Continental Cas. Co. v. Ryan Inc. Eastern

• Decision Date: 24 January 2008
• Docket Number: No. SC05-1935.,No. SC05-4816.,SC05-1935.,SC05-4816.
• Citation: 974 So.2d 368
• Court: Florida Supreme Court
• Parties: CONTINENTAL CASUALTY COMPANY, etc., Petitioner, v. RYAN INCORPORATED EASTERN, etc., et al., Respondents.<SMALL><SUP>1</SUP></SMALL> Lumbermens Mutual Casualty Company, Petitioner, v. Ryan Incorporated Eastern, etc., et al., Respondents.

974 So.2d 368

CONTINENTAL CASUALTY COMPANY, etc., Petitioner, v. RYAN INCORPORATED EASTERN, etc., et al., Respondents.¹

Lumbermens Mutual Casualty Company, Petitioner, v. Ryan Incorporated Eastern, etc., et al., Respondents.

No. SC05-1935.

No. SC05-4816.

Supreme Court of Florida.

January 24, 2008.

Jonathan L. Gaines of Karen L. Stetson, PA., Miami, FL, and William M. Martin of Peterson Bernard, Fort Lauderdale, FL, for Continental Casualty Company, Petitioner.

Patrick E. Maloney of Tressler, Soderstrom, Maloney, and Priess, LLP, Chicago, IL, and Robert L. Donald of the Law Office of Sherman and Donald, Fort

Myers, FL, for Lumbermens Mutual Casualty Company, Petitioner.

Steven G. Schember and Duane A. Daiker of Shumaker, Loop, and Kendrick, LLP, Tampa, FL, for Respondents.

PARIENTE, J.

This Court has for review Ryan Inc. Eastern v. Continental Casualty Co., 910 So.2d 298 (Fla. 2d DCA 2005), in which the Second District Court of Appeal certified conflict with Western World Insurance Co., Inc. v. Travelers Indemnity Co., 358 So.2d 602 (Fla. 1st DCA 1978). The conflict issue is whether a surety that pays money on behalf of its principal and is subrogated to any rights the principal has against its own insurer under principles of equitable subrogation is entitled to recover its attorney's fees under section 627.428, Florida Statutes (2006), for prevailing in a coverage dispute against the principal's insurer. We have jurisdiction. See art. V, § 3(b)(4), Fla. Const. We conclude that a surety that has no written assignment from the insured and is not a named or omnibus insured or named beneficiary under the policy is not entitled to attorney's fees under section 627.428. Accordingly, we quash the Second District's decision in Continental, which granted a motion for fees by the surety, and approve the First District's decision in Western World, which denied a similar request for fees.

FACTS AND PROCEDURAL HISTORY

In November 2000, Ryan Incorporated Eastern (Ryan), as contractor, entered into a contract with 951 Land Holdings, Ltd. (951 Land Holdings), as owner of the property, to construct a golf course in Collier County. This contract required Ryan to obtain commercial general liability ("CGL") insurance. Ryan obtained two separate CGL policies. The primary insurance policy was issued by Continental Casualty Company (Continental) and the excess policy was issued by Lumbermens Mutual. Casualty Company (Lumbermens). In December 2000, Ryan, as the principal, and Hartford Fire Insurance Company (Hartford), as the surety, executed performance and payment bonds to 951 Land Holdings, which were subject to an August 1994 General Indemnity Agreement (GIA) between Ryan and Hartford.

After completion of the golf course, 951 Land Holdings sued Ryan and Hartford for damages resulting from contaminated grass supplied by Ryan's subcontractor. The case proceeded to mediation, after which Hartford paid approximately $4.7 Million in claims, fees and expenses to settle the dispute.² Subsequently, Ryan and Hartford instituted a declaratory judgment action against Continental and Lumbermens for failing to defend and indemnify Ryan and Hartford for the damages paid in the lawsuit brought by 951 Land Holdings. Ryan and Hartford filed a joint motion for summary judgment. Continental and Lumbermens each filed cross-motions for summary judgment. The trial court granted summary judgment in favor of Continental and Lumbermens, concluding that there was no insurance coverage under the CGL policies based on the faulty workmanship of the subcontractor. Ryan and Hartford appealed the decision on coverage and filed a motion for appellate attorney's fees under section 627.428.

