Hartford Acc. and Indem. Co. v. Beaver

• Decision Date: 16 October 2006
• Docket Number: No. 05-13240.,05-13240.
• Citation: 466 F.3d 1289
• Parties: HARTFORD ACCIDENT AND INDEMNITY COMPANY, Hartford Casualty Insurance Co., Twin City Fire Insurance Co., Plaintiffs-Counter-Defendants-Appellees, v. Donald C. BEAVER, Defendant-Cross-Defendant-Counter-Claimant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

466 F.3d 1289

HARTFORD ACCIDENT AND INDEMNITY COMPANY, Hartford Casualty Insurance Co., Twin City Fire Insurance Co., Plaintiffs-Counter-Defendants-Appellees, v. Donald C. BEAVER, Defendant-Cross-Defendant-Counter-Claimant-Appellant.

No. 05-13240.

United States Court of Appeals, Eleventh Circuit.

October 16, 2006.

Caryl E. Delano, Addison & Delano, P.A., Tampa, FL, for Beaver.

Richard R. Garland, Dickinson & Gibbons, P.A., Sarasota, FL, Charles P.

Schropp, Schropp, Buell & Elligett, PA, Robert Loring Rocke, Rocke, McLean & Sbar, P.A., Bennie Lazzara Jr., Wilkes & McHugh, P.A., Tampa, FL, Helen Ann Hauser, Dittmar & Hauser, P.A., Coconut Grove, FL, David C. Knapp, Cabaniss, Smith, Toole & Wiggins, PL, Orlando, FL, for Appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before MARCUS, WILSON and COX, Circuit Judges.

MARCUS, Circuit Judge:

This appeal asks whether Florida law requires insurers, Hartford Accident and Indemnity Company, Hartford Casualty Insurance Company, and Twin City Fire Insurance Company (collectively, "Hartford"), to defend their insured, Donald C. Beaver, against a class action suit in which the class has not yet been certified by the state court and the only potentially covered claims are by putative class members. The district court granted summary judgment to Hartford, ruling that the duty to defend under Florida law would not arise pursuant to a general liability policy unless and until a class has been certified. After thorough review of Florida law, we disagree and accordingly reverse and remand for further proceedings consistent with this opinion.

I.

The relevant facts are these: the appellant, Donald Beaver, was the sole shareholder, owner, director and officer of Brian Center Corporation and Brian Center Management Corporation during the relevant period.¹ The appellees, Hartford, issued a general liability policy to the Defendants with effective coverage dates from November 27, 1987 to November 27, 1992. The terms of the Hartford policy insure the Defendants against damages from bodily injury that occur during the policy period. The policy also provides that Hartford has both the right and the duty to defend any suit seeking covered damages.²

In 1998, two plaintiffs, Hazel Garrison and the Estate of Cary B. Ayres, filed a putative class action suit (the "Underlying Action") in the Circuit Court of the Thirteenth Judicial Circuit in Hillsborough County, Florida, against the Defendants. The Defendants operated numerous nursing home facilities across the South. The complaint alleged that Ayres resided at one of the nursing homes in Tampa, Florida from June 12, 1986, until his death on December 2, 1995, and that Garrison resided in the same nursing home from October 16, 1993, to November 15, 1997. The operative complaint in the Underlying Action (the "Underlying Complaint") broadly charged that: (1) Beaver and Brian Center Defendants breached fiduciary duties owed to the nursing home residents by failing to provide necessary care, services, and supplies required for their health and well-being; (2) LCA Defendants, after merging with Brian Center Defendants in March 1995, also breached their fiduciary duties to the residents; and (3) Beaver as officer and director of the nursing home corporations, assumed duties to provide residents with adequate care and services, and negligently breached those duties in causing Garrison bodily injury.

Hartford accordingly assumed the defense of the Underlying Action but reserved its right to contest coverage. Hartford then commenced this action on July 2, 1999, in the United States District Court for the Middle District of Florida, seeking a declaratory judgment that there was no coverage or duty to defend the Underlying Action. After some delays caused by bankruptcy proceedings, on January 20, 2004, Hartford moved for summary judgment. Then, on August 3, 2004, Hartford informed the district court that Ayres had settled and was withdrawing as a plaintiff in the Underlying Action. The case proceeded with Garrison as the sole named plaintiff.

