First Specialty Ins. v. Caliber One Indem.

• Decision Date: 15 August 2008
• Docket Number: No. 2D07-3257.,2D07-3257.
• Citation: 988 So.2d 708
• Parties: FIRST SPECIALTY INSURANCE COMPANY, Appellant, v. CALIBER ONE INDEMNITY CO., National Healthcare Corp., National Health Corp., and Roger Friedbauer, Appellees.
• Court: Florida District Court of Appeals

988 So.2d 708

FIRST SPECIALTY INSURANCE COMPANY, Appellant, v. CALIBER ONE INDEMNITY CO., National Healthcare Corp., National Health Corp., and Roger Friedbauer, Appellees.

No. 2D07-3257.

District Court of Appeal of Florida, Second District.

August 15, 2008.

Scott A. Cole and Luisa M. Linares of Cole Scott & Kissane, P.A., Miami, for Appellant.

Larry I. Gramovot of Gramovot & Takacs, P.L., Tallahassee, and Kenneth S. Takacs of Gramovot & Takacs, P.L., Tampa, for Appellee Caliber One Indemnity Co.

Darryl L. Gavin of Rumberger, Kirk & Caldwell, A Professional Association, Orlando, for Appellees National Healthcare Corp. and National Health Corp.

No appearance for Appellee Roger Friedbauer.

VILLANTI, Judge.

First Specialty Insurance Company appeals the partial final summary judgment entered against First Specialty and in favor of its insureds, National Healthcare Corp. and National Health Corp. (collectively NHC), in a declaratory judgment action concerning insurance coverage. The trial court held that the insurance policies issued by First Specialty and Caliber One Indemnity Co. provided coverage for the punitive damages and attorneys' fees awarded against NHC in an underlying wrongful death action. For the reasons set forth below, we reverse.

In 2000, the Estate of Patrick Canavan filed a wrongful death action against NHC, Roger Friedbauer, and several other defendants who are not relevant to this appeal.¹ During the jury trial, the trial court granted a directed verdict in favor of Friedbauer. Subsequently, the jury returned a verdict against NHC and awarded punitive damages. The trial court then entered an order awarding the Estate attorneys' fees to be paid by NHC. On appeal, this court reversed the directed verdict in favor of Friedbauer, reversed the amount of the punitive damages award against NHC, and remanded for further proceedings. See Estate of Canavan v. Nat'l Healthcare Corp., 889 So.2d 825 (Fla. 2d DCA 2004).

Thereafter NHC's primary insurer, Caliber One, filed a declaratory judgment action seeking a determination that the insurance policy it issued to NHC did not provide coverage for the punitive damages and attorneys' fees awarded to the Estate in the wrongful death action. Caliber One also sought a determination that it was not obligated to either defend or indemnify Friedbauer because he was neither a named nor an omnibus insured under the policy issued to NHC. First Specialty, NHC's excess insurer, intervened in the case asserting that its excess insurance policy covered only those types of damages covered by the primary insurance policy issued by Caliber One and, therefore, also did not provide coverage for the punitive damages or attorneys' fees awarded against NHC.

The Caliber One policy provided coverage for "damages" which might be awarded against NHC if those damages were within the terms and conditions of the policy. The professional liability section of the policy stated:

We will pay those sums that the insured becomes legally obligated to pay as "damages" because of any act, error or omission in the rendering or failure to render "professional services" by an insured or by any person for whose acts, errors or omissions an insured is legally responsible.

The policy defined "damages" as "any compensatory amount which an Insured is legally obligated to pay for any claim to which this insurance applies, but does not include injunctive or equitable relief or the return of fees or charges for services rendered." (Emphasis added.) The policy's exclusions section stated that coverage did not apply to "[a]ny civil, criminal or administrative fines or penalties levied against an insured." The policy did not use the term "punitive damages" and did not expressly exclude payment of attorneys' fees.

First Specialty's excess insurance policy "applie[d] only to damages covered by the primary insurance and [was] subject to the same terms, conditions, exclusions, definitions and limitations as the primary insurance." The policy stated that it would "pay on behalf of the insured those sums in excess of primary insurance, that the insured becomes obligated to pay as damages for liability imposed on the insured by law or assumed under an insured contract." However, "if primary insurance or other insurance [did] not pay a loss, for any reason other than exhaustion of their limit of insurance, then [First Specialty] shall not pay such loss."

