First Specialty Insurance Corporation v. 633 Partners, Ltd., No. 07-14922 (11th Cir. 11/25/2008), 07-14922.

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtPer Curiam
Docket NumberNo. 07-14922.,07-14922.
Decision Date25 November 2008

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No. 07-14922.
United States Court of Appeals, Eleventh Circuit.
November 25, 2008.

Appeal from the United States District Court for the Southern District of Florida; D. C. Docket No. 06-20618-CV-UU.

Before BIRCH and MARCUS, Circuit Judges, and FORRESTER,* District Judge.

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633 Partners, Ltd. ("633"), Baye Contracting, Inc. ("Baye"), and Fatima Smith (collectively "Appellants") appeal the district court's decision granting summary judgment for First Specialty Insurance Corporation ("First Specialty") in a diversity declaratory judgment action regarding the scope of First Specialty's duties as 633 and Baye's insurer. Appellants contend that the district court erred by concluding that First Specialty had no duty to defend 633 and Baye in an underlying tort action and by finding that the applicable insurance binder contained an assault and battery exclusion that covered the claims of that underlying action. Additionally, Appellants assert that the district court abused its discretion by not allowing them an opportunity to respond to new arguments and facts presented in First Specialty's summary judgment reply brief. For the reasons that follow, we REVERSE the district court's order and REMAND for proceedings consistent with this opinion.


A. First Specialty's Insurance Coverage

On 20 December 2001, 633 and Baye met with Thomas Kallman, a retail insurance broker, to obtain insurance coverage for a building owned and operated by them. In the course of this meeting, Kallman presented them with an insurance

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proposal which they subsequently signed. This proposal indicated that it would be subject to policy terms and conditions and referenced an assault and battery exclusion. Later that day, 633 and Baye received a letter from Kallman's insurance agency purporting to be a binder for the policy (hereinafter referred to as the "20 December binder").1 The binder stated that coverage would be effective beginning 31 December 2001 and gave the limits on the amount of coverage; however, it did not mention any exclusions, including for assault and battery, or any particular conditions of coverage.

On 27 December 2001, Bass Underwriters, an authorized agent of First Specialty, faxed a binder dated 26 December 2001 to Kallman (hereinafter referred to as "26 December binder"). Unlike the earlier binder, this document included a checklist of exclusions, all of which were checked, including the one for "Assault & Bat." R2-56 at 22. Though this binder did not elaborate about the scope of the assault and battery exclusion, it stated that the policy was "subject to the usual terms and conditions in addition to" the listed exclusions. Id. The binder also mentioned that coverage would commence on 31 December 2001 and that the binder would be effective until 1 March 2002 or the date a policy was issued, whichever came first.

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On 16 January 2002, First Specialty issued the insurance policy ("the Policy"), which still had an effective date of 31 December 2001. The Policy included an assault and battery exclusion, which stated:

In consideration of the premium charged, it is hereby understood and agreed that this insurance does not apply to claims or "suits" for "bodily injury", [sic] "personal injury" or death caused by or arising directly or indirectly out of or from an assault or assault and battery of any nature whatsoever, whether or not committed by or at the direction of the Insured, his employees, patrons or any causes whatsoever.

R1-1, Exh. A. The Policy defined "bodily injury" as "bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time." Id. The term "personal injury" was not defined in the Policy, but the phrase "personal and advertising injury" specifically covered injuries resulting from a variety of offenses, including "false arrest, detention or imprisonment." Id.

B. The Underlying Action

The underlying tort claim, for which 633 and Baye sought both defense and indemnification, derived from a series of events that took place on 31 December 2001 at a building owned and operated by 633 and Baye. The basic facts of these occurrences appear to be undisputed.2 On that date, Fatima Smith was approached by Maximo Almonte, who was then on duty as a security guard for 633 and Baye.

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Almonte detained Smith in a building hallway, forced her to enter an empty, locked stairwell, dragged her down a flight of stairs, and then tried to rape and sexually assault her three separate times. These events took place over a thirty-five to forty-minute time span.

