Morales v. Zenith Ins. Co.

• Decision Date: 15 April 2013
• Docket Number: No. 12–11755.,12–11755.
• Citation: 714 F.3d 1220
• Parties: Leticia MORALES, Individually and as Personal Representative of the Estate of Santana Morales, Jr., deceased, as parent and natural guardian of SM and RM, minors, as legal guardian for Santana Morales, III and Marciela Morales, individually, Plaintiff–Appellant, v. ZENITH INSURANCE COMPANY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

714 F.3d 1220

Leticia MORALES, Individually and as Personal Representative of the Estate of Santana Morales, Jr., deceased, as parent and natural guardian of SM and RM, minors, as legal guardian for Santana Morales, III and Marciela Morales, individually, Plaintiff–Appellant,

v.ZENITH INSURANCE COMPANY, Defendant–Appellee.

No. 12–11755.

United States Court of Appeals, Eleventh Circuit.

April 15, 2013.

Tracy Raffles Gunn, Gunn App. Practice, PA, Lee Delton Gunn, IV, Gunn Law Firm, PA, Tampa, FL, for Plaintiff–Appellant.

Richard Scott Maselli, Timon V. Sullivan, Ogden & Sullivan, PA, Tampa, FL, Julissa Rodriguez, Greenberg Traurig, PA, Miami, FL, I. William Spivey, II, Greenberg Traurig, LLP, Orlando, FL, for Defendant–Appellee.

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

Before CARNES, HULL and FAY, Circuit Judges.

HULL, Circuit Judge:

In this diversity case, Plaintiff–Appellant Leticia Morales, on behalf of herself, the Estate of Santana Morales, Jr., and two minor children under her guardianship, along with Marciela Morales (collectively, “the Estate”), challenges the district court's grant of summary judgment to Defendant–Appellee Zenith Insurance Company (“Zenith”) on the Estate's breach of the insurance contract claim. After review and oral argument, we certify questions to the Florida Supreme Court.

I. BACKGROUND

A. Employer Lawns's Insurance Policy with Zenith

On December 4, 1997, Santana Morales, Jr., was working as a landscaper for Lawns Nursery and Irrigation Designs, Inc. (“Lawns”). That day Morales was crushed to death by a palm tree as it was being unloaded from a flatbed trailer.

At the time of Morales's death, his employer Lawns maintained an insurance policy with Zenith, entitled “Workers Compensation and Employers Liability Insurance Policy.” The policy contained two types of coverage.

Part I provided “Workers Compensation Insurance.” Under Part I, Zenith was obligated to: (1) pay “the benefits required of [Lawns] by the workers compensation law” in Florida; and (2) defend Lawns in “any claim, proceeding or suit against [Lawns] for benefits payable by this insurance.” Part I contained no explicit policy limits, but stated that Lawns—and not Zenith—would be responsible for “any payments in excess of the benefits regularly provided by the workers compensation law,” including, for example, “those required because ... of [Lawns's] serious and willful misconduct.”

Part II provided “Employers Liability Insurance.”¹ Under Part II, Zenith was obligated to: (1) “pay all sums [Lawns] legally must pay as damages because of bodily injury to [its] employees, provided the bodily injury is covered by this Employers Liability Insurance”; and (2) defend lawsuits for such damages. Thus, Part II expressly limited its coverage to bodily injury sustained by employees only.

Part II contained policy limits of $100,000 for bodily injury sustained by one or more employees in any one accident, $100,000 for bodily injury caused by disease to any one employee, and $500,000 for all damages covered by the policy, regardless of the number of employees involved.

Part II, however, contained several exclusions, including one barring employer liability insurance coverage for “any obligation imposed by a workers compensation ... law.” That exclusion (the “workers' compensation exclusion”) in full states: “This insurance does not cover: .... any obligation imposed by a workers compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law....”

Because Morales's death occurred during the course and scope of his employment, his employer Lawns was required to pay workers' compensation benefits to Morales's family. SeeFla. Stat. § 440.09(1). Accordingly, under Part I of the policy, Zenith was obligated to pay workers' compensation benefits on Lawns's behalf. After Morales's death, Zenith began paying workers' compensation benefits equal to 66 2/3% of Morales's gross salary to Morales's family in biweekly installments of $513.36. Zenith also contributed $5,000 to Morales's funeral expenses.²

B. The Estate's Tort Lawsuit against Lawns in State Court

On December 3, 1999, the Estate filed a wrongful death action against Lawns in Florida circuit court, alleging that Lawns's negligence caused Morales's death.³ Specifically, the Estate alleged that Lawns's “use of the flatbed trailer without retaining stakes, sides or any manner to prevent the trees from falling off the trailer and killing those persons who were unloading it was negligent.” The Estate did not allege that Lawns had engaged in any intentional tortious conduct or gross negligence.

