Maritime Law--2 Big Decisions from the Florida Supreme Court

March 14, 2014

This week is an active one for the Florida Supreme Court.

The first case up for discussion is State Farm Mut. Auto. Ins. Co. v. Curran, SC12-157 (Fla. Mar. 13, 2014).

After the Plaintiff was rear-ended by an underinsured motorist (UM), Plaintiff requested her $100,000 UM policy limits from State Farm. Plaintiff indicated that her damages were estimated to be $3.5 million because she suffered from reflex sympathetic dystrophy syndrome. State Farm responded that Plaintiff must schedule a compulsory medical examination (CME) pursuant to the terms of the policy. Plaintiff refused to attend a CME and instead filed suit against State Farm. The trial court entered judgment against State Farm for the UM policy limits. The court of appeal affirmed, holding (1) Plaintiff breached the contract when she failed to attend the CME; but (2) State Farm must plead and prove prejudice to avoid liability based on noncompliance with the CME clause, and State Farm failed to meet its burden in this case. The Supreme Court approved of the court of appeal’s decision, holding (1) the forfeiture of benefits under a UM policy will not automatically result upon an insured’s breach of a CME provision unless the insurer pleads and proves actual prejudice as an element of its affirmative defense; and (2) the undisputed facts demonstrate that State Farm was not prejudiced in this case. 

This case, because it involves a car accident case, would not appear to affect those of us that handle marine insurance matters. However, absent controlling federal  maritime law or a determination that the interests of national uniformity require that a rule of federal maritime law be fashioned, the interpretation of a contract of marine insurance will abide state law. Therefore, the argument to be made is that the insurer will be required to prove actual prejudice in the event the insured breaches the insurance contract when it fails to undertake an action post-loss.

The second case up for discussion is Estate of McCall v. United States, SC11-1148  (Fla. Mar. 13, 2014). Here, Michelle McCall received prenatal medical care at a United States Air Force clinic as an Air Force dependent. McCall died after delivering her son as a result of severe blood loss. Petitioners filed an action against the United States under the Federal Tort Claims Act (FTCA). The federal district court found the United States liable under the FTCA. The court concluded that Petitioners’ economic damages amounted to $980,462 and Petitioners’ noneconomic damages totaled $2 million. However, the district court limited Petitioners’ recovery of wrongful death noneconomic damages to $1 million after applying Fla. Stat. section 766.118, Florida’s statutory cap on wrongful deathnoneconomic damages based on medical malpractice claims. The district court subsequently denied Petitioners’ motion challenging the constitutionality of the wrongful death statutory cap. The Eleventh Circuit Court of Appeals affirmed the application of the statutory cap on noneconomic damages and held that the statute was not unconstitutional. The Florida Supreme Court accepted certification to answer questions of Florida law and answered by holding the statutory cap on wrongful death noneconomic damages provided in Fla. Stat. section 766.118 violates the Equal Protection Clause of the Florida Constitution.

Again, this appears to be one of those cases that would not apply in a maritime context. However, in cases where a federal maritime law statute would not be applicable, arguably state law applies to any liability. The law of Florida now is that statutory caps on wrongful death noneconomic damages violates the Equal Protection Clause of the Florida Constitution.

If you are interested in receiving copies of the decisions cited above or otherwise wish to reach me, you may do so by writing to me at mov@chaloslaw.com.

Maritime Law--Punitive Damages for Unseaworthiness Being Reviewed Again

February 27, 2014

On October 9, I blogged on the case of McBride v. Estis Well Service, No. 12-30714 (5th Cir. Oct. 2, 2013),  where a panel of the U.S. Court of Appeals for the Fifth Circuit ruled that seamen may recover punitive damages for their employer's willful and wanton breach of the general maritime law duty to provide a seaworthy vessel.  The court found that previous decisions, to the extent that they denied recovery of punitive damages for maritime liability sounding in unseaworthiness, read too much into prior Supreme Court and appellate court rulings on related, but different, issues. You can find my discussion on that case here=> McBride Discussion.

At that time I noted that this was a potentially a major decision, likely to be appealed and certainly to generate discussion. Now, a majority of the circuit judges have voted in favor of granting the defendant's petition for rehearing en banc. You can find the en banc order here=> McBride v. Estis Well Service, No. 12-30714 (5th Cir., February 24, 2014). 

Watch this space, as the question on whether punitive damages for unseaworthiness are recoverable is not yet clearly answered. 

