Underwriters at Lloyds London v. Std Enterprises

• Citation: 395 F.Supp.2d 1142
• Decision Date: 04 October 2005
• Docket Number: No. 8:03-CV-1696-T-EAJ.,8:03-CV-1696-T-EAJ.
• Parties: UNDERWRITERS AT LLOYDS LONDON, Plaintiff, v. STD ENTERPRISES, INC., Alberto Rivera, and Maria Rivera, his wife, Defendants.
• Court: U.S. District Court — Middle District of Florida

395 F.Supp.2d 1142

UNDERWRITERS AT LLOYDS LONDON, Plaintiff, v. STD ENTERPRISES, INC., Alberto Rivera, and Maria Rivera, his wife, Defendants.

No. 8:03-CV-1696-T-EAJ.

United States District Court, M.D. Florida, Tampa Division.

October 4, 2005.

Dawn M. McMahon, Coleman & Associates, P.A., Roderick F. Coleman, Coleman & Associates, P.A., Boca Raton, FL, for Underwriters at Lloyds London, Plaintiff.

Wm. Scott Patterson, The Insurance Coverage Law Group, LLC, Baltimore, MD, for STD Enterprises, Inc., Alberto Rivera, Maria Rivera wife of Alberto Rivera, Defendants.

Raymond T. Elligett, Jr., Schropp, Buell & Elligett, P.A., Tampa, FL, Pro se.

ORDER

JENKINS, United States Magistrate Judge.

Pending before the court are Plaintiff's Motion for Summary Judgment (Dkt.103) and Defendant STD Enterprises, Inc.'s Third Motion for Summary Judgment (Dkt.106).¹ The undersigned has reviewed the filings in this case, applicable statutes, and the relevant caselaw in evaluating the parties' arguments.

I. Background

The following facts are undisputed. Defendants Alberto and Maria Rivera filed a complaint in state court seeking damages from Defendant STD Enterprises, Inc. ("STD") arising from an auto accident. (Dkt. 1 at 74, Exhibit B). The Riveras alleged that on April 24, 2001, Alberto Rivera was driving a tractor-trailer owned by Defendant STD. (Id.) This trailer was insured by Plaintiff Underwriters at Lloyds London ("Underwriters"). (Dkt. 1 at 5). The Riveras alleged that the brakes on the trailer failed, causing the vehicle to flip over, and resulted in bodily injury to Mr. Rivera. (Dkt. 1 at 74-75, Exhibit B).² When the Riveras initiated the state court action, Underwriters undertook the defense of STD pursuant to auto liability policy number LBA01497 ("the Policy"). (Dkt. 1 at 2).

Underwriters filed the present action in federal court on August 11, 2003. (Dkt.1). Underwriters requests a declaratory judgment that it does not have a duty to defend or indemnify STD in the state court action. STD filed a counterclaim for a declaratory judgment that Underwriters does have a duty to defend STD in state court. (Dkt.8). This court has jurisdiction pursuant to 28 U.S.C. § 1332.

Underwriters asserts that it does not have a duty to defend or indemnify STD because the Riveras' state court action falls under a cross-liability exclusion contained in Endorsement LSI94-6 of the Policy. A cross-liability exclusion eliminates coverage for claims or suits brought by one insured against another insured covered under the Policy.³ Underwriters argues that the cross-liability exclusion applies here because both STD and Alberto Rivera qualify as insureds under the policy. An "insured" under the Policy includes "any other person who is an approved driver identified on the Scheduled Driver Endorsement for any business use of a covered auto." (Dkt. 1 at 42).

STD argues that the cross-liability exclusion does not apply because: (1) the Riveras do not allege in the state court complaint that Alberto Rivera was engaged in the business use of a covered auto, and therefore Alberto Rivera is not an insured under the Policy; and (2) the exclusion did not become effective until STD received a written copy of the policy with the endorsements well after the April 24, 2001 accident.⁴ The parties do not dispute that the binder that Underwriters issued on April 1, 2001 did not contain written reference to the cross-liability exclusion. The binder contains the statement, "Exclusions/Amendments as per quote." (Dkt. 107 at 10).

II. Summary Judgment Standard

Summary judgment is appropriate only where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "A genuine issue of material fact does not exist unless there is sufficient evidence favoring the nonmoving party for a reasonable jury to return a verdict in its favor." Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir.1995). At the summary judgment stage, the judge's function is not to "weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In considering a motion for summary judgment, the court views all evidence in the light most favorable to the party opposing the motion. Harris v. H & W Contracting Co., 102 F.3d 516, 519 (11th Cir.1996). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. If the movant meets this burden, the burden then shifts to the nonmoving party to establish that a genuine dispute of material fact exists. See Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 918 (11th Cir.1993). Summary judgment is appropriate here because, as the parties point out, there are no genuine issues of material fact. (Dkt. 103 at 2; Dkt. 106 at 1).

