               Case: 13-10138       Date Filed: 07/11/2014       Page: 1 of 25


                                                                      [DO NOT PUBLISH]


                  IN THE UNITED STATES COURT OF APPEALS

                            FOR THE ELEVENTH CIRCUIT
                              ________________________

                                    No. 13-10138
                              ________________________

                         D.C. Docket No. 8:11-cv-00293-TGW

J.B.D. CONSTRUCTION, INC.,
a Florida corporation,

                                                  Plaintiff-Counter Defendant -Appellant,

                                            versus

MID-CONTINENT CASUALTY COMPANY,
an Ohio Corporation,

                                           Defendant-Counter Claimant - Appellee.
                              ________________________

                      Appeal from the United States District Court
                          for the Middle District of Florida
                            ________________________


                                       (July 11, 2014)

Before MARTIN and HILL, Circuit Judges, and FULLER, * District Judge.

FULLER, District Judge:



*
  Honorable Mark E. Fuller, United States District Judge for the Middle District of Alabama,
sitting by designation.
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       This case involves an insurance coverage dispute between Mid-Continent

Casualty Company (“MCC”) and its insured, J.B.D. Construction, Inc. (“J.B.D.”).

On cross-motions for summary judgment, the district court found that MCC had

neither a duty to defend nor a duty to indemnify J.B.D. in an underlying defective

construction suit brought by Sun City Center Community Association, Inc. (“Sun

City”). J.B.D. appeals the district court’s ruling, arguing that MCC breached its

contractual duty to defend by failing to appoint counsel and to pay investigative

fees and that MCC is also obligated to indemnify it for the value of its settlement

with Sun City. J.B.D. also requests that this Court remand the suit back to the

district court to determine which consequential damages, if any, it is entitled to as a

result of MCC’s breach of its duty of defense. After careful review, and with the

benefit of oral argument, we hold that MCC had a duty to defend J.B.D. against

Sun City in the underlying litigation and that MCC breached that duty by failing to

provide any semblance of a defense to J.B.D. We further hold that MCC did not

have a duty to indemnify J.B.D. for the value of J.B.D.’s settlement with MCC.

Accordingly, we AFFIRM IN PART and REVERSE IN PART and REMAND

the case back to the district court to determine whether and to what extend MCC’s

breach entitles J.B.D. to consequential damages.

                I. FACTS AND PROCEDURAL BACKGROUND

1. Underlying Lawsuit


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      On July 23, 2004, J.B.D. entered into a written contract with Sun City for the

construction of a fitness center. J.B.D. and Sun City agreed that the fitness center

would be constructed as an addition to an existing “Atrium” building. The existing

“Atrium” building would be physically joined with the fitness center at the

buildings’ roof lines. Under a series of pre-construction Change Orders, Sun City

agreed to purchase the pre-fabricated components of the fitness center, such as the

building shell, slab concrete, building block, and rubber flooring. J.B.D.’s

corporate representative acknowledged that the project included assembling the

fitness center and installing everything needed to make it a complete building, such

as air conditioning, electrical, and plumbing. The project did not include

furnishing or supplying fitness equipment. J.B.D., in its role as general contractor,

retained a number of subcontractors and material suppliers to install Sun City’s

Change Order components. J.B.D. also obtained a performance bond to cover their

contractual obligations as well as a conditional payment bond. Sun City purchased

and accepted delivery of the components, and J.B.D. began construction.

Construction was finished on January 18, 2007.

      Beginning in the spring of 2007, Sun City and J.B.D. noticed damage caused

by water leaks in the fitness center’s roof, windows, and doors. This damage

included rusting steel, peeling paint, and blistering and discolored stucco. In

response, the parties took a series of steps to repair the damage and to eliminate the


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leaks. Despite those efforts, Sun City refused to release the final payment because

it believed the construction to be deficient. In October 2008, J.B.D. initiated a

lawsuit against Sun City in the Thirteenth Judicial Circuit in Hillsborough County,

Florida seeking full payment under the construction contract (hereinafter, “Sun

City Litigation”). Sun City then filed a three count Counterclaim against J.B.D. for

Breach of Contract (Count I), Breach of Section 553.84 Fla. Stat. (Count II); and

Negligence (Count III) (hereinafter, “Sun City Counterclaim”).

      The Counterclaim alleged that J.B.D. breached its contractual obligations to

provide labor, services, and materials in a workmanlike manner. The

Counterclaim also alleged that J.B.D. breached its duty of care and that

construction defects and deficiencies by J.B.D. violated minimal building codes

and caused damage to the building. It further alleged that these defects and

deficiencies caused “damages to the interior of the property, other building

components and materials, and other, consequential and resulting damages” and

“damage to other property.”

