In its recent decision in Canal Indem. Co. v. Margaretville of NSB, Inc., 2013 U.S. Dist. LEXIS 93658 (M.D. Fla. July 3, 2013), the United States District Court for the Middle District of Florida had occasion to consider the limitation of coverage effected by a classified operations endorsement on a general liability policy.
Canal Indemnity Company insured Bad Lands Excavating, Inc., a construction subcontracting company, under a general liability insurance policy. The policy contained a “special exclusion endorsement,” limiting coverage to those operations classified and specifically identified in the policy’s declarations or endorsements. The policy also contained an endorsement excluding coverage for underground property damage caused by explosion or collapse. In its application for the policy, Bad Lands was asked to disclose all operations it performed for which it was seeking insurance coverage. In response, Bad Lands selected only grading of land, including “borrowing, filling or back filling.” As a result, this was the only operation identified in the declarations page of the policy issued by Canal.
Bad Lands was later named as a defendant in a property damage lawsuit in which it was alleged that Bad Lands negligently installed sheet pilings on plaintiff’s property. Canal took the position that by having only identified grading operations, its policy necessarily excluded Bad Lands’ sheet piling operations. Canal further argued that sheet piling could not be considered a grading operation. Grading, it pointed out, is commonly defined as “to level off a smooth horizon or sleeping surface,” whereas a pile is typically defined as a “long slender column usually of timber, steel or reinforced concrete driven into the ground to carry a vertical load.” Relying on these dictionary definitions, Canal argued that “no reasonable interpretation of ‘grading’ would contemplate driving columns into the ground, such as is done in pile driving.” The underlying claimants, however, suing on behalf of Bad Lands, argued that because the policy did not define the terms “operations,” “grading of land,” “borrowing,” filling,” or “back filling,” these terms needed to be interpreted broadly in favor of coverage. They also argued that if the policy did not insure piling operations, then the underground property damage exclusion was unnecessary, or at the very least created an ambiguity.
The court rejected the claimants’ arguments, finding that the classification endorsement was clear and unambiguous, explaining:
The Court agrees with Plaintiff that no reasonable interpretation of these terms would assume that the smoothing or leveling off of a surface encompasses the driving of columns, or sheet piles, into the ground. Second, the Special Exclusion Endorsement unambiguously limits coverage to the sole classification shown on the declaration.
The court further rejected the argument that the underground property damage exclusion created an ambiguity, noting that the exclusion was boilerplate and that in any event, “Defendants cannot generate ambiguity with the circular argument that a particular exclusion would not be needed but for coverage of that activity.” As such, the court agreed that Canal had no coverage obligations with to the underlying suit.