On appeal, the Second District Court of Appeal reversed the final summary judgment in favor of Continental and Lumbermens on the underlying coverage issue and "[remanded] this case to the circuit court for further proceedings on the authority of J.S.U.B., Inc. v. United States Fire Insurance Co., 906 So.2d 303 (Fla. 2d DCA 2005)." Continental, 910 So.2d at 299.³ As to appellate attorney's fees, the court granted Ryan and Hartford's motion "conditioned upon the ultimate entry of judgment in favor of the Contractor and the Surety, on remand." Id. at 301. The Second District determined that when a surety such as Hartford makes payment for its principal, "the surety becomes subrogated to the rights and remedies of its principal." Id. at 300. Because of its payment, the Second District reasoned that the surety "stands in the shoes of the Contractor as a first party claimant under the CGL policies" and is equally entitled to an award of fees under section 627.428. Id. at 301.

The Second District further elaborated on public policy considerations. Specifically, the court explained that because the GIA between Ryan and Hartford required Ryan to reimburse Hartford for any fees associated with the enforcement of the bond, a denial of fees to Hartford would make Ryan liable for those fees with no possibility of reimbursement from the insurers. See id. Because this result would contradict the purpose of section 627.428— to discourage the contesting of valid claims by insurance companies—and would "exalt[] form over substance," as the principal could have carried the ball in the litigation and been entitled to the same fees, the court conditionally granted Hartford's motion. See id.

In reaching this decision, the Second District certified conflict with Western World. In Western World, the surety and its principal sued the liability insurer for its failure to defend the principal and sought reimbursement for the money the surety paid on the bond. See 358 So.2d at 603. Similar to the Second District in Continental, the First District held that when a surety pays a judgment for the principal, the surety may be indemnified from the principal and is subrogated to any rights the principal has against its insurance carrier. See id. at 604. However, on nearly identical facts, the First District concluded that the surety was not entitled to its appellate fees because it was neither a named insured nor named beneficiary under the liability policy. See id. We accepted jurisdiction to resolve this conflict.

ANALYSIS

A. Overview of Section 627.428

This case requires us to review section 627.428, Florida Statutes (2006).⁴ Because this issue involves the interpretation of a statute, our review is de novo. Brass & Singer, P.A. v. United Auto. Ins. Co., 944 So.2d 252, 253 (Fla.2006). Section 627.428, a provision of the Florida Insurance Code, was originally enacted in 1959, see ch. 59-205, § 477, Laws of Fla., and has been the subject of extensive interpretation by both Florida and federal courts. See, e.g., Fireman's Fund Ins. Co. v. Tropical Shipping & Constr. Co., 254 F.3d 987 (11th Cir.2001); Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So.2d 1216 (Fla.2006); Brass & Singer, 944 So.2d at 253-54; David Boland, Inc. v. Trans Coastal Roofing Co., 851 So.2d 724 (Fla.2003); Roberts v. Carter, 350 So.2d 78 (Fla.1977). Although the section authorizes an award of attorney's fees, it does so only in a discrete set of circumstances. The statute provides in pertinent part that

[u]pon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which the recovery is had.

§ 627.428(1), Fla. Stat.

As with any case of statutory construction, we begin with the "actual language used in the statute." Borden v. East-European Ins. Co., 921 So.2d 587, 595 (Fla.2006). This is because legislative intent is determined primarily from the text. See Maggio v. Fla. Dept. of Labor & Employment Sec., 899 So.2d 1074, 1076-77 (Fla.2005). The plain language of section 627.428 provides for an award of attorney's fees to a "named or omnibus insured or the named beneficiary" who obtains a judgment or decree against an insurer. § 627.428, Fla. Stat. (emphasis supplied).

A "named insured" is one who is "designated as an insured" under the liability policy. Romero v. Progressive Southeastern Ins. Co., 629 So.2d 286, 288 (Fla. 3d DCA 1993). An "omnibus insured" is one who is covered by a provision in the policy but not specifically named or designated. See Industrial Fire & Cas. Ins. Co. v. Prygrocki, 422 So.2d 314, 315 (Fla.1982) (holding that a pedestrian was an omnibus insured under a liability policy providing coverage for medical and other expenses incurred as a result of bodily injuries sustained by "a pedestrian, through being struck by the insured motor vehicle"); State Farm, Fire & Cas. Co. v. Kambara, 667 So.2d 831, 831-32 (Fla. 4th DCA 1996) (holding that a resident was an omnibus insured under a landlord's liability policy that provided coverage for "bodily injury caused by an accident on your premises you own or rent"). Additionally, the rights of an "omnibus insured" flow "directly from his or her status under a clause of the insurance policy without regard to the issue of liability." Kambara, 667 So.2d at 833. A "named beneficiary" is one who is specifically designated as such in the policy. See Roberts, 350 So.2d at 79.

Hartford does not contend that it falls within the narrow statutory class of entities outlined in section 627.428. Rather, it argues that it is entitled to an award of fees by standing in the shoes of Ryan, the "named insured" under the CGL policies, as both an assignee and equitable subrogee. Thus, the issue we must resolve is whether a surety that itself does not fall within any statutory classification may...