Damages for Loss of Use in Florida

By on October 26, 2017
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Florida courts have long relied upon the Restatement (Second) of Torts as governing lawsuits where loss of use damages are at issue. Restatement (Second) of Torts § 928 provides in part:

When one is entitled to a judgment for harm to chattels not amounting to a total destruction in value, the damages include compensation for

. . . .

(b) the loss of use.

Restatement (Second) of Torts § 928 (1979).

In the past Florida courts have interpreted the Restatement (Second) to mean that “loss of use damages are only recoverable when an owner suffers a complete deprivation of use of the property.” AT&T Corp. v. Lanzo Constr. Co., 74 F. Supp. 2d 1223 (S.D. Fla. 1999), citing Schryburt v. Olesen, 475 So. 2d 715, 717 (Fla. 2d DCA 1985). Furthermore, courts in Florida agree that “a party is entitled to recover loss of use damages even if a substitute chattel is not utilized.” Lanzo Constr., 74 F. Supp. 2d 1223. With these legal principles in mind the court in Lanzo Constr. found that the complete loss of use of a single fiberoptic cable – not the loss of use of the entire phone system was sufficient to warrant the award of damages. Id. With respect to the measuring loss of use damages, the court found that:

Florida law explicitly provides that loss of use damages are measured by the amount necessary to rent a similar article or other suitable article within which to perform the services usually performed by the damaged article during the period of repair.

Id., citing Mortellaro & Co. v. Atlantic C.L.R. Co., 107 So. 528 (1926). Accordingly, the measure of damages was determined to be the “amount that it would cost to rent a fiberoptic cable” – whether or not the cable was actually rented. Id.

The Florida Supreme Court criticized the outcome reached in Lanzo Constr. in MCI WorldCom Network Servs vs. Mastec, Inc. finding that the damaged cable rather than the entire telecommunication system was the relevant property for loss of use purposes. 995 So. 2d 221, 229 (Fla. 2008). Notwithstanding, the court stopped short of saying that loss of use damages as an element of compensatory damages cannot be awarded where the personal property harmed has not been destroyed. The Florida Supreme Court held that:

loss-of-use damages based on rental replacement value is not the appropriate measure of damages when there have been no such damages incurred and the telecommunications traffic carried by the damaged cable has been accommodated within the telecommunications carrier’s own network so there has been no loss of service

MCI WorldCom Network Servs vs. Mastec, Inc., 995 So. 2d at 229-30.

Subsequent cases decided by courts interpreting Florida laws with respect to damages for loss of use have narrowed the potential breadth of MCI WorldCom’s holding. In a homeowner’s construction completion delay case, the Third District Court of Appeal found that a complete loss of use does not necessarily mean “all use” when considering loss of use damages arising from delayed occupancy; rather, loss of use of a substantial portion of the homeowner’s premises may be sufficient. See Gonzalez v. Barrenechea, 170 So. 3d 13 (Fla. 3d DCA  2015).

In July 2017, the U.S. District Court in the Middle District of Florida declined to dismiss a complaint brought by a telecommunications company against a party that severed one of its cables distinguishing the MCI WorldCom case wherein the Florida Supreme Court held that MCI could not recover loss of use damages as a result of MCI WorldCom suffering “no actual loss of use or rental of replacement cable, nor interruption of service to MCI’s customers.” Level 3 Communs., LLC v. Salser Constr., Inc., 2017 U.S. Dist. LEXIS 105896, *4 (M.D. Fla. July 10, 2017). Level 3 Communs. alleged in its complaint that it lost the ability to provide services to numerous customers in connection with Salser’s damage to a fiber-optic cable. Level 3 Communs., 2017 U.S. Dist. LEXIS 105896 at *1. Unlike the holding of the MCI WorldCom case, the court in Level 3 Communs did not determine that the entire telecommunication system was the relevant property for loss of use purposes.

Loss of use damages appear to be an evolving concept in Florida which should be followed closely by all construction litigators who practice in Florida.

Filed under Loss of Use Damages

The Slavin Doctrine (Florida) – Recent Developments

By on February 18, 2015
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In 1958 the Slavin doctrine was first articulated by the Florida Supreme Court. Slavin v. Kay, 108 So.2d 462 (Fla. 1958). That doctrine is that “a contractor is relieved of liability caused by a patent defect after control of the completed premises has been turned over to the owner.” Easterday v. Masiello, 518 So. 2d 260 (Fla. 1988)(Court expanded the Slavin doctrine to apply to architects and engineers). Two recent cases in Florida relied upon the Slavin doctrine precluding liability against design professionals.

