Opinion ID: 66507
Heading Depth: 3
Heading Rank: 2

Heading: Issues Related to Duty to Indemnify

Text: Though our finding that First Specialty had a duty to defend 633 and Baye provides sufficient grounds for reversal of the district court’s summary judgment order, the district court on remand still must address the issue of duty to indemnify in light of our findings regarding the duty to defend. In order to facilitate this determination, we will address the two other issues Appellants raise on appeal, both of which affect the inquiry on the duty to indemnify. First, Appellants contend that the district court erred by failing to provide them the opportunity to rebut newly-presented evidence discussed in First Specialty’s reply brief in support of its summary judgment motion. Second, they assert that the assault and battery exclusion should not have been included in the Policy as a matter of law. We address these arguments in turn. 1. Opportunity to Rebut Smith’s Deposition Testimony After First Specialty submitted its summary judgment reply brief to the district court, Appellants argued that it had raised a new argument for the first time on appeal and requested the opportunity to respond or to conduct additional 17 This action would not be moot for the same reasons that the duty-to-defend finding would not be harmless error. 22 discovery, pursuant to Rule 56(f).18 In particular, they objected to the use of Smith’s deposition testimony from the underlying suit. The district court rejected the request, determining that First Specialty merely had responded to arguments raised in Appellants’ opposition to First Specialty’s initial summary judgment motion. The court, in a later order on the first summary judgment motion, also concluded that additional discovery would be unnecessary and unhelpful since Smith’s counsel in the underlying action was acting as the counsel for 633 and Baye in this case and thus would be unable to rebut Smith’s testimony. We review the denial of a motion for leave to conduct limited discovery under Rule 56(f) for abuse of discretion. See Shuford v. Fidelity Nat’l Prop. & Cas. Ins. Co., 508 F.3d 1337, 1341 (11th Cir. 2007). The district court’s ruling will be reversed only if the moving party establishes that the ruling resulted in a “substantial prejudicial effect.” Alexander v. Fulton County, Ga., 207 F.3d 1303, 1326 (11th Cir. 2000) (quotation marks omitted). “When employing an abuse of discretion standard, we must affirm unless we at least determine that the district court has made a clear error of judgment, or has applied an incorrect legal standard.” Id. (quotation marks omitted). A district court’s decision to permit the filing of a surreply is purely 18 Appellants stylized this as a motion to strike, but the district court properly treated it as a motion for leave to file surreply instead. 23 discretionary and should generally only be allowed when “a valid reason for such additional briefing exists, such as where the movant raises new arguments in its reply brief.” Fedrick v. Mercedes-Benz USA, LLC, 366 F. Supp. 2d 1190, 1197 (N.D. Ga. 2005). Our sister circuits have held that a district court can abuse its discretion by failing to give the opposing party a chance to respond to materials presented for the first time in a reply brief and instead granting summary judgment on the basis of that evidence. See, e.g., Doebele v. Sprint/United Mgmt. Co., 342 F.3d 1117, 1139 n.13 (10th Cir. 2003) (finding that the district court “abused its discretion to the extent it relied on new evidentiary materials presented for the first time in” a summary judgment reply brief); Provenz v. Miller, 102 F.3d 1478, 1483 (9th Cir. 1996) (determining that the district court should have given the nonmoving party an opportunity to respond to new evidence raised in the reply to a motion for summary judgment). Additionally, under the applicable local rules, the district court can authorize the filing of a surreply only to rebut matters raised in an opposing pleading. After examining the evidence, we find that the district court acted within its discretion in denying Appellants’ request to file a surreply. We see no basis for treating the references in First Specialty’s reply brief to Smith’s testimony from the underlying suit as “new” evidence. As the district court noted, First Specialty 24 referred to this testimony to respond to Appellants’ assertion that the false imprisonment and assault constituted separate events rather than as a means to make a wholly new argument.19 Since Appellants’ counsel participated in the underlying case, they cannot claim surprise or lack of knowledge. Appellants assert that they could have raised new evidence to rebut Smith’s deposition testimony, namely the verdict forms from the underlying suit and affidavits from Smith clarifying her testimony. Based on our review of the evidence, we find it unlikely that these documents would be either helpful or persuasive to the district court. A verdict form alone tells us nothing about the jury’s view on whether the false imprisonment and assault were distinct events. An affidavit from Smith would be unlikely to add anything to her testimony, which is fairly clear in its description of the events. There would thus seem to be little basis for the district court to need to permit further discovery. Additionally, any evidence they offered would not meet the local requirement that it be used to rebut newly raised arguments. For all of these reasons, we find that the district court did not abuse its discretion in denying Appellants’ motion. 