      MCC had sold two Commercial General Liability (“CGL”) policies to J.B.D.

covering the timeframe relevant to this suit, December 2006 through December

2008 (“MCC Policy”). 1 On May 6, 2009, J.B.D. tendered the Sun City

Counterclaim to MCC for a defense and indemnification. On May 21, 2009, MCC

1
 These policies are MID-CONTINENT CASUALTY COMPANY Policy Nos. GL669650
(12/15/06 through 12/15/07) and GL698630 (12/15/07 through 12/15/08).
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sent a Reservation of Rights letter informing J.B.D. that it was investigating

whether the MCC Policy covered any of Sun City’s claims. The letter also

identified and addressed various coverage exclusions MCC believed would affect

its obligation to defend or indemnify. On May 26, 2009 and June 1, 2009, J.B.D.’s

counsel followed up with MCC to determine whether MCC would be providing

J.B.D. with a defense. MCC represented that J.B.D.’s request was “in process” but

did not otherwise respond to J.B.D.

      On July 15, 2009, after a series of investigations, J.B.D. agreed to settle Sun

City’s claims for $181,750.94, an amount less than Sun City’s pre-mediation

demand. J.B.D. funded the settlement from its own accounts on August 3, 2009.

Shortly thereafter, J.B.D. notified MCC of its settlement and requested

contribution and reimbursement under the MCC Policy for damages and legal costs

incurred as a result of litigating the Sun City Counterclaim. Approximately a year

later, on July 27, 2010, J.B.D. again contacted MCC, demanding reimbursement

and threatening to pursue legal remedies if MCC did not respond. On August 17,

2010, J.B.D. again contacted MCC to demand reimbursement and to state its

intention to sue if MCC did not reimburse it for settlement costs.

      On October 12, 2010, MCC mailed J.B.D. a check for $5,717.77 to cover its

defense obligation under the MCC Policy. MCC determined it owed J.B.D.

$10,717.77 for attorney’s fees and costs minus the $5,000 policy deductible,


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covering the time J.B.D. tendered suit to MCC through the completion of the

settlement. In response, on October 28, 2010, J.B.D. sent MCC a letter insisting

that MCC owed it a full reimbursement of the $181,750.94 settlement value and

requesting confirmation that it could accept the $5,717.77 check as partial payment

of that amount. J.B.D. also indicated its intention to file a bad faith suit against

MCC if MCC did not submit the remaining balance by November 9, 2010. MCC

responded on November 29, 2010, stating that “it placed no restrictions with

regards to negotiation of the reimbursement check” but requested information

about the basis for J.B.D.’s claim. On December 30, 2010, J.B.D. again sent MCC

a letter re-iterating its belief that MCC owed it a full reimbursement under the

MCC Policy’s contractual duty to defend and duty to indemnify. J.B.D. also noted

that it filed a Civil Remedy Notice of Insurer Violations with the Florida Division

of Financial Services on September 10, 2010 2 and threatened to initiate suit if

MCC did not submit the full payment by January 10, 2010.

2. MCC Policy Provisions

       As previously mentioned, MCC had issued two identical standard form

Insurance Services Office (“ISO”) CGL policies to J.B.D. covering the timeframe

relevant to this suit. The relevant policy language is as follows: “[MCC] will pay

2
   The Civil Remedy Notice alleged violations of Fla. Statutes 629.954(1)(i)(3)(c),
626.9541(1)(i)(3)(e), 626.9541(1)(i)(3)(f), 626.9541(1)(i)(3)(g) and sought $181,750.94, $20,000
in attorney’s fees and costs, fees and costs to J.B.D.’s bonding company, compensation for hours
and repair work in excess of $15,000, and lost profits due to impairment of bonding capacity.
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those sums that the insured becomes legally obligated to pay as damages because

of . . . ‘property damage’ to which this insurance applies. . . . This insurance

applies to . . . ‘property damage’ only if . . . [t]he ‘property damage’ is caused by

an ‘occurrence’ that takes place in the ‘coverage territory’. . . .”

       “‘Property damage’ means . . . ‘[p]hysical injury to tangible property,

including all resulting loss of use of that property . . . or . . . [l]oss of use of

tangible property that is not physically injured.’”

       “An ‘occurrence’ means an accident, including continuous or repeated

exposure to substantially the same general harmful conditions.”

