Fidelity & Guar. Ins. Underwriters, Inc. v. Federated Dept. Stores, Inc.

• Decision Date: 05 March 2003
• Docket Number: No. 3D01-1216, No. 3D01-1227.
• Parties: FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC.; United States Fidelity & Guaranty Co.; and International Insurance Co., Appellants, v. FEDERATED DEPARTMENT STORES, INC., d/b/a Bloomingdale's; Bloomingdale's, Inc.; and Bernard Kroll, individually, Appellees.
• Court: Florida District Court of Appeals

845 So.2d 896

FIDELITY AND GUARANTY INSURANCE UNDERWRITERS, INC.; United States Fidelity & Guaranty Co.; and International Insurance Co., Appellants, v. FEDERATED DEPARTMENT STORES, INC., d/b/a Bloomingdale's; Bloomingdale's, Inc.; and Bernard Kroll, individually, Appellees.

Nos. 3D01-1216, 3D01-1227.

District Court of Appeal of Florida, Third District.

March 5, 2003.

Rehearing and Rehearing Denied May 16, 2003.

Simmons & Dunlap and Judith W. Simmons (Tampa); Stephens, Lynn, Klein, La Cava, Hoffman & Puya, P.A. and Gary Khutorsky; Bunnell, Woulfe, Kirschbaum, Keller, McIntyre & Gregoire, P.A. (Ft. Lauderdale), for appellants.

Larson•King, LLP, and Lowry Barfield, and Adam B. Leichtling, for appellees.

Before COPE, GERSTEN, and GREEN, JJ.

Rehearing and Rehearing En Banc Denied May 16, 2003.

GREEN, J.

On this appeal, appellants, Fidelity Guaranty Insurance Underwriters, Inc. and United States Fidelity and Guaranty Company (collectively "USF & G") appeal an adverse final summary declaratory judgment determining that appellees, Federated Department Stores, d/b/a Bloomingdale's (collectively "Bloomingdale's"), and Bernard Kroll, individually, were entitled to insurance coverage under its policy.¹ On cross-appeal, the appellees assert that the trial court erred in failing to award them pre-judgment interest. For the reasons outlined herein, we affirm the final summary judgment and reverse the order denying pre-judgment interest to the appellees.

I. BACKGROUND

Bloomingdale's department store, located at the Falls Shopping Center in Miami-Dade County, Florida, sustained severe structural damage as a result of Hurricane Andrew in August, 1992. After an investigation, Bloomingdale's concluded that its building construction and design had not been in compliance with numerous requirements of the South Florida Building Code at the time of the storm. Bloomingdale's filed suit against the general contractor, Bernard Kroll, individually, and several of his companies.

Mr. Kroll had been the permit holder/qualifying agent for the construction of the Bloomingdale's store as well as its licensed general contractor.² The building permit remained in Kroll's name throughout the completion of the project. At the commencement of the construction, Kroll was an officer and director of Kroll Enterprises, Inc. ("Kroll I") and its wholly owned subsidiary, Kroll Construction Company. Kroll sold his ownership interest in these companies and formed B.K. General Contractors, Inc. in January, 1984. Kroll, however, remained the permit holder/qualifying agent for the Bloomingdale's project. He transferred his general contracting license from his old company to his new company, B.K. General Contractors. Kroll continued to provide construction services to the Bloomingdale's project through B.K. General Contractors, of which he was an officer, director, and sole shareholder. Further, Kroll personally, and as president of Kroll Enterprises, Inc., granted Kroll Construction Company performance for the Bloomingdale's project.

After Kroll sold all of his stock and interest in Kroll I, that company's name was changed to Coutinho Construction International, Inc. ("Coutinho Construction"), and Coutinho Construction was sued in Bloomingdale's underlying action as a company formerly known as Kroll Enterprises, Inc. Additionally, on February 11, 1985, Kroll Construction Company changed its name to Coeng Enterprises, Inc. ("Coeng Enterprises"), and this entity was sued in the underlying action as a company formerly known as Kroll Construction Company.

On February 19, 1986, Kroll formed a second corporation which was also named Kroll Enterprises, Inc. ("Kroll II"). Like Kroll I, Bernard Kroll was its president and director.³ Kroll II was an active business entity on the date of the losses alleged in Bloomingdale's underlying litigation.

II. THE USF & G POLICY

Kroll had purchased a "completed operations coverage" policy from USF & G. This policy was issued in 1991, and was in effect at the time of the alleged losses. The policy identified the "named insured" as:

BK GENERAL CONTRACTORS, INC.

AND KROLL; CMT, INC.

KROLL ENTERPRISES, INC.

KROLL REPUBLIC, INC.

B.K. GENERAL CONTRACTORS OF NEW JERSEY

Suite 275, 150 Interstate North Pkwy.