In Transp. Eng’g, Inc. v. Cruz the trial court, relying upon the Slavin doctrine granted summary judgment in favor of the contractor and denied the same relief to the design professional. The court affirmed summary judgment in favor of the contractor and vacated the trial court’s order denying summary judgment to the engineer, finding, “it was undisputed . . .  that DOT accepted the project with bare (uncushioned) guardrail ends within the clear zone, and that this was an open and obvious condition. Therefore, even if TEI violated its standard of care . . . summary judgment should have been granted in TEI’s favor based upon Slavin and Easterday. Transp.” Eng’g, Inc. (TEI) v. Cruz, 2014 Fla. App. LEXIS 18273, 39 Fla. L. Weekly D 2333 (Fla. Dist. Ct. App. 5th Dist. Nov. 7, 2014)(case involved changes to state’s standard design for guardrails by Florida DOT which were followed by design engineer; thereafter, a third party was killed hitting the unprotected guardrail).

In McIntosh v. Progressive Design & Eng’g the district court, relying upon the Slavin doctrine affirmed the lower court where the jury determined that the design professional was negligent in its design of a traffic signal (the legal cause of a traffic fatality); however, “the negligent design was accepted and discoverable by FDOT with the exercise of reasonable care.” McIntosh v. Progressive Design & Eng’g (In re Estate of McIntosh), 2015 Fla. App. LEXIS 163, *7, 40 Fla. L. Weekly D 160 (Fla. 4th DCA Jan. 7, 2015). The result in McIntosh is factually distinguishable from other cases that have relied upon the Slavin doctrine. In McIntosh, the ultimate owner of the traffic signal was not FDOT, but rather was Broward County, Florida; which entity would not give its final acceptance of the project work until the final phase of the project was completed (the burn-in period). The fatal accident occurred prior to control of the traffic signal being turned over to the county. The district court rejected this argument; instead finding, that “responsibility for a patent defect rests with the entity in control [when the design was approved and accepted] and with the ability to correct it.” Id. at *12. In McIntosh, the entity in control was the FDOT. Only time will tell whether other district courts will follow the approach taken in McIntosh.

Filed under Architects, Design Professionals, Engineers, Liability, Patent Defect

11th Circuit Interprets Post-1986 CGL Policy Under Florida Law

By on September 2, 2014
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In July 2014, the 11th U.S. Circuit Court of Appeals issued an unpublished decision interpreting the terms of a commercial general liability (CGL) policy in a construction defect dispute which, as a result of an endorsement, did not include a subcontractor exception with respect to the scope of “your work.”

According to the unpublished opinion in J.B.D. Constr., Inc. v. Mid-Continent Cas. Co. (MCC), 2014 U.S. App. LEXIS 13358 (11th Cir. Fla. July 11, 2014), in connection with a storm, certain project work proved to have been defectively installed, the result of which allowed water to penetrate the structure and damage completed work. In J.B.D., the 11th Circuit held that not only did the “your work” exclusion of the CGL policy support denial of claims made by the contractor for the cost to repair damage to its work, but it also supported denial of the contractor’s claim with respect to property damage that occurred as a result of its subcontractor’s defective work.

The Florida Supreme Court has yet to interpret a post-1986 CGL policy that does not include the subcontractor exception. However, in two consecutive opinions, the Florida Supreme Court did interpret a CGL policy to determine whether property damage to a contractor’s completed work caused by the defective work of subcontractors constituted an occurrence under a CGL policy, which was covered by the policy. Auto-Owners Ins. v. Pozzi Window Co., 984 So. 2d 1241 (Fla. 2008); U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871 (Fla. 2007).

In J.S.U.B., the Florida Supreme Court considered a CGL policy that included the subcontractor exception. The J.S.U.B. court held that the costs to repair damage to property caused as a result of a subcontractor’s defective work is an occurrence and, therefore, a covered claim under a CGL policy. Insurers, contractors, developers and practitioners will be watching, if and when the Florida Supreme Court decides the issue addressed in J.B.D.

Worthy of note: In J.B.D., the insurer, MCC, determined after a claim was made that it had no duty to defend the contractor in the case. The 11th Circuit – citing Jones v. Fla. Ins. Guar. Ass’n, 908 So. 2d 435, 442–43 (Fla. 2005) – disagreed finding that MCC had a duty to defend under Florida law based upon the facts stated in the contractor’s complaint. The 11th Circuit found that “[e]ven 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.”

Based upon MCC’s conduct, the 11th Circuit held that MCC breached its duty to defend and remanded the case for a determination of J.B.D.’s damages, including consequential damages, from the time of tender through the conclusion of the case at the trial level.

Filed under Commercial General Liability (CGL) Policy, Construction Defect, Subcontractor Exception