Source: https://insuranceclaimsbadfaith.typepad.com/insurance_claims_badfaith/additional_insureds/
Timestamp: 2019-04-25 11:54:45+00:00

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Remand in Florida: You Can't Argue Fraudulent Joinder Without Fraud.
In Taylor v. Admiral Insurance Co., 2012 WL 3113909 (S.D. Fla. July 31, 2012), Coverage and Bad Faith denial were alleged by an assignee of Miami-Dade County against an Excess and Surplus Lines Insurer. The basis of the claim is Miami-Dade's reliance on a Certificate of Insurance. The Carrier contended that Brown & Brown, a Florida corporation which issued the Certificate, was not authorized to issue a Certificate for Coverage with the Carrier. Taylor v. Admiral Ins. Co., 2012 WL 3113909 *1 (S.D. Fla. July 31, 2012).
The lawsuit was originally filed in Florida State Court in Miami. The Carrier, Admiral, was the sole Defendant. Admiral had previously issued a General Liability Insurance Policy to the host of an "event" in Miami-Dade County. Admiral was sued for alleged breach of contract, common law bad faith, and statutory bad faith for its denial of Miami-Dade County's request to Admiral "to defend and indemnify it". Miami-Dade County asserted that it was Admiral's Additional Insured. After the assignee was severely injured from a fall at the "event," she sued both Miami-Dade County and the host (Admiral's Policyholder) for damages. Taylor v. Admiral Ins. Co., 2012 WL 3113909 *1 (S.D. Fla. July 31, 2012).
Admiral removed the case to Federal Court. There, the Plaintiff successfully requested leave to amend the complaint and in it added a Defendant and two claims. The added Defendant is Brown & Brown. Adding Brown & Brown, a Florida corporation and a Florida resident for purposes of Diversity Jurisdiction, had the effect of destroying Federal Diversity Jurisdiction since both the Plaintiff and Brown are Florida residents.
Brown & Brown filed a Motion to Remand accordingly. Admiral opposed the motion essentially on the ground of fraudulent joinder, without arguing fraud. Instead, Admiral argued that Brown should be dropped as a party. Taylor v. Admiral Ins. Co., 2012 WL 3113909 *2 (S.D. Fla. July 31, 2012).
The District Court granted the Motion to Remand. In so ruling, the Court expressly declined to grant a rehearing on its prior ruling giving the Plaintiff leave to amend the Complaint to add Brown (and also to add one claim of "ratification" against Admiral while also alleging one claim of fraud against Brown & Brown). The District Judge politely wrote: "I decline Admiral's offer to reconsider my initial decision permitting the joinder of Brown & Brown, and drop Brown & Brown as a party." Taylor v. Admiral Ins. Co., 2012 WL 3113909 *2 (S.D. Fla. July 31, 2012).
There being no diversity upon which to any longer base Diversity Jurisdiction in this case, the case was accordingly remanded to the Florida State Court.
Fiduciary Disclosure, Standards Underpin S.E.C. Anti-Fraud Claims Against Goldman.
The Securities and Exchange Commission has filed a Civil Suit alleging Fraud against Goldman Sachs and one of its Officers, one Fabrice Tourre. Download S.E.C. v. Goldman Sachs and Fabrice Tourre (S.D.N.Y. Case No. 10 Civ. 3229 Complaint Filed 04.16.10). Here is the SEC's Press Release describing its Complaint: Download Press Release.041610.SEC Charges Goldman, Sachs With Fraud in Connection With the Structuring and Marketing of a Synthetic CDO.
The filing of this lawsuit has set off a tremendous number of newspaper reports from Coast to Coast, and across the world, every day since Friday when the SEC filed its lawsuit, down through the morning of this post. E.g., Joshua Gallu & Christine Harper, "Goldman Sachs Sued by SEC for Fraud Tied to CDOs (Update 4)" (Bloomberg.com, Friday, April 16, 2010); Walter Hamilton & Nathaniel Popper, "SEC Targets Goldman Sachs With Fraud Suit" (latimes.com, Saturday, April 17, 2010); Gretchen Morgenson and Landon Thomas, Jr., "A Glare on Goldman, From U.S. and Beyond" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Monday, April 19, 2010); Aline van Duyn, "Regulator's Move Risks Opening Lawsuit Floodgates" (FT.com, Sunday, April 18, 2010).
The SEC's lawsuit is not based on the inherent characteristics or the very nature of Collateralized Debt Obligations (CDOs). It is based instead on a Claim of Fraud in the use of a CDO. The CDO involved in the SEC's Lawsuit was called Abacus. Goldman Sachs allegedly invented it and invited people, for a premium, to invest in it. It was allegedly devised for the purpose of failure. A billionaire client of Goldman Sachs selected the investment securities (tied to subprime mortgages) that would go into Abacus. He then bet against the securities that he selected. And made more billions. The Abacus investors allegedly did not know that Goldman's client selected the securities which Goldman invited them to invest in; in fact, allegedly Goldman told the Abacus investors that an impartial/disinterested third party selected the securities.
