Auto-Owners Ins. Co. v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 03 May 1989
• Docket Number: AUTO-OWNERS,No. 88-00540,88-00540
• Citation: 14 Fla. L. Weekly 1123,547 So.2d 148
• Parties: 14 Fla. L. Weekly 1123, 14 Fla. L. Weekly 1860 INSURANCE COMPANY, Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY and Ray E. Ulmer, Jr., Appellees.
• Court: Florida District Court of Appeals

Page 148

547 So.2d 148

14 Fla. L. Weekly 1123, 14 Fla. L. Weekly 1860

AUTO-OWNERS INSURANCE COMPANY, Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY and Ray E. Ulmer, Jr., Appellees.

No. 88-00540.

District Court of Appeal of Florida Second District.

May 3, 1989.

On Motion for Rehearing Aug. 2, 1989.

Warren M. Goodrich, Steven L. Brannock, and David N. Finkelstein of Holland & Knight, Tampa, for appellant.

E. Clay Parker and Pamela A. Mark of Parker, Johnson, Owen, McGuire & Michaud, P.A., Orlando, for appellee St. Paul Fire and Marine Ins. Co.

Jeffrey R. Fuller of Williams, Brasfield, Wertz, Fuller & Lamb, P.A., St. Petersburg, for appellee Ray E. Ulmer.

SCHEB, Acting Chief Judge.

This appeal focuses on one more phase of seemingly endless litigation. This phase concerns issues of indemnity and contribution. The case originated in an action for damages by Kenneth McGuire, who suffered serious permanent injuries in 1967 when he dove from a pier owned by La Playa of Reddington Beach, Inc. and located on land owned by First Arlington Investment Corporation. McGuire recovered a judgment for $1,000,000 against First Arlington and La Playa, and this court affirmed. First Arlington Inv. Corp. v. McGuire, 311 So.2d 146 (Fla. 2d DCA 1975), cert. denied, 330 So.2d 16 (Fla.1976).

In 1975, First Arlington and La Playa filed suit against their insurance carrier, Auto-Owners Insurance Company, and Ray E. Ulmer, Jr., the attorney Auto-Owners selected, alleging that Auto-Owners and Ulmer were negligent in defending First Arlington and La Playa. Ulmer's malpractice carriers, American Home Assurance (AHA), Continental Casualty Company (CNA) and St. Paul Fire and Marine Insurance Company (St. Paul) were joined as defendants because each provided malpractice coverage for specific periods during Ulmer's representation. ¹ Auto-Owners filed a cross-claim against Ulmer, his law firm, and his three malpractice carriers, seeking indemnification and contribution in the event it was liable to First Arlington and La Playa.

On or about October 19, 1979, the parties in the litigation, except Ulmer, his law firm, and St. Paul, entered into a series of settlement agreements resulting in the payment of damages to Arlington and La Playa. Auto-Owners agreed to pay $750,000; CNA agreed to pay its policy limits subject to a resolution of whether its policy limits were $250,000 or $500,000; ² and AHA agreed to pay $500,000. All claims except those of First Arlington and La Playa against Ulmer and St. Paul and Auto-Owners' cross-claim against Ulmer and St. Paul were settled. Arlington and La Playa covenanted not to sue Auto-Owners, Ulmer's law firm, AHA and CNA. Auto-Owners covenanted not to sue Ulmer's law firm, AHA, or CNA. While Auto-Owners neither released nor covenanted not to sue Ulmer, all parties to the agreements, including Auto-Owners, did agree that any judgment obtained against Ulmer would never be recorded and that collection would be enforced solely against Ulmer's malpractice carrier, St. Paul. As mentioned, St. Paul was not a party to these agreements.

Litigation by First Arlington, La Playa, and Auto-Owners continued against Ulmer and St. Paul. On April 27, 1983, the trial court entered a final summary judgment in favor of Ulmer and St. Paul and against First Arlington and La Playa, holding that the settlement agreements referred to had the legal effect of discharging Ulmer and St. Paul. On appeal, this judgment was affirmed per curiam without opinion. First Arlington Inv. Corp. v. Ulmer, 446 So.2d 108 (Fla. 2d DCA 1984).

On November 15, 1984, the court entered final summary judgment against Auto-Owners because it did not obtain a release from Ulmer as required by section 768.31(2)(d), Florida Statutes (1987), and therefore could not maintain a suit for contribution against St. Paul.

In April 1987, Ulmer, St. Paul, and Auto-Owners filed motions for summary judgment. St. Paul argued that because Auto-Owners agreed not to enforce any judgment against Ulmer's assets, it had no obligation to pay under Ulmer's liability policy. However, the trial judge found there was a disputed issue concerning the parties' intent with respect to the 1979 agreements, so he empaneled a jury to resolve that issue. The jury found that Auto-Owners did not intend that any judgment it might obtain against Ulmer would be Ulmer's obligation. Rather, Auto-Owners simply agreed to seek collection only from St. Paul. The legal effect of the 1979 agreements remained subject to interpretation by the court.