2. Applicability of Assault and Battery Exclusion 19 Appellants’ briefs on appeal discuss multiple legal arguments they could have raised to rebut First Specialty’s use of the testimony, such as the concurrent cause doctrine. However, these all appear to be just further elaborations on their “separate and distinct events” argument. 25 Appellants make two arguments as to why the assault and battery exclusion contained in the Policy should not apply to Smith’s underlying suit as a matter of law. First, they contend that there is a genuine issue of material fact regarding whether the 20 December binder or 26 December binder was in effect at the time of the incident involving Smith. Second, they assert that, even if the 26 December binder applied, the assault and battery exclusion included in the Policy was not a “usual term” of a First Specialty policy and was ambiguous; thus it should not be incorporated into the binder. We review both of these claims de novo. See Michigan Millers Mut. Ins. Corp. v. Benfield, 140 F.3d 915, 924 (11th Cir. 1998) (noting that “where a district court interprets an insurance policy as a matter of law, the district court's construction of the policy is subject to de novo review”). Appellants contend that the 20 December binder should be binding on First Specialty because Kallman had the authority to issue the binder for First Specialty. “Florida case law provides that an insurer may be held accountable for the actions of those whom it cloaks with ‘apparent agency’.” Almerico v. RLI Ins. Co., 716 So. 2d 774, 777 (Fla. 1998). Florida courts “have applied a three-prong test under general agency law in order to determine the existence of apparent agency: first, whether there was a representation by the principal; second, whether a third party relied on that representation; and, finally, whether the third party changed position 26 in reliance upon the representation and suffered detriment.” Id. First Specialty does not dispute that the latter two prongs would be met here, since 633 and Baye relied on Kallman’s authority and changed their position based on that reliance. However, it does not appear that First Specialty ever represented that Kallman was acting as its agent. Appellants point to testimony by Kallman which seemed to indicate that the 20 December binder could only have been issued with First Specialty’s approval.20 However, those statements were about the general practice of issuing binders and specifically contradict Kallman’s statement that his company did not have binding authority from First Specialty and probably should not have issued the 20 December binder. Based on this testimony, we agree with the district court’s conclusion that there was no genuine issue of material fact regarding whether First Specialty had authorized Kallman to act as its agent. As a result, there is no basis under Florida law for finding Kallman to have apparent authority to bind First Specialty based on the 20 December binder.21 Accordingly, the 26 December binder, which was issued by First Specialty rather than Kallman, 20 In particular, he noted that his company’s procedure was to “never [issue a binder] without knowing the coverage was bound” and that they would “call[] the broker [or do] whatever we needed to do to put the coverage into place.” R2-56 at 14. Later in his testimony, he stated that if his company had issued a document looking like the 20 December binder, then they “would have called the broker.” Id. at 20. 21 Since we make this finding, we do not need to address Appellants’ argument that First Specialty failed to provide 633 and Baye with actual notice of the intent to modify the 20 December binder before issuing the 26 December binder. 27 would be the operative binder here.22 We also reject Appellants’ assertion that the 26 December binder should not include the assault and battery exclusion from the Policy. Under Florida law, insurance binders “include all the usual terms of the policy as to which the binder was given together with such applicable endorsements as are designated in the binder, except as superseded by the clear and express terms of the binder.” Fla. Stat. § 627.420. As a result, binders can be enforceable before the issuance of the insurance policy. See Gas Kwick, Inc. v. United Pac. Ins. Co., 58 F.3d 1536, 1540 (11th Cir. 1995) (noting that Florida law permits binder-based enforceability to let “[i]nsured parties benefit from having an early effective date while the policy is in the process of being issued”). Accordingly, the assault and battery exclusion included in the Policy would be enforceable against 633 and Baye if it was either a “usual term” of the policy or an applicable endorsement designated in the binder. Based on the evidence presented, we find that the assault and battery exclusion would be a usual term of the policy. First Specialty provided an affidavit 22 Appellants also assert that the 26 December binder should not apply because First Specialty violated the Florida statute requiring insurers to mail insurance binders directly to their insured. See Fla. Stat. § 626.922(1) (2008). However, the case they cited for this proposition has since been overturned by the Florida Supreme Court, which instead held that an insured party could not use that section to require personal delivery of copies of the policy if the insurer gave copies to an independent insurance broker and the insured showed no evidence that the broker was acting as an agent of the insurer. See Essex Ins. Co. v. Zota, 985 So. 2d 1036, 1050 (Fla. 2008). Since Kallman was not acting as First Specialty’s agent, 633 and Baye could not use this statute as the basis for their objection. 