The district court granted Hartford's motion for summary judgment, ruling that the Underlying Complaint did not trigger a duty to defend because the facts in the complaint, "on their face, fail to bring Ms. Garrison's claims within coverage of [Hartford's] policy." Hartford later moved for clarification, asking whether the district court meant that Hartford did not have a duty to defend the Underlying Action based on claims by putative class members rather than by Ms. Garrison. On June 2, 2005, the district court granted Hartford's motion for clarification, concluding that Hartford did not have a duty to defend the Underlying Action. The district court noted the absence of controlling Florida precedent, but held

that Hartford does not have a duty to defend against the class action allegations contained in the state court complaint until such time as that class is certified pursuant to Florida Rule of Civil Procedure 1.220.

The plain language of Rule 1.220 strongly suggests that a class must be certified before a claim may be maintained on its behalf. Without class certification, there is no class action claim to defend against. The Court is also persuaded by the reasoning of the federal cases holding that the claims of potential class members cannot be aggregated to satisfy the amount in controversy requirement. For example, the Ninth Circuit in Gibson v. Chrysler Corp., 261 F.3d 927, 940 (9th Cir.2001), noted that "a class action, when filed, includes only the claims of the named plaintiff or plaintiffs. The claims of unnamed class members are added to the action later, when the action is certified as a class under Rule 23."

Beaver, alone among the Defendants, filed this appeal from the district court's ruling.

II.

We are Erie-bound by Florida law in deciding this diversity case. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The case presents an open question of Florida law, but despite the absence of state law deciding the exact issue before us, Florida law yields the conclusion that a duty to defend exists here.

Our starting point is the Florida Supreme Court's decision in Jones v. Florida Ins. Guar. Ass'n, 908 So.2d 435 (Fla.2005), which succinctly outlined the general parameters of an insurer's duty to defend:

It is well settled that an insurer's duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage. The duty to defend must be determined from the allegations in the complaint.

The duty to defend is of greater breadth than the insurer's duty to indemnify, and the insurer must defend even if the allegations in the complaint are factually incorrect or meritless. Indeed, when the actual facts are inconsistent with the allegations in the complaint, the allegations in the complaint control in determining the insurer's duty to defend. Any doubts regarding the duty to defend must be resolved in favor of the insured.

Id. at 442-43 (internal citations and quotation marks omitted).

These basic principles have been long-established in Florida. See, e.g., State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072, 1077 n. 3 (Fla.1998) (acknowledging that "the duty to defend is controlled by the allegations in the complaint against the insured"); Nat'l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So.2d 533, 535 (Fla.1977) (same); Biltmore Constr. Co. v. Owners Ins. Co., 842 So.2d 947, 949 (Fla. 2d DCA 2003) (same); Sunshine Birds & Supplies, Inc. v. United States Fid. & Guar. Co., 696 So.2d 907, 910 (Fla. 3d DCA 1997) ("The allegations of the complaint govern the duty to defend even if they may be factually incorrect or without merit, or where ... there has been a suggestion made that the purported negligent allegations are really allegations of intentional acts in disguise .... [W]here a complaint alleges facts that are partially within and partially outside the coverage of an insured's policy, the insurer is not only obligated to defend, but must defend that entire suit." (citations omitted)); Irvine v. Prudential Prop. & Cas. Ins. Co., 630 So.2d 579, 579-80 (Fla. 3d DCA 1993) ("The duty is determined solely by the allegations against the insured, not by the actual facts, nor the insured's version of the facts."); Grissom v. Commercial Union Ins. Co., 610 So.2d 1299, 1307 (Fla. 1st DCA 1992) ("All doubts as to whether a duty to defend exists in a particular case must be resolved against the insurer and in favor of the insured. So long as the complaint alleges facts that create potential coverage under the policy, the insurer must defend the suit."); Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 813 (Fla. 1st DCA 1985) ("[T]he duty to defend continues even though it is ultimately determined that the alleged cause of action is groundless and no liability is found within the policy provisions defining coverage. If the allegations of the complaint leave any doubt regarding the duty to defend, the question must be resolved in favor of the insured requiring the insurer to defend.").

Thus, the central inquiry in a duty to defend case is whether the complaint "alleges facts that fairly and potentially bring the suit within policy coverage." Jones, 908 So.2d at 443. Since the parties agree that Hartford faces potential liability only if a class is certified, we are obliged to ask whether the Underlying Complaint alleges facts that fairly and potentially support class certification.

Florida Rule of Civil Procedure 1.220 sets forth state law enumerating the prerequisites for class certification:

Before any claim or defense may be maintained on behalf of a class by one party or more suing or being sued as the representative of all the members of a class, the court shall first conclude that (1) the members of...