Insurer's Duty to Defend Under Injury-In-Fact Theory

August 02, 2012

In the case of AXIS SURPLUS INSURANCE COMPANY v. CONTRAVEST CONSTRUCTION COMPANY, et al, 23 Fla. L. Weekly Fed. D279a (M.D. Fla. June 5, 2012) (Antoon, J.), the court found that in a declaratory judgment action filed by an insurance company, a commercial general liability insurer has a duty to defend insureds in an underlying suit for allegedly negligent construction and development of individual dwelling units and common areas of condominium community where property damage occurred during policy period.

The court reasoned that under injury-in-fact theory which provides that damage “occurs” at the moment that there is actual damage and date of discovery is irrelevant, the insurer has duty to defend where underlying complaint suggests that “property damage” at issue occurred at some point after buildings were completed but before discovery by expert inspections, which includes the time that the policies were in effect. The court also found that even under the insurer's strict interpretation of the manifestation theory, that property damage “manifests” when it is discovered, the insurer still has duty to defend insurers where allegations of underlying complaint potentially brings the suit within coverage. The court further found that the decision as to insurer's duty to indemnify is premature absent a resolution of the underlying suit.

Facts of the Case

Axis sought a declaration that it had no duty to defend or indemnify its insureds in an underlying suit brought against the insureds by a condominium association. The insureds, in turn, filed a counterclaim against Axis and a third-party complaint against several other insurers, seeking a declaration regarding the various insurers' obligations to defend and indemnify the insureds in conjunction with the underlying suit and, relatedly, the appropriate trigger for coverage with respect to the policies at issue. Two of the third-party insurers moved to dismiss the third-party complaint for lack of subject-matter jurisdiction, asserting that the insured had not presented a justiciable issue.

In the underlying suit, an association brought claims against the insureds for alleged negligent construction and development of individual dwelling units and common areas of a condominium community. Due to this negligence, the community allegedly sustained severe damage, including damage caused by water intrusion, which were not readily discoverable by the association or its members and that they only became aware of the defects through the retention of construction experts.

Axis issued four CGL policies to the insureds and defended the insureds for two policy years in the underlying suit under a reservation of rights and denied coverage for two other policy years. In the third-party complaint, the insureds allege that all of the insurers named issued reservations of rights regarding their duties to defend and indemnify the insureds in the underlying suit and have taken inconsistent positions regarding the issues of coverage and the trigger for coverage. To resolve these inconsistencies, the insureds sought a judgment declaring the following: (1) each insurer's obligation to defend the insureds in the underlying suit; (2) each insurer's obligation to indemnify the insureds regarding the underlying suit; (3) the appropriate trigger for coverage with respect to the policies at issue; and (4) the obligation of the insurers pursuant to section 627.428, Florida Statutes to pay attorneys' fees incurred by the isureds in filing the declaratory action.

Justiciable Controversies?

The court found that the issues regarding the third-party insurers' duty to defend and duty to indemnify did not create justiciable controversies because those insurers had not yet denied any coverage to the insureds.

Furthermore, because there had been no resolution of the underlying suit, a declaration as to the third-party insurers' duty to indemnify was premature.

The court reasoned that a declaration as to the trigger for coverage under each of the third-party insurer policies amounts to a determination of the obligations of the insurers pursuant to those policies and, that this amounted to an advisory opinion and is not justiciable.

Concerning the insured's request for a declaration of the insurers' obligations to pay the insureds' attorneys' fees in connection with bringing the declaratory judgment action, the court found that because it did not have subject-matter jurisdiction over the declaratory judgment claims against the third-party insurers, the insureds have not obtained a “judgment or decree” against either insurer to be entitled to any attorneys' fees pursuant to section 627.428.

Main Lawsuit Against CGL Insurer

The court noted that in order to trigger coverage under Axis's policy, “property damage” must have “occurred” during the policy period. The parties did not dispute that the alleged damage would constitute “property damage” under the terms of the policy. The parties disagreed over whether the alleged property damage “occurred” during the policy period.

Axis asserted that damage “occurs” when it is discovered and that the allegations of the complaint indicate that the damage was not discovered until 2008, which was after the latest Axis policy expired. The insureds asserted that damage “occurs” when it is discoverable and that, based on the allegations of the complaint, the damages may have been discoverable during the Axis policy periods.

The court noted that the Florida Supreme Court has yet to issue an opinion on this issue, and there is disagreement among the trial courts as to which theory is correct, citing the different interpretations of two cases -- Trizec Properties, Inc. v. Biltmore Construction Co., 767 F.2d 810 (11th Cir. 1985), and Travelers Insurance Co. v. C. J. Gayfer's & Co., 366 So. 2d 1199, 1200 (Fla. 1st DCA 1979).

