Cast Steel Products, Inc. v. Admiral Ins. Co.

• Decision Date: 28 October 2003
• Docket Number: No. 02-16511.,02-16511.
• Citation: 348 F.3d 1298
• Parties: CAST STEEL PRODUCTS, INC., Plaintiff-Appellant, v. ADMIRAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

348 F.3d 1298

CAST STEEL PRODUCTS, INC., Plaintiff-Appellant, v. ADMIRAL INSURANCE COMPANY, Defendant-Appellee.

No. 02-16511.

United States Court of Appeals, Eleventh Circuit.

October 28, 2003.

Thomas Corley Smith, Callaway, Braun, Riddle & Hughes, P.C., F. Bradley Hassell, Eubank, Hassell & Associates, PA, Daytona Beach, FL, for Plaintiff-Appellant.

Mitchel Chusid, Ritter & Chusid, Patrick Patrissi, English, McCaughan & O'Bryan, P.A., Boca Raton, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before BLACK and FAY, Circuit Judges, and JORDAN^*, District Judge.

FAY, Circuit Judge:

Cast Steel Products, Inc. ("Cast Steel") appeals an adverse summary judgment granted to Admiral Insurance Company ("Admiral") on Cast Steel's action for a declaration that either (or both) of its 1999 and 2000 "claims-made" professional liability policies with Admiral covered a defective product claim that accrued at the conclusion of the 1999 policy period but was not reported until the start of the 2000 policy period. The district court found that neither policy provided coverage for the claim because the claim had not both accrued and been reported to Admiral during the same policy period. Cast Steel argues on appeal that the 1999 Professional Liability Policy ("99 Policy") is ambiguous with respect to coverage of the 1999 claim upon renewal of the 99 Policy in 2000. Specifically, Cast Steel contends that because the 99 Policy automatically extends the claims reporting period upon cancellation or non-renewal of the policy, but is silent as to whether renewal of the policy would provide the same reporting extension, an unresolved ambiguity exists in the policy that precluded the district court from granting summary judgment.

We agree that the 99 Policy is ambiguous. We further find that, because under Florida law an ambiguity in an insurance policy must be construed in favor of the insured so as not to deny coverage, summary judgment should have been granted to Cast Steel. Swire Pacific Holdings, Inc. v. Zurich Ins., Co., 845 So.2d 161, 165 (Fla.2003). Accordingly, we REVERSE the district court's order granting summary judgment in Admiral's favor, and REMAND to the district court with instruction to enter summary judgment in Cast Steel's favor as to the 99 Policy.

I.

Cast Steel is a Florida corporation in the business of supplying castings and components to the mining and waste energy industries. In early 1999, it purchased professional liability insurance from Admiral, a surplus lines insurer headquartered in Delaware, through Admiral's designated surplus lines broker in the state of Florida, Gary Markel.¹ The 99 Policy had a retroactive effective date of January 6, 1999 and an expiration date of January 6, 2000, at 12:01 a.m. Cast Steel subsequently renewed the 99 Policy, and the renewal policy had an effective date of January 6, 2000, and expiration date of January 6, 2001 ("00 Policy").² Both policies, by their terms, were "claims-made" policies, which meant that each policy purported to cover only those claims which had both accrued and were reported to Admiral during the policy period indicated on the face of the policy.

Sometime in early 1999, Cast Steel was awarded a contract to provide 130 pallet cars to Hibbing Taconite ("Hibbing"), an iron ore mine located in Hibbing, Minnesota, for the purchase price of $5.5 million. Cast Steel delivered the cars in June 1999. Soon thereafter, in August 1999, Hibbing reported significant problems with the wheels of the cars, which, after some investigation, Cast Steel determined to be caused by defective design of the bearings. On October 21, 1999, Hibbing prepared an incident report and formally reported its claim to Cast Steel. Cast Steel immediately advised Ayers/Sierra of the Hibbing claim and asked that the proper claim paperwork be prepared. In an unfortunate twist of fate, Ayers/Sierra failed to submit the Hibbing claim to Admiral until January 6, 2000 — just hours after the 99 Policy had expired.

On February 10, 2000, Admiral sent Cast Steel a reservation of rights letter and began investigating the Hibbing claim.³ After four months of investigation by an independent claims adjuster, Admiral sent Cast Steel a letter denying coverage under all policies.

This suit followed on July 25, 2001. Cast Steel originally brought the action in Florida state court, seeking, inter alia, a declaration that at least one of the various policies obligated Admiral to cover the Hibbing claim. Admiral removed the action to the Middle District of Florida on diversity grounds and, in July 2002, Cast Steel moved for summary judgment on the 99 Policy. Admiral's own summary judgment motion followed. On October 24, 2002, the district court entertained oral argument and in November granted summary judgment to Admiral, finding that none of the policies provided coverage to Cast Steel.

