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June 2011 Case Law Summary

Mon Jul 18th, 2011 on     Uncategorized,    

Chong v. Medmarc Cas. Ins. Co., No. 10-12237 (11th Cir. May 27, 2011)

Nadella Chong, Esq. (“Chong”) maintained a professional liability insurance policy with Medmarc, which covered “all claims of negligence arising from an act or omission in the performance of ‘professional services’ rendered by Chong.” Chong, misbelieving his client legitimately sought to establish a subsidiary in the United States, deposited a cashier’s check from the client into the firm’s trust account and then, per the phony client’s direction, wired money from the trust account to the client’s overseas business partners. End result – Chong wired money belonging to other clients because the cashier’s check proved fraudulent.

Medmarc claimed that the acts at issue did not constitute a “professional service.” The Middle District Court of Florida agreed with Medmarc, granting summary judgment in the carrier’s favor. The Eleventh Circuit reversed, however, holding that (a) an attorney’s management of trust funds constitutes a “professional service,” (b) “Chong’s erroneous transfer of its clients’ trust funds to a third party was an act or omission in the conduct of its professional fiduciary duties to its clients that would give rise to a claim of negligence against it by those clients and for which it would have been liable in damages,” and (c) “[s]uch a claim for a negligent act or omission is covered by the plain terms of the policy.”

Barnard v. Geico Gen. Ins. Co., No. 10-cv-213 (N.D. Fla. May 25, 2011)

Layura Sellers (“Sellers”) was involved in an automobile accident, which resulted in the death of Michael Scarberry (“Scarberry”). The vehicle operated by Sellers was owned by her father, Raymond Paulk (“Paulk”), and insured by GEICO. Paulk’s bodily injury coverage was capped at $10,000.00. Settlement discussions failed and the Scarberry estate sued the Paulks, resulting in a $2.5 million consent judgment in favor of the Scarberry estate. Following the consent judgment, the Scarberry estate and the Paulks filed separate third-party bad faith suits against GEICO, which were consolidated.

In assessing GEICO’s bad faith liability, the Court found that GEICO had offered policy limits eleven days after the accident, repeatedly attempted to contact the attorney representing the Scarberry estate, Hosam Zawahry (“Zawahry”), and kept the Paulks informed of settlement efforts. Accordingly, Judge Smoak, operating under a totality of the circumstances standard, held that Zawahry was the party responsible for failed settlement efforts (not GEICO), and granted GEICO’s motion for summary judgment. Judge Smoak was not persuaded by Zawahry’s argument that the original releases submitted to Zawahry by GEICO were invalid due to GEICO’s not including Paulk on the releases, holding that “this was clearly merely an oversight” by GEICO possibly amounting “to negligent behavior, not bad faith.”

Bessman v. Traveler’s Prop. Cas. Co. of Am., No. 09-cv-123 (N.D. Fla. Mar. 29, 2011)

While operating a vehicle in the course of his employment with Hope Lumber & Supply Co. (“Hope”), Paul Bessman (“Bessman”) was involved in an accident with an uninsured/underinsured motorist. Traveler’s denied Bessman’s UM/UIM claim because Hope had rejected UM/UIM coverage, as was Hope’s right under Section 627.727 of the Florida Statutes. The decision hinged on the factual determination that the Hope agent who rejected UM/UIM coverage was, in fact, authorized to do so.

Fontainebleu Gardens Condo. Assoc., Inc. v. Pacific Ins. Co., Ltd., No. 11-cv-20552 (S.D. Fla. Apr. 27, 2011)

This suit arose out of a Hurricane Wilma damage dispute. Pacific removed to federal court. Fontainebleu attempted to join non-diverse parties and remand to state court. The issue before Judge Altonaga was whether Fontainebleu’s joinder attempt was fraudulent; i.e., aimed solely at destroying complete diversity.

Counts III and IV of Fontainebleu’s amended complaint asserted negligence claims against Pacific adjusters. Judge Altonaga determined that “there is no possibility that Fontainebleu, as Pacific’s insured, c[ould] assert a valid state-law claim for negligence against [Pacific’s adjusters]” because “Florida law does not recognize a cause of action by an insured against an independent insurance adjuster in simple negligence.” Accordingly, Judge Altonaga held that the Pacific adjusters “were fraudulently joined and remand should not be granted on the basis of their joinder.”

Count II of Fontainebleu’s amended complaint asserted negligence against Pacific agents. Judge Altonaga determined that, under Florida law, “[an agent’s] negligent failure to procure requested insurance coverage is a valid claim… .” Judge Altonaga further opined, however, that, “[u]nder Florida law, an insured’s cause of action against an agent for negligence does not accrue until the proceedings against the insurer are final.” Accordingly, Judge Altonaga held that Fontainebleu’s “proposed joinder of [Pacific’s agents] is not a case of joinder of indispensible parties; [Fontainebleu] may, as it admits, file a separate claim against them in state court.”

