Case Title: Intervest Constr. of Jax, Inc. v Gen. Fidelity Ins. Co.

Citation: 

Docket Number: SC11-2320

State: florida

Court: Florida Supreme Court

Date: 2014-02-06T00:00:00Z

Document:
Supreme Court of Florida 
 
 
____________ 
 
No. SC11-2320 
____________ 
 
 
 
INTERVEST CONSTRUCTION OF JAX, INC., et al., 
Appellant, 
 
vs. 
 
GENERAL FIDELITY INSURANCE COMPANY, 
Appellee. 
 
[February 6, 2014] 
 
QUINCE, J. 
 
This case is before the Court for review of two questions of Florida law 
certified by the United States Court of Appeals for the Eleventh Circuit that are 
determinative of a cause pending in that court and for which there appears to be no 
controlling precedent.  We have jurisdiction.  See art. V, § 3(b)(6), Fla. Const.   For 
the reasons that follow, we hold that the insured in this case can use the payments 
to it from a third party to satisfy the self-insured retention provision.  
FACTUAL AND PROCEDURAL HISTORY 
 
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This case involves the terms of a general liability insurance contract entered 
into by General Fidelity Insurance Company (General Fidelity) with Intervest 
Construction of Jax, Inc., and ICI Homes, Inc. (ICI).  The dispute arose out of a 
personal injury lawsuit filed against ICI by an injured homeowner. 
 
In 2000, ICI contracted with Custom Cutting, Inc. (Custom Cutting) to 
provide trim work, including installation of attic stairs in a residence that ICI was 
in the process of building.  The contract between Custom Cutting and ICI 
contained an indemnification provision requiring Custom Cutting to indemnify ICI 
for any damages resulting from Custom Cutting’s negligence.  In April 2007, 
Katherine Ferrin, the owner of a residence constructed by ICI, fell while using the 
attic stairs installed by Custom Cutting.  This fall resulted in serious injuries to 
Ferrin.  Ferrin filed suit against ICI for her injuries; she did not file suit against 
Custom Cutting.  In turn, ICI sought indemnification from Custom Cutting under 
the terms of the subcontract. 
 
At the time of the accident, Custom Cutting maintained a commercial 
general liability insurance policy with North Pointe Insurance Company (North 
Pointe).  ICI was not an additional insured under Custom Cutting’s policy with 
North Pointe.  ICI held the General Fidelity policy at the time of the accident.  
Contained in the General Fidelity policy was a Self–Insured Retention 
endorsement (“SIR”) in the amount of $1 million.  The SIR endorsement stated 
 
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that General Fidelity would provide coverage only after the insured had exhausted 
the $1 million SIR.  The policy also included a transfer of rights clause granting 
the insurer some subrogation rights, the extent to which the parties dispute. 
 
ICI, Custom Cutting, North Pointe, General Fidelity, and Ferrin participated 
in a mediation of Ferrin’s claim.  At the mediation, the parties agreed to a $1.6 
million settlement of Ferrin’s claim.  As part of the settlement, North Pointe agreed 
to pay ICI $1 million to settle ICI’s indemnification claim against Custom Cutting.  
ICI, in turn, would pay that $1 million to Ferrin.  The instant dispute then arose as 
to whether ICI or General Fidelity was responsible for paying Ferrin the remaining 
$600,000. 
 
Because of the disagreement between General Fidelity and ICI over 
coverage, North Pointe paid the $1 million into the trust account of ICI’s counsel 
and each party reserved all rights and claims against the other.  Approximately one 
month later, both ICI and General Fidelity each paid $300,000 to Ferrin, in 
addition to the $1 million from North Pointe, in order to settle Ferrin’s claim for 
the full $1.6 million.  However, the parties reserved the right to bring their claims 
against each other in order to be reimbursed for their contribution to the settlement. 
 
ICI filed suit in the Circuit Court of the Fourth Judicial Circuit, in and for 
Duval County, Florida for breach of contract and a declaratory judgment seeking 
return of the $300,000 ICI paid above the $1 million indemnification payment and 
 
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for attorneys’ fees and costs incurred in the Ferrin lawsuit.  General Fidelity then 
removed the case to the United States District Court for the Middle District of 
Florida based on diversity jurisdiction.  General Fidelity filed a counterclaim 
seeking return of the $300,000 it had paid to Ferrin.  The parties filed cross-
motions for summary judgment.   
 
In its complaint, ICI alleged that General Fidelity failed to perform its 
obligation under the policy by refusing to pay $600,000 of the $1.6 million 
settlement.  ICI maintained that Custom Cutting/North Pointe’s contribution of $1 
million to settle ICI’s indemnification claim, which was then passed on to Ferrin, 
satisfied the SIR obligation in the policy and General Fidelity was required to pay 
the remaining $600,000.  General Fidelity argued that North Pointe’s $1 million 
payment to settle the indemnity claim did not reduce the SIR because the payment 
originated from Custom Cutting, not ICI.  Thus, General Fidelity maintained that 
the terms of the policy required ICI to pay the additional $600,000 to settle Ferrin’s 
claim. 
 
