended, or modified by any application therefor.
While Rick and Zack testified that Talcon constructed multiple
residential homes in recent years, Talcon's renewal application did not
include this past residential work or indicate the prospect of future
residential construction. Even though Talcon had begun constructing the
two residential homes at the time of the renewal application, it
misrepresented to Travelers that it was not engaged in any residential
construction. Talcon, in fact, stated that 0% of its current work was
"Residential" and 100% was "Municipal/Government."
ZALMA OPINION
The covenant of good faith and fair dealing requires that neither party
to the contract of insurance will do anything to deprive the other of
the benefits of the contract nor misrepresent or conceal material facts
from the other. In this case Talcon lied when it submitted its
application by claiming it did no residential construction work at the
time that it was, in fact, constructing two residential properties.
Since it is true that liars never prosper the lie about the work being
done defeated its claims.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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