Interstate Fire & Cas. Co. v. Abernathy ex rel. Abernathy

• Decision Date: 24 May 2012
• Docket Number: CASE NO. 1D11-1905
• Court: Florida District Court of Appeals
• Parties: INTERSTATE FIRE & CASUALTY COMPANY, Appellant, v. TATIANA ABERNATHY, as natural guardian and mother of DAKOTA ABERNATHY, her minor child, and TATIANA ABERNATHY, Individually, CHOCTAW TOUCHDOWN CLUB, INC., EMERALD COAST ENTERTAINMENT, LLC, and FUNTASTIC FACTORY, INC., Appellees.

INTERSTATE FIRE & CASUALTY COMPANY, Appellant,

v.TATIANA ABERNATHY, as natural guardian and mother of

DAKOTA ABERNATHY, her minor child, and TATIANA

ABERNATHY, Individually, CHOCTAW TOUCHDOWN

CLUB, INC., EMERALD COAST ENTERTAINMENT,

LLC, and FUNTASTIC FACTORY, INC., Appellees.

CASE NO. 1D11-1905

DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA

Opinion filed May 24, 2012

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

An appeal from the Circuit Court for Okaloosa County.

Thomas T. Remington, Judge.

Larry A. Matthews and Raymond F. Higgins of Bozeman, Jenkins & Matthews, P.A., Pensacola, Katherine E. Giddings and Kristen M. Fiore of Akerman Senterfitt, Tallahassee, and Robert R. Baugh and Jaime C. Erdberg of Sirote & Permutt, P.C., Birmingham, AL, pro hac vice, for Appellant.

Dixie D. Powell of Powell, Powell & Powell, Crestview and Arden J. Lea, Homer, LA, for Appellee Tatiana Abernathy.

BENTON, C. J.

Interstate Fire & Casualty Company (Interstate) appeals (antecedent summary judgments and) the final judgment against it awarding Tatiana Abernathy $6,250,430.¹ The trial court ruled that a certificate of insurance a broker issued on April 18, 2007, conferred coverage on a purported additional insured for liability for an injury alleged to have occurred four days earlier, on April 14, 2007. We reverse and remand for entry of summary judgment in favor of Interstate, and against Ms. Abernathy, on all claims predicated on the putative liability of the Choctaw Touchdown Club (Club).

"[L]osses which exist at the time of the insuring agreement, or which are so probable or imminent that there is insufficient 'risk' being transferred between the insured and insurer, are not proper subjects of insurance." 7 Lee R. Russ in consultation with Thomas F. Segalla, Couch on Insurance § 102:8 (3d ed. 2011). "Public policy considerations and the general nature of insurance prevent an insurance policy from providing coverage for a policyholder's losses unless those losses are fortuitous." M. Elizabeth Medaglia & 3 Marc A. Peritz, Law & Practice of Insurance Coverage Litigation § 35:3 (2011).

One of the fundamental assumptions deeply embedded in insurance law is the principle that an insurer will not pay for a loss unless the loss is "fortuitous,"meaning that the loss must be accidental in some sense. The public policy underlying the fortuity requirement is so strong that if the insurance policy itself does not expressly require that the loss be accidental courts will imply such a requirement. The fortuity principle is often expressed with reference to certainty: losses that are certain to occur, or which have already occurred, are not fortuitous. In some jurisdictions, the fortuity doctrine is codified.⁷⁸

⁷⁸See, e.g.:

CA—Cal. Ins. Code § 22 ("Insurance is a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event");

NY—N.Y. Ins. Law § 1101[a] ("'Insurance Contract' means any agreement or transaction whereby one party, the insurer, is obligated to confer a benefit of pecuniary value upon another party, the insured or beneficiary, depending upon the happening of a fortuitous event").

1 Robert H. Jerry, II, New Appleman on Insurance Law Library Edition § 1.05(2)(a) (2009) (footnote omitted).² See also Nat'l Union Fire Ins. Co. ofPittsburgh, PA. v. Stroh Cos., Inc., 265 F.3d 97, 107 (2d Cir. 2001) (holding "fortuity and known loss principles are integral to the nature of insurance and thus apply as a matter of public policy, irrespective of specific [insurance] policy terms"); Intermetal Mexicana, S.A. v. Ins. Co. of N. Am., 866 F.2d 71, 77 (3d Cir. 1989) ("It is generally recognized that it is against public policy to allow insurance coverage on a certainty.").

On April 14, 2007, the Club conducted a fundraiser it called the Jellyfish Festival. Emerald Coast Entertainment, LLC (Emerald Coast) supplied recreational gear for the festival, including an "inflatable bungee run," manufactured by Funtastic Factory, Inc. (Funtastic), on which Dakota Abernathy (14 years old at the time) was allegedly seriously injured. The Club did not have liability insurance coverage at the time of the accident, and had made no application, request or agreement concerning such coverage.

