March 2011 Case Law Summary

Precise Constr., Inc. v. Amerisure Ins. Co., No. 10-10976, 2011 WL 855821 (11th Cir. Mar. 14, 2011)

A general contractor filed suit against a subcontractor’s insurer to recover the cost of demolishing and rebuilding a mislocated foundation of a construction project. The general contractor was an additional insured under the subcontractor’s CGL policy. The Middle District granted summary judgment in favor of the subcontractor’s insurer. The Eleventh Circuit affirmed on two grounds: First, the appellate court held that because the damage arose out of the subcontractor’s work, the damages resulting from improper construction of the foundation were excluded pursuant to Exclusion j(5). Second, the appellate court held that there was no covered “property damage,” since the damages sought were solely for the removal and repair of the misplaced foundation: “There are no allegations of damage other than to the foundations themselves, which [the general contractor] concedes were correctly constructed but made defective through [the general contractor’s] misplacement.”

Genovese, M.D. v. Provident Life & Acc. Ins. Co., No. SC06-2508, 2011 WL 903988 (S.D. Fla. Mar. 17, 2011)

The certified question was “whether [the Florida Supreme Court’s] holding in Allstate Indemnity Co. v. Ruiz, 899 So. 2d 1121 (Fla. 2005), permitting the discovery of work product in first-party bad faith actions brought pursuant to section 624.155, Florida Statutes (2010), also applies to attorney-client privileged communications in the first-party bad faith context.” The Court answered the certified question in the negative, holding that its decision in Ruiz did not extend to attorney-client privileged communications. Thus, the Court held that attorney-client materials are not discoverable in a first-party bad faith suit. The Court recognized, however, that “cases may arise where an insurer has hired an attorney to both investigate the underlying claim and render legal advice.” In that situation, the Court held that “the trial court should conduct an in-camera inspection to determine whether the sought-after materials are truly protected by the attorney-client privilege. If the trial court determines that the investigation performed by the attorney resulted in the preparation of materials that are required to be disclosed pursuant to Ruiz and did not involve the rendering of legal advice, then that material is discoverable.” The Court also emphasized that its opinion was not intended to undermine the “at issue” doctrine, where discovery of attorney-client privileged communications between an insurer and its counsel is permitted where the insurer raises the advice of its counsel as a defense to the action and the communication is necessary to establish the defense.

Garden-Aire Vill. S. Condo. Ass’n Inc. v. QBE Ins. Corp., No. 10-61985-CIV, 2011 WL 1184737 (S.D. Fla. Mar. 31, 2011)

An insured condominium association filed a declaratory suit against its insurer. The insurer moved to dismiss the first two counts of the action and to stay the third. The Court sided with the carrier, holding that the third count, a request for a declaration that the policies’ hurricane deductible was void pursuant to Section 627.701(4) of the Florida Statutes, should be stayed pending the Florida Supreme Court’s decision in Chalfonte. As to the first count, regarding coverage for glass windows and sliding glass doors, the Court held there was no justiciable controversy between the parties, since the carrier had not issued an adversarial response regarding coverage for those items. The Court also held that the second count, regarding entitlement to an appraisal, was premature since the insured filed suit seeking appraisal prior to any notice or meaningful exchanges with the insurer and since the insurer was not given the opportunity to invoke the policies’ post-loss conditions.

United Auto. Ins. Co. v. The Estate of Stephen D. Levine, No. 3D09-3234 (Fla. 3d DCA Mar. 30, 2011)

The appellate court affirmed the lower court’s entry of final judgment and denial of post-trial motions in a statutory bad faith case. The appellate court rejected the insurer’s argument that it should have been permitted to show the jury that it settled certain claims, in a multiple-claimant situation, quickly and by tendering more than the aggregate policy limits. The appellate court explained that the fact that one independent claimant negotiated separate settlement terms with the carrier did not tend to prove whether the carrier acted properly regarding the claim of another independent claimant. The appellate court noted that inclusion of that evidence would have distracted the jury. The appellate court also rejected the carrier’s contention that the underlying plaintiff should not have had the opportunity to offer testimony to prove her status as the assignee of the carrier’s insured, stating that the assignment was not a required element of the plaintiff’s statutory bad faith claim. The appellate court also rejected the carrier’s argument that the jury instructions impermissibly shifted the burden of proof to the carrier. The appellate court lastly held that the plaintiff satisfied its burden to set forth a prima facie statutory bad faith case, highlighting the carrier’s insistence on the execution of a “one-size-fits-all” release, the carrier’s failure to follow up in a catastrophic injury situation, and the insurer’s failure to present expert testimony regarding its claims-handling policies.

