[DO NOT PUB LISH]

IN THE UN ITED STATES C OURT OF APPEALS FOR T HE ELE VENTH C IRC UIT

____ ____ ____ ____ ____ ____ ____ ____ __ No. 1 3-1579 9

____ ____ ____ ____ ____ ____ ____ ____ __ D.C . Doc ke t No .: 0 :12 -cv-60 824-KM W

NOVA C ASUALTY C O. Pla int iff-Appe lla nt,
ve rsus ONEB EAC ON AM ERICA INSUR ANC E C O. De fend ant-Appe lle e.

____ ____ ____ ____ ____ ____ ____ ____ __ Appe alfrom

theUni te d Sta

te s Di stri ct

Co urt for theSouth ern Dist

ric t of Fl orida

____ ____ ____ ____ ____ ____ ____ ____ ___ (Ma rch 17, 2 015) Case: 13-15799 Date Filed: 03/17/2015 Page: 1 of 14Be fore W ILLIAM PR YOR a nd J ORD AN, C irc uit

Jud ge s, a nd W ALTER , Dis tric t

* Judg e. WALTER , Dis tric t Ju dge : Pla int iff-Appe lla

nt N ova Ca sua lty Co . (“Nova ”) a

ppe al s th e dis tric t c ourt’ s grant of s um

m ary judgm ent i n favor of De fend ant-Appe lle e One Be ac on Am eri ca Insura nc e Co . (“ One Be ac on” ). In th e unde rly ingins uran cedis put e, One Be ac on se rved a s th e prim ary

ins urer, whil e Nova

wa s th e ex ce ss insure r. Thi s de cl aratory jud gm ent a ct ion

arise s from

One Be ac on’ s re fusa l t o de fend and i nde m

nify it s ins ured , forci ng t

he e xc es s c arrie r Nova

to step in to de fend and s et tlea sta tec ourt la wsui t a ga ins t t

heins ured . Nov a ins tit

ute d th is s uit , se ekinga

de cl aratio n th at One Be ac on wa s ob lig at ed to de fend and i nde m

nify theins ured

and t ha t i ts fa ilu re to d o so res ult ed

in a brea ch

of c ont rac t. T he dis tric t c ourt a gree d wi th N ova but
none the le ss h el d th at

Nova wa s no t e nti tle d to da

m ag es . Nov a now a

ppe al s th at rulin g. Fol lowi ng a

rev ie w of th e rec ord a

nd wi th t hebe ne fit o f oralargum ent, we RE VER SE AND REMA

ND. I. FACT UAL AND PR OCE DURAL HI STO RY A. Fac ts. The fac ts o f thi s c as e are und isp ute d. Sil ve rhunt Ass oc iate s, Lt d.

Honora ble Donald E. Walter, United States District J udg e for the Western District of * L ouisiana, sitting by

designation. 2 Case: 13-15799 Date Filed: 03/17/2015 Page: 2 of 14(“ Silve rhunt ”) l ea se d Flori da prope rty to Ne w York C om

m uni ty Ba nc orp, Inc
. (“NYC B” ). NYC B o pe rat ed a ba nk o n th e le as ed

prope rty . Thele as e requ ire d NYC B t o m ainta in l ia

bil ity ins uran ceof at l ea st $ 1 mill ion pe r oc cu rrenc e on t

he premise s a

nd t o li st Si lve rhunt

a s a n a ddi tio na l i nsure d (“ AI”) un de r NYC B’ s ins uran cepol ic y . Thele as e al so c ont ai ne d a n in de m nific at ion provi sio n in

whi ch NYC B agree d to de fend

and h old Silv erhu nt h armle ss a ga ins t pe rsona l i nju ry cl ai m s a risi ng from

oc cu rrenc es on t

he le as ed pre m ise s. On eB ea co n is sue d a n ins uran cepol ic y

to NYC B, provi din g $1 m ill ion pe r oc cu rrenc e prim ary

li m its and $20 m ill ion

e xc es s li mits . Silv erhu

nt w as li ste d a s a

n AI in theOne Be ac on p oli cy , whic h wa s e xe cute d, i ssu ed , a nd d el ive red in N ewYork. Sepa rat el y , Nov a ins ured Silve rhunt

