Shaw v. Liberty Mut. Fire Ins. Co., Case No: 6:15-cv-686-Orl-TBS

• Decision Date: 12 February 2016
• Docket Number: Case No: 6:15-cv-686-Orl-TBS
• Parties: KENNETH E. SHAW and DAWN M. SHAW, Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Middle District of Florida

KENNETH E. SHAW and DAWN M. SHAW, Plaintiffs, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant.

Case No: 6:15-cv-686-Orl-TBS

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION

February 12, 2016

ORDER¹

This case comes before the Court on Defendant Liberty Mutual Fire Insurance Company's Motion for Summary Judgment on the Pollution Exclusion (Doc. 46). Plaintiffs Kenneth E. Shaw and Dawn M. Shaw have filed a response in opposition to the motion (Doc. 50), and Liberty Mutual has filed a reply (Doc. 51). For the reasons that follow, the motion is due to be granted.

I. Background

While on vacation, the Shaws spent the night in a rented room at the Boardwalk Inn and Suites (the "Hotel") located at 301 South Atlantic Avenue, Daytona Beach, Florida (Doc. 46-1, ¶¶ 19-29; Doc. 46-2, ¶¶ 19-29; Doc. 50 at 5). Their room was on the first floor directly above an enclosed parking garage (Doc. 50-2, at 1-2). During the night, the Shaws were poisoned by carbon monoxide gas (Doc. 50 at 2). An expert retained by their counsel believes the accident occurred because brick grates originally designed topermit airflow into the parking garage for ventilation purposes had been blocked (Doc. 50-2 at 2). The expert opines that because the grates were blocked, there was negligible, if any airflow in the garage underneath the Shaws' room (Id., at 3). This allowed carbon monoxide to concentrate and enter the room through openings where plumbing lines penetrate the ceiling of the garage (Id., at 2). An expert engaged by counsel for the owners of the Hotel believes two gas pool heaters improperly installed in the "poorly vented" parking garage were the source of the carbon monoxide gas (Doc. 51-2 at 2).

The Shaws filed separate but substantially identical state court lawsuits against the owners, operators, and managers of the Hotel (Docs. 46-1, 46-2). They alleged that as the result of those defendants' negligence, they were "exposed to an environmental contaminant on the hotel premises, determined by treating doctors to be carbon monoxide, an unsafe condition, causing Plaintiff to sustain severe and violent injuries." (Doc. 46-1, ¶ 22; Doc. 46-2, ¶ 22). Both complaints sought damages for breach of the duty to maintain the Hotel premises in a reasonably safe condition; failure to make reasonable inspections to determine whether any unsafe conditions existed; failure to warn the public of known unsafe conditions; and failure to take actions commonly taken by persons owning and operating hotels to detect carbon monoxide (Id.).

The state court complaints alleged that when the accident occurred, the Hotel was owned and/or operated by GS 2006-GG6 Boardwalk Inn, LLC, Prism Hotel Management Company, Inc., Prism Hotel Company, Prism Hotel Partners GP, Inc., Prism Hotel Partners, L.P., and Prism Hospitality LP (Id., ¶¶ 2-13). With the exception of Prism Hospitality LP, all of these entities were insured by Federal Insurance Company under a primary general commercial liability policy with applicable policy limits of $1,000,000(Doc. 50-4, ¶ 3). Federal undertook the defense of the state court lawsuits (Doc. 50-4, ¶ 6).

When the accident occurred, Prism Hotel Management Company, Inc., Prism Hotel Partners, L.P., and Prism Hotel Partners G.P., Inc. (collectively "Prism"), were insured by Liberty Mutual under a commercial liability umbrella policy ("Policy") with limits of $25,000,000 (Doc. 30, ¶ 5). Liberty Mutual denied coverage based upon the pollution exclusion in the Policy (Doc. 46 at 4).

The parties to the state court lawsuits, together with Federal, negotiated and settled on terms contained in a written agreement. The settlement agreement provides for a neutral arbitrator to determine the amount of the Shaws' damages (Doc. 50-4, ¶ 2). After considering the parties' presentations the arbitrator found that Dawn M. Shaw suffered damages in the amount of $6,798,323.62, and Kenneth E. Shaw suffered damages in the amount of $577,634.43 (Id., at 24). Federal paid its $1,000,000 policy limits to the Shaws in return for a full release of all claims (Id., ¶¶ 4-10). The state court defendants assigned all of their claims against Liberty Mutual to the Shaws in return for a covenant that, so long as they cooperate with the Shaws, the Shaws will not attempt to collect from them (Id., ¶ 5).