Atlanta, GA 30339

The policy stated that it also provided coverage for the officers, directors, and sole shareholders of B.K. General Contractors, Inc. (i.e. Kroll). The policy also contained an exclusion for liability contractually assumed by the insured.⁴

USF & G defended Kroll in Bloomingdale's suit with a reservation of rights, but maintained that it owed no duty to indemnify him under its policy. Kroll and his companies disputed this and demanded that they be provided a full defense and indemnification.

III. SETTLEMENT AND INSURANCE DECLARATORY SUIT BELOW

During the pendency of Bloomingdale's suit, a settlement agreement was reached between Bloomingdale's, Coutinho Construction (the successor corporation for Kroll I), Kroll individually, and USF & G. According to the terms of this agreement, the parties agreed, inter alia, that USF & G would make an immediate payment to Bloomingdale's, USF & G would litigate coverage with Kroll and his companies, as well as Bloomingdale's in a declaratory action, and if coverage was found to exist for any claims brought against Kroll or his companies, USF & G would pay, in addition to amounts previously paid, the full amount of its indemnity coverage plus an additional 55%. Pursuant to this agreement, the appellees filed the declaratory action below against USF & G seeking to establish the existence of an indemnity obligation under the USF & G policy for claims asserted against Kroll and/or the Kroll entities in the Bloomingdale's litigation.

Cross-motions for summary judgment on the coverage issue were subsequently filed. The material undisputed facts established from the record evidence in support of these motions were as follows:

1. The named insureds listed under the USF & G policy at issue were:

BK GENERAL CONTRACTORS, INC.

AND KROLL; CMT, INC.

KROLL ENTERPRISES, INC.

KROLL REPUBLIC, INC.

B.K. GENERAL CONTRACTORS OF NEW JERSEY

Suite 275, 150 Interstate North Pkwy.

Atlanta, GA 30339

2. The policy provides completed operations coverage.

3. There is no policy requirement that any of the named corporate insured be an active company during the policy period.

4. Kroll I was involved in the construction of Bloomingdale's at least through the summer of 1984 and remained liable for the defective construction of the store through the running of the applicable statute of limitations period.

5. Bernard Kroll was individually liable for the defective construction of Bloomingdale's by virtue of being the permit holder/qualifying agent for the construction.

6. Kroll sold his interest in Kroll I and its subsidiary Kroll Construction Company in January, 1984, but continued to be the permit holder/qualifying agent for the Bloomingdale's construction. Kroll also continued to provide construction services to the project.

7. Kroll formed B.K. General Contractors, Inc. in January 1984 and continued to provide construction services to the Bloomingdale's project as its sole shareholder.

8. The USF & G policy provides coverage for B.K. General Contractors, Inc. and its officers, directors and sole shareholder.

9. The claims asserted against Kroll in the underlying action were limited to his role as the qualifying agent for the general contractor, Kroll Construction Company, and as personal guarantor of Kroll Construction Company's obligations, and the claim asserted against Kroll Enterprises, Inc. was under the guaranty.

10. The guaranty was executed by Kroll on May 26, 1983 individually and as president of Kroll I. It personally and unconditionally guaranteed Kroll Construction Company's performance to Bloomingdale's under the 1982 contract for the construction of the Bloomingdale's store.

11. Kroll I was the party to the guaranty at issue with Bloomingdale's.

12. Kroll Construction Company was a wholly owned subsidiary of Kroll I as of the date of the construction contract.

13. In January 1984, Kroll, after the execution of the construction contract and guaranty, sold all of his stock in Kroll I and resigned as its officer and director.

14. Kroll I changed its name to Coutinho Construction International, Inc. and was sued in the underlying suit as a company formerly known as Kroll Enterprises, Inc.

15. On February 11, 1985, Kroll Construction Company changed its name to Coeng Enterprises, Inc. and Coeng Enterprises was sued in the underlying suit as a company formerly known as Kroll Construction Company.

16. On February 19, 1986, Kroll formed a second corporation with the name Kroll Enterprises, Inc. ("Kroll II") and was its president and director.

The dispositive issue for the respective cross-motions for summary judgment was which of the two Kroll Enterprises, Inc. (i.e. Kroll I or Kroll II) was the named insured under USF & G's policy. USF & G took the position that Kroll II was its named insured under the policy since Kroll I and not Kroll II was involved in the Bloomingdale's construction project and underlying litigation, and Kroll had sold all of his interest in Kroll I prior to the issuance of this USF & G policy. Kroll, on the other hand, responded that Kroll I was indeed a named insured on USF & G's policy. According to Kroll, he purchased "completed operations coverage" from USF & G for Kroll I to protect it and himself against potential ongoing legal liabilities for latent structural defects which manifested themselves only years later.⁵ Moreover, Kroll pointed out that USF & G's policy did not limit coverage to only those business entities in which Kroll currently had an active interest.

The trial court granted summary judgment in favor of the appellees and found that both Kroll and Kroll Enterprises, Inc. were covered under USF & G's policy for the...