und er a ge ne ralli ab ili ty

pol ic y , provi din g $1 m ill ion pe r oc cu rrenc e prim ary li m its and $ 4 mill ion

e xc es s li m its
. Trag ic al ly , a

n a rm ed robbe ry at t he ba nk l eft a ba nk p at ron, M ic ha el Mc Qua de (“ Mc Qua de ”), p ara lyze d a fte r be ingsho t. M cQ ua de sue d Sil ve rhunt and NYC B in Flori da

sta te c ourt. Nova

steppe d in

to de fend Silv erhu nt a ga ins t Mc Qua de ’s sui t a

nd re que ste d th at

One Be ac on d efe nd a

nd i nde m nify Silv erhu nt pursu ant t o th e AI cl au se of th e NYC B l ia bil ity pol ic y . One Be ac on d ec lin ed , ba se d up on i ts b el ie f tha

t un de r the c irc um sta

nc es of th e ca se and t

hete rm s of t

he
co ntra ct , it

wa s no t re qui red to d efe nd Sil ve rhunt . Nov a subs eq ue ntl y req ue ste d that On eB ea co n pa

rtic ipate in the se ttl em ent of M cQ ua de ’s c la im a ga ins t 3 Case: 13-15799 Date Filed: 03/17/2015 Page: 3 of 14Silve rhunt , but a ga in, One Be ac on re fuse d. Whil e One Be ac on’ s $1 m ill ion prim ary li m its we re s til l a

va ila ble , Nov a se ttl ed Mc Qua de ’s a ct ion

a ga ins t Sil ve rhunt

for $1.5 m ill ion . One Be ac on d id n ot pa rtic ipa te in or c ont

ribut e to t he se ttl em ent. A fte r Nova se ttl ed Mc Qua de ’s c la im ag ai nst Silv erhu nt, One Be ac on s et

tle d M cQ ua de ’s a ct ion

a ga ins t NYC B fo r an undi sc los ed

am ount , whi ch

wa s in e xc es s of i ts p rim ary

li m its . Ac co rding ly , th e prim ary li m its of th e One Be ac on p oli cy are n ow e xha

ust ed
. B. Re le vant Pr oc edur al H istory. Nova file d su it in d ist

ric t c ourt, se ekinga

de cl aratory

judgm ent t

hat One Be ac on h ad

a dut y to de fend and i nde m

nify Silv erhu nt. Nova a lso c la im ed

a right to eq uit ab le sub rogatio n, ba se d on it s se ttl em ent wi th M cQ ua de . One Be ac on file d a c ount erc la im

se ekinga de cl ara tory jud gm ent t

hat i t ha d no dut

y to de fend or ind em nify Silv erhu nt in th e Mc Qua de li tig at ion
. Follo wingc ross-m oti ons for sum m ary jud gm ent, t

he dis tric t c ourt, ap ply ing Ne w York l aw , he ld t

hat On eB ea co n, a s th e prim ary ins urer, b rea ch ed

it s duty to de fend and i nde m

nify Silv erhu nt i n th e Mc Qua deli tig at ion . How ev er, t he c ourt al so c onc lud ed

tha t, wi th O ne Be ac on’ s $1 mill ion pol ic y e xha ust ed on b eh al f of NYC B, Nova

wa s no t e nti tle d to dam ag es in the a bse nc e of proof o f ba d fa ith
. Nova file d th e ins ta

nt a ppe al . One Be ac on did n ot c ross-a ppe alany of th e iss ue s de ci de d a dve rse ly

to its pos iti on. 4 Case: 13-15799 Date Filed: 03/17/2015 Page: 4 of 14II. STANDA RD O F RE V IE W