The district court denied ICI’s motion for summary judgment but granted 
General Fidelity’s motion, holding that ICI could not use the $1 million 
indemnification payment to satisfy the SIR.  The district court cited four California 
cases addressing similar SIR provisions in insurance policies.  Based on the 
reasoning in those California cases, the district court concluded that the language 
 
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in the SIR provision at issue in this case is unambiguous because it provides that 
the “Retained Limit” must be paid by the insured and that the “Retained Limit” 
will only be reduced by payments made by the insured.  Thus the district court 
found that the indemnity payment that ICI received from Custom Cutting did not 
exhaust the SIR obligation as required by the language of the policy.  Additionally, 
the district court found that even if ICI had paid the $1 million out of pocket, 
General Fidelity had paid out the additional $600,000, and ICI was indemnified by 
Custom Cutting at a later date, ICI would still not have exhausted the SIR as 
required by the policy because the “transfer of rights” provision in section IV(8) of 
the policy provides that if the insured has rights to recover all or part of any 
payment that the insurer has made, those rights are transferred to the insurer.  
Accordingly, the district court entered judgment in favor of General Fidelity for 
$300,000. 
 
ICI appealed the district court’s ruling to the Eleventh Circuit Court of 
Appeals.  The Eleventh Circuit identified two issues that governed the outcome of 
the case, but concluded there was no controlling Florida law on either issue.  
Unlike the district court, the Eleventh Circuit did not find the California cases 
persuasive in interpreting the General Fidelity policy because the California 
policies were materially different.  Thus, the Eleventh Circuit certified two 
questions to this Court for resolution: 
 
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1. DOES THE GENERAL FIDELITY POLICY ALLOW THE 
INSURED TO APPLY INDEMNIFICATION PAYMENTS 
RECEIVED FROM A THIRD-PARTY TOWARDS 
SATISFACTION OF ITS $1 MILLION SELF-INSURED 
RETENTION? 
 
2. ASSUMING THAT FUNDS RECEIVED THROUGH AN 
INDEMNIFICATION CLAUSE CAN BE USED TO OFFSET THE 
SELF-INSURED RETENTION, DOES THE TRANSFER OF 
RIGHTS PROVISION FOUND IN THE GENERAL FIDELITY 
POLICY GRANT SUPERIOR RIGHTS TO BE MADE WHOLE TO 
THE INSURED OR TO THE INSURER? 
Intervest Constr. of Jax, Inc. v. Gen. Fid. Ins. Co., 662 F.3d 1328, 1332-33 (11th 
Cir. 2011).  We address each question in turn below. 
ANALYSIS 
 
Under Florida law, the interpretation of insurance contracts, such as the 
commercial general liability policy in this case, is governed by generally accepted 
rules of construction.  U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla. 
2007).   “Insurance contracts are construed according to their plain meaning.  
Ambiguities are construed against the insurer and in favor of coverage.”  Taurus 
Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005).  
However, courts only look to the rules of construction “when a genuine 
inconsistency, uncertainty, or ambiguity in meaning remains after resort to the 
ordinary rules of construction.”  Id. (quoting State Farm Mut. Auto. Ins. Co. v. 
Pridgen, 498 So. 2d 1245, 1248 (Fla. 1986)).  Courts may not “rewrite contracts, 
add meaning that is not present, or otherwise reach results contrary to the 
 
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intentions of the parties.”  Id. (quoting Pridgen, 498 So. 2d at 1248).  Further, “in 
construing insurance policies, courts should read each policy as a whole, 
endeavoring to give every provision its full meaning and operative effect.”  
J.S.U.B., 979 So. 2d at 877 (quoting Auto-Owners Ins. Co. v. Anderson, 756 So. 
2d 29, 34 (Fla. 2000)).  “Although exclusionary clauses cannot be relied upon to 
create coverage, principles governing the construction of insurance contracts 
dictate that when construing an insurance policy to determine coverage the 
pertinent provisions should be read in pari materia.”  Id. (quoting State Farm Fire 
& Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1074-75 (Fla. 1998)). 
 
The text of the SIR endorsement in the instant case provides, in pertinent 
part: 
THIS ENDORSEMENT CHANGES THE POLICY. 
PLEASE READ IT CAREFULLY 
 
SELF-INSURED RETENTION 
Per Occurrence 
 
Self-Insured Retention: $1,000,000 Per Occurrence 
Including Loss Adjustment Expense 
 
In consideration of the premium charged, it is agreed the insurance afforded by the 
policy to which this endorsement is attached is subject to the following additional 
terms, conditions and provisions.  In the event of a conflict between any of the 
terms, conditions or provisions of the policy and this endorsement, this 
endorsement will control the application of insurance to which the policy applies. 
 
