Delta Health Group Inc. v. Royal Surplus Lines Insurance Company, No. 08-14137 (11th Cir. 6/10/2009), 08-14137.
| Decision Date | 10 June 2009 |
| Docket Number | No. 08-14137.,08-14137. |
| Parties | DELTA HEALTH GROUP INC., Plaintiff-Appellant Cross-Appellee, v. ROYAL SURPLUS LINES INSURANCE COMPANY, a Foreign Corporation, Defendant-Appellee Cross-Appellant. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Appeal from the United States District Court for the Northern District of Florida; D. C. Docket No. 05-00108 CV-3-RV-MD.
Before WILSON and ANDERSON, Circuit Judges, and GOLDBERG,* Judge.
Appellant and Cross-Appellee Delta Health Group Inc. ("Delta") appeals from a jury verdict largely in favor of its insurer, Appellee and Cross-Appellant Royal Surplus Lines Insurance Company ("Royal"), in a suit concerning the scope of Royal's duty to defend and indemnify Delta under various insurance agreements between Delta and Royal. Delta and Royal also each appeal from the district court's order denying their respective motions for attorney's fees following the jury's verdict. For the reasons described below, we affirm the district court's denial of attorney's fees to both parties, and we affirm with respect to Delta's appeal and also with respect to Royal's cross-appeal.
Delta owns, operates, and manages nursing home facilities in several states. Royal is an insurance company that issued two professional healthcare liability insurance policies to Delta ("Royal Primary policies"). Following the expiration of the second Royal Primary policy, Delta obtained primary policy coverage from Lexington Insurance Company ("the Lexington policy"). The Lexington policy required the satisfaction of a $50,000 self-insured retention before the Lexington policy would provide coverage. Also, in the Lexington policy, defense costs eroded the $3 million aggregate limit. Royal also issued two umbrella policies to Delta, which afforded excess coverage above Delta's primary policies ("Royal Umbrella policies"). Because the Lexington policy did not provide sufficient primary coverage under the terms of the second Royal Umbrella policy, Royal and Delta negotiated an amendment to the second Royal Umbrella policy under which, in the event that the Lexington policy was exhausted, Delta was required as a self-insured to provide coverage for the first $1,000,000 per occurrence, and to provide its own defense costs before the Royal Umbrella policy would take effect.
Numerous people filed suit against Delta for alleged injury at the hands of Delta employees or agents. Many of the claims implicated the periods covered by the Royal Primary policies and the periods covered by the Lexington policy and Delta's self-insurance. For those claims implicating the Royal Primary policies and the Lexington policy, Delta and Royal agreed to share defense costs until Delta satisfied the $50,000 self-insured retention requirement under the Lexington policy. Royal and Lexington then shared defenses costs until the exhaustion of the Lexington policy. After the exhaustion of the Lexington policy, Delta and Royal again shared the costs of defending the underlying suits. Delta and Royal also shared settlement payments for underlying claims involving injuries occurring after the exhaustion of the second Royal Primary policy.
Delta brought suit in 2005 against Royal, seeking declaratory judgment that Royal owed Delta a complete defense on all of the underlying claims and repayment of the defense costs Delta had expended under the cost-sharing agreements. Delta later added a claim for indemnification for the amounts that Delta had contributed to settlement. Royal counter-claimed, alleging that the Royal Primary policies required Delta to pay a $50,000 deductible for each claim, and that Delta had refused to pay the deductible in many cases.
This case went to jury trial in the Northern District of Florida. At the beginning of trial, the district judge ruled as a matter of law that Royal owed Delta a complete defense in all of the underlying cases. The jury found, however, that Delta had validly agreed to share costs in the defense of all of the cases. The jury also found that Royal should have indemnified Delta for the settlement costs of only one of the underlying cases. Because the parties had earlier stipulated that Delta owed Royal unpaid deductibles, the district court determined that Delta owed Royal over $700,000 in unpaid deductibles on Royal's counterclaim after subtracting the indemnification amount Royal owed Delta under the jury's verdict. Both parties then moved for attorney's fees. The district court declined to assign any attorney's fees. Delta has appealed the jury verdict and the denial of its motion for attorney's fees. Royal has cross-appealed the denial of its motion for its attorneys fees, and has alleged error in the presentation of the indemnification issue to the jury.