       The policy also excludes coverage for the following:

       j. Damage to Property
       “Property damage” to:
       ....
       (4) Personal property in the care, custody or control of the insured;
       (5) that particular part of real property on which you or any contractors or
       subcontractors working directly or indirectly on behalf are performing
       operations, if the “property damage” arises out of those operations; or
       (6) That particular part of any property that must be restored or replaced
       because “your work” was incorrectly performed on it.
       ....
       Paragraph (6) of this exclusion does not apply to “property damage”
       included in the “products-completed operations hazard.”
       ....
       l. Damage to Your Work
       “Property damage” to “your work” arising out of it or any part of it and
       included in the “products-completed operations hazard”. 3

3
  This exclusion is known as the “your work” exclusion. See, e.g., Amerisure Mut. Ins. Co. v.
Auchter Co., 673 F.3d 1294 (11th Cir. 2012) (citing U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979
So.2d 871, 879 (Fla. 2007). The MCC Policy originally contained what is commonly known as a
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       The MCC Policy defines “your work” to mean “work or operations

performed by you or on your behalf; and . . . materials, parts, or equipment

furnished in connection with such work or operations.”

       The MCC Policy also included Products-Completed Operations Hazard

(“PCOH”) coverage. Under the policy:

       [PCOH] includes all “bodily injury” and “property damage” occurring away
       from premises you own or rent and arising out of “your product” or “your
       work” except:
       (1) Products that are still in your physical possession; or
       (2) Work that has not yet been completed or abandoned. However, “your
       work” will not be deemed completed at the earliest of the following times:
              (a) When all of the work called for in your contract has been
              completed.
              (b) When all of the work to be done at the job site has been
              completed if your contract calls for work at more than one job site.
              (c) When that part of the work done at a job site has been put to its
              intended use by any person or organization other than another
              contractor or subcontractor working on the same project.
       Work that may need service, maintenance, correction, repair or replacement,
       but which is otherwise complete, will be treated as completed.

3. Insurance Coverage Dispute

       On January 11, 2011, J.B.D. sued MCC in Hillsborough County Circuit

Court. MCC subsequently removed the action to the Middle District of Florida on

February 11, 2011 on the basis of diversity jurisdiction. In its Second Amended



“subcontractor exception,” see id., stating that “[t]his exclusion does not apply if the damaged
work or the work out of which the damage arises was performed on your behalf by a
subcontractor.” However, it was eliminated by Endorsement CG 22 94 10 01.
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Complaint, J.B.D. brought damage claims against MCC based on MCC’s alleged

breach of its duty of defense, breach of its duty to indemnify, and for a declaration

of its rights under the MCC Policy. MCC answered, asserting various affirmative

defenses and a counterclaim for a declaration of no coverage. On April 13, 2012,

both parties filed cross-motions for summary judgment on all claims. The motions

disputed whether MCC owed J.B.D. a duty of defense or indemnification, whether

MCC breached either duty, and, if so, whether and to what extent J.B.D. was

entitled to consequential damages flowing from MCC’s breach.

      On October 25, 2012, the district court entered an order denying J.B.D.’s

motion for summary judgment and granting in part and denying in part MCC’s

motion for summary judgment. The court reasoned that to the extent any of the

Sun City claims were for the costs to repair the defectively installed roof, doors

and windows, these costs were not “property damage” and therefore not covered

by the MCC Policy under Florida law. The district court then held that the scope

of J.B.D.’s “work” included construction of the entire fitness center. Therefore, to

the extent that any of the Sun City claims were for the costs to repair damage to the

other components of the fitness center caused by the defectively installed roof,

doors and windows, those costs fell under the “your work” exclusion and were not

covered by the MCC Policy. Accordingly, the district court held that J.B.D.’s




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coverage under the MCC Policy was limited only to claims for damage to non-

fitness center property caused by J.B.D. or its subcontractor’s construction defects.


       Applying these coverage limits to the suit before it, the court held that MCC

did not have a duty to defend J.B.D. in the underlying Sun City Litigation because

“there [was] nothing on the face of the Counterclaim which indicate[d] damage to

property other than the Fitness Center itself.” 4 The court then held that MCC did

not have a duty to indemnify J.B.D. as a matter of law because J.B.D. had not

demonstrated the existence of actual damage to property other than the fitness

center itself, and, therefore, J.B.D. had not established it paid Sun City to settle

claims for any covered “property damage.” Judgment was entered in favor of

MCC on the duty to defend, duty to indemnify, and declaratory judgment claims

on December 11, 2012. J.B.D. filed its Notice of Appeal on January 8, 2013.