Unless otherwise specified, all terms used in this endorsement have the meaning 
set forth in the policy. 
 
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1. The Self-Insured Retention, shown above, applies to each and every 
“occurrence” or offense made against any insured, to which this 
insurance applies, irrespective of the number of claims which may be 
joined in to any one “suit” or claim. 
 
2. Our total liability will not exceed the Limits of Insurance as 
specified in the policy Declarations, Coverage Parts or endorsements. 
The Limits of Insurance will apply only in excess of the Self-Insured 
Retention, hereinafter referred to as the “Retained Limit.” 
 
3. We have no duty to defend or indemnify unless and until the 
amount of the “Retained Limit” is exhausted by payment of 
settlements, judgments, or “Claims Expense” by you. 
 
. . . . 
 
5. Should any claim arising under this policy result in a settlement or 
judgment, including “Claims Expense” incurred by the insured or on 
the insured's behalf, in excess of the “Retained Limit,” we will pay 
those amounts in excess of the “Retained Limit” to which this 
insurance applies subject to the Limits of Insurance as specified in the 
Declarations. 
 
6. The “Retained Limit” will only be reduced by payments made by 
the insured. 
 
. . . . 
 
11. With respect to any claim payable under this insurance and subject 
in whole or in part to the “Retained Limit” as provided in this 
endorsement, we will have the right, but not the obligation to assume 
the control of said claim and to pay any part of or all of the amount of 
any such loss including “Claims Expense” within the “Retained 
Limit” on behalf of and for the account of the insured to affect 
settlement of said claim. Amounts paid by us pursuant to this 
paragraph will be reimbursed to us by the insured within ten (10) days 
from the date of our written request to the insured. We will have the 
right to make partial recoveries from the insured when partial 
 
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settlements or “Claims Expense” are incurred by us within the 
“Retained Limit” as provided by this endorsement. 
 
. . . .  
 
14. The insolvency, bankruptcy, receivership of the insured, or any 
refusal by or inability of the insured to satisfy its obligations pursuant 
to this endorsement will not reduce the “Retained Limit” as set forth 
in the endorsement, nor will it require us to pay any amounts within 
the “Retained Limit.” The payment of the “Retained limits” by the 
insured is a condition precedent for our obligation to pay any sums 
either in defense or indemnity and we shall not pay any such sums 
until and unless the insured has satisfied its “Retained limits.” 
 
The underlined portions of the endorsement were cited by the district court as 
unambiguously requiring the insured to pay the “Retained Limit” from his or her 
own funds. 
 
Both parties filed motions for summary judgment on the issue of whether 
ICI’s self-insured retention obligation was exhausted by an indemnification made 
by one of its subcontractors.  The district court denied ICI’s motion and granted 
General Fidelity’s motion, entering judgment in its favor for $300,000.  Intervest 
Constr. of Jax, Inc. v. Gen. Fid. Ins. Co., Case No. 3:09-cv-00894-HES-JRK (M.D. 
Fla. Apr. 22, 2010).  The district court recognized that no Florida law addressed 
this narrow issue and cited three California decisions as persuasive authority.  Id. at 
6.  The cited cases included Vons Cos. v. United States Fire Insurance Co., 92 Cal. 
Rptr. 2d 597 (Ct. App. 2000), Travelers Indemnity Co. v. Arena Group 2000, L.P., 
2007 WL 935611 (S.D. Cal. Mar. 8, 2007), and Forecast Homes, Inc. v. Steadfast 
 
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Insurance Co., 105 Cal. Rptr. 3d 200 (Ct. App. 2010).  The district court briefly 
summarized the reasoning in the cases and noted that “the instant case does not fall 
directly in line with any of the policy language discussed” in these cases.  Intervest 
Constr., Case No. 3:09-cv-00894-HES-JRK , slip op. at 8.  However, the district 
court found that the SIR endorsement in the policy repeatedly stated that the 
retained limit must be paid by the insured and that the limit would only be reduced 
by payments made by the insured.  The district court found these terms to be 
unambiguous and required ICI to exhaust the SIR by payment of its own funds, not 
by application of the indemnification funds.  Id. 
 
On appeal, the Eleventh Circuit stated that the crux of the dispute between 
the parties focuses on two provisions of the General Fidelity policy, the SIR 
endorsement and the transfer of rights clause.1  Intervest Constr., 662 F.3d at 1329.  
The Eleventh Circuit noted that the particular language at issue in the General 
Fidelity policy is different from the language in the California cases.2
                                         
 
1.  The transfer of rights clause is set forth and addressed in the analysis of 
the second certified question below. 
  Id. at 1330.  
 
