Eastpointe Condo. I v. Travelers Cas. and Sur. Co.

• Decision Date: 14 October 2009
• Docket Number: Case No. 08-81187-CIV.
• Citation: 664 F.Supp.2d 1281
• Parties: EASTPOINTE CONDOMINIUM I ASSOCIATION, INC., Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — Southern District of Florida

664 F.Supp.2d 1281

EASTPOINTE CONDOMINIUM I ASSOCIATION, INC., Plaintiff, v. TRAVELERS CASUALTY AND SURETY COMPANY OF AMERICA, Defendant.

Case No. 08-81187-CIV.

United States District Court, S.D. Florida.

October 14, 2009.

COPYRIGHT MATERIAL OMITTED

Scott Andrew Silver, Francisco Xavier Novoa, Silver, Feldman, Bass & Brams, West Palm Beach, FL, for Plaintiff.

John R. Catizone, Selena Donaldson Stallworth, Litchfield Cavo LLP, Tampa, FL, for Defendant.

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

DANIEL T.K. HURLEY, District Judge.

This case involves an alleged breach of the duty to defend under a "Non-Profit Management and Organization Liability Insurance Policy" issued by defendant Travelers Casualty & Surety Company of America ("Travelers") to plaintiff Eastpointe Condominium I Association, Inc. ("the Association").

The case is now before the court upon the parties' cross-motions for summary judgment [DE# 15, 29]. For reasons stated below, the court concludes that the subject claim against the Association is an excluded loss under the "tangible property" exclusion of the Travelers policy, defeating coverage and relieving Travelers of any obligation to defend the underlying claim against its insured.

Facts

The Association obtained insurance liability coverage under two different policies. First, it obtained a Commercial General Liability (CGL) Policy from QBE Insurance Corporation ("QBE") which provided coverage for property damage ["QBE Policy"]. Second, it obtained a Non-Profit Management and Organization Liability Insurance Policy, or Directors & Officers Liability Policy, from Travelers Casualty and Surety Company of America ("Travelers") which covered "loss ... incurred by the [Association] as the result of any claim ... made against the [Association] ... for a Wrongful Act." ["Travelers Policy"] [DE# 15-2].

The Travelers Policy defines a "wrongful act" at Section II. S. ("Definitions") as follows:

Wrongful Act means any error, misstatement, misleading statement, act, omission, neglect, or breach of duty committed or attempted, or allegedly committed or attempted, by the Insured organization or by one or more Inured Persons, individually or collectively, in their respective capacities as such, including but not limited to any Wrongful Employment Practices.

In turn, Section IV of the Travelers Policy, as amended by policy endorsement, expressly excludes coverage for claims against the Association "for or arising out of any damage, destruction, loss of use or deterioration of any tangible property," defined to include "construction defects," "mold, toxic mold, spores, mildew, fungus or wet or dry rot."¹

During the period when both policies were in place, a unit owner, Lynn Bursten as Trustee of the Lynn Kelvin Bursten Revocable Living Trust ["Bursten"], sued the Association for failure to adequately maintain and repair the roof and air conditioning system of the condominium building before, between and after Hurricanes Jeanne and Frances made landfall in South Florida in October, 2004.

In her original state court complaint, filed December 23, 2004, Bursten alleged that the Association's failure to maintain and repair the property constituted negligence, breach of contract, and breach of fiduciary duty, all based on an alleged breach of the Association's duties under the Declaration of Condominium to maintain, repair and/or replace the roof and air conditioning units located on the roof of the condominium property. As a consequence, Bursten alleged that the condominium building sustained severe water intrusion during the Hurricanes, causing pervasive mold and other damage to Bursten's unit and its contents.

The Association promptly tendered the Bursten complaint to QBE and Travelers. Following tender of suit papers, on January 25, 2005, Travelers issued formal notice denying coverage and disclaiming any duty to defend pursuant to the "tangible damage" exclusion of the Travelers Policy. The Association then retained personal counsel, Attorney Daniel Bram, to defend its interests in the Bursten lawsuit.

At the same time, QBE, the Association's commercial general liability carrier, accepted defense of the Bursten suit under a reservation of rights, and provided and paid for the Association's defense against all claims, designating Attorney Scott Silver as defense counsel. Despite the appearance of Attorney Silver in the litigation, the Association continued its retention of Attorney Bram, apparently operating under the incorrect assumption that QBE was only defending on the negligence claim, leaving it exposed on the breach of fiduciary duty and breach of contract claims. However, it is undisputed that QBE defended the Association against all claims lodged in the Bursten suit, and made no statement in its reservation of rights letter which suggested otherwise.

