Opinion ID: 3045818
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Heading Rank: 1

Heading: Florida’s Workers’ Compensation Act

Text: The right of an injured employee to recover from his employer for an injury sustained in the course of his employment is governed by Florida’s Workers’ Compensation Act. See Fla. Stat. § 440.015. Under the no-fault system created by the Act, “the employee gives up a right to a common-law action for negligence in exchange for strict liability and the rapid recovery of benefits.” Turner v. PCR, 12 We issued several jurisdictional questions to the parties about whether the notice of removal and complaint adequately alleged their citizenship in order to invoke the district court’s diversity jurisdiction. The parties agree that the allegations of citizenship are likely not sufficient, but that a motion to amend the pleadings would be appropriate under 28 U.S.C. § 1653 to correct the jurisdictional defect. We grant Zenith’s request to treat the pleadings as amended by the supplemental materials it has submitted, which do demonstrate diversity of citizenship. See 28 U.S.C. § 1653 (“Defective allegations of jurisdiction may be amended . . . in the trial or appellate courts.”). 12 Case: 12-11755 Date Filed: 04/15/2013 Page: 13 of 30 Inc., 754 So. 2d 683, 686 (Fla. 2000). As such, “workers’ compensation is the exclusive remedy available to an injured employee as to any negligence on the part of that employee’s employer.” Eller v. Shova, 630 So. 2d 537, 539 (Fla. 1993) (citing Fla. Stat. § 440.11(1)); see also Ruiz v. Aerorep Grp. Corp., 941 So. 2d 505, 507 (Fla. 3d DCA 2006) (“When an employee’s injury arises out of the course and scope of his or her employment, worker’s compensation is the exclusive remedy for the injury, and the employer is provided with immunity from any other liability for the injury.”). Thus, workers’ compensation law generally makes employers immune from suit. Eller, 630 So. 2d at 540; see also Turner, 754 So. 2d at 686. There are two exceptions to this rule. Workers’ compensation law does not immunize an employer from suit when: (1) the employer’s intentional tort causes the employee’s injury, see Jones v. Martin Elecs., Inc., 932 So. 2d 1100, 1104–05 (Fla. 2006); Fla. Stat. § 440.11(1)(b)(1); or (2) the employer’s conduct is “substantially certain” to injure the employee, Eller, 630 So. 2d at 539; see also Fla. Stat. § 440.11(1)(b)(2). Moreover, even when the injured employee’s tort action is not subject to workers’ compensation immunity, an injured employee may be precluded from bringing a tort suit against his employer when the employee has elected workers’ compensation benefits as his exclusive remedy. See Jones, 932 So. 2d at 1105. “[M]ere acceptance of some compensation benefits . . . is not enough” to constitute 13 Case: 12-11755 Date Filed: 04/15/2013 Page: 14 of 30 an election of remedies. Id. (internal quotation marks omitted). An employee elects workers’ compensation benefits as his exclusive remedy if he has “pursued” that remedy to “full satisfaction,” Lowry v. Logan, 650 So. 2d 653, 656 (Fla. 1st DCA 1995), a phrase that has been interpreted to mean a “determination or conclusion on the merits,” id. at 657. A settlement agreement resolving a workers’ compensation benefits claim may constitute a conclusion on the merits. See Petro Stopping Ctrs., L.P. v. Gall, 23 So. 3d 849, 852 (Fla. 5th DCA 2009); see also Lowry, 650 So. 2d at 658. B. Florida’s Standards for Construing Insurance Contracts “[I]n construing insurance policies, courts should read [the] policy as a whole, endeavoring to give every provision its full meaning and operative effect.” U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla. 2007) (internal quotation marks omitted). When “the terms of an insurance contract are clear and unambiguous, a court must interpret the contract in accordance with its plain meaning,” Key v. Allstate Ins. Co., 90 F.3d 1546, 1549 (11th Cir. 1996), and a court must enforce a clear and unambiguous contractual provision “whether it is a basic policy provision or an exclusionary provision.” Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005) (internal quotation marks omitted). If a provision is ambiguous, the provision is strictly construed against the insurer and in favor of coverage. Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 14 Case: 12-11755 Date Filed: 04/15/2013 Page: 15 of 30 845 So. 2d 161, 165 (Fla. 2003). Ultimately, an insurer’s liability depends on whether the insured’s claim is within the coverage of the policy. “This remains true even when the insurer has unjustifiably failed to defend its insured in the underlying action.” Spencer v. Assur. Co. of Am., 39 F.3d 1146, 1149 (11th Cir. 1994). C. Florida Cases Interpreting Workers’ Compensation Exclusions in Liability Policies Under Florida law it is unclear whether a workers’ compensation exclusion in an employer liability policy—which is intended to protect employers from tort liability to their employees—bars coverage of an employee’s tort judgment obtained in a separate negligence suit against the employer. In Florida Ins. Guaranty Ass’n, Inc. v. Revoredo, 698 So. 2d 890 (Fla. 3d DCA 1997), for instance, the Florida Third District Court of Appeal (the “Third DCA”) concluded that a workers’ compensation exclusion in a commercial general liability (“CGL”) policy barred coverage of an employee’s negligence claim against the employer despite the employer’s failure to obtain workers’ compensation insurance. In Revoredo, a subcontractor’s employee died from a workplace injury; neither the subcontractor nor the contractor maintained workers’ compensation insurance. Id. at 890–91. The employee’s estate filed a wrongful death action against the contractor, and the contractor demanded that its CGL insurer defend 15 Case: 12-11755 Date Filed: 04/15/2013 Page: 16 of 30 him in the action. Id. at 891. When the insurer refused, the contractor settled with the employee’s estate and assigned any rights he had against the insurer to the estate. Id. The estate then brought suit against the insurer. The insurer defended on the basis of the contractor’s CGL policy which contained two “standard employee exclusion provisions”: (1) a workers’ compensation exclusion, the same type of exclusion as in this case; and (2) a more general employee injury exclusion. See id. Specifically, the CGL policy excluded coverage of: (1) “[a]ny obligation of the insured under a worker’s compensation . . . law”; or (2) “‘[b]odily injury’ to . . . [a]n employee of the insured arising out of and in the course of employment by the insured.” 13 Id. As to the workers’ compensation exclusion, the estate contended that the exclusion did not apply because the contractor provided no workers’ compensation coverage for the injured employee, and thus the contractor’s liability for the employee’s wrongful death arose under tort law and not workers’ compensation law. Id. at 892. As to the employee injury exclusion, the estate argued that the employee was not the contractor’s employee, and consequently, the second exclusion did not apply to bar the claim against the contractor. Id. The Third DCA concluded that both exclusions applied to bar coverage of 13 The Third DCA did not describe the coverage the CGL policy actually provided, but focused on the language of the exclusions from that coverage. See Revoredo, 698 So. 2d at 891– 92. 16 Case: 12-11755 Date Filed: 04/15/2013 Page: 17 of 30 the estate’s claim. Id. at 891. First, the Third DCA observed that Florida law “made it clear that subcontractors’ employees . . . are employees of the contractor.” Id. Thus, the employee exclusion operated to bar the estate’s claim. See id. at 892. Moreover, the Third DCA stated that regardless of the contractor’s failure to obtain workers’ compensation insurance, the contractor was still required to secure payment of the employee’s workers’ compensation benefits if the subcontractor did not. Id. Accordingly, since the contractor’s liability arose under workers’ compensation law, the contractor’s obligation to the employee was “one under a workers’ compensation . . . law,” and the workers’ compensation exclusion in the CGL policy operated to bar coverage of the estate’s wrongful death claim against the employer. Id. at 893 (internal quotation marks omitted). The Third DCA also observed “[t]he logic” in these standard employee exclusions, because under a CGL policy, “the only coverage intended, and for which the premium has been paid, is the liability of the insured to the public, as distinguished from liability to the insured’s employees whether or not they are protected by the workers’ compensation law.” Id. at 892 (emphasis added). However, in Wright v. Hartford Underwriters Ins. Co., 823 So. 2d 241 (Fla. 4th DCA 2002), the Florida Fourth District Court of Appeal (the “Fourth DCA”) suggested a different result while evaluating an exclusion in an employer liability policy and not a CGL policy. 