2.  The Eleventh Circuit also cited a fourth California case as being 
materially different from the instant case.  The Eleventh Circuit noted in a footnote 
that the SIR endorsement at issue in Insurance Co. of the State of Pennsylvania v. 
Acceptance Insurance Co., 2002 WL 32515066 (C.D. Cal. Apr. 29, 2002), 
contained a provision expressly addressing the possibility that the insured had 
other insurance covering the same claims. 
 
 
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The Eleventh Circuit considered these distinctions to be “potentially significant” 
and found the policies in the California cases to be “materially different for two 
reasons: (1) the General Fidelity Policy, unlike those policies examined by other 
courts, does not contain an explicit provision addressing the precise issue in 
question, and (2) the language of the General Fidelity Policy is arguably less 
restrictive than the language of the policies at issue in those cases.”  Id. (footnotes 
omitted).  The Eleventh Circuit explained that “[r]equiring that a payment be made 
from one’s ‘own account’ is not necessarily the same as requiring that the retained 
limit be paid ‘by you’.”  Id.  In fact, the Eleventh Circuit reasoned that “a strong 
argument could be made that ICI exhausted its SIR because it paid for the 
protection afforded in the indemnification clause; to wit, ICI paid for that 
indemnity protection in the purchase price of the Custom Cutting subcontract and 
therefore hedged its retained risk, just as it could have paid for a loan or paid a 
premium on an insurance policy.”  Id.  Thus the Eleventh Circuit expressed 
skepticism of the district court’s analysis of this issue of Florida law.  Id. at 1330-
31.  The Eleventh Circuit also noted that the policy at issue here “appears on its 
face to be more permissive” than those in the California cases because it did not 
contain any other provision requiring payments directly from the insured’s own 
account or expressly prohibiting the use of indemnification payments to satisfy the 
SIR.  Id. at 1331. 
 
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Although each of the California cases cited by the district court and the 
Eleventh Circuit addressed the satisfaction of a SIR obligation, none involved the 
same policy language at issue here.  What the cases have in common with each 
other, and with the resolution of the instant case, is that the policy language 
controlled—because it either clearly addressed or was ambiguous on the issue of 
how or by whom the SIR could be paid. 
 
Vons involved an issue similar to the one presented here.  A person was 
injured by a pallet jack being operated by a Vons employee in the common area of 
a shopping center owned by Vons’ landlord, Longs Drug Stores (Longs).  Vons, 92 
Cal. Rptr. 2d at 599.  The victim sued Vons for his injuries.  Vons in turn cross-
complained against Longs, alleging that Longs had expressly agreed to indemnify 
Vons for injuries that occurred in the common area and that Longs was partially to 
blame for the accident.  Id.  As part of Vons’ lease agreement with Longs, Vons 
was named an additional insured under Longs’ comprehensive general liability 
(CGL) insurance policy.  The insurance policy contained a SIR endorsement, but it 
had been exhausted at the time the injured man filed his complaint.  Thus the 
insurance policy provided first dollar coverage for the victim’s injuries.  Id.   
Vons was also insured under its own CGL policy issued by U.S. Fire.  The 
Vons policy provided $1 million in coverage, but also included a $1 million SIR 
endorsement.  The SIR endorsement in the Vons policy also provided that it was 
 
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“subject to the limits of liability, exclusions, conditions, and other terms of the 
policy to which this agreement is attached . . .” and that “all other terms and 
conditions of this Policy remain unchanged.”  Id.  Longs’ insurer issued a $1 
million check to Vons as an additional insured under the Longs policy; Vons 
contributed $539,905 of its own funds to pay all of the settlement to the injured 
man.  Vons and U.S. Fire disagreed on whether the $1 million SIR in the Vons 
policy would be deemed exhausted if that sum were paid on behalf of Vons as an 
additional insured under the Longs policy.   
Vons sued U.S. Fire for declaratory relief on the issue.  The trial court ruled 
that U.S. Fire had to reimburse Vons the $539,905 contributed to the settlement.  
The trial court determined that the Vons policy did not limit the source of the $1 
million SIR in any way and did not require Vons to pay the SIR exclusively from 
its own pocket.  Id. at 600.  U.S. Fire appealed to the California appellate court, 
which concluded that the “subject to” language in the SIR endorsement made the 
endorsement subordinate to the other policy terms and conditions, including the 
“other insurance” provision that made the insurance excess in the event that other 
insurance was available.  Id. at 604-05.  The court explained that the SIR standing 
alone would ordinarily make the Vons policy excess, but this provision was 
expressly made subject to policy terms which also provided that U.S. Fire’s 
coverage was excess if any other valid insurance were available for the same 
 
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coverage.  The appellate court concluded that the most reasonable construction of 
this provision permitted the payment of the SIR amount through other valid and 
collectible insurance.  Id. at 605.  At the very least, the court stated, it rendered the 
SIR ambiguous on this point.  Id.  As the appellate court explained: 
Nowhere does the SIR expressly state that Vons itself, not other 
insurers, must pay the SIR amount.  Because the SIR was subject to 
the other insurance provisions, which also made the Vons policy 
excess if there were another policy covering the accident, Vons as a 
reasonable insured could read the policy as permitting the use of other 
insurance proceeds to cover the SIR amount. 
 