After Goldman's client selected the subprime mortgage securities to be placed inside the Abacus CDO, Goldman arranged for its billionaire client to insure them with Credit Default Swaps (CDSs), or credit insurance policies, which is how the client bet against the securities that the client selected. Goldman Sachs allegedly also received a Premium for this form of Credit Insurance. The insurers? AIG and parties still unknown, but perhaps not unknown for much longer. Simply put, when Abacus failed, Goldman's billionaire client received more billions from the payout of the Credit Default Swaps.
Thus, the SEC lawsuit is underpinned by Fiduciary Standards of liability and behavior, i.e., Full Disclosure and No Self-Dealing. Timely concepts for the SEC and other Regulators to enforce. When those and similar Fiduciary Duties are not enforced, a Great Collapse is the present result -- and will be again if behaviors are not changed.
A post on the SEC Lawsuit and Fiduciary Duties is on the Insurance Claims and Issues Blog of Sunday, April 18, 2010.
Before passing on to other recent cases involving a Reasonable Expectations Doctrine, several other rulings under Arizona law were made in this important new decision. The Madsen case involved claims involving alleged First Party Bad Faith and Coverage. The Plaintiff in that case, Ms. Jacqueline Madsen, "claims she was an additional insured under a nonrenewable Short Term Medical Policy" issued by Fortis. (Id. at *1.) The Federal Judge reiterated Arizona law (id. at *9), and entered Summary Judgment for the First Party Insurance Company in that case because of the Court's ruling that the Arizona Reasonable Expectations Doctrine required a jury determination of fact which, in the Federal Judge's view, clearly supported a determination that the Defendant acted reasonably and not in Bad Faith. Further, something more was required to support Ms. Madsen's claim for Punitive Damages than even a showing of First Party Bad Faith. "The something more that must be shown is evidence that Fortis was aware of and consciously disregarded a substantial and unjustified risk that significant harm would occur." (Id. at *10.) "Accordingly," said the Federal Judge, the ruling that the Plaintiff's First Party Bad Faith Claim in that case "fails as a matter of law" means that Summary Judgment is also granted in favor of Fortis in that case "on the punitive damages claim."
The clear lesson of these new decisions is an old lesson of caution: Care must be taken to understand the Insurance Law of the place where the Insurance Policy is at issue and will be interpreted.
REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
The More, the Merrier ... But What Does the Policy Say?
(1) Will Courts applying Florida Insurance Law hold that a Liability Insurance Policy is "ambiguous" if that policy includes as a covered person "'any other person with respect to liability because of acts or omissions' of the insured"?
(2) Will Courts applying Florida Insurance Law hold that a Liability Insurance Policy is limited to otherwise extending Coverage ONLY to where the additional insured is "vicariously liable" where the Liability Policy extends Coverage to additional insureds "'with respect to liability because of acts or omissions' of the named insured"?
Here is a link to the Eleventh Circuit's questions in Maria Garcia v. Federal Insurance Co. (11th Cir. Opinion No. 05-14720, Questions Certified December 26, 2006).
In Florida, the answers to questions about whether a person or entity is an "additional insured" often depend on the Insurance Policy language and on whether, under substantive law, the putative "additional insured" is actually or potentially vicariously liable for the conduct of the Named Insured, in basic terms.
In Garcia, the Federal Trial Judge dismissed Ms. Garcia's lawsuit against Federal Insurance Company on these facts reported by the Eleventh Circuit on December 26, 2006, above. The issues are not unfamiliar to many in Florida and in the United States outside of Florida.
As reported by the Eleventh Circuit, Federal issued a Homeowners Policy that insured one Laura Anderson. "Maria Garcia worked as a caregiver for Laura Anderson," and Ms. Garcia "served as a housekeeper and also ran errands" for Ms. Anderson in a used Volvo owned by a member of Ms. Anderson's family. Slipsheet Opinion at 2. Ms. Garcia had an accident with the Volvo in which the car struck one Gail Archer, "causing serious injuries." Ms. Archer sued Ms. Anderson and Ms. Garcia, among others. The Archer complaint alleged that Anderson was vicariously liable for Garcia's actions and omissions, but the claim of Anderson's vicarious liability does not appear to have been at issue for Insurance Coverage.
What was at issue for Insurance Coverage was Ms. Archer's claim that Ms. Anderson and Ms. Garcia "negligently failed to maintain the car". Slipsheet at 3. Federal Insurance Company settled all claims against its Named Insured, Ms. Anderson, but denied any Coverage under the Anderson Homeowner's Policy for the claims alleged against Ms. Garcia. "Garcia settled Archer's claim for $7,000,000" and filed suit against Federal for Coverage under Ms. Anderson's Homeowner's Policy issued by Federal. Id.
Perhaps particularly appropriate in this certification, but actually a standard part of the Eleventh Circuit's practice when certifying Florida State Law questions to the Supreme Court of Florida, the Eleventh Circuit openly stated that it did not mean to restrict, "in any way," the Florida Supreme Court's answer to the Eleventh Circuit's questions. The Eleventh Circuit further broadly stated that "the questions posed are just a guide." Slipsheet at 12.
It will be interesting to see what, if any, response the Supreme Court of Florida has to the additional insured issues presented to it by the case of Maria Garcia v. Federal Insurance Co., linked above.
Until then, best wishes to all for a Happy New Year!

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