State Farm Fla. Ins. Co. v. Puig, No. 3D10-2104 (Fla. 3d DCA Mar. 23, 2011)

In a first-party statutory bad faith action, the trial court granted the plaintiffs’ motion to compel the carrier’s entire claim file. The carrier sought a writ of certiorari quashing the trial court’s order. The appellate court first held that the trial court correctly compelled the insurer to produce work product materials in its claim file that were prepared on or before the date that the underlying litigation concluded (when the trial court confirmed an appraisal award). The appellate court held that the trial court erred, however, in ordering production of work product materials prepared after the underlying litigation concluded, since the plaintiffs did not demonstrate good cause, special relevance or need, and did not ask the court to compel production of those documents. The appellate court also held that the lower court erred in ruling that the Florida Supreme Court’s decision in Ruiz eliminated the attorney-client privilege for insurers involved in bad faith litigation, citing Genovese.

Gen. Star Indem. Co. v. Atl. Hospitality of Fla., LLC, No. 3D10-3109 (Fla. 3d DCA Mar. 9, 2011)

A commercial property insurer sought a writ of certiorari quashing 2 discovery orders compelling 2 of the insurer’s senior officers (the president/CEO and the corporate secretary) to appear for deposition in a windstorm insurance case. The officers were each pre-printed signatories to the insurer’s form policies. The carrier filed an affidavit establishing that the officers had no role in the investigation or adjustment of the claim at issue. The appellate court quashed the trial court’s orders, holding that the insured had not shown that the president’s deposition was “reasonably calculated to lead to the discovery of admissible evidence.” The appellate court emphasized that the carrier had shown that its president was a manager, not an adjuster or other employee with personal knowledge regarding the claim. The appellate court concluded that neither the president’s pre-printed signature on the policy nor the president’s receipt of a loss assessment warranted the president’s deposition, especially where the adjuster had not yet been deposed regarding the claim. The appellate court also rejected the insurer’s request to apply the “apex doctrine.”

Flores v. Am. Sec. Ins. Co., No. 3D09-3246 (Fla. 3d DCA Mar. 2, 2011)

A homeowner appealed the lower court’s denial of his motion for prejudgment interest on an appraisal award from the date of loss. The appellate court affirmed, relying on Sunshine State v. Davide, 15 So. 3d 749 (Fla. 3d DCA 2009), and distinguishing North Pointe Insurance Co. v. Tomas, 16 So. 3d 977 (Fla. 3d DCA 2009). The appellate court based its decision on the fact that the insurer had initially admitted coverage. When the loss was initially submitted to the insurer, the carrier made payment on the claim. The insured maintained that the payment was inadequate and filed a supplemental claim, which the carrier denied. The insured then filed suit, and the carrier invoked the policy’s appraisal provision. The insured won an appraisal award which the carrier paid within 30 days. The appellate court held that since the dispute turned on quantifying the covered loss, not the existence of coverage, the insured was not entitled to prejudgment interest on the supplemental amount of the appraisal award as computed from the date of loss.

Ellie’s 50’s Diner, Inc. v. Citizens Prop. Ins. Corp., No. 4D09-1768 (Fla. 4th DCA Mar. 2, 2011)

An insured appealed the lower court’s denial of its motion for prejudgment interest from the date of loss. The appellate court affirmed, relying in part on Sunshine State v. Davide, 15 So. 3d 749 (Fla. 3d DCA 2009). The appellate court reasoned that because the policy allotted the carrier 30 days within which to pay an appraisal award and the carrier made payment within that time period, the insured was not entitled to prejudgment interest. When the loss was initially submitted to the insurer, the carrier made payment on the claim. The insured then filed suit against Citizens claiming entitlement to additional funds. Citizens moved to compel appraisal; an appraisal award was entered in favor of the insured resulting in further payment to the insured. Citizens paid the appraisal award within 30 days. The appellate court held that the “Loss Payment” provision of the policy precluded a prejudgment interest award, since the carrier paid the claim within the time allotted by the policy.

Citizens Prop. Ins. Corp. v. Gutierrez, No. 3D10-2134, 2011 WL 710148 (Fla. 3d DCA Mar. 2, 2011)

The insureds’ property sustained damage due to Hurricane Wilma. The insureds filed a claim for damages with Citizens. Citizens made initial payment on the claim. Almost 4 years later, the insureds filed a supplemental claim for Hurricane Wilma damages, and demanded appraisal. Citizens made numerous requests for additional information & documents, which the insureds allegedly failed to provide. The insureds subsequently filed suit against Citizens, and filed a motion to compel appraisal, alleging that they had complied with the policy’s post-loss conditions. Citizens filed an answer and response to the motion to compel appraisal, asserting that the insureds refused to provide information & documents requested, and that the insureds’ compliance with the policy was a condition precedent to appraisal. The lower court held a hearing on the motion to compel appraisal, where the parties disputed whether the insureds were in compliance with the post-loss conditions. At the conclusion of the hearing, the lower court granted the motion to compel appraisal. The appellate court reversed and remanded for an evidentiary hearing on the issue of the insureds’ compliance with the policy’s post-loss conditions, citing Mango Hill, Galeria Villas, and Maytin.