Id. 
 
Another case which involved the question of whether a policy required the 
SIR to be paid from the insured’s own account is Arena Group.  The underlying 
action involved personal injuries sustained when a two-ton marquee sign at the San 
Diego Sports Arena fell on two individuals.  Arena Group, 2007 WL 935611, at 
*1.  The Arena Group was an additional insured under a policy that included a SIR 
of $500,000.  The court noted that “a policy may prohibit the use of other 
insurance to satisfy a retention by including a policy provision requiring the 
insured to personally pay the retained amount.”  Id. at *5.  The court focused on 
the language of the policy, which stated, “Insured shall pay from its own account 
all amounts within the Retained Amount” and “The Retained Amount is the 
responsibility of the Insured and is to be paid from the Insured’s own account.”  Id.  
Thus, the court concluded, the policy “unambiguously requires the Insured to pay 
 
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the Retained Amount from its ‘own account’ ” and payments made by Arena 
Group’s other insurers to the injured parties did not satisfy the SIR.  Id. 
 
The language of the insurance policy in Forecast Homes was even more 
explicit, expressly limiting who could satisfy the SIR.  The SIR endorsement 
required that the named insured “make actual payment” of the SIR amount and 
provided that “[p]ayments by others, including but not limited to additional 
insureds or insurers, do not serve to satisfy the self-insured retention.”  Forecast 
Homes, 105 Cal. Rptr. 3d at 208.  The court found that “[t]his section of the policy 
regarding who can make the payment to satisfy the SIR is clear and unambiguous.”  
Id. 
 
Acceptance Insurance involved a number of underlying actions for 
construction defects and property damage in homes based on work performed by a 
developer of residential real estate and the developer’s subcontractors.  2002 WL 
32515066 at *1.  The developer had a number of insurance contracts, including 
two with Insurance Company of the State of Pennsylvania (ISOP) and a 
comprehensive general liability policy with North American Capacity Insurance 
Company (NACIC).  Id.  Pursuant to its contracts, ISOP expended substantial 
funds in defending the underlying actions and making settlement payments.  ISOP 
sought indemnification from NACIC for a portion of the expenditures.  Id.  The 
NACIC policy included a $250,000 per occurrence SIR endorsement.  NACIC 
 
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argued that the SIR had not been satisfied because the developer did not pay any 
portion of its defense or settlement costs.  Id. at *2.  Those costs were paid by 
ISOP and other insurance companies not parties to the action between ISOP and 
NACIC.  Thus, the issue to be resolved was whether the NACIC insurance contract 
required the developer to fund the SIR itself.   
The court determined that the SIR provision “clearly and unambiguously” 
required the developer to be responsible for satisfying the SIR with its own funds, 
regardless of any insurance coverage applicable to the underlying actions.  Id. at 
*7.  The SIR contained a provision stating that regardless of other insurance, the 
insured would continue to be responsible for the full SIR before the limits of 
insurance under the NACIC policy would apply.  Id.  The court noted that this 
provision in the SIR endorsement would be meaningless if not interpreted as 
requiring the insured to satisfy the SIR with its own funds.  Id.  Otherwise, the 
provision “would be reduced to simply reiterating the more general terms” of the 
policy.  Id.  Additionally, the endorsement expressly stated that it changed the 
policy and that it controlled in the event of a conflict with other policy provisions.  
Id. at *6.  The court explained that the SIR endorsement in the NACIC policy 
“clearly place[d] the insured on notice that the additional provisions of the 
Endorsement change[d] the general policy terms and conditions and [were] 
separate requirements.”  Id. 
 
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We agree with the Eleventh Circuit that the policies at issue in the California 
cases are materially different from the instant policy.  See Intervest Constr., 662 
F.3d at 1330.  While the SIR endorsement in the instant case contains the same 
notice of change to the policy that the SIR endorsement in Acceptance Insurance 
contained, it does not contain a provision addressing other insurance within the 
context of the SIR.  The policy in Acceptance Insurance contained a provision 
expressly stating that regardless of other insurance the insured would continue to 
be responsible for the full SIR before the limits of the policy applied.   Acceptance 
Ins., 2002 WL 32515066 at *7.  The SIR endorsement in the Forecast Homes 
policy required the named insured to “make actual payment” of the SIR amount 
and expressly provided that “[p]ayments by others, including but not limited to 
additional insureds or insurers, do not serve to satisfy the self-insured retention.”   
Forecast Homes, 105 Cal. Rptr. 3d at 208.  There is no similar language or 
provision in the instant case. 
 