                                       II. DISCUSSION

       1. MCC Policy Coverage

       The primary issues on appeal are whether MCC had a duty to defend and/or

a duty to indemnify J.B.D. under the MCC Policy in the underlying Sun City


4
   It was undisputed that the defective installation qualified as an “occurrence” under the policy
and that this “occurrence” took place during a time period covered by the MCC Policy. The
district court also explicitly rejected MCC’s argument that their payment, and J.B.D.’s
acceptance, of the $5,717.77 check constituted an “accord and satisfaction” thereby eliminating
any liability with regard to the duty to defend claim. However, this issue was mooted by the
district court’s holding that MCC did not owe J.B.D. a duty of defense in the first place.
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Litigation. To resolve these disputes, we must first determine the scope of

coverage under the MCC Policy.

      a. “Property damage” caused by an “occurrence”

      The MCC Policy provides coverage for “property damage” caused by an

“occurrence.” The parties do not dispute that J.B.D.’s defective construction

qualifies as an occurrence. “Property damage” means “[p]hysical injury to

tangible property, including all resulting loss of use of that property.” The Florida

Supreme Court has been clear that the cost of removing or repairing defective work

does not qualify as a claim for “property damage.” See U.S. Fire Ins. Co. v.

J.S.U.B., Inc, 979 So. 2d 871 (Fla. 2007); Auto Owners Ins. Co. v. Pozzi Window

Co., 984 So. 2d 1241 (Fla. 2008). However, a claim for the costs of repairing

damage to other property caused by defective work does qualify as a claim for

“property damage.” See J.S.U.B., 979 So. 2d at 889 (“[T]here is a difference

between a claim for the costs of repairing or removing defective work, which is not

a claim for ‘property damage,’ and a claim for the costs of repairing damage

caused by defective work, which is a claim for ‘property damage.’”).

      A recent decision by this Court, Amerisure Mutual Insurance Co. v. Auchter

Co., 673 F.3d 1284 (11th Cir. 2012), further limited the definition of covered

“property damage” in a standard CGL policy such as the one issued by MCC in

this case. In Auchter, Amelia Island Company (“Amelia”) entered into a contract


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with Auchter Company (“Auchter”), a general contractor, for the construction of

an inn and conference center on Amelia’s property. Id. at 1295. Auchter entered

into a subcontract with Register Contracting Company (“Register”) to construct the

inn’s roof. Id. Amelia purchased the individual tiles and then Register installed

them. After the roof was completed, several tiles became dislodged and caused

damage to other roof tiles. Id. at 1296. Amelia sued Auchter for the cost of

repairing the defectively installed roof. Id. Amelia did not allege that the

dislodged tiles had damaged any parts of the inn other than the roof itself. Id.

Auchter subsequently tendered the claim to its insurer, Amerisure Mutual

Insurance Company (“Amerisure”), and Amerisure brought a declaratory judgment

to determine coverage under the CGL Policy it had issued to Auchter. Id. at 1297.

      This Court held that Amelia’s claim for the costs to repair the defective roof

were not claims for “property damage” because the defective installation of the

inn’s roof did not cause “physical injury to tangible property.” Id. at 1309. In

reaching its conclusion, the Court emphasized that Amelia’s claim was to replace

the defectively installed roof as a whole, not simply to replace or repair the various

tiles or other project components that had been damaged by the dislodged tiles. Id.

at 1307. The Court placed particular emphasis on the fact that, because of the

interlocking nature of roof tiles, Auchter’s defective workmanship would require a

refabrication of the entire roof and could not be repaired piecemeal. Id. at 1308.


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Thus, the relevant component for examining the scope of Auchter’s

subcontractor’s defective work was not the individually installed roofing tiles,

which the Court considered to be the raw materials from which the roof was made,

but instead was the entire roof itself. Id. Accordingly, the Court held that

Amelia’s claim was not for the costs to repair damage to other property, such as

the other tiles, caused by Auchter’s subcontractor’s defective work, which would

have been covered “property damage,” but was instead simply a claim for the cost

of replacing the subcontractor’s entire defective roof, and therefore was not

covered “property damage.” Id. at 1307 (citing J.S.U.B., 979 So. 2d at 890).

