Rtg Furniture Corp. v. Industrial Risk Insurers, 07-80538-CIV.
| Decision Date | 09 October 2008 |
| Docket Number | No. 07-80538-CIV.,07-80538-CIV. |
| Citation | 616 F.Supp.2d 1258 |
| Parties | RTG FURNITURE CORPORATION, plaintiff, v. INDUSTRIAL RISK INSURERS, defendant. |
| Court | U.S. District Court — Southern District of Florida |
C. Thomas Brown, Glenn H. Silver, Silver & Brown PC, Fairfax, VA, Spencer Meridith Sax, Brett Adam Duker, Sachs Sax & Klein, Boca Raton, FL, for Plaintiff.
Elaine Johnson James, John David Dickenson, Edwards Angell Palmer & Dodge LLP, West Palm Beach, FL, David E. Bland, Robins Kaplan Miller & Ciresi, Minneapolis, MN, James V. Chin, James A. Kitces, Robert W. Fisher, Robins Kaplan Miller & Ciresi LLP, Atlanta, GA, for Defendant.
ORDER DENYING CROSS MOTIONS FOR PARTIAL SUMMARY JUDMENT [DE # 65, 69], VACATING BIFURCATION ORDER [DE # 88] & DENYING MOTION TO STRIKE [DE# 90]
This is an insurance coverage dispute arising out of business interruption losses allegedly suffered by plaintiff RTG Furniture Corporation in 2004 as a result of Hurricanes Charley, Frances, and Jeanne ("the Hurricanes"). The case is currently before the court on plaintiffs motion for partial summary judgment [DE# 65] and defendant's motion for partial summary judgment [DE# 69]. Upon consideration of the motions, responses, replies, pertinent portions of the record and oral argument of the parties, the court enters the following order.
Plaintiff RTG Furniture Corporation (RTG) owns and operates retail furniture stores and warehouses throughout the State of Florida. Defendant Industrial Risk Insurers (IRI) is an unincorporated association consisting of two members: (1) Employers Reinsurance Corporation and (2) Westport Insurance Corporation.
IRI is engaged in the business of selling insurance policies to businesses such as RTG, and in February/March 2004, IRI issued property insurance policy number 31-3-70168 to RTG covering the policy period spanning December 31, 2003 to March 1, 2005 ("the Policy"). The Policy is an "all risk" policy, i.e. a policy which covers all risks of loss unless the risk is expressly excluded from coverage. It does not specifically exclude "windstorms," and hence covers loss and damage resulting from the peril of windstorms, including hurricanes.
RTG paid $1,257,000.00 in premium for the Policy, the terms of which were negotiated between IRI and insurance brokers Tomas Tio of Property Risk Services (Tio) and Ken Jacobs of Acordia Southeast Inc. (Jacobs), purportedly acting on behalf of RTG. There is a dispute between the parties as to whether Tio and Jacobs acted as RTG's actual or apparent agents, in these negotiations.
According to IRI, when RTG's primary layer property insurance policy with Lexington Insurance Company was due to expire in December, 2003, Stuart Suls, on behalf of RTG, contacted Acordia Southeast Inc.(Ken Jacobs), to explore new insurance options for RTG. Acordia, in turn, retained Property Risk Services LC (Tomas Tio), a wholesale broker, to assist in placing the new coverages.
RTG did thereafter issue a formal "Broker of Record" letter in October, 2003 stating:
Acordia Southeast, Inc. and Property Risk Services, LC are authorized to negotiate directly with any interested company with respect to modifications in existing insurance policies and in closing, changing, increasing or canceling insurance carried under temporary binders or cover notes.
However, RTG now disputes that it retained Jacobs or Tio to act as its agent in negotiating the language of the new IRI policy. It states that RTG retained Acordia only to act as its broker for purposes of obtaining quotes for insurance coverage. It claims that Tio was then retained by Acordia—not RTG—as a wholesale broker to assist Acordia in researching the coverages. While RTG acknowledges that it had a Brokerage Services Agreement with Acordia (Jacobs), it denies having any contractual or agency relationship with Property Risk Services (Tio), and denies knowing anything about Tio's specific communications and negotiations with IRI until after the Hurricanes hit in the summer and fall of 2004.
Tio sought proposals for insurance from various underwriters, and, after receiving a proposal from IRI, began discussions with James Rumble, an underwriter at IRI. IRI claims that Tio then prepared a manuscript form with specifications which he submitted to IRI on behalf of RTG, while RTG disputes that Tio's insurance specifications were RTG's specifications, and disputes whether Tio even sent specifications to IRI with his manuscript form in the first place.