Emerald Coast was, however, insured under a policy issued by Interstate,³ which included an endorsement entitled "ADDITIONAL INSURED-OWNERS, LESSEES OR CONTRACTORS-SCHEDULED PERSON OR ORGANIZATION." The endorsement provided that "Who is An Insured" under the policy was "amended to include as an insured the person or organization shownin the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured." No person or organization was named or scheduled. But the Schedule, under the heading "Name of Person or Organization," contained this language: "AS REQUIRED BY WRITTEN CONTRACT." At the time of the accident, Emerald Coast had no written contract with the Club, nor did the Club have any agreement concerning liability insurance, written or oral, either with Emerald Coast or Interstate.

On Monday, April 16, 2007, two days after the accident, a representative of the Club contacted Jack Jernigan, owner of Emerald Coast, and requested a certificate of insurance naming the Club as an additional insured under Emerald Coast's policy. Mr. Jernigan forwarded the request to Dick Wardlow Insurance Brokers (Wardlow), the insurance broker that had procured the Interstate liability policy for Emerald Coast. Wardlow prepared and faxed to the Club a form certificate of insurance on April 18, 2007, which stated that the certificate "CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER"⁴ but also statedthat the Club "is named as additional insured" for "[o]perations at Jelly Fish Festival on 4/13/07 to 4/14/07."

On August 20, 2009, Ms. Abernathy filed suit against Emerald Coast, the Club, and Funtastic, stating negligence and products liability claims. Interstate undertook defense of Emerald Coast, but notified the Club that it would not defend Ms. Abernathy's claims against the Club. On November 30, 2009, Ms. Abernathy and the Club entered into a settlement agreement under which the Club consentedto entry of judgment for $6.25 million. As part of the same agreement,⁵ the Club assigned to Ms. Abernathy all of its rights under the Interstate policy, and Ms. Abernathy agreed not to execute the judgment against the Club. The trial court entered judgment on the same date, which recited and adjudged: "[T]he Court being fully advised and having reviewed the Joint Stipulation and Agreement between the parties and having approved the same," the "[p]laintiffs . . . shall recover from Defendant, CHOCTAW TOUCHDOWN CLUB, INC., . . . the sum of $6,250,000.00 with costs in the sum of $430."

Ms. Abernathy then filed an amended complaint on December 18, 2009, adding Interstate as an additional defendant and alleging breach of contract, statutory bad faith,⁶ and common law bad faith based on Interstate's "wrongful decision to deny both a defense and coverage to defendant Choctaw Touchdown Club, Inc., although this Defendant was clearly entitled under the terms and conditions of the subject policy to both." The amended complaint alleged that Ms. Abernathy was entitled to receive from Interstate the full amount of the judgment rendered against the Club. The certificate of insurance issued four days after the event was the sole basis upon which coverage for the Club was alleged.⁷

Ms. Abernathy and Interstate then filed a series of motions for summary judgment. Ms. Abernathy asserted there were no genuine issues of material fact and that coverage existed for the Club under the Interstate policy, that Interstate wrongfully refused to defend the Club, and that the settlement between Ms. Abernathy and the Club was reasonable and made in good faith. Interstate opposed these motions and filed its own motion for summary judgment, arguing that the certificate of insurance (COI) clearly stated it was "issued as a matter of information only" and did not "amend, extend or alter the coverage afforded" by the policy; that the COI issued after the alleged injury; that there was no privity of contract between Interstate and the Club at the time the injury occurred, and that the Club could not acquire insurance to cover an injury that had already occurred. Interstate also contended that Ms. Abernathy had not presented any evidence that the amount of damages set out in the settlement agreement was objectively reasonable and agreed to in good faith.

On April 29, 2010, the trial court denied Ms. Abernathy's motion for summary judgment as to coverage under the policy, but granted summary judgment in favor of Ms. Abernathy on the issue of the reasonableness of the Coblentz settlement agreement. On July 7, 2010, the trial court denied Ms. Abernathy's renewed motion for summary judgment regarding coverage. But onAugust 24, 2010, the trial court granted summary judgment in favor of Ms. Abernathy, ruling the Interstate policy covered the Club, on grounds that Wardlow, as an insurance broker, had authority to issue the COI, that the COI was part of the policy, based on the definition of "policy" in section 627.402, Florida Statutes (2006), and that there was no reason why an injured party could not acquire insurance coverage after the fact of the injury:

4. §627.402, Fla. Stat., defines "policy" as "a written contract of insurance or written agreement for or effecting insurance, or the certificate thereof, by whatever name called, and includes all clauses, riders, endorsements, and papers which are a part thereof."

5. The undisputed testimony of Barbara Robedee provides that Dick Wardlow Insurance Brokers had the authority to issue the certificate of insurance at issue. The only dispute is the effect of the certificate. As stated above, by statute they are considered a part of the

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