W e revi ew

de nov o th e dis tric t c ourt’ s de te rm inatio n of s um m ary jud gm ent. See Ja m es Ri ve r Ins. C o. v. Ground Down Eng’ g, Inc . 540 F.3d 1 270, 127 4 (11t h Ci r. 2008 ). The int erpre ta tio n of pro vis ion s in

a n in sura nc e pol ic y

is a que sti on o f la w, whi ch is revi ew ed

de nov o. Se e id. III . DISCUSSIO N A. Choic e of L aw. The first que sti on i s whe the r Florida or Ne w York l aw

sho uld a ppl y in de te rm ini ng t

he rem ed ie s a

va ila ble for a brea ch

of c ont rac t a ct ion . In a

div ers ity
ac tio n, we a

ppl y thesub sta

nti ve la w of th e forum

sta te , Flori da , in cludi ng i ts
co nflic t of l aw s rul es . Se e Fiore ttiv. M as s. Ge n. Li fe Ins . C o., 5 3 F.3d 1228 , 123 5 (11th Cir. 1995 ). The Florid a Suprem e Co urt ha s a dopt ed thedoc trineof le

x loc i
co ntr ac tus for co nflic t of l aw s qu es tio ns i n c ont rac ts. Seeid. ; Sta

te Farm Mut. Auto . Ins. Co . v. Roa ch , 945 So. 2d 116 0, 11 63 (Fla . 200 6). “ The doc trineof le x loc i c ont rac tus dire ct s th at , in

thea bse nc e of a

c ont rac tua l prov isi on s pe ci fy ingthe gove rningla

w, a c ont rac t (ot he r tha n on e for the pe rform an ceof se rvic es ) is gove rned by thela w of th e sta

te in whic h th e co ntra ct

is m ad e . . . . ” Fiore tti , 53 F.3d at 12 35. Howe ve r, iss ue s re ga rdingthem anne r an d m ea ns o f pe rform an ceof thec ont rac t a re d et ermine d by

thela w of th e pla ceof pe rform an ce . Se e Gov’ t Em p. Ins . C o. v. Ground s, 33 2 So. 2 d 13 , 14-15 (Fla. 197 6). He re, t he dis tric t 5 Case: 13-15799 Date Filed: 03/17/2015 Page: 5 of 14co urt pro pe rly a ppl ie d Ne w York l awto al l c ont rac t i nte rpret at ion

iss ue s, fin din g, as pre vio usl y

dis cu sse d, t

hat On eB ea co n owe d Sil ve rhunt a dut y to de fend and ind em nify it and a lso tha

t, b y fai lin g to a ct , One Be ac on b rea ch ed thedut y it owe d to Si lve rhunt
. W e m ust ne xt a sc ert ai n th e nature of Nov a’ s a ct ion a ga ins t On eB ea co n in orde r to d et erminewhi ch

sta te ’s la w gov erns therem ed ie s a va ila ble to Nova

in light o f the bre ac h. No va ’s a ction a ga ins t On eB ea co n is ba se d on One Be ac on’ s pe rform an ce , or la ck

the reof, u

nde r the c ont

rac t. Unde r the c onfli ct

of la ws an al y sis , th is i s a

n is sue inv olv ingthem anne r an d m ea ns o f pe rform an ce . He re, fac tors rel at ingto thepe rform an ceof th e co ntra ct , in cludi ng t heloc at ion

of th e prope rty , th e tort, and t

he juri sdi ct ion

in whic h th e Mc Qua de sui t wa s brou ght and not de fend ed , a

re a ll ground ed

in Florid a. SeeGround s, 33 2 So. 2 d a t 14 -15; Adam s v. Fid. & Ca s. C o. of N. Y., 92 0 F.2d 897, 899 n.5 (11th Ci r. 1991 ) (noti ng that i n a ba d fa ith fai lure to se ttl e ca

use of a ct ion , Flori da

la w a ppl ie d to que sti ons rega rdingtheins urer's pe rform an ceund er t he c ont rac t a nd t he rem ed ie s a

va ila ble for non-pe rform an ce ). Ac co rding ly , Flori da la w gov erns Nova ’s e nti tle m ent t o an d th e exte nt o f reli ef a

va ila bleund er i ts e qui ta

ble sub rogatio n th eo ry . The dis tric t c ourt e rred i n a

ppl y ingNe w York l aw . B. Equitabl e Subrogati on . Equi ta blesub rogatio n “ is a