Zenith agreed to defend Lawns in the action under Part II of the policy pursuant to a reservation of rights, and Zenith retained J. Gregory Giannuzzi to represent Lawns in the lawsuit. As counsel for Lawns, Giannuzzi filed Lawns's answer to the Estate's complaint and asserted affirmative defenses. One of Lawns's affirmative defenses was that the Estate's claim was barred because of the Estate's receipt of workers' compensation benefits. Giannuzzi filed Lawns's motion to dismiss on the same ground.⁴

Representing Lawns in the suit proved difficult. Lawns never responded to Giannuzzi's letters and phone calls, and Giannuzzi's firm was never able to locate Lawns's lone corporate officer. Giannuzzi eventually filed a motion to withdraw as counsel because of Lawns's lack of cooperation, which the state court granted. The state lawsuit proceeded with Lawns unrepresented. The Estate subsequently filed a motion for sanctions due to Lawns's failure to respond to discovery requests and comply with court orders. The state court granted the motion, striking Lawns's pleadings as a sanction and entering a default judgment in the Estate's favor on the issue of Lawns's liability to the Estate.

The case proceeded to a one-day jury trial as to damages. Lawns did not appearat trial. On March 14, 2005, the jury awarded the Estate $9.525 million in damages against Lawns.

C. The Workers' Compensation Settlement

While the Estate's wrongful death lawsuit was still ongoing, Zenith continued to pay workers' compensation benefits to the Estate on Lawns's behalf until August 2003, when Zenith made a final lump sum payment of $20,000 in full settlement of the Estate's workers' compensation claim against Lawns. The parties entered a settlement agreement at the same time.⁵ The settlement agreement included a section entitled “Election and Waiver,” under which the Estate agreed that

in exchange for the consideration described below, the [Estate] hereby waives all rights to any and all benefits under The Florida Workers' Compensation Act. Further, this settlement and agreement shall constitute an election of remedies by the [Estate] with respect to the employer and the carrier as to the coverage provided to the employer.

A judge of compensation claims approved the settlement agreement. ⁶ In all, the Estate received over $100,000 in workers' compensation benefits from Zenith, pursuant to the Florida Workers' Compensation Act and Part I of the policy.

D. The Estate's Lawsuit in Federal Court

The Estate filed an action in Florida circuit court against Zenith asserting that Zenith had breached its insurance policy with Lawns when it did not pay the Estate the $9.525 million tort judgment entered against Lawns. Zenith removed the case to a federal court in the Middle District of Florida.⁷

Zenith and the Estate filed cross motions for summary judgment. Zenith argued it was entitled to summary judgment because: (1) the Estate had elected workers' compensation benefits as its exclusive remedy in the settlement of the workers' compensation claim and had received all workers' compensation benefits owed under Part I of the policy; (2) the Estate's claim was excluded by the workers' compensation exclusion in Part II of the policy; and (3) the Estate lacked standing to bring a claim for breach of Part II of Lawns's policy. Alternatively, Zenith contended that even if it was liable, the Estate's damages were limited to the $100,000 policy cap for bodily injury sustained in an accident under Part II of the policy.

In response, the Estate argued that: (1) Zenith failed to preserve any defenses it might have had to the tort action—like workers' compensation immunity and election of remedies—by withdrawing its representation from Lawns in the underlying state suit; (2) the workers' compensation exclusion in Part II did not operate to bar its claim because the $9.525 million judgment was not “an obligation imposed” by Florida's Workers' Compensation Act; and (3) the Estate had standing to bring its breach of contract claim under Part II of the policy as a third party beneficiary. The Estate also contended that Zenith failed to preserve a defense to insurance coverage premised on Lawns's failure to cooperate in the defense of the tort lawsuit because Zenith did not comply with the mandatory notice requirements of Florida's claims administration statute in order to preserve that defense.

The district court granted summary judgment to Zenith and denied it to the Estate, ruling that the workers' compensation exclusion in Part II barred Zenith's coverage of the employee Estate's $9.525 million tort judgment against the employer Lawns. Observing that Florida law provides workers' compensation benefits as the exclusive remedy for an employee injury caused by an employer's negligence, the district court determined that the Estate's state court lawsuit alleging Lawns's negligence triggered an “obligation imposed by” Florida's Workers' Compensation Act, and thus the judgment issued in that lawsuit fell within the policy exclusion in Part II.⁸

In support the district court cited, inter alia,Indian Harbor Ins. Co. v. Williams, 998 So.2d 677 (Fla. 4th DCA 2009), and Florida Ins. Guaranty Ass'n, Inc. v. Revoredo, 698 So.2d 890 (Fla. 3d DCA 1997), as Florida decisions...