We review the district court's decision regarding the award of attorney's fees for abuse of discretion, "revisiting questions of law de novo and reviewing subsidiary findings of fact for clear error." Atlanta Journal & Constitution v. City of Atlanta Dep't of Aviation, 442 F.3d 1283, 1287 (11th Cir. 2006).
Regarding Delta's allegations of error at trial, Wright v. CSX Transport. Inc., 375 F.3d 1252, 1256 (11th Cir. 2004). Furthermore, "[w]e will not disturb a jury's verdict unless the charge, taken as a whole, is erroneous and prejudicial." Mosher v. Speedstar Div. of AMCA Int'l, 979 F.2d 823, 824 (11th Cir. 1992).
After trial, Delta and Royal both moved for attorney's fees, each claiming to be the prevailing party in the suit. Delta moved for attorney's fees pursuant to Fla. Stat. § 627.428(1).1 Delta argued it received judgment for purposes of § 627.428(1) because Delta prevailed in its claim for declaratory judgment that Royal owed Delta a duty to defend, and because Delta prevailed on indemnification for settlement costs in one of the thirty-six underlying suits. Royal moved for attorney's fees pursuant to a provision in the first Royal Primary policy between Delta and Royal, which provided for attorney's fees if Royal was required to take action to seek payment of deductibles owed by Delta,2 because Royal succeeded in its counter-claim against Delta for unpaid deductibles.
The district court held that both parties would be entitled to attorney's fees under their respective theories. The district court found, however, that the fees owed to each side could not be significant. The district court also determined that the attorney's fees would result in a "wash," and neither party could truly be deemed "prevailing" for the purpose of awarding attorney's fees. The district court accordingly declined to grant attorney's fees to either party. Both parties appeal the district court's determination and seek attorney's fees from this Court.
Delta argues that the district court erroneously concluded that Royal could be entitled to attorney's fees. Delta argues that the attorney's fees provision of the first Royal Primary policy violates Florida public policy reflected in Fla. Stat. § 627.428. Accordingly, Delta argues that the attorney's fees provision in the first Royal Primary policy should be declared invalid. If Delta were correct in this argument, Delta would then receive attorney's fees because there would no longer be an entitlement to attorney's fees by Royal to "wash" Delta's entitlement to attorney's fees.
Delta's argument that the attorney's fees provision of the first Royal Primary policy violates Florida public policy is premised upon the Florida Supreme Court's statement that "the purpose of this provision [§ 627.428] is to level the playing field so that the economic power of insurance companies is not so overwhelming that injustice may be encouraged because people will not have the necessary means to seek redress in the courts." Ivey v. Allstate Ins. Co., 774 So. 2d 679, 684 (Fla. 2000). The statute has been declared a "one-way street," Danis Indus. Corp. v. Ground Improvement Techniques, Inc., 645 So. 2d 420, 421 (Fla. 1994), and insurers may not collect attorney's fees under § 627.428. Id. According to Delta, if insurers are allowed to place fee provisions in insurance policies allowing for insurers to seek attorney's fees, then the non-reciprocal fee statute of § 627.428 would be rendered impotent, and by implication the purpose of leveling the playing field would be undermined.
Delta is incorrect that the provision concerning attorney's fees in the first Royal Primary policy is against public policy. We need not, and do not, express an opinion as to whether it would violate Florida public policy for an insurance policy to provide for fees for the insurer any time that an insured sues the insurer and loses. The instant policy provision does not allow the insurer to collect attorney's fees whenever the insured loses a litigated case on a claim for coverage. Instead, the provision applies only where the insurer must sue the insured in order to collect a deductible that the insured was obligated to pay and failed to pay. In contrast, § 627.428 addresses the concern that insurers will contest valid claims by their insureds, and that insureds will be forced to take legal action to seek payment. Danis Indus., 645 So. 2d at 421. We hold that this limited provision in the first Royal Primary policy does not violate the public policy expressed in § 627.428 because the instant insurance contract provision does not pertain to the issue contemplated by § 627.428. Therefore, it was not an abuse of discretion for the district court to find that Royal was entitled to attorney's fees under the terms of the insurance contract for the amounts expended in seeking the payment of deductibles owed.3
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