n e qui ta ble rem ed y roote d in thele ga l 6 Case: 13-15799 Date Filed: 03/17/2015 Page: 6 of 14co nse que nc e of thea ct ion s a nd re latio nship be twe en

thepa rtie s.”C olum

bia Ba nk v. Tu rbev ill e, 143 So. 3d

964 , 968 (Fla. 1st

Dis t. C t. Ap p. 20 14). T he rat ion al e unde rly ingthedoc trineof e qui ta blesub rogatio n is “ to p reve nt u nju st e nric hm ent by a ssu ring t hat t he pe rson who i n e qui ty

a nd g ood co nsc ie nc e is re spon sib le for thedebt i s ul tim at el y

answe rabl e for its dis ch arge .” Id. “ The doc trinepla ce s on e pa rty int o th e shoe s of a

not he r so t hat t he sub sti tut ingpa

rty ret ai ns t he right s, rem ed ie s, or s ec uriti es tha t wo uld oth erwi se be lon g to theorigi na l pa rty .” Id. (inte rnalm arks omitt ed). In th e ins uran cec ont ext, e qui ta ble sub rogatio n e nsure s that t he “prim ary

ins urer i s he ld re spon sib le to the e xc es s in sure r for im prope r fai lure to se ttl e, sin cethepos iti on o f the latte r is a na log ous to t

hat of t he ins ured whe n on ly

one ins urer i s invol ve d.” Pere ra v . U.S. Fid . a nd Gu ar. C o., 3 5 So. 3 d 893, 900 (Fla. 201 0) (int erna l m arks omitt ed). The iss ue be fore u s is , und er a the ory of e qui ta ble sub rogatio n, wh at , if
anythi ng, c an

Nova rec ove r from

One Be ac on wh en

One Be ac on e xha

ust ed it s pol ic y li m its for an oth er i nsure d a fte r refusi ng t o de fend a nd s et tleon Si lve rhunt ’s be ha lf. As ke d a

not he r way , if On eB ea co n bre ac he d it s du ty to de fend and ind em nify be fore s et

tli ng M cQ ua de ’s sui t a ga ins t NYC B, ca n it s se ttl em ent for t

he limits of it s po lic y

a bsol ve it of a ny res pons ibi lit

y to Silve rhunt ? Our a

nswe r is n o. Allins urers are e xpe ct ed

to pe rform

in good fai th whe n ha

ndl ingc la im s ag ai nst the ir in sure ds. A s th e Florid a Suprem e Co urt ha s a rtic ulate d, “whe n a

n 7 Case: 13-15799 Date Filed: 03/17/2015 Page: 7 of 14ins urer i s ha ndl ingc la im s a ga ins t i ts i nsure d, i t ha s a dut y to use thesa

m e de gree of c are and d ili ge nc e as a pe rson o f ordin ary

c are and p rude nc e shou ld e xe rci se in them an ag em ent of h is o wn bu sin es s.” Id. at 89 8 (int ernal m arks omitt ed). An ins urer’ s good fai th d uty obl iga te s th e ins urer t o a dvi se theins ured of se ttl em ent op portu

nit ie s, t o a dvi se a s to theproba ble out co m e of the lit igatio n, t o wa

rn of th e poss ibi lit

y of a n e xc es s ju dgm ent, a

nd t o ad vis e theins ured

of a ny steps h e m ight t ak e to a

voi d sa m e. The ins urer m ust inv es tig at e thefac ts, giv e fai r co nsi de rat ion to a se ttl em ent offe r that i s no t unrea sona ble und er t

he fac ts, an d se ttl e, if poss ibl e, whe re a

rea sona bly prude nt p ers on, fa ce d wi th t heprosp ec t of pa y ingthetot alrec ove ry , wou ld d o so . B ec au se thedut y of goo d fai th i nvol ve s di lig en ceand c are in the inv es tig at ion and e va luatio n of thec la im a ga ins t t he ins ured , ne gli ge nc e is re le va nt t o th e que sti on o f good fai th. Bo sto n Ol d C olo ny

