CHICAGO TITLE INS. v. Northland Ins. Co.

• Decision Date: 23 April 2010
• Docket Number: No. 4D08-4450.,4D08-4450.
• Citation: 31 So.3d 214
• Parties: CHICAGO TITLE INSURANCE COMPANY, Appellant, v. NORTHLAND INSURANCE COMPANY, Appellee.
• Court: Florida District Court of Appeals

31 So.3d 214

CHICAGO TITLE INSURANCE COMPANY, Appellant, v. NORTHLAND INSURANCE COMPANY, Appellee.

No. 4D08-4450.

District Court of Appeal of Florida, Fourth District.

March 3, 2010.

Rehearing Denied April 23, 2010.

Steven L. Brannock and Sarah C. Pellenbarg of Holland & Knight, LLP, Tampa, for appellant.

Louis Schulman and R. Steven Rawls of Butler, Pappas, Weihmuller, Katz & Craig, LLP, Tampa, for appellee.

MAY, J.

A dispute between a title insurer (Chicago Title) and its errors and omissions carrier (Northland) over the interpretation of a policy and its exclusions create the issue in this appeal. Chicago Title appeals an adverse summary judgment and argues that Northland waived its right to raise the policy exclusions as a defense to a garnishment action when it wrongly refused to defend its insured First Southern Title Company in an underlying action. We disagree and affirm.

The underlying litigation arose from an attorney's misappropriation of monies in a real estate transaction for which First Southern was the title agent. First Southern's employee released a check to the attorney to hold in escrow for satisfaction of a mortgage. The attorney misappropriated the funds, leaving insufficient money to satisfy the mortgage. Chicago Title made payment under its policy to clear the title.

Chicago Title then filed suit against First Southern, its principal, and the attorney, seeking to recover the funds. The complaint alleged a significant shortage in escrow funds as a result of "negligence, misapplication, conversion and/or theft of funds." The complaint alleged counts for negligence and negligent supervision against First Southern and its principal, and for fraud and deceit against the attorney and First Southern's principal.

First Southern and its principal tendered their defense to Northland, but Northland denied the tender and coverage based on the "Handling of Funds" exclusion and the "Additional Exclusion Endorsement" of its policy.¹

Chicago Title, First Southern, and its principal entered into a settlement agreement, which the court approved in a final judgment. The court entered the consent judgment in favor of Chicago Title and against First Southern and its principal on the negligence, breach of fiduciary duty, and negligent supervision counts. The court also entered judgment against First Southern on the breach of contract count, and against First Southern's principal on the breach of guarantee count. All other counts were dismissed with prejudice.

Chicago Title was unable to collect on the judgment from First Southern or its principal, causing it to file a Motion for Issuance of Writ of Garnishment against Northland. The trial court issued the writ; Northland answered by denying liability. The trial court ultimately entered a final judgment in favor of Northland, from which Chicago Title now appeals.

We have de novo review of a summary judgment. Howard v. Boulanger Drywall Corp., 23 So.3d 817, 819 (Fla. 4th DCA 2009). The parties agree there are no genuine issues of material fact. We are left with the legal issue of whether Northland was entitled to judgment as a matter of law. Selepro, Inc. v. Church, 17 So.3d 1267, 1269 (Fla. 4th DCA 2009).

Chicago Title first argues that Northland waived its right to deny coverage when it wrongfully refused to defend First Southern and its principal in the underlying litigation and is now bound by the terms of the final judgment. The trial court disagreed with this argument and so do we. In a subsequent action by the insured against its insurer, Florida courts look to the complaint and the insurance policy to determine whether there is coverage. See Keen v. Fla. Sheriffs' Self-Ins. Fund, 962 So.2d 1021, 1024 (Fla. 4th DCA 2007). This is true notwithstanding an insurer's refusal to defend leading to the insured entering into a consent judgment. See, e.g., Kopelowitz v. Home Ins. Co., 977 F.Supp. 1179, 1187 n. 3 (S.D.Fla.1997) (citing Columbia Cas. Co. v. Hare, 116 Fla. 29, 156 So. 370 (1934) and Spencer v. Assurance Co., 39 F.3d 1146, 1148 (11th Cir. 1994)).

Chicago Title next argues that Northland was contractually obligated to provide coverage to First Southern because the complaint alleged counts for negligence and negligent supervision, regardless of the ultimate cause of loss—the misappropriation of funds. We agree with the trial court that semantics cannot avoid the obvious. Where the application of one or more policy exclusions applies to the face of the complaint, no duty to defend exists, even if the complaint alleges facts that would otherwise give rise to a covered claim. See Keen, 962 So.2d at 1024. Here, the damages resulted from the misappropriation of funds, which is clearly excluded from coverage under the policy.

The complaint...