III. Underwriters' Duty to Defend

Under Florida law, a court may issue a declaratory judgment as to an insurer's duty to defend and duty to indemnify.⁵ Higgins v. State Farm Fire & Casualty Co., 894 So.2d 5, 9 (Fla.2004). Florida courts have held that an insurer's duty to defend arises when a complaint filed against an insured alleges facts within the scope of the policy's coverage. Trizec Properties, Inc. v. Biltmore Construction Co., 767 F.2d 810, 811 (11th Cir.1985) (citing Tropical Park, Inc. v. United States Fidelity & Guaranty Co., 357 So.2d 253, 256 (Fla. 3rd DCA 1978)). Florida has adopted a strict rule that the insurer's duty to defend is based solely on the allegations in the complaint. Lime Tree Village Community Club Ass'n, Inc. v. State Farm General Ins. Co., 980 F.2d 1402, 1405 (11th Cir.1993); Auto Owners Ins. Co. v. Travelers Casualty & Surety Co., 227 F.Supp.2d 1248, 1258 (M.D.Fla.2002).⁶ The allegations in the complaint are controlling even if other testimony indicates that the actual facts are different from those alleged. State Farm Fire & Casualty Co. v. Edgecumbe, 471 So.2d 209, 210 (Fla. 1st DCA 1985).

The insurer's duty to defend exists "even if the facts alleged are untrue or the legal theories unsound." Auto Owners Ins. Co., 227 F.Supp.2d at 1258 (citing West Am. Ins. Co. v. Silverman, 378 So.2d 28, 30 (Fla. 4th DCA 1979)). The duty to defend arises "even though ultimately there may be no liability on the part of the insured." Trizec Properties, 767 F.2d at 811. If the allegations in the complaint create potential coverage under the policy, this is sufficient to trigger the insurer's duty to defend. See id. at 812 (citing Tropical Park, 357 So.2d at 256). Doubts as to whether a duty to defend exists are resolved in favor of the insured, and exclusionary clauses in insurance contracts are to be construed liberally in favor of the insured. Id.; Tropical Park, 357 So.2d at 256 (citing George v. Stone, 260 So.2d 259 (Fla. 4th DCA 1972)).

The court thus considers the parties' arguments about Underwriters' duty to defend in light of the allegations in the state court complaint. Underwriters argues that the Policy's cross-liability exclusion precludes coverage if one insured sues another insured. Underwriters maintains that both STD and Alberto Rivera (Defendant and Plaintiff in the state suit, respectively) qualify as insureds under the policy. Underwriters issued the Policy to STD; therefore STD is an insured. To show that Alberto Rivera is also an insured, Underwriters must demonstrate that: (1) Mr. Rivera was an approved driver identified on the Scheduled Driver Endorsement, and (2) Mr. Rivera was engaged in the business use of a covered auto. (Dkt. 1 at 42). The parties agree that Alberto Rivera was, at the time of the accident, an approved driver identified on the Scheduled Driver Endorsement. (Dkt. 94 at unnumbered 7; Dkt. 1 at 36).

Yet Underwriters does not demonstrate that, based solely on the allegations in the state court complaint, Mr. Rivera was an insured. Underwriters' showing that Mr. Rivera was driving his employer's vehicle does not establish that he was engaged in a business use of that vehicle at the time of the accident. Underwriters discusses Mr. Rivera's deposition testimony that he picked up his trailer at work on the day of the accident. (Dkt. 103 at 9). However, in determining whether Underwriters has a duty to defend STD, the court may not consider testimony outside of the complaint. Edgecumbe, 471 So.2d at 210. In the state court complaint, the Riveras do not allege that Alberto Rivera was engaged in the business use of a covered auto at the time of the accident. (Dkt. 1 at 74-75; Dkt. 94 at unnumbered 7). Therefore, looking only at the allegations in the complaint as Florida law dictates, Underwriters has a duty to defend STD in the state court action.

Underwriters argues in the alternative that even if there is a duty to defend, it should be relieved of that obligation because facts establish that the Policy provides no coverage. (Dkt. 103 at 5). In essence, Underwriters asserts that if there is no duty to indemnify STD, there is no longer a duty to defend STD. Underwriters is correct in theory: the duty to defend ceases when it is shown that there is no potential for coverage, i.e., when there is no duty to indemnify.⁷ Thus the court must examine whether Underwriters has shown that there is no potential for coverage of STD under the Policy.

IV. Underwriters' Duty to Indemnify

Under Florida law, an insurer's duty to indemnify is determined by analyzing the policy coverages in light of the actual facts of the underlying case. Auto Owners Ins. Co. v. Travelers Cas. & Surety Co., 227 F.Supp.2d 1248, 1258 (M.D.Fla.2002) (citing State Farm Fire & Cas. Co. v. CTC Dev. Corp. 720 So.2d 1072, 1077 n. 3 (Fla.1998)). Underwriters states that the cross-liability exclusion was a "usual term" of the Policy, that facts now available show that Alberto Rivera is an...