Ruderman v. Wash. Nat’l Ins. Co., No. 08-23401, 2011 WL 915721 (S.D. Fla. Mar. 16, 2011)

Plaintiffs’ counsel in a class action suit against a home health care insurer moved for an award of attorney’s fees ($4 million) under Section 627.428 of the Florida Statutes and costs ($66,560). The Court engaged in a detailed fee and cost analysis.

Buckley Towers Condo., Inc. v. QBE Ins. Corp., No. 07-22988, 2011 WL 710699 (S.D. Fla. Mar. 1, 2011)

The Court addressed the reasonableness/recoverability of filing fees, process server fees, transcript costs, witness fees, photocopying and interpreter fees. The Court ultimately awarded $34,047.07 in costs to the insured.

Smith v. N.H. Indem. Co., No. 1D10-3423 (Fla. 1st DCA Mar. 16, 2011)

The appellant argued that the trial court erred in finding that Section 627.7282 of the Florida Statutes did not invalidate the cancellation of his auto insurance policy; the appellant argued that the cancellation was void because it violated Section 627.7282. The appellate court affirmed, holding that Section 627.7282 only applied to situations where an insurer sets an incorrect premium at the time an insured applies for insurance coverage, not at the time of renewal. The appellate court concluded that based on the plain language of the statute, the insurer was entitled to summary judgment on the issue of whether it properly and effectively cancelled the policy.

Great Am. Ins. Co. of N.Y. v. Admiral’s Walk, Inc., No. 10-81217, 2011 WL 802319 (S.D. Fla. Mar. 7, 2011)

The Court stayed the insurer’s declaratory judgment action as to coverage and as to the limits of the policy, since there was a pending state court proceeding that involved the same issues between the same parties. The Court held that the claims and defenses of all parties to the federal action could be fully adjudicated in the state court proceeding. Thus, to avoid duplicative proceedings, the Court stayed the declaratory action pending the outcome of the state court suit.

Am. Empire Surplus Lines Ins. Co. v. Chabad House of N. Dade, Inc., No. 10-20872-CIV, 2011 WL 1085558 (S.D. Fla. Mar. 21, 2011)

The Court held that an abuse or molestation exclusion in a CGL policy relieved the insurer of its duty to defend and indemnify with respect to an underlying action involving injuries sustained by a special needs child. The Court also held that a designated premises endorsement to the policy did not bar coverage for acts that occurred away from the insured’s volunteer agency office.

Valero v. Fla. Ins. Guar. Ass’n, Inc., Nos. 4D09-1151 and 4D09-1335 (Fla. 4th DCA Mar. 2, 2011)

An insurer filed a declaratory judgment action arguing that it had no duty to defend or indemnify its insureds with respect to a negligent supervision action arising out of sexual molestation. The insurer denied coverage based on its policies’ sexual molestation exclusions. The lower court granted the insurer’s motion for summary judgment on the applicability of the sexual molestation exclusion, and the appellate court affirmed. The appellate court held that the exclusion was clear and unambiguous.

Certain Interested Underwriters at Lloyd’s London Subscribing to Certificate of Ins. No. 9214 v. Halikoytakis, No. 8:09-CV-1081-T-17TGW, 2011 WL 1296816 (M.D. Fla. Mar. 31, 2011)

The Court granted the insurer’s motion for summary judgment, holding that the carrier had no duty to defend or indemnify its insured. The Court held that the insured’s noncompliance with the “Independent Contractors Special Condition” in Lloyd’s landlord/tenant policy invalidated the policy, relieving the carrier of its duties.

MGM Constr. Serv. Corp. v. Travelers Cas. & Sur. Co. of Am., No. 06-12616 (Fla. 3d DCA Mar. 2, 2011)

Appeal from the trial court’s determination that a subcontract entered into with an unlicensed subcontractor should be automatically dishonored as a matter of law. Underlying action involved a dispute between a contractor and subcontractor regarding several construction projects. Travelers issued bonds that obligated it to pay the subcontractors for labor and material expenses they incurred on behalf of the contractor. The contractor sued the subcontractor; the subcontractor filed a third-party complaint against Travelers. The contractor and Travelers asserted the affirmative defense of illegality/unenforceability of contract, on the basis that the subcontractor did not possess a specialty contractor’s license as required by Miami-Dade County Code of Ordinances. The appellate court reversed, remanding to the lower court to consider a list of factors when analyzing whether the subcontract should be dishonored.