The Eleventh Circuit also noted that the language of the instant policy “is 
arguably less restrictive than the language of the policies at issue in [the California] 
cases.”  Intervest Constr., 662 F.3d at 1330.  For example, in Arena Group, the 
“other insurance” provision required the insured to pay all amounts within the 
retained amount “from its own account” and was also stated prominently on the 
first page of the policy—“The Retained Amount is the responsibility of the Insured 
 
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and is to be paid from the Insured’s own account.”  Arena Group, 2007 WL 
935611 at *5.  The Arena Group policy clearly and unambiguously informed the 
insured that the retained amount had to be paid from its own funds.  The language 
of the instant policy states that the retained limit must be paid by the insured, but 
does not specify where those funds must originate.  Requiring payment to be made 
from the insured’s “own account” is not necessarily the same as requiring that it be 
paid “by you.” 
 
Moreover, as the Eleventh Circuit noted in its opinion, “a strong argument 
could be made that ICI exhausted its SIR because it paid for the protection 
afforded in the indemnification clause.”  Intervest Constr., 662 F.3d at 1330.  The 
contract between Custom Cutting and ICI, which included the right to 
indemnification, was entered into six years before the General Fidelity policy was 
purchased by ICI.  ICI paid for the indemnity protection in the purchase price of 
the Custom Cutting subcontract and therefore hedged its retained risk in this 
manner.  ICI bargained for and paid for this right to indemnification and, without 
an express policy provision to the contrary, should be able to use it to satisfy the 
SIR.  The instant case is more akin to the policy in Vons, in which the SIR did not 
“expressly state that Vons itself, not other insurers, must pay the SIR amount.”  
Vons, 92 Cal. Rptr. 2d at 605.   
 
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In light of the language of the policy and the right to indemnification for 
which ICI paid, we answer the first certified question in the affirmative and find 
that the General Fidelity policy allows the insured to apply indemnification 
payments received from a third party toward satisfaction of its $1 million self-
insured retention. 
 
The second certified question asks whether the common law rule of the 
“made whole doctrine” applies here or whether the transfer of rights clause in the 
policy abrogated the doctrine.  The district court did not address this issue.  
However, the Eleventh Circuit considered the effect of the transfer of rights clause 
if ICI was permitted to use the Custom Cutting indemnification to satisfy the SIR 
obligation.  See Intervest Constr., 662 F.3d at 1331.  As the Eleventh Circuit 
explained, that right alone “would be of little value if the General Fidelity Policy 
gave General Fidelity the priority to be made whole before ICI could use any of the 
indemnity payment towards the SIR.”  Id. at 1331 n.6.    
 
The text of the transfer of rights provision is found in SECTION IV—
COMMERCIAL GENERAL LIABILITY LIMITS, and provides in full: 
8. Transfer Of Rights Of Recovery Against Others To Us  
If the insured has rights to recover all or part of any payment we have 
made under this Coverage Part, those rights are transferred to us.  The 
insured must do nothing after loss to impair them.  At our request, the 
insured will bring ‘suit’ or transfer those rights to us and help us 
enforce them.  
 
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As the Eleventh Circuit stated, the language of this provision is clear—it 
gives the insurer General Fidelity subrogation rights.  However, the provision gives 
no guidance as to the priority to recover when the indemnity amount is insufficient 
to “make whole” both parties.  See Intervest Constr., 662 F.3d at 1331.  In its 
appeal to the Eleventh Circuit, ICI made two arguments regarding why the transfer 
of rights provision did not affect its priority to the indemnification funds.  First, the 
plain language of the provision allows General Fidelity to recover only for 
payments “we have made,” and, at the time ICI received the indemnification 
payment from Custom Cutting, General Fidelity had not yet made any payment.  
Second, even if the court disregards the tense of the language, the General Fidelity 
policy did not abrogate the “made whole doctrine” and thus ICI has priority to 
receive any indemnification before General Fidelity.  Id.  In turn, General Fidelity 
argued that the court cannot place excessive emphasis on the tense of the language, 
and further that the transfer of rights provision in the policy abrogated the common 
law rule of the “made whole doctrine” by writing into the policy priority rights for 
General Fidelity.  Id. 
 