17 Case: 12-11755 Date Filed: 04/15/2013 Page: 18 of 30 In Wright, an employee was injured in the course of his employment. His employer had a dual-coverage workers’ compensation and employer liability policy, similar to the one here, with insurer Hartford. Id. at 241. After settling his workers’ compensation claim with the employer and Hartford, the employee sued the employer, alleging that his injury was caused by a supervisor’s gross negligence for which the employer was vicariously liable. Id. When Hartford declined to defend the employer in the employee’s suit, the employer settled the claim with the employee and conceded liability and damages for the employee’s injury. Id. The employer assigned its rights as insured under the Hartford policy to the employee, and the employee agreed to seek to recover the judgment only against Hartford under the policy. Id. at 242. When Hartford refused to pay on the employee’s judgment against the employer, the injured employee sued Hartford for damages under the policy. The trial court granted summary judgment to Hartford, ruling that since the insured employer was entitled to workers’ compensation immunity in the employee’s tort lawsuit, workers’ compensation benefits presented the exclusive remedy for the employee’s injury, and thus the employee could not pursue payment of the tort judgment from Hartford. Id. The Fourth DCA reversed. It held that because Hartford declined to defend the employer in the underlying tort lawsuit and the employer waived its affirmative 18 Case: 12-11755 Date Filed: 04/15/2013 Page: 19 of 30 defense of workers’ compensation immunity in the settlement of that lawsuit, Hartford was bound by the settlement agreement and could not later contest the employer’s liability on the basis of workers’ compensation immunity. Id. at 242– 43. The Fourth DCA remanded the case for consideration of the “remaining coverage issues,” namely, whether (1) the employee’s supervisor was an insured under the Hartford policy and (2) the policy’s intentional tort exclusion applied to bar coverage of the employee’s judgment. Id. at 243. In remanding, the Fourth DCA specifically told the trial court that the workers’ compensation exclusion “in the employer’s liability coverage in part II . . . does not apply to [the employee’s] civil action because the settlement judgment was not an ‘obligation imposed by worker’s compensation’ law.” Id. In other words, the appellate court instructed the trial court that the workers’ compensation exclusion did not bar coverage of the tort judgment and that coverage issue was not remanded. Seven years later, in Indian Harbor Ins. Co. v. Williams, 998 So. 2d 677 (Fla. 4th DCA 2009), the Fourth DCA seemingly changed course when it construed a similar exclusion albeit in a CGL policy. In Indian Harbor, two injured employees sued their employer for negligence. The employer did not maintain workers’ compensation insurance, but the employer did have a CGL policy that excluded coverage of “[a]ny obligation of the insured under a workers 19 Case: 12-11755 Date Filed: 04/15/2013 Page: 20 of 30 compensation . . . law.” 14 Id. at 678–79. The CGL insurer filed declaratory judgment actions to determine whether its insured, the employer, was entitled to coverage under the liability policy for the employees’ negligence claims. Id. at 678. The insurer argued that the actions filed against the employer “would have been covered by way of a workers’ compensation claim if [the employer] had met his statutory obligation of obtaining workers’ compensation insurance.” Id. at 679. Thus, even though the employer had failed to obtain workers’ compensation insurance, because the employees’ claims sounded in workers’ compensation law, workers’ compensation benefits presented the exclusive remedy to the employees’ injuries. Id. The Fourth DCA held that the workers’ compensation exclusion in the CGL policy operated to bar coverage of both employees’ negligence claims. See id. at 678. In so doing, the Fourth DCA adopted the Third DCA’s reasoning in Revoredo, chiefly the notion that “the only coverage intended [by CGL policies], and for which the insurance premium was paid, was the liability of the insured to the public.” See id. at 679 (citing Revoredo, 698 So. 2d at 892). Federal district courts applying Florida law have more often relied on Indian Harbor and Revoredo than Wright, and have concluded that a liability policy does 14 Similarly to the Third DCA in Revoredo, the Fourth DCA did not explain what coverage was provided by the CGL policy in Indian Harbor, but instead focused on the exclusion. See Indian Harbor, 998 So. 2d at 679. 