Smith subsequently sued Almonte, 633, and Baye for a number of torts.3 Her claims against 633 and Baye included: negligence4; false imprisonment and assault based on respondeat superior; negligent hiring, retention and supervision resulting in false imprisonment and rape; negligent misrepresentation resulting in false imprisonment and rape; and derivative liability for Almonte's actions. She also brought claims against Almonte for assault and battery, false imprisonment, and negligent rendition of security services.

To date, Smith has proceeded to trial only against Almonte. She voluntarily dismissed the assault and battery claim pre-trial; thus the jury addressed solely the negligent rendition and false imprisonment claims. The jury found that Almonte had falsely imprisoned Smith while acting in the scope of his employment and was

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therefore liable for $5 million in damages.5 Smith's trial against 633 and Baye also began but the court declared a mistrial due to concerns about a potential conflict of interest between 633/Baye and First Specialty, which was defending the two companies under a reservation of rights.6 Those proceedings have been stayed pending the resolution of this action, and First Specialty continues to defend under a reservation of rights.

C. Procedural History

First Specialty filed suit in March 2006 in the United States District Court for the Southern District of Florida seeking a declaratory judgment that it had no duty to defend or indemnify 633 and Baye with respect to Smith's tort suit against those two companies. In its complaint, First Specialty alleged that the assault and battery exclusion in the Policy covered Smith's claims, and therefore that it should have no duty to indemnify or defend either of those two companies. First Specialty subsequently moved for summary judgment, which the district court granted in part and denied in part.

In analyzing First Specialty's summary judgment motion, the district court

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focused on whether Smith's claims would be covered by the language in the assault and battery exclusion. The court initially looked at whether there would be a duty to defend based solely on the allegations in the complaint, as required under Florida case law. According to the court, there was language in Smith's complaint that seemed to indicate that the false imprisonment and the assault and battery involved distinct acts.7 Based on this language, the court concluded that First Specialty had a duty to defend on the false imprisonment claim and its related negligence claims but not on those negligence claims related to the assault and battery, since the latter group clearly "arose out of" the assault and battery.

After concluding that there was a duty to defend, the court then looked at whether there was a duty to indemnify, since it interpreted Florida case law to say that the absence of the latter would preclude the existence of the former. Because Florida law required that the duty to indemnify be determined based on the actual facts of the case, the court looked to Smith's testimony and read it to say that the false imprisonment was inherently intertwined with the assault and battery. Accordingly, the court found that First Specialty had no duty to indemnify on any of Smith's claims, since they all were covered by the assault and battery exclusion.

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As a result, all of Smith's claims would be precluded from coverage. After reaching this conclusion, the court noted that there were disputed issues of fact regarding whether the policy in effect at the time of Smith's incident included the assault and battery exclusion. The court therefore denied without prejudice First Specialty's summary judgment motion on that issue and granted Appellants leave to conduct further discovery solely on that topic.

In the midst of the initial summary judgment briefing, Appellants filed a motion to strike, contending that First Specialty's references to Smith's testimony constituted raising of new factual issues in a reply brief, since First Specialty had not referenced the testimony previously. They requested that the court either strike this new material or deny the summary judgment motion and allow them a chance to respond to this new evidence. The court rejected their claim, determining that First Specialty had not raised a new issue but rather was citing the testimony as evidence to rebut Appellants' assertion that the false imprisonment and assault and battery were independent.

After discovery, First Specialty again moved for summary judgment, which the court granted. The court initially found that there was no genuine issue of material fact regarding whether the 26 December binder was in force at the time of the incident since there was no evidence that Kallman had actual or apparent

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authority to issue the 20 December binder on behalf of First Specialty. That binder thus was not enforceable against First Specialty. Additionally, the court found that the assault and battery exclusion in the Policy applied to Smith's incident based on provisions in the 26 December binder. As a result, the court determined that all of Smith's claims fell under...

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