“Subrogation is the substitution of one person in the place of another with 
reference to a lawful claim or right.”  W. Am. Ins. Co. v. Yellow Cab Co. of 
Orlando, Inc., 495 So. 2d 204, 206 (Fla. 5th DCA 1986) (quoting Boley v. Daniel, 
72 So. 644, 645 (Fla. 1916)).  Florida recognizes two types of subrogation:  
 
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conventional subrogation and equitable or legal subrogation.  Conventional 
subrogation arises or flows from a contract between the parties establishing an 
agreement that the party paying the debt will have the rights and remedies of the 
original creditor.  See Dade Cnty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d 
638, 646 (Fla. 1999).  Since subrogation is an offspring of equity, equitable 
principles apply, even when the subrogation is based on contract, except as 
modified by specific provisions in the contract.  In the absence of express terms to 
the contrary, the insured is entitled to be made whole before the insurer may 
recover any portion of the recovery from a tortfeasor.  See Fla. Farm Bureau Ins. 
Co. v. Martin, 377 So. 2d 827, 830 (Fla. 1st DCA 1979). 
 
The “made whole doctrine” provides, absent a controlling contractual 
provision that states otherwise, that the insured has priority over the insurer to 
recover its damages when there is a limited amount of indemnification available.  
See Schonau v. GEICO Gen. Ins. Co., 903 So. 2d 285, 287 (Fla. 4th DCA 2005) 
(“Decisions applying the ‘made whole’ doctrine essentially hold that where both 
the insurer and the insured simultaneously attempt to recover all of their damages 
from a tortfeasor who cannot (because of insolvency, limited insurance coverage, 
or other reasons) pay the full value of damages, the insured has priority of recovery 
over the insurer.”).  Martin and the subsequent cases involving the “made whole 
doctrine” all deal with the insured’s primary right to recover before the insurance 
 
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carrier.  See, e.g., Monte de Oca v. State Farm Fire & Cas. Co., 897 So. 2d 471 
(Fla. 3d DCA 2004); Centex-Rodgers Constr. Co. v. Herrera, 761 So. 2d 1215 (Fla. 
4th DCA 2000); Humana Health Plans v. Lawton, 675 So. 2d 1382 (Fla. 5th DCA 
1996).  We have acknowledged the application of the made whole doctrine in 
Florida.  See Ins. Co. of N. Am. v. Lexow, 602 So. 2d 528, 529-30 (Fla. 1992) 
(“Using the common law subrogation principle, endorsed by Florida courts, the 
district court reasoned that the insured was entitled to be made whole before the 
subrogated insurer could participate in the recovery from a tortfeasor.”). 
 
ICI cites a Washington case for the proposition that the specific language of 
the transfer of rights provision found in the General Fidelity policy does not write 
out the “made whole doctrine,” thereby preserving ICI’s right of priority.  See 
Bordeaux, Inc. v. Am. Safety Ins. Co., 186 P.3d 1188, 1192-93 (Wash. Ct. App. 
2008) (holding that “[t]he trial court properly ruled that [the insureds] were entitled 
to be made whole before any third-party recovery funds are paid to the insurers”).  
General Fidelity argues that Bordeaux is not on point. 
 
Bordeaux addressed the nature of SIR provisions in commercial general 
liability policies that American Safety Insurance Company (American Safety) 
issued to the condominium developer, Bordeaux, Inc.  When the condominium 
association filed a lawsuit against Bordeaux alleging extensive construction defects 
and property damage relating to the condominiums, Bordeaux tendered its defense 
 
- 23 - 
to its two insurers, American Safety and Steadfast Insurance.  Id. at 1189.  The 
American Safety policy contained a SIR provision that obligated Bordeaux to pay 
$100,000 before American Safety had an obligation to provide indemnity, 
coverage, or defense under the policy.  Id.  The policy also contained a subrogation 
provision which stated that “[i]f the insured has rights to recover all or part of any 
payment we have made under this Coverage Part, those rights are transferred to 
us.”  The policy defined the word “we” as “American Safety.”  Id. at 1190.  The 
Washington court determined that “the subrogation provision clearly only allows 
American Safety to recover payments it actually made.”   Id. at 1192 (emphasis 
added).  Additionally, despite the subrogation provision in the policy, the court 
concluded that the “made whole doctrine”3
 
Bordeaux cited two Florida cases in support of its conclusion that the SIR 
did not operate as primary insurance, thereby making American Safety’s policy 
provide excess insurance.  This conclusion was significant because had the self-
insurance provisions constituted insurance and American Safety’s policy been 
 applied in the case and affirmed the 
trial court’s ruling that the insureds “were entitled to be made whole before any 
third-party recovery funds are paid to the insurers.”  Id. at 1192-93.   
                                         
 
3.  The court did not use the term “made whole doctrine,” instead referring 
to the “long-standing rule . . . favoring full compensation of insureds over 
subrogation rights of insurers.”  Bordeaux, 186 P.3d at 1192.  This clearly is the 
same as the “made whole doctrine” under Florida law. 
 