20 Case: 12-11755 Date Filed: 04/15/2013 Page: 21 of 30 not cover a negligence-based tort judgment against an employer when the policy contains a workers’ compensation exclusion. For instance, in Sinni v. Scottsdale Ins. Co., 676 F. Supp. 2d 1319 (M.D. Fla. 2009), an injured employee filed a workers’ compensation claim and began receiving payments from her employer’s workers’ compensation insurer. Id. at 1325–26. Eventually, the employee settled the workers’ compensation claim with the employer and the workers’ compensation insurer for a final lump-sum payment. Id. at 1326. The employer in Sinni also maintained a CGL policy with another insurer. See id. In pertinent part, the CGL policy provided coverage for “those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.” Id. at 1327. The CGL policy defined “bodily injury” as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” Id. at 1328 (emphasis added). The employee subsequently filed a tort lawsuit against her employer alleging negligence, and later obtained a consent judgment against her employer after the employer’s CGL insurer declined to defend its insured in the tort lawsuit. Id. at 1322, 1327. In the employee’s lawsuit against the CGL insurer to collect on the tort judgment, the insurer argued that the employee’s claims were barred by a 21 Case: 12-11755 Date Filed: 04/15/2013 Page: 22 of 30 workers’ compensation exclusion in the CGL policy which stated that “[t]his insurance does not apply to . . . [a]ny obligation of the insured under a workers’ compensation . . . law or any similar law.” Id. at 1328. The district court agreed that the workers’ compensation exclusion applied, as the employee’s negligence claim was “an obligation of the insured under a workers’ compensation law,” and further, the claim had been remedied by the employee’s full receipt of workers’ compensation benefits. Id. at 1330, 1333. The district court concluded that, to the extent Wright stated otherwise, the district court was “firmly convinced that the Florida Supreme Court would not follow Wright.” 15 Id. at 1332. The Sinni court also found other problems with Wright, noting, for example, that it appeared that the Fourth DCA later implicitly overruled the relevant Wright language in Indian Harbor. Id. at 1332 n.18. Following Indian Harbor, the district court concluded that the workers’ compensation exclusion in the CGL policy applied and barred coverage of the tort judgment. The district court reached a similar result in XL Ins. America, Inc. v. Ortiz, 673 F. Supp. 2d 1331 (S.D. Fla. 2009). In Ortiz, an employer maintained a CGL policy which covered claims that the insured employer was “legally obligated to 15 Like the district court in the present case, the Sinni court also mischaracterized the relevant language in Wright as dicta. See Sinni, 676 F. Supp. 2d at 1332 & n.18. As we have previously noted, however, this language was not dicta but instead a specific instruction to the trial court, limiting what the trial court could hold on remand. See supra note 9. 22 Case: 12-11755 Date Filed: 04/15/2013 Page: 23 of 30 pay as damages because of ‘bodily injury’ or ‘property damage’” as well as damages because of “personal and advertising injury.” Id. at 1333–34. The CGL policy excepted from coverage “[a]ny obligation of the insured under a workers’ compensation . . . law.” Id. at 1334. After sustaining injury in a workplace accident, an injured employee first sued his coworker for gross negligence, and the coworker stipulated to a consent judgment under which he assigned to the employee any claims he might have against their employer and its insurers. Id. at 1337. The employee filed a second state action, this time directly against the employer, asserting breach of contract and negligent misrepresentation. Id. The insurer advised the employer that it would defend the employer subject to a reservation of the insurer’s rights under the CGL policy. Id. at 1338. The insurer in Ortiz then filed