If you are interested in contacting me, you may reach me atmov@chaloslaw.com.

Maritime Law-Lone Claimant in Limitation Action Can Proceed to State Court

February 04, 2014

In Offshore of Palm Beaches, Inc. v. Lynch, No. 13-11092 (11th Cir. Feb. 3, 2014), Offshore appealed the district court's order permitting a lone claimant to pursue personal injury claims in state court after Offshore had invoked the Limitation of Liability Act (Limitation Act), 46 U.S.C. sec. 30501. The court concluded that the district court did not abuse its considerable discretion in determining that the claimant could proceed first in state court with her tort claim before the district court adjudicated the boat owner's efforts to limit its liability to the value of the vessel. Accordingly, the court affirmed the judgment of the district court.

While the holding of the case is not of itself earth-shattering, the case provides an excellent summary of appellate jurisdiction over admiralty matters involving injunctions. If you or your client are considering whether an admiralty matter is appealable, this decision may be of importance to you.

If you are interested in receiving a copy of this decision, please feel free to contact me at mov@chaloslaw.com.

Maritime Law: Florida Court Finds Insurer Can Deny Pre-Tender Costs

January 29, 2014

In Embroidme.Com, Inc. v. Travelers Prop. Cas. Co. of Am., 2014 U.S. Dist. LEXIS 7715 (S.D. Fla. Jan. 23, 2014) (Marra, J.), the United States District Court for the Southern District of Florida considered an insurer’s obligation to reimburse its insured for pre-tender defense costs under Florida law and whether its letter disclaiming such costs is governed by Florida Claims Administration Statute, Fla. Stat. § 627.426(2).

The facts are as follows: Travelers insured Embroidme.com under a general liability policy with web site injury protection.  Embroidme.com was named as a defendant in an underlying copyright infringement lawsuit in April 2010.  On June 28, 2010, Embroidme.com retained counsel to defend it in the lawsuit.  However Embroidme.com did not tender the suit to Travelers until October 2011.  Travelers subsequently agreed to provide its insured with a defense, but disclaimed any coverage obligation with respect to Embroidme.com’s pre-tender defense costs.  Embroidme.com challenged Travelers’ disclaimer of coverage on the basis that the policy did not expressly bar coverage for pre-tender costs and that Travelers’ disclaimer of coverage for such amounts was untimely and thus in violation of Florida Claims Administration Statute, § 627.426(2).

Florida Claims Administration Statute, § 627.426(2) states that an insurer is estopped from denying coverage unless “[w]ithin 30 days after the liability insurer knew or should have known of the coverage defense, written notice of reservation of rights to assert a coverage defense is given to the named insured by registered or certified mail sent to the last known address of the insured or by hand delivery.”  The statute also discusses the insurer’s obligation to disclaim coverage or provide an insured with a defense within sixty (60) days of filing of suit.  A “coverage defense” is defined under the statute as “a defense to coverage that otherwise exists.”

In considering the statute, the court found that Traveler’s coverage correspondence to Embroidme.com was late under the statute: its initial reservation of rights letter was issued forty-two (42) days after Embroidme.com’s initial tender, and Travelers did not actually retain counsel until another ninety-one (91) days later.  Thus, reasoned the court, if coverage for pre-tender defense costs could be considered a “coverage defense” for the purpose of the statute, then Travelers’ failure to issue its letters in a timely fashion would result in an estoppel of its right with respect to this defense.

However, the court concluded that the pre-tender defense issue was not a “coverage defense” but a policy condition.  In particular, the policy precluded the insured from “voluntarily assuming any obligation or incurring any expense without Travelers' consent.”  Thus, reasoned the court, “under the plain language of the Policy there is no coverage for the defense costs incurred without Travelers' knowledge and not at Travelers' request.”  This was not a “coverage defense,” but instead a precondition to coverage not subject to statutory estoppel under § 627.426(2).  As a result, the court held in Travelers’ favor, concluding that its denial of coverage for pre-tender defense costs was appropriate and that Travelers’ delay in issuing coverage correspondence did not result in statutory estoppel.

This decision is an important one in the marine insurance context, as I have seen many cases where the insured insists on retaining its own counsel without considering the language of the policy precluding an insured from doing so without the insurer's consent. I urge all policyholders to evaluate their policy conditions before undertaking the expense as a "prudent uninsured" without obtaining insurer approval.

If you are interested in receiving a copy of this decision or wish to contact me, you may do so by writing to me at mov@chaloslaw.com.