- 24 - 
deemed “excess” insurance, then American Safety’s rights to subrogation would 
have been superior to Bordeaux’s, and American Safety would have been entitled 
to recover third-party settlement funds before its insured.4
 
However, the language of the transfer of rights clause in the instant case is 
exactly the same as that in Bordeaux.  While Bordeaux is not controlling precedent 
  The Bordeaux court 
cited the Fourth District Court of Appeal’s decision in Zinke-Smith, Inc. v. Florida 
Insurance Guaranty Ass’n, 304 So. 2d 507, 509 (Fla. 4th DCA 1974), and this 
Court’s decision in Young v. Progressive Southeastern Insurance Co., 753 So. 2d 
80, 85-86 (Fla. 2000), for the proposition that self-insurance does not constitute 
insurance.  Both parties make much of the fact that Florida cases were cited in 
Bordeaux.  ICI cites this as evidence that Washington law is similar to Florida’s.  
However, General Fidelity correctly notes that the Florida cases cited turned on a 
different point of law.  Zinke-Smith is based on statutory construction, not on 
interpretation of policy language.  The Fourth District held that an employer who 
secures worker’s compensation as a self-insurer does not become an insurer under 
the insurance code.  In Young, this Court dealt with the meaning of “insurance” in 
the Uninsured Motorists Statute, holding that a self-insured party is not insured.  
Young did not involve interpretation of policy terms at all, only statutory 
interpretation.   
                                         
 
4.  General Fidelity did not make that argument in this case.   
 
- 25 - 
in this case, it is persuasive authority that the “made whole doctrine” is still 
applicable despite the insurance subrogation provision.  As Florida law explains, 
because subrogation is an offspring of equity, equitable principles (such as the 
“made whole doctrine”) apply even when the subrogation is based on contract, 
unless the contract contains express terms to the contrary.  See Fla. Farm Bureau, 
377 So. 2d at 830.  Here, the transfer of rights clause does not address the priority 
of reimbursement nor does the clause provide that it abrogates the “made whole 
doctrine.”  In the absence of such express language, equitable principles prevail.  
Thus, we answer the second certified question by stating that the transfer of rights 
provision in the policy does not abrogate the made whole doctrine, thereby 
preserving ICI’s right of priority. 
CONCLUSION 
Accordingly, we answer the Eleventh Circuit’s first certified question in the 
affirmative and the second certified question by concluding that the transfer of 
rights provision in the policy does not abrogate the made whole doctrine.  Having 
answered the certified questions, we return this case to the United States Court of 
Appeals for the Eleventh Circuit. 
It is so ordered. 
 
PARIENTE, LEWIS, LABARGA, and PERRY, JJ., concur. 
CANADY, J., dissents with an opinion in which POLSTON, C.J., concurs. 
 
 
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NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
CANADY, J., dissenting. 
Based on the unambiguous allocation of risk under the provisions of the 
policy, I would conclude that indemnification payments received from a third party 
may not be applied to satisfy the self-insured retention.  I thus would answer the 
first certified question in the negative.  That negative answer to the first question 
renders the second certified question moot. 
Paragraph 3 of the self-insured retention endorsement plainly states that the 
insurer has “no duty to defend or indemnify unless and until the amount of the 
‘Retained Limit’ is exhausted by payment of settlements, judgments, or ‘Claims 
Expense’ by you”—that is, by the insured.  Paragraph 6 of the endorsement plainly 
states that “the ‘Retained Limit’ will only be reduced by payments made by the 
insured.”  No other provisions of the policy render these provisions ambiguous. 
A payment made by a third party pursuant to an indemnification agreement 
is not a payment “made by the insured.”  The insurance policy should not be 
rewritten to allow satisfaction of the self-insured retention limit in a manner other 
than the manner specifically provided for in the policy.  I thus would reject the 
legal fiction adopted by the majority that a payment made by a third party pursuant 
to a contractual indemnity provision is a payment “made by the insured.”  
 
- 27 - 
Imposing that legal fiction effectively reads the phrase “by you” out of paragraph 
3.  And it reads the entirety of paragraph 6 out of the endorsement.  The majority’s 
unjustified interpretation of the endorsement gives the endorsement a meaning that 
is no different than if those provisions were absent from the policy. 
I dissent. 
 
POLSTON, C.J., concurs. 
 
 
Certified Question of Law from the United States Court of Appeals for the 
Eleventh Circuit - Case No. 10-12613-GG 
 
W. Braxton Gilliam, IV and Robert M. Dees of Milam Howard Nicandri Dees & 
Gilliam, P.A., Jacksonville, Florida,  
 
 
for Appellants 
 
Louis Schulman of Dutton Law Group, P.A., Tampa, Florida, 
 
 
for Appellee