TAMPA, Fla. — The arbitration clause in a limited warranty provided by a builder to the original homebuyer also binds the insurer for a subsequent owner, a federal magistrate judge in Florida concluded June 6. Florida Farm Bureau Insurance Cos. v. Pulte Home Corp., No. 8:04-CV-2357-T-EAJ (M.D. Fla.).

Florida Farm Bureau Insurance Companies sued Pulte Home Corp. for negligence, implied warranty and strict liability to recover $114,377 paid to remediate mold from the home owned by its insureds, R. Chris Landsberg and Carol B. Landsberg. The Landsbergs sought coverage after heavy rains in September 2004 caused water leaks and led to mold contamination.

They purchased the home in 2001 from Matthew N. and Elicia D. Clinger, who were the original owners of the Bradenton, Fla., home constructed by Pulte in 1999.

Pulte moved to dismiss or stay, and to compel arbitration subject to the arbitration clause contained in the limited warranty provided to the Clingers in 1999. The warranty limited Pulte's liability to repair and replacement, and required the parties to mediate any disputes and, if that failed, to submit to binding arbitration.

Florida Farm Bureau argued that it was not bound by the arbitration provision because it was not an intended beneficiary of the warranty, and because its claims were not subject to the agreement.

U.S. Magistrate Judge Elizabeth A. Jenkins ruled, first, that Florida Farm Bureau was bound by the terms of the arbitration provision.

Reviewing the warranty language in light of Florida law, the magistrate judge explained, 'by permitting the subsequent owner to assume the warranties afforded to the original owner, the parties to the Limited Warranty unambiguously intended that subsequent owners of the home would directly and substantially benefit from the Limited Warranty. Thus, because subsequent owners of the home receive more than an incidental benefit from the Limited Warranty, subsequent owners of the home are third party beneficiaries to the Limited Warranty and can be compelled to arbitrate.'

Magistrate Judge Jenkins said that Florida Farm Bureau claimed subrogration rights and, thus, was bound by the arbitration provision to the same extent as the Landsbergs.

The magistrate judge also concluded that the carrier's claims arose out of the contract and were, thus, bound by the terms of the agreement.

Florida Farm Bureau relied on Seifert v. U.S. Home Corp. (750 So.2d 633, 636 [Fla. 1999]), in which Florida's Supreme Court concluded that the parties to a home sale did not contemplate arbitrating tort claims for wrongful death or personal injuries against an air-conditioning contractor.

Florida courts have interpreted Seifert narrowly, Magistrate Judge Jenkins said in concluding that it was inapplicable.

The magistrate judge found the circumstances here analogous to those in Engle Homes, Inc. v. Jones (870 So.2d 908, 909 [Fla. 4th DCA 2004]), in which an intermediate Florida court found that, unlike Seifert, the arbitration clause covering 'any and all unsettled claims or disputes ...' encompassed claims of negligent design and construction.

The arbitration agreement between the Clingers and Pulte specifically applied to '[a]ny controversy, claim or dispute arising out of or relating to this Agreement or Your purchase of the Home (other than claims under the Limited Warranty) ...,' Magistrate Judge Jenkins explained.

'Analogous to the claims in Engle Homes, Plaintiff's tort and breach of warranty claims are premised upon Pulte's alleged negligence design and construction of the house,' the Magistrate Judge said.

'Indeed, to resolve Plaintiff's claims, it is necessary to refer to or construe the provisions of the Purchase Agreement and the Limited Warranty,' Magistrate Judge Jenkins concluded. 'Because Plaintiff's claims are directly related and closely intertwined with the Purchase Agreement and the Limited Warranty, Plaintiff's claims are addressed by the Purchase Agreement and Limited Warranty. Therefore, Plaintiff's claims are subject to mediation and arbitration.'

Barry D. Graves of Gainesville, Fla., represents Florida Farm Bureau.

Christopher H. Burrows of Scott M. Grant P.A. in Naples, Fla., is counsel for Pulte Home Corp. Alan K. Cooper of Butler Pappas Weihmuller Katz Craig in Tampa, Fla., represents third-party defendant Kinwin Ltd., a window installer based in Chattanooga, Tenn.
 
Related Document: Order - MOL-0506-14 (PDF format)
 

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