Ins. C o. v. Gutie rrez , 386 So. 2d 783 , 785 (Fla. 198 0) (ci tatio ns om itt ed). If an

ins uran cec om

pa ny ha s m ore tha

n on e ins ured , it

owe s a dut y to ac t in g ood fai th t owa

rds bo th o r al l of i ts i nsure ds. See Co ntre ras v. U. S. Sec . Ins. Co ., 92 7 So. 2 d 16 , 21 (Fla. 4th Dis t. C t. Ap p. 20 06). In Florid a, a

n in sure r m ay

e xha ust pol ic y li m its by se ttl ingwit

h on e ins ured
ev en if do ingso l ea

ve s th e oth er i nsure d e xpos ed , so lon g a s th es e ne got iatio ns a re co nduc te d in

goo d fa ith . Th e ca se s in whi ch the se sc en ari os h av e pla

y ed out inv ari ab ly have inv olv ed

voc alc la im ants who o ffer to se ttl e wit h on e ins ured , y et refus e to s et

tlewit h a not he r (whosec ondu ct

is ofte nti m es m ore egregi ous tha n th e se ttl ingins ured). Alt

hough th e “ ins urer m

ust be gin by se ekingto prote ct

bot h 8 Case: 13-15799 Date Filed: 03/17/2015 Page: 8 of 14ins ured s,” . . . “ [i] t i s th e cl ai m ant’ s re fusa l t o e nte r a g lob alrel ea se tha t t rigge rs th e ins urer’ s duty

to ree va luate it s a

pproa ch to the de fens e . . . . ” Ade ga v. Sta te Farm Fire a nd C as . Ins. Co ., 20 09 WL 338 7689 , *6 (S.D. Fla . Oc t. 1 6, 20 09). Rel y ing on t he latte r prec ep t, On eB ea co n c ont en ds t hat i t wa s wi thi n it s rights in se ttl ingon be ha lf of NYC B, ev en

if do ingso l eft

Silv erhu nt e xpos ed

to a jud gm ent. One Be ac on i gnore s a

c riti ca l fa ct : i t ne ve r sought t o prot ec t bo th o f its ins ured s. Inste ad , it utt erl y ign ored Silv erhu nt, by dis rega rdingit s du

ty to de fend Silv erhu nt in t he Mc Qua de li tig at ion
. None the le ss, be ca

use Florid a la

w im pose s on an in sure r the dut

y to ac t i n good fai th, One Be ac on s ubmits tha t No va m ust e sta bli sh t hat i t a ct ed

in ba d fa ith in o rder t o re co ve r dam ag es in ex ce ss o f the pol ic y li m its . Whil e we are n ot pe rsua de d by

One Be ac on’ s a

rgum ents o n th at

iss ue , we a ck

nowl ed getha

t Flo rida juris prude nc e is, at

ti m es , di sc orda

nt. Co m pa re Ern ieHa ire Ford, Inc . v. Univ ers al Unde rwrite rs Ins. Co ., 33 1 F. App ’x640 , 647 (11th Ci r. 2009 ) (rec ogni zi ng t hat brea ch of c ont rac t c la im s m ay

li e “ ev en in circum sta

nc es in whic h th e pla int iff ha s not or c oul d no t a sse rt a

ba d fa ith c la im .” ), Hartford Ins. Co . v. M ai nst rea m Co nst r. Group, Inc. , 864 So. 2d

127 0, 12 71 (Fla . 5t

h Di st. Ct . App . 200 4) (co nc lud ingtha t ba d fa ith c la im s a ga ins t a

n in sure r “ m ay

onl y bebrought a fte r co ve rageand
co ntra ct ua l i ssu es be twe en

theins ured

and t he ins urer a

re re sol ve d . . . .” ), Ca rrouse l C onc es sio ns, In c. v. Flo rida Ins. Gua r. Ass’ n, 48 3 So. 2 d 51 3, 51 6 (Fla
. 9 Case: 13-15799 Date Filed: 03/17/2015 Page: 9 of 143d Di st. Ct . App . 198 6) (findi ng t hat bre ac h “ ca

