Most insurance coverage protection disputes contain acquainted perils reminiscent of hearth, wind, and water intrusion. Not often does a court docket wrestle with whether or not a large aquarium inside an orthodontic workplace qualifies as “coated gear” below a businessowners coverage with gear breakdown protection. But that’s exactly the weird backdrop of Kawa Orthodontics, LLP v. Depositors Insurance coverage Firm.
On the trial court docket stage, the information have been easy however unusual. Kawa Orthodontics displayed a large aquarium system consisting of acrylic tanks related by an overhead bridge by way of which fish might swim and sufferers might gaze. A crack appeared within the acrylic bridge. To handle it, Kawa drained the tanks, relocated the fish, and employed Erisa Enhancements to take away the cracked bridge.
In the course of the elimination work, two extra cracks shaped within the wall of one of many tanks, captured on surveillance video. Kawa submitted a declare for the injury. Depositors denied it, writing in its denial letter that “the loss was because of the negligent work of Erisa Enhancements,” invoking the coverage exclusion for “defective, insufficient or faulty…design, specs, workmanship, work strategies, restore, building, renovation, reworking, grading, compaction, [or] failure to guard the property.”
Depositors filed for abstract judgment in federal court docket, arguing that a number of provisions within the coverage barred protection. It pointed to the exclusion for “put on and tear; rust or different corrosion, decay, deterioration, hidden or latent defect…[and] settling, cracking, shrinking or enlargement,” in addition to the exclusion for “mechanical breakdown.” The insurer additionally insisted that the Gear Breakdown protection couldn’t apply as a result of the aquarium was not “coated gear,” which the coverage outlined as “Coated Property…that generates, transmits or makes use of vitality…or which, throughout regular utilization, operates below vacuum or strain, aside from the burden of its contents.” In Depositors’ view, the acrylic tanks have been merely containers relatively than equipment.
Kawa responded with its personal movement for abstract judgment, pointing to the coverage’s Extra Protection for Gear Breakdown, which promised: “We can pay for direct bodily lack of or injury to Coated Property attributable to or ensuing from an ‘accident’ to ‘coated gear.’ If an preliminary ‘accident’ causes different ‘accidents,’ all might be thought-about one ‘accident.’”
Beneath that language, Kawa argued, the primary crack within the bridge was an “accident” within the type of a rupture from mechanical breakdown, and the later tank cracks have been merely a part of the identical occasion. It emphasised that each its professional and Depositors’ personal professional admitted there was no industry-approved technique to restore acrylic aquariums, making it inconceivable to carry Erisa negligent below any identifiable customary of care.
The district court docket agreed with Kawa and entered judgment in its favor. 1 Choose Rodney Smith held that the aquarium was coated gear as a result of it operated “below vacuum or strain” through a submersible pump that circulated water. He discovered the cracking was a “rupture” that certified as a mechanical breakdown.
The court docket rejected the negligence exclusion, reasoning that since “there is no such thing as a identifiable customary of care relevant to the restore work on this occasion,” Erisa couldn’t be deemed negligent. Decoding ambiguous coverage language in favor of the insured, the court docket utilized the rule of the final antecedent to construe “mechanical breakdown, together with rupture or bursting attributable to centrifugal pressure” in order that “attributable to centrifugal pressure” modified solely “bursting,” which means a rupture alone was sufficient. The court docket entered closing judgment in favor of Kawa within the quantity of $326,004.33, the precise money worth of the loss.
On attraction, Depositors pressed a number of arguments. It claimed the district court docket improperly thought-about the preliminary bridge crack as a result of Kawa had not pled it as a part of its declare. It argued the court docket erred find no negligence, citing Florida precedent that the absence of {industry} requirements doesn’t negate the responsibility to behave with cheap care. It renewed its place that the aquarium was not “coated gear,” that no “accident” as outlined by the coverage had occurred, and that exclusions for put on and tear and latent defect utilized. Kawa countered in its appellate transient that the aquarium system functioned as one unit, that the cracks have been accidents inside the coverage’s definition, and that the negligence exclusion couldn’t apply within the absence of a longtime responsibility.
The Eleventh Circuit reversed and remanded. 2 The panel emphasised that the trial court docket had gone too far in eradicating negligence from the case. It held that “though {industry} requirements are proof of the suitable customary of care, the existence of {industry} requirements isn’t dispositive,” and that below Florida regulation “the usual of care is a query of reality for the jury.” Viewing the proof in Depositors’ favor, a jury might fairly conclude the cracks have been attributable to Erisa’s improper use of the aquarium partitions as a scaffold and by inserting weight on the acrylic.
The appellate court docket additionally famous {that a} jury might discover the preliminary crack didn’t essentially trigger a “complete lack of all the aquarium system,” as Depositors’ professional testified there have been doable short-term fixes. As a result of factual disputes existed on negligence and causation, the appellate court docket didn’t attain the insurer’s different protection defenses, leaving these arguments alive on remand.
At this stage, Kawa now not holds a judgment in its favor; as an alternative, the case will proceed with a jury to determine whether or not the aquarium cracks have been the results of negligent repairs or a coated accident below the coverage’s Gear Breakdown protection. This uncommon battle over a fish tank exhibits how insurance coverage regulation typically activates definitions, exclusions, and the exact wording of protection provisions.
I’ll proceed to observe this matter and report again because it unfolds. I counsel that readers on this protection learn an article written by lawyer Iris Kuhn, Small Enterprise Producers Ought to Buy Gear Breakdown Protection, and an article I wrote, Electrical Arcing Versus Fireplace Injury Claims—What’s Coated and Why Gear Breakdown Protection Ought to Be Bought With Each Industrial Coverage.
Thought For The Day:
“The distinction between the precise phrase and the virtually proper phrase is the distinction between lightning and a lightning bug.”
—Mark Twain
1 Kawa Orthodontics v. Depositors Ins. Co., No. 21-CV-81884 (S.D. Fla. Sept. 23, 2023).
2 Kawa Orthodontics v. Depositors Ins. Co., No. 23-13662, 2025 WL 2718235 (11th Cir. Sept. 24, 2025).