FIGA, Inc. v. Devon Neighborhood Assoc., Inc., No. SC10-347 (Fla. June 30, 2011)

“This case arose from certain hurricane damage claims made by [Defendant], under a 2004 insurance policy… .” FIGA demanded appraisal. Devon argued that it did not have to complete appraisal as a condition precedent to suit because (a) Section 627.7015 of the Florida Statutes (pertaining to alternative property dispute resolution) applied retroactively to Devon’s claim, (b) Devon was not notified of its mediation rights pursuant to Section 627.7015, and (c) an insured is excused from appraising a property dispute prior to suit if an insurer fails to notify the insured of its mediation rights. The trial court and Florida’s Fourth District Court of Appeal agreed with Devon, but the Supreme Court of Florida quashed and remanded, determining that the 2005 amendments to Section 627.7015 do not retroactively apply to contracts formed prior to the amendments’ enactment.

Certain Interested Underwriters at Lloyd’s, London Subscribing to Policy No. M12226 v. Chabad Lubavitch of Greater Ft. Lauderdale, Inc., No. 4D10-762 (Fla. 4th DCA June 8, 2011)

“A building owned by [Defendant] was damaged when a crane landed on it during Tropical Storm Barry.” This case revolved around an all-risk policy’s wind exclusion / anti-concurrent cause language. In sum, the Court interpreted the subject policy’s wind exclusion as follows: If wind alone creates damage, the loss is excluded. But if wind damages a heating system and a fire erupts, for example, the heating system damage is excluded and the fire damage is covered.

Mid-Continent Cas. Co. v. United Rentals, Inc., No. 4D11-149 (Fla. 4th DCA June 1, 2011)

“[A]n electrician performing contract work … died after operating a scissor lift leased by [General Interior Systems Southern, Inc.] from United Rentals, an equipment rental company.” This third-party wrongful death suit resulted. The lesson to be learned from this opinion is that, although severance is discretionary under Florida Rule of Civil Procedure 1.270(b) (“may”), a tort suit should be severed from a coverage suit so that the jury’s tort liability determination is not influenced by the fact the defendant is insured. To not do so, the Court determined, would run afoul of Florida’s non-joinder of insurers statute, Section 627.4136(1) of the Florida Statutes.

Elliott, et al. v. State Farm FL Ins. Co., No. 4D09-3887 (Fla. 4th DCA June 1, 2011)

Plaintiff, Katie Marie Frontiero (“Katie”), was a passenger on a golf cart that was being operated by Defendant, Alexander Elliott (“Alexander”), on a private road just a few blocks away from Alexander’s home. Alexander’s parents maintained a homeowner’s policy with State Farm. Katie fell out and was injured. Katie’s parents sued Alexander’s parents.

State Farm sought declaratory relief as to whether there was coverage for the accident under the homeowner’s policy. The cased revolved around the policy’s “insured location” provision. The Court held that a private road located within a gated community that is used for ingress and egress to a residence is not an “insured location.” As support for its decision, the Court cited to several other cases from across the nation that were similarly resolved. For example, the Court cited a Massachusetts case where an ATV accident occurred on a private beach owned by 242 homeowners of a homeowner’s association and it was decided that the accident did not take place at an “insured location” merely because the beach was used regularly in connection with the nearby, insured residences.

Universal Prop. & Cas. Ins. Co. v. Colosimo, et al., No. 3D11-180 (Fla. 3d DCA May 25, 2011)

This suit arose out of a kitchen water damage dispute. Universal adopted inconsistent coverage positions during the claim process, so the Colosimos invoked the policy’s appraisal process. The parties’ appraisers failed to agree as to the amount of damage. Shortly thereafter, the Colosimos filed a breach of contract and breach of implied covenant of good faith and fair dealing suit.

Universal sought to stay the proceedings until the conclusion of the arbitration process, but the Court denied Universal’s motion because Universal failed to comply with Section 627.7015 of the Florida Statutes; i.e., Universal failed to explicitly notify the Colosimos of their right to mediate disputed property claims. The Court held that the burden of mediation notification is on the insurer and the insurer cannot evade its notification duty by claiming the insured knew of his right to mediate. Since Universal did not officially notify the Colosimos of their mediation rights, the Court determined that mediation was not a condition precedent to the Colosimos filing suit. Florida’s Third District Court of Appeal confirmed the trial court’s decision, adding that no authority “indicate[s] that an insured’s commencement or exploration of a contractual process irrevocably binds that party through the conclusion of the appraisal.”

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