First Specialty and Caliber One subsequently filed motions for partial summary judgment as to their claims against NHC. Caliber One argued that the insurance policy issued to NHC did not provide coverage for punitive damages because the policy's definition of damages stated that it would cover "any compensatory amount" which would not include punitive damages. It also argued that the policy expressly excluded coverage for civil penalties or fines and that punitive damages were a type of civil penalty or fine. Caliber One also argued that the policy did not cover attorneys' fees. NHC filed a cross-motion for summary judgment, arguing that the policy language was ambiguous and therefore should be interpreted in favor of coverage. The trial court concluded that neither the Caliber One policy nor the First Specialty policy explicitly excluded coverage for awards of punitive damages or adverse attorneys' fees and, therefore, both policies provided coverage for both types of awards. First Specialty then filed this appeal.²

On appeal, First Specialty argues that the insurance policy's definition of "damages," which defines them as "any compensatory amount which [the] Insured is legally obligated to pay," unambiguously limits coverage to compensatory damages because neither punitive damages nor attorneys' fees are "compensatory" in nature. It also argues that the policy's exclusion for "[a]ny civil, criminal or administrative fines or penalties levied against an insured" excludes coverage for punitive damages because punitive damages are a type of civil fine or penalty. NHC responds that, as drafters of the policies at issue, Caliber One and First Specialty had control over the language of their policies and could have expressly and unambiguously excluded punitive damages and attorneys' fees from coverage. NHC argues that because the insurers failed to expressly and unambiguously exclude coverage for punitive damages or attorneys' fees, those two items are covered by the insurance contracts.

"[I]nsurance contracts must be construed in accordance with the plain language of the policy." Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161, 165 (Fla.2003). Ambiguities in the contract, including ambiguities in exclusionary provisions, are construed in favor of the insured and against the insurer who drafted the policy. Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So.2d 528, 532 (Fla.2005); State Farm Mut. Auto. Ins. Co. v. Pridgen, 498 So.2d 1245, 1248 (Fla. 1986) (citing Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So.2d 938, 942 (Fla.1979)). An insurance policy is considered ambiguous if the challenged policy language is susceptible to more than one reasonable interpretation, one providing coverage and the other limiting coverage. Swire Pac. Holdings, Inc., 845 So.2d at 165. However, an insurance provision must actually be ambiguous before it is subject to these rules. Taurus Holdings, Inc., 913 So.2d at 532. "`[I]f a policy provision is clear and unambiguous, it should be enforced according to its terms whether it is a basic policy provision or an exclusionary provision.'" Id. (quoting Hagen v. Aetna Cas. & Sur. Co., 675 So.2d 963, 965 (Fla. 5th DCA 1996)). "[A]bsent ambiguity, waiver, estoppel or contradiction of public policy, courts are not authorized to extend coverage beyond the plain language of the [insurance] policy." The Doctors Co. v. Health Mgmt. Assocs., 943 So.2d 807, 810 (Fla. 2d DCA 2006) (citing Velasquez v. Am. Mfrs. Mut. Ins. Co., 387 So.2d 427, 428 (Fla. 3d DCA 1980)), review denied, 956 So.2d 455 (Fla. 2007). In this case, we conclude that the Caliber One definition of damages is not ambiguous and covers only compensatory damages. Therefore, coverage for punitive damages and attorneys' fees is excluded from both the Caliber One and First Specialty policies.

First Specialty relies on the Middle District of Florida's decision in Travelers Indemnity Co. v. Despain, No. 5:05-cv-489-Oc-10GRJ, 2006 WL 3747318 (M.D.Fla. Dec. 18, 2006). The definition of the term "damages" and the exclusionary language at issue in Despain were identical to the ones at issue in this case.³ The Middle District of Florida concluded that the damages covered by the Caliber One policy did not include punitive damages because "punitive damages are not compensation for an injury, and are separate and distinct from compensatory damages." Id. at *4. The court explained that while compensatory damages are intended to make an injured party whole, punitive damages go beyond actual damages and are intended to punish the defendant or deter others. Id. Based on these principles, the court in Despain concluded that the definition of "damages" contained in Caliber One's policy was not ambiguous; when it stated that it would cover any "compensatory amount" awarded against the insured, it did not include punitive damages. Id. We find Despain's reasoning persuasive.

Compensatory and punitive damages serve different purposes. The purpose of compensatory damages is to compensate the injured party and make it whole to the extent its injury can be measured in terms of money. Mercury Motors Express, Inc. v. Smith, 393 So.2d 545, 547 (Fla.1981); Coop. Leasing, Inc. v. Johnson, 872 So.2d 956, 958 (Fla. 2d DCA 2004); Despain, 2006 WL 3747318, at *4. The purpose of punitive damages, however, is not to compensate the injured party but to punish a defendant or to act as deterrent. Mercury Motors Express, 393 So.2d at 549. Punitive damages are awarded over and...