The court carefully analyzed these decisions and noted that under Florida law, whether there is a duty to defend is determined by the facts and legal theories alleged in pleadings against the insured. The court reasoned, “The insurer must defend when the complaint alleges facts which fairly and potentially bring the suit within policy coverage.” Lime Tree Vill. Cmty. Club Ass'n, Inc. v. State Farm Gen.l Ins. Co., 980 F.2d 1402, 1405 (11th Cir. 1993). "The [ ] complaint suggests that the damage occurred at some point after the buildings were completed but before the experts inspected the property. This time period includes the time that Axis's policies were in effect, and therefore Axis has a duty to defend the Insureds in the underlying suit."

If you are interested in receiving a complete copy of this decision, please feel free to ask me for a copy via this Blog or by email at miamipandi@comcast.net.

$950k Wrongful Death Settlement for Small Boat Accident

July 30, 2012

The Daily Business Review reports today on the case of Smith v. Romeu, Case no: 50-2011CA006736XXXXMB before Palm Beach Circuit Judge Lucy Chernow Brown, wherein the parties settled the case of a wrongful death on the eve of trial for $948,000.00.

The facts of the case are as follows: Romeu met Smith and his sister on the night of May 8, 2010 Beach. Romeu had recently bought a 34-foot speedboat and invited the Smiths aboard for a ride. Romeu gunned the boat and accidentally struck a navigational marker in the Intracoastal Waterway. At the last moment, Romeu made a sharp turn in a failed attempt to avoid the marker. The lurch of the boat threw Smith from the boat, impaling him through the torso on the marker and sinking him to the bottom. A fire and rescue diver retrieved the body about an hour later.

Smith's father filed the civil lawsuit on behalf of his son's estate, with himself and his wife as the estate's claimants. The son was 31 when he died and left no children.

The defendant did not concede liability. It also does not appear that the vessel owner filed limitation of liability proceedings. The case was set for jury trial beginning the week of June 7, though Romeu's attorneys repeatedly tried to get continuances of the trial date. The parties announced a settlement on June 1st.

Two insurance companies — Universal Property & Casualty Insurance Co. and SkiSafe — agreed to pay a combined total of $853,000. In addition, Romeu gave Smith's parents the boat, a 2000 Donzi, and a promissory note for a combined value of about $95,000.

If you are interested in receiving a complete e-copy of the DBR article, please feel free to contact me through this blog or at miamipandi@comcast.net.

Southern District Addresses Valuation in Policy

July 27, 2012

In SUMMIT TOWERS CONDOMINIUM ASSOCIATION, INC., v. QBE INSURANCE CORPORATION, 23 Fla. L. Weekly Fed. D265a (S.D. Fla. May 29, 2012)(Seitz, D.J.), the court found that where one section of policy provides for the insured to receive “actual cash value” for a loss and another section provides for “replacement cost,” the section providing for replacement cost provides that, “[i]f shown as applicable in the Declarations, the following Optional Coverages apply separately to each item,” and the Declarations page identifies the “Value Option” as “RC,” replacement cost is the value option in force under the policy.

Given the shortness of the opinion, the entire opinion is provided below:

QUOTE

AMENDMENT TO ORDER ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

THIS MATTER is before the Court following the Court's Order [DE-153] denying Defendant QBE Insurance Corporation's Motion for Partial Summary Judgment [DE-69]. During the pretrial conference, the parties and the Court identified a legal issue of insurance policy (Commercial Property Insurance Policy (No. QF2310-08) (“Policy”)) involving Valuation and the parties agreed to brief that issue for the Court. The Court has now considered Summit Towers' brief [DE-177], QBE's response [DE-178] and Summit Towers reply [DE-179]. For the reasons set fort below, the Court will enter summary judgment in favor of QBE finding that the “Valuation” section G.3 of the Policy completely supercedes Section E.8.

The parties disagree about how QBE will determine the value of property in the event of a covered loss.1 The Policy contains two sections relevant to valuation -- one provides for Summit Towers to receive “actual cash value” for a loss (see Section E.8.a-c) while the other provides for “replacement cost” (see Section G.3.a-f). Summit Towers argues that these two sections coexist and can be read together to determine the value of a covered loss under the Policy. The Court, however, agrees with QBE that Section E.8 has been superseded by Section G.3. Section G provides that, “[i]f shown as applicable in the Declarations, the following Optional Coverages apply separately to each item.” Policy, G [DE 69-3, p. 42 of 57]. The Declarations page, in turn, identifies the “Value Option” as “RC”. Id. at p. 4 of 57. The optional coverage Summit Towers purchased, “Replacement Cost,” set out at G.3 and identified in the declarations as “RC” is therefore the value option in force under the Policy.