      MCC argues that the holding in Auchter dictates that any claims for the costs

to repair damage to the fitness center or its components are not claims for

“property damage.” Because J.B.D. agreed to construct the entire fitness center,

and the project components are merely the raw materials used in construction, the

cost to repair any damage to the fitness center caused by the subcontractor’s

defective installation of the fitness center’s roof, doors, and windows are costs to

repair J.B.D.’s defective construction. Therefore, MCC argues that the policy

definition of “property damage” only includes claims for costs to repair damage to

property other than the fitness center itself and would not cover claims for costs to

repair damages to other components of the fitness center caused by J.B.D.’s or its

subcontractor’s defective work as a matter of law. J.B.D. asserts that the reasoning


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in Auchter does not apply in this case. Instead, J.B.D. agrees that Florida law

excludes coverage for the cost to repair or replace the defective construction itself,

but contends that damage to other components of the fitness center caused by the

defective construction qualifies as covered “property damage.”

      Because, as explained below, determining the scope of the policy definition

of “property damage” would not change J.B.D.’s coverage under the MCC Policy,

we decline to decide whether to extend the holding in Auchter to the facts of this

case. Instead, we hold that the costs to repair defective construction are not

covered “property damage,” see J.S.U.B., Inc, 979 So. 2d at 87; Pozzi Window

Co., 984 So. 2d at 1241, and turns to the policy’s “your work” exclusion to hold

that any claims against J.B.D. for the cost to repair damage to the fitness center

arising from J.B.D.’s or its subcontractor’s defective work are not covered by the

MCC Policy.

      b. “Your work” Exclusion

      Exclusion (l), otherwise known as the “your work” exclusion, states that

insurance does not apply to “property damage” to “your work” arising out of it or

any part of it and included in the “products-completed operations hazard.” The

MCC Policy defines “your work” to mean “work or operations performed by you

or on your behalf; and . . . materials, parts, or equipment furnished in connection

with such work or operations.” The Products-Completed Operations Hazard is


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defined to include “all ‘bodily injury’ and ‘property damage occurring away from

premises you own or rent and arising out of ‘your product’ or ‘your work.’” The

Products-Completed Operations Hazard includes a number of exceptions, none of

which are relevant to this case. The parties do not dispute that the “your work”

exclusion applies nor do they dispute that it is enforceable.

      Originally, the MCC Policy also included a subcontractor exception to the

“your work” exclusion, which stated that the “your work” exclusion did “not apply

if the damaged work or the work out of which the damage arises was performed on

your behalf by a subcontractor.” As originally written, therefore, the MCC Policy

covered claims for damage to J.B.D.’s “work” arising from the faulty construction

of J.B.D.’s subcontractors. However, this exception was eliminated by

Endorsement CG 22 94 101 01. By eliminating the subcontractor’s exception, the

MCC Policy no longer covered any claims for damage to J.B.D.’s “work” arising

from work performed by J.B.D.’s subcontractors. Cf. J.S.U.B., 979 So. 2d at 887

(holding that an identical “your work” exclusion in a post-1986 CGL policy

excluded coverage for damage caused by the contractor’s defective work and that

the contractor would not have been covered by the policy absent the subcontractor

exception).

      Because J.B.D. undertook the construction of the entire fitness center, we

agree with the district court’s finding that J.B.D.’s “work,” for the purpose of


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applying the “your work” exclusion, included “construction of the health center

building with related and appurtenant improvements to an existing structure.”

Therefore, the “your work” exclusion, absent the subcontractor’s exception, bars

coverage for damages to the completed fitness center or its components (J.B.D.’s

“work”) arising from J.B.D. or its subcontractor’s defective construction. See e.g.,

Auchter, 673 F.3d at 1310 (explaining that the “your work” exclusion, absent a

subcontractor’s exception, would eliminate a contractor’s coverage for damage to a

completed project where a subcontractor’s faulty workmanship on one part of the

project caused damage to another part of the project).

      Reading the “your work” exclusion in conjunction with the settled policy

definition of “property damage,” we find that the MCC Policy does not cover

claims against J.B.D. for the cost to repair or replace any damage to the completed

fitness center or its components, either based on the repair or removal of the

defective construction itself, or based on the repair of any damage arising out

J.B.D.’s or its subcontractor’s defective construction. Having determined the

scope of J.B.D.’s coverage under the MCC Policy, we now turn to whether MCC

had a duty to defend J.B.D. and, if so, whether MCC breached that duty.

