Taurus Holdings v. U.S. Fidelity

• Decision Date: 22 September 2005
• Docket Number: No. SC04-771.,SC04-771.
• Citation: 913 So.2d 528
• Parties: TAURUS HOLDINGS, INC., et al., Petitioners, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al., Respondents.
• Court: Florida Supreme Court

913 So.2d 528

TAURUS HOLDINGS, INC., et al., Petitioners, v. UNITED STATES FIDELITY AND GUARANTY COMPANY, et al., Respondents.

No. SC04-771.

Supreme Court of Florida.

September 22, 2005.

John W. Harbin and Simon H. Bloom of Powell Goldstein, LLP, Atlanta, GA, June Galkoski Hoffman and Christopher E. Knight of Fowler White Burnett, P.A., Miami, FL, for Appellant(s).

Jonathan A. Constine, Douglas S. Crosno and Lori Piechura of Hogan and Hartson, LLP, Washington, DC, Charles M.P. George of George, Hartz, Lundeen, et al., Coral Gables, FL, Thomas J. Morgan, Coconut Grove, FL, Walter J. Andrews, Michael S. Levine and Amy K. Savage of Shaw Pittman, LLP, McLean, VA, and Alyssa M. Campbell of Williams Montgomery and John, LTD, Chicago, IL, for Appellee(s).

William Scott Patterson of Jiranek, Jennings and Patterson, LLP, Baltimore, MD on behalf of United Policyholders; Ronald L. Kammer and Andrew E. Grigsby of Hinshaw and Culbertson, Miami, FL, Laura A. Foggan and John C. Yang of Wiley Rein and Fielding, LLP, Washington, DC on behalf of Complex Insurance Claims Litigation Association, for Amici Curiae.

CANTERO, J.

In this case we must decide whether commercial liability insurance policies exclude coverage for lawsuits that several municipalities have filed against a gun manufacturer. The municipalities seek to recover the cost of medical and other services incurred as a result of gun violence in their communities. The issue is whether the damages "arise out of" the use of guns, and are thus excluded from coverage under the policies' products-completed operations hazard exclusions. As we explain below, we hold that the broad language in the policies excluding from coverage "all bodily injury and property damage occurring away from premises you own or rent and arising out of your product" excludes coverage for these lawsuits.

I. FACTS

Petitioners Taurus Holdings, Inc. and Taurus International Manufacturing, Inc. ("Taurus") manufacture, distribute, and sell firearms. Along with other handgun manufacturers, distributors, and retailers, Taurus faces lawsuits from a number of municipalities around the nation seeking compensation for expenses incurred as a result of gun violence in their communities. The complaints allege several types of misconduct: that the gun manufacturers failed to make guns safe and prevent foreseeable misuse, and failed to provide appropriate warnings about the dangers of guns; that they designed, manufactured and marketed guns in excess of the demand that might be expected from legitimate consumers, thereby guaranteeing that the surplus would enter the illegal firearms market, and that they were aware that the guns they manufactured and sold would fall into the hands of criminals, but took no action to prevent it; and that they falsely and deceptively claimed through advertising and promotion of their handguns that the ownership and possession of handguns in the home increases one's security. Among other causes of action, the suits allege "negligence, negligent supervision, negligent marketing, negligent distribution, negligent advertising, negligent entrustment, public and private nuisance, failure to warn, false advertising, and unfair and deceptive trade practices." Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 367 F.3d 1252, 1252-53 (11th Cir.2004). The municipalities seek compensation for expenses they have incurred for, among other things, police protection, hospital costs, emergency medical services, and prosecution of violent crimes involving the use of handguns.

During the period in question, several different carriers—respondents United States Fidelity and Guaranty Company, Pacific Insurance Company, Ltd., Federal Insurance Company, Great Northern Insurance Company, and United National Insurance Company ("Insurers")—issued commercial general liability insurance policies to Taurus. Among other things, these policies require the Insurers to defend Taurus in "lawsuits seeking damages for bodily injury, property damage, advertising injury, or personal injury." Id. at 1253. The policies all contain exclusions, however, for "products-completed operations hazards." Federal Insurance Company's policy language is representative of the others. It excludes coverage for:

[A]ll bodily injury and property damage occurring away from premises you own or rent and arising out of your product or your work except:

a. products that are still in your physical possession; or

b. work that has not yet been completed or abandoned.

The policy defines "your product" as follows:

[A]ny goods or products, other than real property, manufactured, sold, handled, distributed or disposed of by:

1. you;

2. others trading under your name; or

3. a person or organization whose business or assets you have acquired.