After settling their personal injury claims, the Shaws filed this declaratory judgment action in the state court, seeking to establish coverage under the Policy (Doc. 2). Liberty Mutual removed the case to this Court based upon diversity jurisdiction (Doc. 1). The Shaws' amended complaint prays for a declaration that their injuries are covered losses under the Policy, and Liberty Mutual should be required to pay the amounts still owed to them under the settlement agreement (Doc. 30 at 4). Pending before the Court is LibertyMutual's motion for a summary judgment that there is no coverage, and therefore, it has no liability, based upon the pollution exclusion in the Policy (Doc. 46 at 4).

II. Summary Judgment Standard

A party is entitled to summary judgment if it can show that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. FED. R. CIV. P. 56. An issue of fact is "genuine" if the evidence is such that a reasonable jury could find the fact in favor of the nonmoving party and "material" if the fact "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Ave. CLO Fund, Ltd. v. Bank of Am., N.A., 723 F.3d 1287, 1294 (11th Cir. 2013).

On a motion for summary judgment, the Court must view the evidence in the light most favorable to the nonmoving party, drawing all reasonable inferences in that party's favor. Ave. CLO Fund, 723 F.3d at 1294 (citing Blackston v. Shook & Fletcher Insulation Co., 764 F.2d 1480, 1482 (11th Cir. 1985)). The party moving for summary judgment bears the burden of showing that no genuine issue of material fact exists. Celotex Corp v. Catrett, 477 U.S. 317, 323 (1986); Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991); Watson v. Adecco Emp't Servs., Inc., 252 F.Supp.2d 1347, 1351-52 (M.D. Fla. 2003). The movant can meet this burden directly by negating an essential element of the nonmoving party's claim, or by showing that there is insufficient evidence in the materials on file for the nonmoving party to establish its burden of proof at trial. Clark, 929 F.2d at 608.

When the moving party demonstrates an absence of evidence on a dispositive issue for which the nonmoving party bears the burden of proof at trial, the nonmoving party must then "go beyond the pleadings and by [its] own affidavits, or by thedepositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Celotex Corp., 477 U.S. at 324-35 (internal quotations and citations omitted); Clark, 929 F.2d at 608.

"Essentially, the inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Sawyer v. S.W. Airlines Co., 243 F. Supp. 2d 1257, 1262 (D. Kan. 2003) (quoting Anderson, 477 U.S. at 251-52); see also LaRoche v. Denny's, Inc., 62 F. Supp. 2d 1366, 1371 (S.D. Fla. 1999) ("The law is clear ... that suspicion, perception, opinion, and belief cannot be used to defeat a motion for summary judgment."). The Court "must avoid weighing conflicting evidence or making credibility determinations," Stewart v. Booker T. Washington Ins., 232 F.3d 844, 848 (11th Cir. 2000), since it is the province of the jury and not the judge to assess the probative value of the evidence. Kennett-Murray Corp. v. Bone, 622 F.2d 887, 893 (5th Cir. 1980).

III. Choice of Law

Because the Court's jurisdiction is based on diversity of citizenship, it must examine the law of the forum state, including its choice of law rules, to determine what law applies to this controversy.² Pastor v. Union Ctr. Life Ins. Co., 184 F. Supp. 2d 1301, 1304 (S.D. Fla. 2002) aff'd 128 F. App'x. 100 (11th Cir. 2005). In cases involving contracts, Florida follows the rule of lex loci contractus which, "as applied to insurance contracts, provides that the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage." State Farm Mut. Auto. Ins. Co. v. Roach, 945 So. 2d 1160, 1163 (Fla. 2006);LaTorre v. Conn. Mut. Life Ins. Co., 38 F.3d 538, 540 (11th Cir. 1994) ("Florida law adheres to the traditional rule that the legal effects of terms of the insurance policy and rights and obligations of persons insured thereunder are to be determined by the law of the state where the policy was issued."). The Policy was executed in Texas, and Prism is a Texas business entity (Doc. 1, ¶¶ 7-10; Doc. 51 at 2). Therefore, unless an exception applies, the Court should apply Texas law.

Florida recognizes a public policy exception to the rule of lex loci contractus. In the case of an insurance contract, before the exception will apply, the following requirements must be met: (1) a Florida citizen is in need of protection; (2) the case is a matter of paramount Florida public policy; and (3) the insurer must be on reasonable notice that the insured is a Florida citizen. Roach, at 1165. The exception does not apply because Prism is not a citizen of Florida. Additionally, although the Shaws argue that this is a case of first impression in Florida, they have not shown that it implicates a paramount Florida public policy.

IV. Texas Law

"Under Texas law, insurance policies are construed under the usual principles of contract law. The court's primary role is to give effect to the written expression of the parties' intent. In defining the scope of coverage, the court examines the entire policy to determine the true intent of the parties. The court...