      2. Duty to Defend

      We will first address whether the district court erred in holding that MCC

had no duty to defend J.B.D. against Sun City in the underlying litigation. Because


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we find that MCC did have a duty to defend J.B.D., we will then turn to whether

MCC breached its duty.

      a. Duty to Defend

      The district court accurately recited Florida substantive law governing an

insurer’s duty to defend its insured against legal action in an underlying lawsuit. In

Florida, whether an insurer has a duty to defend depends solely on the allegations

in the complaint and the terms of the insurance policy. See, e.g., Nat’l Union Fire

Ins. Co. v. Lenox Liquors, Inc., 358 So. 2d 533, 536 (Fla. 1977). An insurer has a

duty to defend the entire suit when the complaint alleges “facts that fairly and

potentially bring the suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n,

908 So. 2d 435, 442–43 (Fla. 2005). “The duty to defend is of greater breadth than

the insurer’s duty to indemnify, and the insurer must defend even if the allegations

in the complaint are factually incorrect or meritless.” See Jones, 908 So. 2d at 443

(citations omitted). Any doubts regarding the duty to defend are resolved in favor

of the insured. Id.

      Even if the facts in the complaint potentially bring the suit within policy

coverage, an insurer may avoid the duty to defend if an exclusion applies to the

face of the complaint. See Keen v. Fla. Sheriffs’ Self-Insurance, 692 So. 2d 1021,

1024 (Fla. 4th DCA 2007). Any doubts regarding the application of an exclusion




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are resolved in favor of the insured. See Deni Assocs. of Fla. v. State Farm Fire &

Cas. Ins. Co., 711 So. 2d 1135, 1138 (Fla. 1998).

      The parties agreed at oral argument that MCC had a duty to defend J.B.D.

against claims by Sun City in the underlying litigation. We also agree. For the

reasons given in Part 1a-b supra, the MCC Policy, at the very least, fairly and

potentially covered any claims for damage to property other than the completed

fitness center caused by J.B.D.’s or its subcontractor’s defective work. Count II of

the Sun City Counterclaim, which is the statutory civil action for violations of the

Florida Building Code, unequivocally states a claim for “damage to other

property” caused by J.B.D.’s alleged building code violations. This reference to

“other property” potentially included damage to non-fitness center property such as

the adjacent Atrium building to which the fitness center was being connected or

damage to other equipment, such as exercise machines, which may have been

moved into the building post-construction. Count III of the Counterclaim, the

negligence claim, also references “damages to the interior of the property, other

building components and materials,” and thus potentially includes allegations of

damage to the same non-project property. Accordingly, these allegations of

damage to property other than the fitness center caused by J.B.D.’s or its

subcontractor’s defective work potentially came within MCC Policy coverage and,

therefore, triggered MCC’s duty to defend J.B.D. in the entire suit. See Colony


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Ins. Co. v. Barnes, 410 F. Supp. 2d 1137, 1139 (N.D. Fla. 2005) (“If a complaint

alleges any claim that, if proven, might come within the insurer’s indemnity

obligation, the insurer must defend the entire action.”). Thus, we reverse the

district court’s decision to deny J.B.D.’s motion for summary judgment on this

issue and grant summary judgment in favor of J.B.D.

      b. Breach of the Duty to Defend

      Having determined that MCC had a duty to defend J.B.D against Sun City,

we now turn to the question of whether MCC breached this duty.

      It is undisputed that J.B.D. tendered the Sun City Counterclaim to MCC for

defense and indemnification on May 6, 2009. On May 21, 2009 MCC sent J.B.D.

a Reservation of Rights letter notifying J.B.D. that it was investigating the claim.

At no point after sending this letter did MCC retain counsel or otherwise assist in

defending for J.B.D.

      On July 15, 2009, acting on advice from its own retained counsel, J.B.D.

agreed to settle all claims in the Sun City Counterclaim for $181,750.94. J.B.D.

subsequently notified MCC of the settlement and again requested indemnification.

Over a year later, MCC mailed J.B.D. a check for $5,717.77 to reimburse J.B.D.’s

counsel for his services from the time of tender until the completion of the

settlement. This check represented the value of J.B.D.’s attorney’s fees and

expenses accrued from the date of tender up until the date of settlement less the


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$5,000 contractual deductible. J.B.D. responded by sending a letter to MCC

demanding full reimbursement of the settlement value and notifying MCC of its

intention to treat the check as a partial payment of that amount.

      The record is clear that MCC elected not to defend J.B.D. against Sun City

in the underlying litigation from the time J.B.D. tendered the suit through the

settlement date. This failure to appoint counsel is a clear breach of MCC’s duty to

defend. MCC argues, however, that its payment of the $5,717.77 check acted as an

“accord and satisfaction,” therefore curing the breach. Despite finding that MCC

did not owe J.B.D. a duty to defend, the district court nonetheless ruled, as a matter

of law, that this payment was not an “accord and satisfaction.” We agree.