Id. at 1253. Taurus sought coverage from the Insurers for the defense of the lawsuits and indemnity for any ultimate damages for which it would be liable. Among other defenses not at issue here, the Insurers asserted that the products-completed operations hazard exclusion applied.¹

The federal district court initially agreed with Taurus, concluding that the underlying suits alleged damages caused by tortious business practices. See id. The court found the phrase "arising out of" in the exclusion ambiguous. See id. Upon motion for reconsideration, however, the district court held that "(1) the products-completed operations hazard exclusion was not ambiguous and (2) the injuries alleged in the lawsuits against Taurus arose out of Taurus's handguns and not out of its on-premises negligence." Id. Taurus appealed to the Eleventh Circuit. That court certified the following question of Florida law as determinative of a cause pending in that court and for which there appears to be no controlling precedent:

DOES A "PRODUCTS-COMPLETED OPERATIONS HAZARD" EXCLUSION IN A COMMERCIAL GENERAL LIABILITY POLICY OF INSURANCE BAR COVERAGE AND THEREFORE ELIMINATE AN INSURER'S DUTY TO DEFEND THE INSURED GUN MANUFACTURER IN SUITS ALLEGING NEGLIGENCE, NEGLIGENT SUPERVISION, NEGLIGENT MARKETING, NEGLIGENT DISTRIBUTION, NEGLIGENT ADVERTISING, NEGLIGENT ENTRUSTMENT, PUBLIC AND PRIVATE NUISANCE, FAILURE TO WARN, FALSE ADVERTISING, AND UNFAIR AND DECEPTIVE TRADE PRACTICES BASED ON THE INSURED'S ON-PREMISES BUSINESS PRACTICES.

Id. at 1255. We have jurisdiction to answer the certified question. See art. V, § 3(b)(6), Fla. Const. For the reasons discussed below, we answer it in the affirmative.

II. DISCUSSION

In addressing the issue, we first reiterate the standard in Florida for interpreting insurance contracts. We then analyze cases, first from Florida and then from other states, interpreting the clause "arising out of" in the context of insurance policies. We review various state court decisions considering whether products-completed operations hazard exclusions apply only to defective products or more broadly to all products. We then consider three recent federal cases that have considered similar exclusions as applied to nearly identical claims against gun manufacturers. Finally, we conclude from this analysis that the phrase "arising out of" is not ambiguous, and that the policies exclude coverage for the conduct alleged in the complaints.

A. Standards for Interpreting Insurance Contract Language in Florida

Under Florida law, insurance contracts are construed according to their plain meaning. Ambiguities are construed against the insurer and in favor of coverage. As we recently said:

[W]e must follow the guiding principle that this Court has consistently applied that insurance contracts must be construed in accordance with the plain language of the policy. Further, we consider that "[i]f the relevant policy language is susceptible to more than one reasonable interpretation, one providing coverage and the [other] limiting coverage, the insurance policy is considered ambiguous." An ambiguous provision is construed in favor of the insured and strictly against the drafter.

Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161, 165 (Fla.2003) (citations omitted) (quoting Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla.2000)); see also Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1140 (Fla.1998) (noting that "in Florida ambiguities are construed against the insurer").

Although ambiguous provisions are construed in favor of coverage, to allow for such a construction the provision must actually be ambiguous. In State Farm Mutual Automobile Insurance Co. v. Pridgen, 498 So.2d 1245, 1248 (Fla.1986), we emphasized that insurance contracts are interpreted according to the plain language of the policy except "when a genuine inconsistency, uncertainty, or ambiguity in meaning remains after resort to the ordinary rules of construction." Id. at 1248 (quoting Excelsior Ins. Co. v. Pomona Park Bar & Package Store, 369 So.2d 938, 942 (Fla.1979)). We further held that courts may not "rewrite contracts, add meaning that is not present, or otherwise reach results contrary to the intentions of the parties." Id. (quoting Excelsior, 369 So.2d at 942). Moreover, "if a policy provision is clear and unambiguous, it should be enforced according to its terms whether it is a basic policy provision or an exclusionary provision." Hagen v. Aetna Cas. & Sur. Co., 675 So.2d 963, 965 (Fla. 5th DCA 1996).

B. Florida Court Interpretations of "Arising Out of"

The specific language Taurus claims is ambiguous are the words "arising out of" in the phrase "all bodily injury and property damage occurring away from premises you own or rent and arising out of your product." Taurus, 367 F.3d at 1253 (emphasis added). Florida courts have held similar language not to be ambiguous. In Hagen, 675 So.2d at 963, the Fifth District Court of Appeal held that the term "arising out of" was unambiguous and "is broader in meaning than the term `caused by' and means `originating from,' `having its origin in,' `growing out...