Sunshine Birds and Supplies, Inc. v. U.S. Fidelity and Guar. Co., 96-1351

Citation696 So.2d 907
Decision Date02 July 1997
Docket NumberNo. 96-1351,96-1351
CourtCourt of Appeal of Florida (US)
Parties22 Fla. L. Weekly D1588 SUNSHINE BIRDS AND SUPPLIES, INC., Ignacio Perea, Sr., Maria Perea, and Domingo Sanchez, Appellants, v. UNITED STATES FIDELITY AND GUARANTY COMPANY and Fidelity and Guaranty Insurance Underwriters, Inc., Appellees.

Stephens, Lynn, Klein & McNicholas, P.A., and Robert M. Klein and Marlene S. Reiss, Miami, and Gary Khutorsky, Miami, for appellants.

Schabacker Simmons & Dunlap and Judith W. Simmons, Tampa, for appellees.

Before GERSTEN, GREEN and FLETCHER, JJ.

GREEN, Judge.

Appellants, Sunshine Birds and Supplies, Inc., Ignacio Perea, Sr., Maria Perea, and Domingo Sanchez all appeal from an adverse summary judgment entered in a declaratory action instituted by appellees, United States Fidelity and Guaranty Company and Fidelity and Guaranty Insurance Underwriters, Inc. (collectively "USF & G"). In entering summary judgment in favor of USF & G, the lower court essentially determined that based upon certain policy exclusions, USF & G owes no duty of defense (and hence, no indemnification) to the appellants in two underlying tort actions. We disagree and reverse for the reasons which follow.

I RELEVANT POLICY TERMS

Appellant, Sunshine Birds and Supplies, Inc. ("Sunshine"), is a bird supply business which is located in an industrial district of Dade County. Appellants, Ignacio Perea, Sr., Maria Perea and Domingo Sanchez, are its officers and/or directors. The business entity and the individual appellants are the named insureds on a commercial general liability policy written and issued by USF & G. According to the relevant terms of the policy, USF & G has a duty to defend and indemnify the appellants for any damages they are legally obligated to pay as damages because of "bodily injury" to which the insurance applies. The policy further provides that it applies to bodily injury only if "the bodily injury ... is caused by an 'occurrence' that takes place in the 'coverage territory.' " "Bodily injury" is defined in the policy as "bodily injury, sickness or disease resulting from any of these at any time." "Occurrence" is further defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Specifically excluded from coverage in the policy is "bodily injury expected or intended from the standpoint of the insured."

UNDERLYING COMPLAINTS

Two separate lawsuits have been filed against the appellants by the parents of two minor children. In each of the complaints, it has been alleged that the minors were sexually molested by two of Sunshine's employees on the business premises during non-business hours. 1 Each of the complaints set forth two counts sounding in negligence, one against the business entity itself, and the other against the individual appellants collectively. It is alleged in each of these complaints, among other things, that prior to the unlawful acts complained of, the appellants knew or alternatively, should have known that their two employees 2 had committed previous lascivious and unlawful acts against other minors at the business; that despite the appellants' actual or constructive knowledge of their employees' aberrant propensities and their perverse use of the business premises, the appellants failed to take reasonable precaution to prevent the further victimization of young children; and that the appellants had unlawfully permitted the two employees to establish living quarters on the business premises which had afforded them unrestricted access to the facility for their use in a perverse and illegal manner after business hours. 3 Both complaints further allege that the appellants were negligent in hiring, retaining, training, and supervising their employees as well as negligent in failing to investigate, suspend, and/or terminate the two employees upon their actual notice or reasonable suspicion that these employees were involved in sexual abuse upon minors. 4

II

Based upon these allegations, USF & G initially agreed to defend the appellants in both of these underlying actions subject to a complete reservation of its rights to dispute coverage under the policy. Subsequently, USF & G instituted the declaratory action below for a determination of its rights and potential obligations under the policy. Cross-motions for summary judgment were filed by both sides. USF & G essentially took the position that it owed no duty of defense because the allegations of the appellants' actual knowledge of the sexual molestation on their business premises precluded such acts from being an "occurrence" under the policy and that the purported allegations of negligence were only a "blatant attempt to reach the deep pockets of the insurer for uninsurable intentional acts." The trial court granted USF & G's motion finding that there was no duty to defend or indemnify. This appeal followed.