a federal declaratory judgment action, seeking a declaration of the insurer’s coverage obligations in the disputes. Id. The insurer moved for summary judgment, asserting, inter alia, that the workers’ compensation exclusion described above barred liability coverage of the injured employee’s tort judgment against the insured employer. Id. at 1339. Among other reasons, the district court granted summary judgment to the insurer and held that the workers’ compensation exclusion operated to bar the employee’s claim. The district court observed that the employee had already 23 Case: 12-11755 Date Filed: 04/15/2013 Page: 24 of 30 received workers’ compensation benefits for his injury, and under Florida law, the employee could not “double dip” and collect additional damages from another source. Id. at 1344–45. The district court also noted this result accorded with the purpose of these exclusions in CGL policies, as “the only coverage intended, and for which the premium has been paid, is the liability of the insured to the public, as distinguished from liability to the insured’s employees.” See id. at 1345 (quoting Revoredo, 698 So. 2d at 892). We now turn to standing and then state the parties’ contentions. D. Standing of Injured Third Parties to Sue under Liability Insurance Policies Generally, “[w]hen a contract is designed solely for the benefit of the formal parties thereto, third persons cannot maintain an action thereon, even though such third persons might derive some incidental or consequential benefit from its enforcement.” Am. Sur. Co. of N.Y. v. Smith, 130 So. 440, 441 (Fla. 1930). But under the third party beneficiary doctrine, [w]here . . . it is manifest from the nature or terms of a contract that the formal parties thereto intended its provisions to be for the benefit of a third party, . . . the benefit to such third party being the direct or primary object of the contract, or amongst such objects, such third party may maintain an action on the contract. Id. The Florida Supreme Court has held that liability insurance policies are “amenable to the third party beneficiary doctrine,” and thus one injured by a party 24 Case: 12-11755 Date Filed: 04/15/2013 Page: 25 of 30 insured under a liability insurance policy is an intended third party beneficiary to the policy. See Shingleton v. Bussey, 223 So. 2d 713, 716 (Fla. 1969). In Shingleton, the Florida Supreme Court first applied the doctrine to motor vehicle liability insurance. The Florida Supreme Court observed that securing motor vehicle liability insurance “is an act undertaken by the insured with the intent of providing a ready means of discharging his obligations that may accrue to a member or members of the public as a result of his negligent operation of a motor vehicle.” Id. “Viewed in this light,” the Florida Supreme Court concluded that such policies intend “to benefit injured third parties” thus “render[ing] motor vehicle liability insurance amenable to the third party beneficiary doctrine.” Id. The Florida Supreme Court held that this cause of action vests in or accrues “to the injured party at the same time he becomes entitled to sue the insured.” Id. The Florida Supreme Court later extended these principles to “other forms of liability insurance” in Beta Eta House Corp., Inc. of Tallahassee v. Gregory, 237 So. 2d 163, 165 (Fla. 1970). See Hazen v. Allstate Ins. Co., 952 So. 2d 531, 535 (Fla. 2d DCA 2007). In response to these Florida Supreme Court cases, the Florida Legislature enacted a statute which limited the circumstances under which an injured third party could sue an insurer as a third party beneficiary to a liability policy. See Hazen, 531 So. 2d at 535 (citing Fla. Stat. § 627.7262 (1976)). The present statute, 25 Case: 12-11755 Date Filed: 04/15/2013 Page: 26 of 30 in pertinent part, requires an injured third party to first obtain a judgment against the insured as a condition precedent to filing a direct lawsuit against the liability insurer: It shall be a condition precedent to the accrual or maintenance of a cause of action against a liability insurer by a person not an insured under the terms of the liability insurance contract that such person shall first obtain a settlement or verdict against a person who is an insured under the terms of such policy for a cause of action which is covered by such policy. Fla. Stat. § 627.4136(1); see Hazen, 952 So. 2d at 534.