The case, Liberty Surplus Insurance Corporation v. Kaufman Lynn Construction, Inc., stemmed from a dispute over a commercial general liability (CGL) policy issued to Kaufman by Liberty Surplus Insurance Corporation. After Kaufman sought coverage for $3.3 million in water damage caused by Tropical Storm Eta, Liberty denied the claim, citing the policy’s Course of Construction Exclusion, a provision barring coverage for property damage occurring during construction until the project is completed.
Kaufman was hired by JM Family Enterprises to build a corporate campus in South Florida. The project included multiple office buildings, a dining hall, a parking garage, and a central energy plant. By October 2020, some of the structures were completed, and JM Family had begun using them. However, additional structures remained under construction, and some existing buildings still needed demolition.
When Tropical Storm Eta struck in November 2020, it caused significant water intrusion in the completed buildings. JM Family directed Kaufman to address the damage, prompting Kaufman to file claims against its subcontractors and seek indemnification from Liberty. Liberty denied the claim, asserting that the Course of Construction Exclusion barred coverage until the entire project was completed, leading to the litigation.
Liberty subsequently sought a declaratory judgment that it had no duty to defend or indemnify Kaufman. Kaufman counterclaimed for breach of contract and reformation of the insurance policy, arguing that a mutual mistake had resulted in an incorrect description of the insured project.
The court sided with Liberty on the coverage issue, affirming the Course of Construction Exclusion’s broad interpretation. The exclusion states: "This insurance does not apply to . . . [a]ny 'property damage' at or to any project insured under this policy during the course of construction until the project is completed."
Since some buildings were still under construction at the time of the storm, the court found that the entire project had not been completed, thereby barring coverage. The judges also rejected Kaufman’s argument that the exclusion was ambiguous, concluding that its plain language applied until all phases of construction were finished.
However, the court reversed the lower court’s decision on Kaufman’s claim for reformation of the insurance policy, ruling that Kaufman had standing to seek changes to the contract. Kaufman contended that the policy’s description of the project failed to match the two-phased construction plan it had provided to Liberty when obtaining coverage. The company argued that this discrepancy affected its ability to claim benefits under the policy.
The appellate court determined that Kaufman had suffered an injury because it had received a policy that did not accurately reflect the project for which it had paid premiums. As such, the court held that Kaufman had the right to pursue a judicial correction of the policy’s terms.
The court also denied Liberty’s request for attorney’s fees, holding that its settlement proposal did not comply with Florida’s offer-of-judgment statute. Liberty had offered Kaufman a settlement for its counterclaims, but the court found that the proposal failed to resolve all monetary claims at issue, rendering it invalid.
This ruling underscores the importance of policy exclusions in commercial liability insurance and highlights the complexities of coverage disputes in multi-phase construction projects. The decision also reinforces that contract reformation remains a viable legal remedy when an insured party can demonstrate that an insurance policy does not reflect the agreed-upon terms.
Moving forward, Kaufman will have an opportunity to argue that its policy should be reformed to reflect the project’s phased structure. However, unless that effort succeeds, the ruling affirms that insurers can rely on course of construction exclusions to deny coverage for damages occurring mid-project, potentially leaving contractors without recourse for certain claims.