n be de te rm ine d ob

je ct ive ly from theins uran cec ont

rac t i tse lf wit

hout inq uiry int o whe the r the ins urer a ct ed in good fai th o r ba d fa ith ”), C al dwe ll v. Al lst at e Ins. C o., 4 53 So. 2d 1 187, 119 0-91 (Fla
. 1st Dis t. C t. Ap p. 19 84) (da

m ag es in ex ce ss o f poli cy li m its m ay

be ava ila ble for brea ch of c ont rac t, e ve n wi tho ut p roof of ba d fa ith ), an d St. Pa ul Fi re &Ma

rine Ins. C o. v. Thom as , 273 So. 2d 117 , 121 (Fla. 4th

Dis t. C t. Ap p. 19 73) (in sure r he ld l ia blefor ex ce ss o ve r poli cy li m its be ca

use it wa s li ab le for al l da

m ag es flowi ng from

bre ac h of c ont

rac t), wi th Unde rwrite rs Gua rant eeIns. C o. v. Natio nwid e Mut . Fire Ins. C o., 5 78 So. 2d 3 4, 36 (Fla. 4th Dis t. C t. Ap p. 19 91) (cou rt st at ed in dic ta tha t ba d fa ith

a lle gatio ns, i f the y

e xis t, m ust be sta te d in the
co m pla int), an d St. Pa

ul Fi re a nd M ari ne Ins. C o. v. Le xin gto n Ins. Co ., 20 06 WL 1295 408, *8 n .13 (S.D. Fl a. Apr. 4, 200 6) (al lowi ng p la int iff le av e to a m en d to
res tore it s pre vio usl y

lod ge d ba d fa ith

c la im s un de r eq

uit ab le sub rogatio n th eo ry but not sta tin g th at ba d fa ith a lle gatio ns we re n ec es sa

ry to rec ove ry

of da m ag es ). Florid a’ s Se co nd Di stri ct

Co urt of Appe alspo ke at l en gth a bout thi s is sue in Thom as v. W . W orld In s. C o., wh ere in i t firmly c onc lud ed

tha t ba d fa ith

is not a prere qui sit e to re co ve ry

of e xc es s da

m ag es : In thec as e be fore u s, t

he re i s no thre shol d qu es tio n of “ good fai th” vs. “ba d fa ith .” For he re, t

he c om pa ny e xe rci se d no fai th a

t a ll. It s im

ply wrongful ly

refus ed to co m ply wit h it s c ont rac t t o prov ide a

de fens e on be ha lf of i ts i nsure ds. If that bre ac h by ins urer c au se d fore se ea

ble dam ag es to be a sse sse d a ga ins t i ts i nsure ds, t o th at e xte nt t he ins urer 10 Case: 13-15799 Date Filed: 03/17/2015 Page: 10 of 14shou ld b e he ld l ia ble
.

. . . An i nsure r whic h de nie s c ove ragedoe s so at i ts o wn ris k. Th is h as be en he ld t o betrue e ve n whe re s uc h de nia l i s on a mist ak en but hone st b el ie f that c ove ragedid not e xis t. It se em s on ly

fai r that a

n ins urer wh ose c ont

rac ts a re b y the ir ve ry

nature “ ad

he siv e”sho uld

be he ld t o at l ea st t

he sa m e sta nda rd of da m ag es a ppl ic ab leto oth er co ntra ct ingpa

rtie s. On e purc ha sin g c ove ragesho uld be a ble to rel y upon thi s. An ins urer a t l ea st i m pli ed ly rep res ents i t wi ll be res pons ibl e for dam ag es if it fai ls t o prov ide thec ont

rac te d for co ve rageand d efe nse . Thec onc ep t of “ba d fa ith ” is a via ble and use ful t es t for de te rm ini ng d am ag es a ga ins t a n in sura nc e co m pa ny wit hin thec ont ext of s et

tle m ent ne got iatio ns a

nd d efe nseof c la im s ag ai nst it s in sure ds. But, e m

plo ym ent of t

he te st p res uppo se s th e co m pa ny is at te m pti ng t o e xc iseski ll, jud gm ent a nd fid el ity

on t he ir be ha lf. Thom as , 343 So. 2d

129 8, 13 04 (Fla . 2d Dist . C t. Ap p. 19 77) (inte rnalc ita tio ns om itt ed). In theins ta

