AIU Ins. Co. v. Block Marina Inv., Inc.

• Decision Date: 27 April 1989
• Docket Number: No. 71264,71264
• Parties: 14 Fla. L. Weekly 223 AIU INSURANCE COMPANY, Petitioner, v. BLOCK MARINA INVESTMENT, INC., et al., Respondents.
• Court: Florida Supreme Court

Page 998

544 So.2d 998

14 Fla. L. Weekly 223

AIU INSURANCE COMPANY, Petitioner, v. BLOCK MARINA INVESTMENT, INC., et al., Respondents.

No. 71264.

Supreme Court of Florida.

April 27, 1989.

Rehearing Denied July 14, 1989.

Richard A. Sherman of the Law Offices of Richard A. Sherman, P.A., Fort Lauderdale, for petitioner.

Terry L. Redford of Thornton, David & Murray, P.A., Miami, for respondent Block Marina.

Richard S. Rachlin and Kenneth J. Carusello of Payton and Rachlin, P.A., Miami, for respondent Norfolk Marine Co.

EHRLICH, Chief Justice.

We have for review AIU Insurance Co. v. Block Marina Investment, Inc., 512 So.2d 1118 (Fla. 3d DCA 1987), because of certified conflict with United States Fidelity and Guaranty Co. v. American Fire and Indemnity Co., 511 So.2d 624 (Fla. 5th DCA 1987). We have jurisdiction. Art. V, § 3(b)(4), Fla. Const.

The issue before us is whether petitioner AIU Insurance Company (AIU) is prohibited from denying coverage in connection with a loss, coverage for which is excluded under a comprehensive liability policy, due to its noncompliance with the notice requirements of section 627.426(2), Florida Statutes (1985). Section 627.426(2) provides in pertinent part:

(2) A liability insurer shall not be permitted to deny coverage based on a particular coverage defense unless:

(a) Within 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; and

(b) Within 60 days of compliance with paragraph (a) or receipt of a summons and complaint naming the insured as a defendant, whichever is later, but in no case later than 30 days before trial, the insurer:

1. Gives written notice to the named insured by registered or certified mail of its refusal to defend the insured....

Block Marina obtained a comprehensive general liability policy from AIU which contained an exclusion of coverage for damage to property in the care, custody, or control of the insured. A marina operator's legal liability endorsement to the policy was written which the parties agree would have provided coverage for the claim in question. However, prior to the alleged act of negligence giving rise to a claim against Block Marina by Norfolk Marine, the marina operator's legal liability endorsement was eliminated from the policy. AIU informed Block Marina that although the claim was not one generally covered under the policy, it would provide a defense subject to a reservation of its right to assert a coverage defense under section 627.426(2)(a). Two weeks prior to trial, AIU refused further defense, notifying Block Marina that the claim was not covered under the policy. Thereafter, Block Marina entered into a consent judgment with Norfolk Marine, who agreed not to seek to enforce the judgment against Block Marina. Block Marina and Norfolk Marine were granted a summary judgment prohibiting AIU from denying coverage, because AIU had failed to notify the insured of its refusal to defend within sixty days after its reservation letter and within thirty days before trial, as required by section 627.426(2)(b).

On appeal, AIU relied on the Fifth District Court of Appeal's decision in United States Fidelity and Guarantee Co. v. American Fire and Indemnity Co., 511 So.2d 624, 625 (Fla. 5th DCA 1987) [hereinafter USF & G ] in which the court held:

The legislature did not intend, by section 627.426(2), to create coverage under a liability insurance policy that never provided that coverage, or to resurrect a policy that has expired by its own terms and no longer legally exists, to cover an accident or event occurring after its termination.

In USF & G, the policy under which coverage was sought had expired over ten years before the claim was made. The district court below distinguished USF & G by reasoning that in USF & G there was no coverage issue because there was no policy in effect; whereas, in this case, the issue was whether the policy which was in effect covers a specific loss. 512 So.2d at 1119. Finding the statutory language "unambiguous," the district court affirmed the summary judgment for the insured. Id. at 1119-20. The district court then certified its decision as "possibly in conflict" with USF & G. Id. at 1120 n. 4.

We perceive conflict between the two decisions. It matters not that in USF & G there was a complete lack of coverage because the policy term had expired and in the case before us the lack of coverage was due to an express policy exclusion. Analytically, there is no distinction between the two situations. The comprehensive general liability insurance policy in force in this case explicitly excluded bailment losses from coverage. As noted by Judge Nesbett in his dissenting opinion, it was knowledge of this exclusion which apparently prompted the insured to obtain a marina operator's legal liability endorsement specifically covering bailed goods. Id. at 1120. This endorsement lapsed, thus leaving Block Marina unprotected for the loss later sustained. In both the instant case and in USF & G, coverage which was once available had been allowed to lapse. The Fifth District in USF & G held that under such circumstances section 627.426(2) was not intended to create or resurrect coverage. 511 So.2d at 625. The Third District in effect construed the statute to do just that.

The effect of the decision below is to give insurance coverage to Block Marina for bailment losses at a time when the marina operator's legal liability endorsement had been eliminated from the policy and the contract of insurance expressly excluded such losses...