The court denied Auto-Owners' motion for summary judgment and entered a final summary judgment in favor of Ulmer and St. Paul on January 23, 1988. The court held that Auto-Owners' agreement not to collect against Ulmer barred its claim for indemnity against St. Paul. Auto-Owners now challenges this ruling and the November 15, 1984, ruling.

This appeal presents two issues. The first is whether the trial court properly granted final summary judgment on Auto Owners' indemnity claim against Ulmer and St. Paul. The second concerns the trial court's earlier grant of final summary judgment to Ulmer and St. Paul on Auto-Owners' claim for contribution.

The Indemnity Issue

The parties have not cited, nor has our research revealed, any Florida cases which control this issue. Disputes involving similar factual scenarios have arisen in other jurisdictions, however, and it appears that two divergent views have developed. As this is a case of first impression in Florida, we have chosen what we consider to be the better view.

At the outset, we note that the cornerstone of our decision is the deeply rooted principle of Florida law that the intent of the parties controls interpretations of their releases. See, e.g., Atlantic Coast Line R.R. v. Boone, 85 So.2d 834 (Fla.1956). The language of the 1979 settlement agreements clearly indicates and the jury found that it was not Auto-Owners' intention to release St. Paul from liability. Auto-Owners argues that to allow St. Paul to escape liability because of documents to which it was not a party and which were executed with no intention of releasing St. Paul would be unfair. We find support for this argument in Bodzo v. Willits Int'l Corp., 428 So.2d 225 (Fla.1983), in which the Florida Supreme Court avoided a result which it branded "manifest injustice" by refusing to release a joint obligor simply because a co-obligor had been released where no such dual release was intended. Bodzo at 227.

The line of cases we choose to follow is best exemplified by Deblon v. Beaton, 103 N.J.Super. 345, 247 A.2d 172 (1968). In Deblon, a widowed plaintiff sued the defendant and his two insurance carriers, one of which was Jersey Insurance, for the wrongful death of her husband. The plaintiff agreed that although she would proceed to judgment against the insured defendant, she would seek to collect only from Jersey. Jersey argued, as does St. Paul here, that the agreement released it from liability because the policy of its insured obligated Jersey to pay only that which its insured was "legally obligated to pay." Noting that the policy was one of insurance against liability rather than one of indemnity against loss, the New Jersey court concluded that the narrow construction advanced by Jersey ignored the fact that it was not the plaintiff's intention to release Jersey. The court, therefore, reversed the trial court's grant of Jersey's motion to dismiss.

Despite St. Paul's arguments to the contrary, we find the facts of Deblon to be similar to those in the instant case. In Deblon, the plaintiff expressly reserved rights against Jersey. St. Paul argues that Auto-Owners did not make such a reservation. We find, however, that it did. In the 1979 agreements, it is clearly stated that with the exception of the covenant not to execute against Ulmer, there was to be no modification of Auto-Owners' rights in its action against Ulmer and St. Paul. Nowhere in the various documents did Auto-Owners covenant not to sue Ulmer.

The New Jersey court undergirded its decision in Deblon by discussing several public policies which influenced it, all of which are equally viable in Florida. After discussing the importance of enforcing the parties' intentions, the court in Deblon noted the necessity of giving broad interpretation to coverage so as to protect injured persons. St. Paul argues that this policy consideration is inapplicable since the "injured" parties, La Playa and First Arlington, were made whole by settlements. We recognize, however, Auto-Owners' right to seek indemnification from St. Paul since it has been financially lessened by its contribution to those settlements.

The Deblon court also discussed the policy of encouraging settlements, even if they are merely partial ones, as executed in this case. To release a party which did not engage in settlement negotiations because of those settlement agreements would, we think, have negative implications. Such a ruling could potentially discourage future litigants from entering into compromise negotiations for fear that they might thereby limit their remedies against other parties, regardless of their intent not to do so.

The court in Deblon further commented that an injured plaintiff acquires an interest in an insurance policy at the time of the accident, thereby rendering the insurance company directly liable regardless of collection efforts against the insured. We find this part of the court's discussion especially persuasive in light of the fact that this action commenced at a time when a direct action against an insured's carrier was permissible. Shingleton v. Bussey, 223 So.2d 713 (Fla.1969).

Other jurisdictions have either explicitly followed what we think is Deblon 's well-reasoned analysis, see, e.g., Loy v. Bunderson, 107 Wis.2d 400, 320 N.W.2d 175 (1982), or have come to a similar conclusion on their own. ³ In Coblentz v. American Surety Co. of New York, 416 F.2d 1059 ...