Summit Towers disagrees and argues that only the phrase “actual cash value” in Section E.8. has been replaced by the phrase “replacement cost” from Section G.3. This construction would allow for subsection E.8.c. to remain a part of the Policy and ostensibly allow Summit Towers to obtain glass at the cost of replacement with safety glazing materials. Summit Towers' argument, however, does not give effect to all of the provisions of the Policy and renders the subsections of G.3. superfluous. Moreover, it is not possible to harmonize all of the sections of the Policy under Summit Towers' interpretation. The subsections of E.8 provide exceptions to the payment of actual cash value to Summit Towers and identify scenarios where QBE will pay at replacement cost for covered losses. If the Court merely replaces the phrase “actual cash value” with “replacement cost” in Section E.8, that section would then provide that Summit Towers would be paid at replacement cost for a covered loss except in certain circumstances where it would still be paid at replacement cost. It is nonsensical to interpret the Policy in the manner Summit Towers suggests. The Court must reject this interpretation and concludes that Section G.3 completely replaces Section E.8 of the Policy. This construction gives effect to each provision of the Policy and comports with the plain language of that agreement. City of Homestead v. Johnson, 760 So.2d 80, 84 (Fla. 2000) [25 Fla. L. Weekly S206a] (“All the various provisions of a contract must be so construed, if it can reasonably be done, as to give effect to each.”).

Based on the forgoing, it is

ORDERED that this Order shall amend the Court's Order [DE-153] denying Defendant QBE Insurance Corporation's Motion for Partial Summary Judgment [DE-69]. Summary Judgment is hereby GRANTED in favor of QBE on the policy interpretation issue addressed herein such that Section G.3 of the Policy completely supercedes Section E.8.

__________________

1Generally, under Florida law, “in construing insurance policies, courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.” Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000) [25 Fla. L. Weekly S211a]; see also Fla. Stat. § 627.419(1) (“Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy.”). Policy terms are given their plain and ordinary meaning and read in light of the skill and experience of ordinary people. Anderson, 756 So.2d at 34; see also Vencor Hosps., Inc. v. Blue Cross Blue Shield of R.I., 284 F.3d 1174, 1180-81 (11th Cir. 2002) [15 Fla. L. Weekly Fed. C315a].

* * *

UNQUOTE

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Concordia Survivors File Lawsuit in Fort Lauderdale

July 19, 2012

The Sun-Sentinel reports that six months after the Costa Concordia cruise ship tragedy, another lawsuit has been filed against Carnival Corp. & PLC, owner of the ill-fated ship, along with subsidiary Costa Crociere (Cruises). The July 13 suit, filed in Fort Lauderdale in the U.S. District Court, alleges several charges against Carnival and Costa, including fraudulent misrepresentation, maritime negligence and intentional infliction of emotional distress. Plaintiffs Amanda, Adrian and Brandon Warrick were among the more than 4,000 passengers and crew aboard the Concordia when it hit submerged rocks and capsized near a Tuscan island on Jan. 13. Miami attorney Gabrielle Lyn D'Alemberte, who represents the Warricks, said Wednesday the Warricks have a right to file a lawsuit here and not in Italy as the cruise ticket contract dictates, because they purchased their cruises on Costa's U.S. website. It also would be prejudicial to take it to Italy as they'd be barred from litigation there since there's no contingency for personal injury in this case, she noted.

The full Sun-Sentinel article can be found here =>
CONCORDIA SURVIVORS FILE LAWSUIT IN FORT LAUDERDALE-- Sun-Sentinel, http://www.sun-sentinel.com, July 19, 2012.

However, Ms. D'Alemberte's statements that it would be prejudicial to take the plaintiffs' cases to Italy because they would be barred from litigating there has been disputed by a number of Italian sources. Amongst these sources includes Italian lawyer and local maritime law professor, Attilio Costabel, who presented at the Maritime Law Association joint meeting of the Cruise Lines and Passenger Ships and Maritime Torts and Casualties Committee. Mr. Costabel made clear in his presentation in May 2012 that there were various remedies available to plaintiffs in Italy. It will be interesting to see which lawyer is proven correct.

If you are interested in contacting me, please feel free to do so at miamipandi@comcast.net or mov@chaloslaw.com.