Over a year later, on June 6, 2006, Bursten amended her complaint, supplementing her original allegations of property damage with new allegations of economic loss. More specifically, while the amended complaint still lodged claims of negligence, breach of fiduciary duty and breach of contract, this time Bursten added allegations of fiscal mismanagement, asserting that the Association failed to obtain competitive bids and failed to select a qualified contractor for the restoration and remediation of the building; failed to contract for for remediation and restoration of the building at a reasonable cost and failed to require the selected contractor to post a sufficient performance bond with regard to remediation and restoration of the building.

The Association never tendered a copy of the Amended Complaint to Travelers, nor did it ever otherwise notify Travelers of the fact or substance of the amendment.

In January, 2008, the Bursten suit was resolved with entry of a defense verdict on all claims.

In September, 2008, the Association filed this declaratory judgment and breach of contract suit, seeking to establish Travelers' duty to defend under the subject policy of directors and officers liability insurance. As damages, it seeks to recoup $250,000.00 in attorneys' fees paid to Attorney Bram as personal counsel in its defense of the underlying Bursten suit.

Standard of Review

Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

The non-moving party "[m]ay not rely merely on allegations or denials in its own pleading; rather, its response.... must set out specific facts showing a genuine issue for trial." Fed.R.Civ.P. 56(e)(2). A "mere scintilla" of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that a jury could reasonably find for that party. Walker v. Darby, 911 F.2d 1573 (11th Cir. 1990), citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). Conclusory, uncorroborated allegations by a plaintiff in an affidavit or deposition will not create an issue of fact for trial sufficient to defeat a well supported summary judgment motion. Earley v. Champion Int'l Corp., 907 F.2d 1077, 1081 (11th Cir.1990).

In this case, the material facts are not in dispute. The court is left to resolve whether the allegations in the Bursten complaint fall within the coverage of the Travelers policy, a policy construction question particularly well suited for determination by summary judgment. ABC Distributing, Inc. v. Lumbermens Mut. Ins. Co., 646 F.2d 207 (11th Cir.1981); Technical Coating Applicators, Inc. v. U.S. Fidelity & Guar. Co., 157 F.3d 843 (11th Cir.1998).

Discussion

A. Standard for Determining Duty to Defend

Florida law governs the duty to defend in this diversity action. Hartford Acc. & Indemnity Co. v. Beaver, 466 F.3d 1289 (11th Cir.2006). Under Florida law, the duty to defend is distinct from and broader than the duty to indemnify the insured for damages. LaFarge Corp. v. Travelers Indemnity Co., 118 F.3d 1511 (11th Cir.1997). An insurer's duty to defend is based entirely "on the facts and legal theories alleged in the pleadings and claims against the insured." James River Ins. Co. v. Ground Down Engineering, Inc., 540 F.3d 1270, 1275 (11th Cir.2008). It does not hinge on the true facts that gave rise to the cause of action against the insured, the insured's version of those facts, or the insured's defenses to the underlying complaint. State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th Cir.2004).

Where the complaint contains multiple claims, some falling within and some falling outside the scope of coverage, the insurer is required to defend the entire suit. Trizec Properties, Inc. v. Biltmore Const. Co., Inc., 767 F.2d 810 (11th Cir. 1985); Tropical Park, Inc. v. U.S. Fidelity & Guaranty Co., 357 So.2d 253 (Fla. 3d DCA 1978).

All doubts as to whether a duty to defend exists are resolved against the insurer and in favor of the insured. As long as the complaint alleges facts which create potential coverage under the policy, a duty to defend is triggered. Trizec Properties, supra.

On the other hand, if the pleadings show the applicability of a clear and unambiguous policy exclusion, the insurer has no duty to defend. Andrews v. Capacity Ins. Co., 687 So.2d 366 (Fla. 4th DCA 1997); Hagen v. Aetna Cas. & Sur. Co., 675 So.2d 963 (Fla. 5th DCA 1996); Travelers Ins. Co. v. Emery, 579 So.2d 798 (Fla. 1st DCA 1991).

B. The Travelers Policy

Thus, in determining Travelers' duty to defend, the court looks only to the allegations contained within the four corners of the Bursten complaint. If the facts alleged in that pleading fairly bring the claim within the scope of the policy coverage, Travelers owes a duty to defend, regardless of the merits of the underlying claim. Vector Products, Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316 (11th Cir. 2005) (Fla. law); Higgins v. State Farm Fire & Cas. Co., 894...