Barcelona Hotel, LLC v. Nova Cas. Co., No. 3D10-1934 (Fla. 3d DCA Mar. 2, 2011)

Appeal from the trial court’s grant of summary judgment in favor of the building and personal property insurer. The appellate court reversed, holding that the trial court erred in ruling that an excavator was not a “vehicle,” and thus not a named peril under the policy. The appellate court held that, applying a plain meaning analysis, the excavator was a “vehicle” under the policy, and thus a named peril.

St. Paul Mercury Ins. Co. v. Fed. Deposit Ins. Corp., No. 08-21192-CIV, 2011 WL 1195402 (S.D. Fla. Mar. 29, 2011)

The Court denied the insurer’s motion for summary judgment as to coverage under a bond for losses incurred on a $15 million bank loan. The FDIC claimed the loan loss under the insurance bond, alleging as the basis for coverage the bank director’s dishonest or fraudulent conduct and his receipt of kickbacks out of the loan proceeds. The carrier argued that there was no coverage because the bank did not “discover” the loss during the bond period. The Court declined to adopt the carrier’s position as a matter of law, holding that a genuine issue of material fact existed as to whether a reasonable person would have assumed, based on the facts known to the bank, that a covered loss had been incurred.

Fisk Elec. Co. v. Solo Constr. Corp., No. 09-16273, 2011 WL 891797 (11th Cir. Mar. 16, 2011)

The Eleventh Circuit affirmed the Southern District of Florida’s denial of a subcontractor’s motion to modify the jury’s verdict and to enter judgment holding both defendants jointly and severally liable for the jury’s award. The Eleventh Circuit held that the subcontractor waived its right to contest the verdict by failing to raise an objection to the verdict before the jury was dismissed. The Eleventh Circuit also affirmed the Southern District’s denial of the subcontractor’s motion for a new trial, holding that admission of evidence that a mediation took place and resulted in a payment did not violate Florida law or Federal Rule of Evidence 408.

Beach Cmty. Bank v. St. Paul Mercury Ins. Co., 635 F.3d 1190 (11th Cir. 2011)

The Eleventh Circuit vacated the Northern District of Florida’s entry of summary judgment in the insurer’s favor, holding that a financial institution bond covered losses that a bank suffered upon a loan default that had been secured by a forged guaranty. The Eleventh Circuit held that the insurer failed to establish that the loss did not result directly from the extension of credit. The Eleventh Circuit also held that factual issues remained as to whether the bank relied on the guaranty in issuing the loan, whether the bank had physical possession of the guaranty when it issued the loan, and whether the bank issued the loan in good faith.

Van Dyke v. Matrix Employee Leasing, No. 1D09-1393 (Fla. 1st DCA Mar. 2, 2011)

Appellate court reversed in part an order of the Judge of Compensation Claims (“JCC”) which denied claims for temporary partial disability benefits and for the authorization of medical care. The appellate court affirmed the denial of the claim for authorization of a doctor, because the claimant failed to establish the medical necessity of the care.

Langevin v. First Union Nat’l Bank, No. 1D10-4308 (Fla. 1st DCA Mar. 3, 2011)

Appellate court affirmed an order of the JCC denying permanent total disability benefits, holding that the JCC properly found that the claimant failed to satisfy the five-step inquiry used to establish catastrophic injury under Section 440.15(1)(b) of the Florida Statutes.

Jewell v. Gevity HR & Chartis Ins., No. 1D10-4126 (Fla. 1st DCA Mar. 23, 2011)

Appellate court reversed the JCC’s order finding that the employer/carrier was entitled to apportionment, holding that the JCC erred in concluding that the need for medical care was the result of merger with a preexisting condition. The appellate court explained that although there was evidence that the claimant had preexisting conditions, there was no evidence that the claimant had a preexisting permanent impairment or disability. Thus, there could be no merger under Section 440.15(5)(b) of the Florida Statutes.

Kauffman v. Cmty. Inclusions, Inc./Guarantee Ins. Co., No. 1D10-4046 (Fla. 1st DCA Mar. 23, 2011)

Contains discussion regarding workers’ compensation fee awards under Section 440.34(1)(b) of the Florida Statutes. The appellate court rejected the claimant’s constitutional challenge to Section 440.34.

McDermott v. United Parcel Serv./Liberty Mut., No. 1D10-3557 (Fla. 1st DCA Mar. 28, 2011)

Contains discussion regarding workers’ compensation fee awards under Section 440.34(1)(b) of the Florida Statutes.

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