In his discussions with IRI and Lexington, Tio suggested and incorporated his own wording to the terms of prospective coverages. After analyzing and comparing insurance proposals then submitted by IRI and Lexington, Tio recommended to Acordia that IRI offered the better coverage option for RTG. By email dated December 17, 2003, Mary Ashley of. Acordia then transmitted the IRI Proposal tc RTG in care of Stuart Suls. By email dated December 24, 2003, Suls, in turn, instructed Ken Jacobs at Acordia to bind coverage for RTG with IRI.
At that juncture, IRI issued a Binder of Insurance for RTG (effective 12-31-03 through 2-29-04) which it forwarded to Tio for delivery to RTG. The Binder extended coverage subject to various deductibles, specifically including the following Named Storm Occurrence Deductible:
A. "Basic Deductible(s): $50,000 Property Damage and Time Element combined, except $100,000 Property Damage and Time Element Combined for Warehouses ... except where noted below: ...
B. Named Storm Occurrence: The amount to be deducted for each named Storm Occurrence shall be the sum of 5% of the one hundred (100%) combined PD Value and TE Value at all locations in Lee, Henry ... Counties Florida and 3% in All other Designated Wind Areas "where physical loss or damage occurs."
The Binder is remarkable, in that—unlike the Policy which ultimately issued—it specifically restricts application of the NSO Deductible to those locations "where physical loss or damage occurs," and it contains a definition for "Property Damage Value" and "Time Element Value:"
For the purpose of the deductible provisions: (a) PD Value shall be the sum of the value of all covered property just immediately preceding the physical loss or damage.... (b) TE Value shall be the sum of all Time Element values that would have been earned for the Location(s) where the physical loss or damage occurs, loss occurs, had there not been physical loss or damage.
In February 2004, IRI issued the Policy to RTG for the policy period covering December 31, 2003 to March 1, 2005.
On August 13, 2004, Hurricane Charley tracked across Florida. On September 4, 2004, Hurricane Frances tracked across Florida. On September 25, 2004, Hurricane Jeanne tracked across Florida.
RTG made claim under the Policy for business interruption losses caused by the Hurricanes, specifically claiming loss due to interruption of power and utilities, acts of civil authority, hindrance of ingress and egress and damage to dependent properties precipitated by the Hurricanes—all losses which it maintained "ensued" from the Hurricanes and therefore fell outside the play of the Policy's $5,000,000.00 "Named Storm Occurrence Deductible" (NSO Deductible):1
5. DEDUCTIBLE CLAUSE—All losses, damages, or expenses arising out of any one occurrence shall be adjusted as one loss and from the amount of such adjusted loss shall be deducted the sum of $50,000 except as follows:
....
d. As respects loss or damage in (sic) resulting from the peril of a Named Storm Occurrence, this Company shall not be liable for loss to any location covered hereunder unless such loss exceeds (5%) of the combined property damage and time element value .... In the event of loss involving two or more locations for which a claim is submitted, the applicable percentage Deducible herein shall apply jointly to such locations. A minimum Deductible of $250,000 each occurrence and a maximum Deductible of $5,000,000 each occurrence shall apply. This Deducible shall not apply to ensuing loss or damage not otherwise excluded herein. [Emphasis supplied].
In addition to claiming coverage under the general "all risk" coverage extended by the Policy, RTG also claimed coverage under specific policy provisions for "time element coverage" and "consequential loss" set out at ¶ 19 and ¶ 47 of the Policy:
19. Extensions of Time Element Coverage: This Policy, subject to all its provisions and without increasing the amount of said policy, insures against loss resulting from damage to or destruction by the perils insured against, to:
a) property of any supplier (of any tier) due to any accidental occurrence of incoming or outgoing services including but not limited to electricity, water, steam, gas, telephone, fuel or refrigeration services of the Inured .....
d) the actual loss sustained for a period not to exceed sixty (60) consecutive days when, as a result of a peril insured against, access to real or personal property is prohibited by order of civil or military authority.
e) the actual loss sustained for a period not to exceed (60) consecutive days when, as a result of a peril insured against, ingress or egress from real or personal property is thereby prevented or hindered irrespective of whether the property of the insured shall have been damaged 47. CONSEQUENTIAL LOSS—This policy insures against consequential loss to the property insured caused by change of temperature or humidity or by interruption of any service including but not limited to power, heat, air conditioning, or refrigeration resulting from a peril insured against.
On June 18, 2007, RTG supplied IRI with proofs of loss and made claim for the following amounts:
• losses ensuing from Hurricane Charley $2,214,221
• losses ensuing from Hurricane Frances $6,923,148
• losses ensuing from Hurricane Jeanne $3,260,018
IRI refused to pay RTG's claims, contending that the losses did not exceed the Policy's Named...
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