      An “accord and satisfaction results as a matter of law when an offerree

accepts payment which is tendered only on the express condition that its receipt is

to be deemed a complete satisfaction of a disputed claim.” See Hannah v. James A.

Ryder Corp., 380 So. 2d 507, 609–10 (Fla. 3rd DCA 1980) (citations omitted).

J.B.D. did not accept payment on the express condition that its receipt would be a

complete satisfaction of the lingering duty of defense dispute. Correspondences

between the parties make clear that J.B.D. intended to treat the check as partial

payment of the $181,750.94 settlement value J.B.D. believed MCC owed it.

Accordingly, we affirm the district court’s denial of MCC’s motion for summary

judgment on the accord and satisfaction issue and hold that MCC breached its


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contractual duty to defend under the MCC Policy as a matter of law by failing to

provide J.B.D with counsel or otherwise defend J.B.D. against the Sun City

Counterclaim. We remand the case to the district court for the sole purpose of

determining whether, and to what extent, J.B.D. is entitled to damages, including

consequential damages, as a result of MCC’s breach of its duty to defend J.B.D.

from the time of tender through date of settlement.5

       3. Duty to Indemnify

       We now turn to whether MCC had an indemnity obligation under the MCC

Policy. An insurer’s duty to indemnify is narrower than the duty to defend and

must be determined by analyzing the policy coverage in light of the actual facts in

the underlying case. State Farm Fire and Cas. Co. v. CTC Dev. Corp., 720 So. 2d

1072, 1077 (Fla. 1988). The duty to indemnify is dependent upon the entry of a

final judgment, settlement, or a final resolution of the underlying claims. See

Northland Cas. Co. v. HBE Corp., 160 F. Supp. 2d 1348, 1360 (M.D. Fla. 2001).

If the insured cannot demonstrate that it suffered a loss under the policy, the

insurer has no duty to indemnify. Id.

       As discussed in Part 1a-b supra, the MCC Policy does not provide coverage

for the costs to repair or replace J.B.D.’s or its subcontractor’s defective

construction under the policy definition of “property damage” or for the costs to

5
   Included in this inquiry is determination of whether the $5,000 policy deductible applies to
J.B.D.’s potential recovery, an issue the parties dispute before this Court.
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repair damage to the completed 6 fitness center or its components arising from

J.B.D.’s or its subcontractor’s defective construction under the “your work”

exclusion. Accordingly, the MCC Policy only covers claims for damage to

property other than the completed fitness center caused by the defective installation

of the doors, windows, and roof. The MCC Policy provides indemnification for

“the sums that the insured becomes legally obligated to pay as damages because of

. . . property damage to which this insurance applies.” Thus, MCC is only

obligated to indemnify J.B.D. for any sum J.B.D. paid Sun City to settle claims for

the costs of repairing damage to property other than the completed fitness center.

       Applying the policy coverage to the “actual facts in the underlying case,” we

cannot find evidence of damage to property other than the completed fitness center

or its components. The Sun City Counterclaim included a claim for breach of

contract, a statutory claim for failing to comply with Florida building codes, and a

negligence claim. Among other damages, the three claims sought costs to repair

any defective construction, costs to repair damage to the fitness center caused by

the alleged construction defects, and damage to other property. J.B.D. and Sun

City agreed to settle all claims in the underlying Counterclaim on July 15, 2009,

for $181,750.94. Based on Sun City’s pre-mediation damages/costs breakdown,


6
  It is undisputed that the fitness center was completed in January, 2007 and that therefore
coverage for the alleged property damage would fall within the “products completed operations
hazard.”
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the settlement value was for estimated remediation costs, actual repair costs,

engineering invoices, and legal fees and costs. Nothing on the record suggests that

the settlement, including the estimated remediation costs, were to repair physical

damage to property other than the fitness center itself, and, therefore the district

court did not err in holding that MCC did not owe J.B.D. a duty to indemnify it for

the value of the Sun City settlement. 7

       J.B.D. argues that the settlement value reflected compensation for costs to

repair property other than the completed fitness center. J.B.D. directs the Court to

engineering reports documenting water intrusion points at certain transition areas

between the completed fitness center and the pre-existing Atrium building, and

argues that the settlement agreement was based partially on estimates of the costs