nt c as e, we ne ed

not de ci de whe the r, as a

m at te r of Florid a la

w, ba d fa ith is a prere qui sit e to N ova ’s c la im , be ca usea ba d fa ith req uire m ent, i f one
ev en e xis ts, wa s no t t

rigge red unde r the fac ts o f thi s c as e. One Be ac on wa s Silve rhunt ’s prim ary

ins urer, whil e Nova

wa s th e ex ce ss i nsure r. One Be ac on’ s prim ary c ove rageatta ch ed

im m ed iate ly upo n th e ha

ppe nin g of a

n e ve nt t rigge ring lia bil ity , whe rea s Nov a’ s e xc es s c ove rageatta ch ed onl y a fte r a p rede te rm ine d
am ount of prim ary

c ove ragewa s e xha

ust ed . Se e Le xin gto n, 20 06 WL at *4 (ci tin g Kingv. Gu ara

nty Na t’ l Ins . C o., 4 40 So. 2d 6 07 (Fla . 3d Dist . C t. Ap p. 19 83)). As theprim ary

ins urer, O ne Be ac on wa s re spon sib le for Silv erhu nt’ s se ttl em ent wi th
11 Case: 13-15799 Date Filed: 03/17/2015 Page: 11 of 14Mc Qua de , up to t he li m its of it s $1 m ill ion pol ic y . Se e TowneRe al ty , Inc . v. Safe co Ins. C o. of Am ., 85 4 F.2d 1264 , 126 8 (11t h C ir. 19 88); s eea lso Ae tna Ca s. & Sur. C o. v. Ch ic ag o Ins. Co ., 99 4 F.2d 1254 , 125 8 (7th Cir. 1993 ) (“ [C] ourts wil l a llo w th e exha

ust ion of th e prim ary

la y er o f ins uran cebe fore t

urnin g to the
ex ce ss.” ). As t

he e xc es s in sure r, Nova ’s c ove ragewa s no t a ctivate d untila fte r the first $ 1 mill ion

wa s pa id b y

One Be ac on’ s po lic y . De spi te One Be ac on’ s a

rgum ents t o th e co ntra

ry , we are n ot c onvi nc ed

tha t One Be ac on c annot

be he ld l ia

blefor the$1 mill ion

se ttl em ent si m

ply be ca use it ha d a lre ad

y e xpe nde d it s po lic y

li m its whe n it

se ttl ed Mc Qua de ’s sui t a ga ins t NYC B. Be ca

use dam ag es for a brea ch of c ont rac t a re m ea sure d a s of t

he date of thebre ac h, se e Grossm an Hol din gs L td. v. Ho uriha n, 41 4 So. 2 d 10 37, 1 040 (Fla. 1982 ), Nova ’s dam ag es a ga ins t On eB ea co n a re m ea sure d from

thedate tha

t One Be ac on re fuse d to de fend Silv erhu nt, an d Nov a, force d to und ert ak e the obl iga tio ns o f theprim ary

ins urer, s et

tle d th e ca se for $1.5 m ill ion . C riti ca lly , whe n Nov a se ttl ed

theMc Qua dea ct ion

on b eh al f of Silv erhu

nt, One Be ac on’ s $1
m ill ion pol ic y wa s inta ct

and a va ila ble . He nc e, e ve n th ough

One Be ac on subs eq ue ntl y e xha ust ed it s pri m ary

li m its , th e brea ch

a nd t he dam ag es are m ea sure d at a

poi nt i n ti m e be fore t

hat m one y

wa s sp ent. On eB ea co n’ s su bse que nt
exha ust ion of it s po lic y

li m its doe s no t e xc useit s e arl ie r brea ch , nor d o it s own errone ous ac ts i nure to its be ne fit b y a bsol vin g it

of li ab ili ty . One Be ac on c annot 12 Case: 13-15799 Date Filed: 03/17/2015 Page: 12 of 14uni la