III

In concluding that USF & G owed no duty of defense to appellants, the trial court apparently relied solely upon those allegations of actual knowledge by the appellants and found that no "occurrence" had been triggered. In so doing, the court completely ignored the alternatively pled allegations that appellants had only constructive knowledge of prior sexual abuse on the business premises. We think that this was error and completely runs afoul of well-established legal precedent regarding an insurer's duty to defend.

First of all, it is a well-settled rule that the allegations of the underlying complaint control an insurer's defense obligations.

The duty of an insurer to defend is determined solely by the allegations of the complaint against the insured not by the actual facts, nor the insured's version of the facts or the insured's defenses.

Marr Invs., Inc. v. Greco, 621 So.2d 447, 449 (Fla. 4th DCA 1993) (quoting Reliance Ins. Co. v. Royal Motorcar Corp., 534 So.2d 922, 923 (Fla. 4th DCA 1988), rev. denied, 544 So.2d 200 (Fla.1989)). The allegations of the complaint govern the duty to defend even if they may be factually incorrect or without merit, National Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So.2d 533, 536 (Fla.1977); Aetna Cas. and Sur. Co., Inc. v. Miller, 550 So.2d 29, 30 (Fla. 3d DCA 1989); Reliance Ins. Co. v. Royal Motorcar Corp., 534 So.2d 922, 923 (Fla. 4th DCA 1988); Logozzo v. Kent Ins. Co., 464 So.2d 605, 606-07 (Fla. 3d DCA 1985); Federal Ins. Co. v. Applestein, 377 So.2d 229, 232-33 (Fla. 3d DCA 1979), or where as here, there has been a suggestion made that the purported negligent allegations are really allegations of intentional acts in disguise. See Marr Inv. v. Greco. 5

It is further clear in this area of the law that where 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. See Grissom v. Commercial Union Ins., Co., 610 So.2d 1299, 1307 (Fla. 1st DCA 1992) (where complaint involves allegations of negligent and intentional acts, and policy excludes only intentional acts but covers negligence, insurer must defend entire suit), rev. denied, 621 So.2d 1065 (Fla.1993); Metro Dade County v. Florida Aviation Fueling Co., 578 So.2d 296, 298 (Fla. 3d DCA), rev. denied, 589 So.2d 290 (Fla.1991); American Hardware Mut. Ins. Co. v. Miami Leasing and Rentals, Inc., 362 So.2d 28, 28-29 (Fla. 3d DCA 1978). Moreover, any doubt about an insurer's duty to defend must be resolved in favor of the insured. See Grissom, 610 So.2d at 1307; Florida Ins. Guar. Ass'n. v. Giordano, 485 So.2d 453, 456 (Fla. 3d DCA 1986); Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 814 (Fla. 1st DCA 1985).

With these established guiding principles in mind, we must determine whether an "occurrence" as defined in USF & G's policy has been triggered by the allegations of the underlying complaints. As stated earlier, "occurrence" is defined in the USF & G policy as an "accident." According to Webster's New Collegiate Dictionary, 6 (8th ed.1981), "accident" is defined as:

[A]n event occurring by chance or arising from unknown causes ... 2a: an unfortunate event resulting from carelessness, unawareness, ignorance, or a combination of causes b: an unexpected happening causing loss or injury which is not due to any fault or misconduct on the part of the person injured but from the consequences of which he may be entitled to some legal relief....

USF & G first argues that based upon our decision in State Farm Fire & Casualty Co. v. Compupay, Inc., 654 So.2d 944 (Fla. 3d DCA), rev. denied, 662 So.2d 341 (Fla.1995), no "occurrence" was triggered by the complaints by virtue of those allegations in the complaints that the appellants had prior knowledge of their employee's proclivities to engage in child molestation, but failed to take remedial actions to prevent the same.

In Compupay the insured employer, as the appellants in this case, was sued for the negligent retention of one of its male supervisors who allegedly was known by the employer to sexually harass female employees. The gravamen of the Compupay allegations, however, were that at all times the insured employer had actual, rather than constructive knowledge, of the intentional wrongs being perpetrated against the plaintiff/victim by the male supervisor and took no actions to address the same. 6 According to the complaint the plaintiff had allegedly repeatedly lodged specific complaints to the employer about the harassment and, despite such complaints, the employer had acted with deliberate indifference to the situation. In finding that the insurer had no duty to defend, this court first noted that the insurance policy specifically excluded the claims of the insured's employees. See Id. at 947. More importantly, however, our court concluded that the employer's alleged history of deliberate indifference to a known wrong being...

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