to repair this damage. Because this damage was not to the completed fitness

center, J.B.D. contends it is covered “property damage” not excluded by the “your

work” exclusion and, at the least, creates a fact issue as to whether the settlement

triggered MCC’s duty to indemnify. We cannot agree. While J.B.D. is correct that

damage to property other than the completed fitness center would be covered by

the MCC Policy, we find no evidence of such damage. The engineering reports


7
  Under Florida law, J.B.D. has the burden of allocating the settlement amount between covered
and uncovered claims and the inability to do so precludes recovery. See, e.g., Am. Cas. Co. of
Reading Pa. v. Health Care Indemn., Inc., 613 F. Supp. 2d 1310, 1320 (M.D. Fla. 2009). Thus,
even if J.B.D. could establish that some portion of the settlement value was for claims to repair
damage covered under the MCC Policy, J.B.D.’s claims would mostly likely fail because it could
not allocate what portion was for covered property damage and what portion was not.
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J.B.D. directs the Court to vaguely speak of water intrusion points, not water

damage. Absent evidence of actual damage to the Atrium building, the

engineering reports themselves are insufficient to create a genuine dispute that

J.B.D.’s work caused damage to some property other than the fitness center. 8

       Finally, although J.B.D. concedes that the “your work” exclusion is

enforceable, it contends that MCC has not carried its burden of establishing that

the physical evidence of damage to the completed fitness center was caused by

J.B.D. or its subcontractor’s “work” rather than from manufacturing defects or

design flaws. See Auto Owners Ins. Co. v. Travelers Cas. & Sur. Co., 227 F.

Supp. 2d 1248, 1258 (M.D. Fla. 2002) (noting that the insurer bears the burden of

establishing that an exclusion applies if defending on the ground of non-coverage).

J.B.D.’s argument misreads the plain language of the “your work” exclusion. The

“your work” exclusion does not exclude coverage for damage “caused” by J.B.D.


8
  J.B.D. also argues that the remediation estimate is based on the approximate cost of arresting
ongoing water intrusion which, if left uncorrected, would eventually result in damage to covered,
non-project property thus triggering MCC’s indemnity obligation. J.B.D. contends these
mitigation costs should qualify for coverage under the MCC Policy. See Leebov v. United States
Fidelity and Guar. Co., 401 Pa. 477 (Pa. 1960). While the costs to repair J.B.D.’s defective
construction certainly did mitigate potential future damage, it can hardly be said they should
qualify for coverage as “mitigation costs.” See Rolyn Companies, Inc. v. R & J Sales of Texas,
Inc., 671 F. Supp. 2d 1314, 137 (S.D. Fla. 2009) (finding that repairs to conform buildings to
their original specifications, thus making the buildings “like new,” could not be covered
“mitigation costs”). To accept J.B.D.’s argument would defeat the distinction between covered
and uncovered “property damage” that is well-settled under Florida law. Because the cost to
repair defective work, which is expressly not covered, will almost always also mitigate potential
damage to other property, which is covered, an uncovered claim for costs to repair defective
work would instantly be transformed into a covered claim for “mitigation costs.” Absent some
unique circumstances, none of which we can find here, we refuse to adopt this rule.
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or its subcontractor’s work but instead excludes coverage for damage that “arises”

from J.B.D.’s or its subcontractor’s work. The term “arise” is broader than the

word “cause,” see Taurus Holdings, Inc. v. USF & G Co., 913 So. 2d 528, 539–40

(Fla. 2005), and it is undisputed that the damage “arose” from J.B.D.’s or its

subcontractor’s work. Therefore, MCC has carried its burden of establishing, as a

matter of law, that the “your work” exclusion applies and therefore that the

settlement payment did not trigger MCC’s duty to indemnify.

      Accordingly, analyzing the policy in light of the facts in the underlying case,

we find no evidence of damage to property other than the completed fitness center

and therefore uphold the district court’s determination that MCC does not have a

duty to indemnify J.B.D as a matter of law. Because the settlement value was not

covered by the MCC Policy, MCC also did not have a duty to indemnify J.B.D. for

any legal fees and costs included in the settlement. See Assurance Co. of Am. v.

Lucas Waterproofing, Inc., 581 F. Supp. 2d 1201 (S.D. Fla. 2008).

                                III. CONCLUSION

      For the reasons discussed above, we REVERSE the district court’s grant of

summary judgment to MCC on the issue of MCC’s duty to defend and REMAND

for a determination of consequential damages consistent with this opinion. We

otherwise AFFIRM the district court’s holdings.




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