28 from its vice president indicating that the assault and battery exclusion included in the Policy “was the only assault and battery exclusion used by First Specialty on policies issued by General Binding Authority agents.” R2-59, Exh. B. at 2. Appellants contend that this statement does not prove that the exclusion was a “usual term” of First Specialty’s commercial liability policies because there is no indication that the exclusion was commonly included in all of its policies. Though we could find no Florida case law addressing what would constitute a “usual term,” the language in § 627.420 discussing “the usual terms of the policy as to which the binder was given” appears to contemplate that it would be “usual” for the specific type of policy being issued rather than for all policies in general. See Fla. Stat. § 627.420 (emphasis added). Since First Specialty adequately showed that it traditionally included such an exclusion in similar policies and Appellants have not put forward any evidence to raise an genuine issue of material fact on the issue, we find that it would be a “usual term” of the policy. The assault and battery exclusion would also qualify for inclusion as an applicable endorsement designated in the binder. The 26 December binder expressly noted that it was being issued “subject to the usual terms and conditions.” R2-56 at 20. Appellants assert that this language is insufficient to incorporate the exclusion from the Policy because it is ambiguous as to what kind 29 of assault and battery exclusion applies. In support of this argument, they reference a Missouri case in which the court found that a similar reference in a binder did not incorporate the assault and battery exclusion from the subsequent policy because the surplus lines industry utilized two different variations of that exclusion and the binder did not identify which would be applicable. See Alea London Ltd. v. Bono-Soltysiak Enters., 186 S.W. 3d 403, 412–13 (Mo. Ct. App. 2006). In addition to the fact that we are not bound by Missouri law, we find the decision to be distinguishable from the present case. That court’s decision was predicated on the fact that the binder referenced an assault and battery exclusion but “did not contain express language subjecting it to the language in the policy.” Id. at 412. Moreover, the court refused to read the binder to impliedly incorporate a particular exclusion because both of the prevailing types of assault and battery exclusions were included in the policy and attached documents — a narrow exclusion in the body of the policy and a broader one in the endorsement. See id. at 413. The failure to make such a distinction rendered the binder ambiguous, thus meaning that the terms of the exclusion would be construed against the insurer.23 23 According to the court, the “narrow” exclusion “would typically exclude acts of the insured’s employees, rather than patrons” whereas the “broad” exclusion “excludes liability from injuries expected or intended by the insured as well as injuries arising from assault and battery regardless of who committed the act or whether expected or intended by the insured.” Id. The ambiguity was enhanced in Alea London since the broad exclusion in the endorsement purported to replace the narrow exclusion in the policy body. See id. at 408. 30 See id. Here, in contrast to Alea London, First Specialty’s binder specifically indicated that it would be subject to the usual policy terms, the Policy itself contained just a single version of the assault and battery exclusion, which was a usual term of such policies, and Appellants have failed to put forward any evidence that other variations of the exclusion could have been applicable. Since there is no conflict between the terms of the binder and those in the standard policy, there thus would be no ambiguity regarding the content of the applicable assault and battery exclusion. See id. at 412 (noting that ambiguity could still result “if the terms of a binder conflict with the terms of the standard policy” even if the binder incorporated a policy term) (quotation marks omitted). Accordingly, we find that the district court did not err in any of its findings regarding the binders and assault and battery exclusion. The 26 December binder was the operative binder since Kallman had no authority to bind First Specialty with the 20 December document. Additionally, the assault and battery exclusion in the Policy was incorporated into the 26 December binder both as a usual term of the policy and by an endorsement in the binder. As a result, the 26 December binder is the operative document for assessing the duties to indemnify and defend and would include the assault and battery exclusion from the later-issued policy. 31