Specifically, the district court determined that Cast Steel failed to comply with the 99 Policy's notice requirement when it failed to report the Hibbing claim during the 99 Policy period. As to the 00 Policy, the court held that because the Hibbing claim accrued during 1999, and Cast Steel was undisputedly aware of the claim when it renewed the policy, the plain language of the 00 Policy precluded coverage.⁴ With respect to Cast Steel's argument that Admiral was on notice of its claim because Admiral (or Admiral's surplus lines broker Markel) cloaked Ayers/Sierra with apparent authority to receive claims on Admiral's behalf, the district court found that Cast Steel failed to show that Admiral ever represented to Cast Steel that Ayers/Sierra was its agent in this regard and, moreover, the record showed that Ayers/Sierra itself adamantly denied being Admiral's agent or ever making a representation to Cast Steel that it was Admiral's agent.

Cast Steel asserts on appeal that the district court erred in granting summary judgment to Admiral because issues of fact remained as to whether Ayers/Sierra was cloaked with apparent authority to receive claims on behalf of Admiral. Cast Steel also argues that an unresolved ambiguity as to whether renewal of the 99 Policy extended the period in which it could report claims precluded summary judgment on Admiral's behalf.

II.

We review a district court's granting of a motion for summary judgment de novo, applying the same legal standards used by the district court. Hilburn v. Murata Elecs. N. Am., Inc., 181 F.3d 1220, 1225 (11th Cir.1999). We "view the evidence and all factual inferences therefrom in the light most favorable to the party opposing the motion." Burton v. City of Belle Glade, 178 F.3d 1175, 1187 (11th Cir.1999) (quoting Clemons v. Dougherty County, 684 F.2d 1365, 1368 (11th Cir.1982)). Denial of summary judgment is also reviewed de novo. Weeks v. Harden Mfg. Corp., 291 F.3d 1307, 1311 (11th Cir.2002).

III.

The district court's decision presents a somewhat alarming scenario. Faced with two consecutive insurance policies that created apparently seamless coverage over two policy periods, the court nevertheless found that a claim accruing within the two periods was somehow not covered by either policy. On the face of the 99 and 00 Policies, there appears to be no gap in coverage. Indeed, the 99 Policy was effective until 12:01 a.m. on January 6, 2000, and the 00 Policy was retroactively effective beginning on January 6, 2000 (presumably at 12:01 a.m.). At a glance, one would be hard pressed to imagine how a claim accruing in the middle of the two policy periods would not be covered by one of the policies. But because a claims-made policy is designed to cover only claims both accruing and reported during the specified policy period, the district court held that a claim which accrued late in the first policy period but was not reported until early in the second was covered by neither policy.

Cast Steel challenges the district court's conclusion, and argues that because the 99 Policy automatically extends (by thirty days) the period in which to report 1999 claims if the insured elects to cancel or non-renew the policy, there remains an ambiguity as to whether renewal provides a similar reporting extension. Subsection B of the "Extended Discovery Period" provision (Section IV) of the 99 Policy provides as follows:

If the policy is cancelled or not renewed by the Named Insured an automatic thirty (30) day Claims Extension Period shall apply to claims, provided such claims are not covered under any subsequent insurance purchased by the Named Insured, or that would be covered but for the exhaustion of the amount of insurance applicable to such claims.

99 Policy, Sect. IV(B). Cast Steel chose neither of the two options above, but rather renewed the 99 Policy in the following year. Neither this section, nor any section of the 99 Policy, however, discusses whether a similar reporting extension accompanies renewal of the policy. Accordingly, Admiral counters that the policy's silence can only mean that the same reporting extension does not accompany renewal.

The district court, siding with Admiral, did not find any ambiguity in the 99 Policy. Granting summary judgment in Admiral's favor, the district court relied on the Southern District of Florida's 2001 Pantropic decision in finding that renewal of the 99 Policy did not extend the time in which Cast Steel could report its claim. Pantropic Power Prods., Inc. v. Fireman's Fund Ins. Co., 141 F.Supp.2d 1366 (S.D.Fla.2001). In Pantropic, which was affirmed by this Court in an unpublished per curiam opinion, the plaintiff offered, and the district court rejected, the identical argument to Cast Steel's here. The court in Pantropic, in granting insurer's motion for summary judgment, explained that because an insurer undertakes a more limited risk in a claims-made policy, it typically charges a lower premium. Id. at 1369. In exchange, the insured is only permitted...