Westfield not obligated to defend Florida contractor

A federal appeals court Monday affirmed that Westfield Insurance Co. is not obligated to defend or insure a Florida contractor in connection with a complex dispute with one of its subcontractors.

The Diaz Fritz Group Inc., based in Temple Terrace, Florida, hired Howard Baker Inc. in May 2009 as a subcontractor to perform foundation work at University Community Hospital Carrollwood in Tampa, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta inThe Diaz Fritz Group Inc. d.b.a. Diaz Fritz Isabel vs. Westfield Insurance Co.

Diaz Fritz agreed to pay Tampa-based HBI $290,000 to complete the project. But problems developed and, according to Diaz Fritz,  HBI negligently caused some of the hospital’s other property to flood, incurring substantial damage.

After the hospital demanded Diaz Fritz remediate the situation within three days, the company reached out to Westfield, but the insurer said HBI was responsible for the flooding. Westfield sent the claim to HBI’s insurer, Zurich American Insurance Co., but the insurers could not agree on whether Zurich’s policy required it to provide coverage to Diaz Fritz as an additional insured.

Meanwhile, without seeking Westfield’s approval, Diaz Fritz paid for the necessary repairs — which totaled about $506,000 — without admitting fault. It then decided to withhold the $290,000 it had agreed to pay HBI for its work but still remained on the hook for more than $200,000 of the amount it had paid the hospital.

After Westfield refused to defend it, Diaz Fritz filed suit against HBI in state court, where a jury found HBI partially responsible for $267,00 in damages. Offsetting the $290,000 Diaz Fritz had withheld, the jury awarded HBI $23,400 in damages.

Diaz Fritz filed suit against Westfield in U.S. District Court in Tampa, seeking a declaratory judgment the insurer was obligated to defend and indemnify it.

The district court ruled in Westfield’s favor and was affirmed by a three-judge appeals court panel.

The district court ruled in Westfield’s favor “after concluding that the plain and unambiguous policy language” covered “suits”’ for damages because of property damage, the appeals court ruling said.

“In contrast, it found that HBI’s affirmative defense only sought to offset the amount of damages Diaz Fritz claimed it was owed in a  contract action. We agree, and find Diaz Fritz’s contrary argument unconvincing,” the panel said, in holding Westfield was not obligated to provide either a defense or indemnification.

Westfield attorney Aram P. Megerian, a partner with Cole, Scott & Kissane P.A., in Tampa, said in a statement he believed the court reached the right conclusion. Diaz Fritz attorneys did not respond to a request for comment.