te ral ly c reatean “ ex ce ss p oli cy ” ca se a nd t he n e va deli ab ili ty

by c om pla ini ng that i t e xha

ust ed it s pri m ary

li m its . “ Whe n a

n in sure r ha s a

dut y to de fend the ins ured , th ere sho uld

be no re ward to the ins urer for b rea ch ingtha t duty .” C ont ’l Ca s. C o. v. Uni te d Pa c. Ins. C o., 6 37 So. 2d 2 70, 2 78 (Fla . 5t h Di st. Ct . App . 199 4) (ci tatio ns o m itt ed) (disc uss ingc ont ribut ion for a sha re o f the c ost

of de fens e). Alt hough One Be ac on wa s pe rm itt ed to co nduc t a

tho rough inv es tig at ion

to de te rm inewhe the r the re wa s c ove rageund er i ts p oli cy , th e la w pl ai nly provi de s that “the c om

pa ny a ct s at i ts p eri l i n re fusin g to de fend it s in sure d a

nd wi ll be he ld
res pons ibl e for the c onse que nc es .” Flori da Farm Bu rea u Mut. Ins. C o. v. Ri ce , 393 So. 2d 552, 556 (Fla. 1st

Dis t. C t. Ap p. 19 80); E rnie Ha ireFord, Inc ., 33 1 F. App’ x at 64 7 (sa

m e); Ca rrouse l C onc es sio ns, In c. , 483 So. 2d at 51 6 (“ If the ins urer b rea ch es it s duty

to de fend , it -- likeany

oth er p art

y who fai ls t o pe rform

it s co ntra ct ua l ob lig at ion s-- be co m es li ab lefor al l da m ag es natura lly

flowi ng from

the brea ch .” ). Inde ed , whe n it is “ subs eq

ue ntl y de te rm ine d th at

thec om pa ny errone ousl y

de nie d c ove rage , th e co m pa ny wil l beli ab lefor dam ag es for bre ac h of its a gree m ent,” C al dwe ll, 453 So. 2d at 11 91, e ve n if i ts mist ak e wa s a n ho ne st
one . Se e Thom as , 343 So. 2d at 13 04; St. Pa

ul Fi re & Ma

rine Ins. C o., 2 73 So. 2d at 121 -22. On eB ea co n c hoseit s c ourse of a ct ion wit h fullkno wle dge of th e fac t that Silve rhunt

wa s lo oki ng t o One Be ac on for c ove rage . Se e Am . Fid. Fire In s. Co . v. J ohns on, 1 77 So. 2d 6 79, 683 (Fla. 1st Dis t. C t. Ap p. 19 65) (“ Havin g 13 Case: 13-15799 Date Filed: 03/17/2015 Page: 13 of 14ch ose n to step a sid e, Am eri ca n Fide lit y c annot now rec ei vethebe ne fit o f any diffe rent c ourse it m ight ha vepursu ed

ha d it ta ke n c om m an d of t heli tig at ion .” ). One Be ac on’ s st ea dfas t re fusa l t o de fend Silv erhu nt b as ed on i ts e rroneo us b el ie f,
ev en if ho ne stl y

he ld, that Silve rhunt

wa s no t c ove red unde r its pol ic y wa s at i ts

“pe ril.”Ric e, 393 So. 2d

556 . As the Sev enth C irc uit ha s e xpl ai ne d, “ it is a

ba d ide a to i nform

ins uran cec arrie rs th at

whi ch ev er i s le as t fa ith ful t o it s ob lig ation to theins ured

wil l e sc ap e al l l ia

bil ity a s lo ng a s a

res pons ibl e ca

rrier c ove rs th e los s.” W . C as . & Suret

y Co . v. W . W orld In s. C o., Inc ., 76 9 F.2d 381, 383 (7th Ci r. 1985 ). The burde n of fun din g $1 m ill ion of th e Silve rhunt -Mc Qua de se ttl em ent fal ls s qua rel y on O ne Be ac on’ s sh oul de rs. IV . CON CLU SION For the foreg oin g re as ons, we REVERSE thedis tric t c ourt’ s ju dgm ent a s to thede te rm ina

tio n of da m ag es and REMAND for furthe r proc ee din gs, c onsi ste nt wit h th is o pin ion
.

14

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