Opinion ID: 1817563
Heading Depth: 1
Heading Rank: 3

Heading: Cognizability of Jones' Claims

Text: According to the statute's express language, the FIGA Act was intended to [p]rovide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer. § 631.51(1), Fla. Stat. (1995). The Act specifically provides and instructs that it shall be liberally construed to effect the purposes of the statute. See § 631.53. The act is designed to protect Florida citizens, not the insurance industry. The Act obligates FIGA to respond to covered claims that arise either prior to adjudication of the insurer's insolvency or arise within thirty days after determination of insolvency of the responsible carrier. See § 631.57(1)(a)(1). The Act limits FIGA's liability for each covered claim to the amount in excess of $100 and less than $300,000. See § 631.57(1)(a)(2). Most importantly, the Act specifies that FIGA shall be deemed the insolvent insurer to the extent of the insolvent insurer's obligation on covered claims: (1) The association shall: . . . . (b) Be deemed the insurer to the extent of its obligation on the covered claims, and, to such extent, shall have all rights, duties, and obligations of the insolvent insurer as if the insurer had not become insolvent. § 631.57(1)(b). `Covered claim' means an unpaid claim . . . which arises out of, and is within the coverage, and not in excess of, the applicable limits of an insurance policy. . . . § 631.54(3). It is well settled that an insurer's duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage. State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072, 1077 n. 3 (Fla.1998); see also Nat'l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So.2d 533, 535 (Fla.1977). The duty to defend must be determined from the allegations in the complaint. See, e.g., Nat. Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So.2d 533, 535 (Fla.1977); Biltmore Constr. Co. v. Owners Ins. Co., 842 So.2d 947, 949 (Fla. 2d DCA 2003); McCreary v. Fla. Residential Prop. & Cas. Joint Underwriting Ass'n, 758 So.2d 692, 695 (Fla. 4th DCA 1999); Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 813 (Fla. 1st DCA 1985). The duty to defend is of greater breadth than the insurer's duty to indemnify, and the insurer must defend even if the allegations in the complaint are factually incorrect or meritless. See, e.g., Sunshine Birds & Supplies, Inc. v. United States Fid. & Guar. Co., 696 So.2d 907, 910 (Fla. 3d DCA 1997); Baron Oil, 470 So.2d at 814. Indeed, [w]hen the actual facts are inconsistent with the allegations in the complaint, the allegations in the complaint control in determining the insurer's duty to defend. Baron Oil, 470 So.2d at 814; see Marr Invs. Inc. v. Greco, 621 So.2d 447, 449 (Fla. 4th DCA 1993); Irvine v. Prudential Prop. & Cas. Ins. Co., 630 So.2d 579, 579-80 (Fla. 3d DCA 1993) (The duty is determined solely by the allegations against the insured, not by the actual facts, nor the insured's version of the facts.). Any doubts regarding the duty to defend must be resolved in favor of the insured. See Grissom v. Commercial Union Ins. Co., 610 So.2d 1299, 1307 (Fla. 1st DCA 1992); Baron Oil, 470 So.2d at 814. In the instant case, the trial court entered final summary judgment in favor of Jones, determining that FIGA had an obligation and duty to defend its insured, MICHAEL PRATT. This determination is not only amply supported by and in conformity with the only evidence in the record as informed by the above-stated principles of law, it is the proper application of Florida law and conclusively established. Count II of the complaint filed against Heath Gilliam and Michael Pratt d/b/a Spruill Auto Sales alleged that Anthony Dixon, an employee of Spruill Auto Sales, was permitted to drive the vehicle ultimately involved in the collision with Althea Jones, and that Dixon permitted Gilliam to drive the vehicle, thus extending Pratt's consent to Gilliam. The complaint further contended that Gilliam was negligent in the operation of the vehicle, causing a collision with the vehicle operated by Althea Jones. Finally, the complaint alleged that [a]s the person with possession and control of that motor vehicle, Mike Pratt and Spruill Auto Sales are legally responsible for Mr. Gilliam's negligence. See Ray v. Earl, 277 So.2d 73 (Fla. 2d DCA 1973); Winters v. Phillips, 234 So.2d 716 (Fla. 3d DCA 1970). The liability insurance coverage provisions of the policy provided that Dealers Insurance would pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies caused by an accident resulting from garage operations. The policy very broadly defined garage operations to include the ownership, maintenance, or use of the autos indicated in Part II as covered autos. Part II of the garage policy cross-referenced Item Two of the declarations page for determining which autos were covered autos under the policy. Item Two of the declarations page indicated by numerical code that any auto was a covered auto under the liability insurance coverage section of the policy. The liability insurance coverage provisions further specified that Michael Pratt d/b/a/ Spruill Auto Sales was insured for any covered auto, and that, subject to certain exceptions not implicated in the instant matter, [a]nyone else is an insured while using with your permission a covered auto. Finally, the policy specified that it is exclusively Dealers' right and . . . duty to defend any suit seeking damages under the policy. Upon comparing the allegations in the complaint with the insurance policy in effect at the time of the accident, it is absolutely clear that the complaint alleged facts that fairly and potentially brought the legal action within policy coverage, thus triggering Dealers' duty to defend Pratt. The decision in Government Employees Insurance Co. v. Sellers, 667 F.Supp. 850 (S.D.Fla.1987), is instructive on this point. There, the district court dismissed GEICO's action for declaratory relief regarding whether one of two possible drivers of a vehicle involved in a collision had the insured's permission to drive the vehicle. See id. at 852. GEICO had argued that it would be unduly burdened in proceeding with the action if it ultimately was not liable under the policy. See id. at 851. In dismissing the action, the district court determined that GEICO in essence sought relief from its duty to defend-relief that could not be granted because the claimant's state court claim brings Geico, as a matter of law, within the rubric of what it would have to defend, regardless of the outcome of the case. Id. at 852. Moreover, as previously stated, any doubt with regard to the duty to defend must be resolved in favor of the insured. See Grissom, 610 So.2d at 1307; Baron Oil, 470 So.2d at 814. This is not a case in which a lack of coverage or exclusion from liability emerges in any conceivable way from comparing the facts in the complaint with the text of coverage under the policy. Cf. Nationwide Mut. Fire Ins. Co. v. Keen, 658 So.2d 1101 (Fla. 4th DCA 1995) (plaintiff's statement that he was operating a boat with a 40-horsepower engine relieved the insurer of the duty to defend because the boat was more powerful than coverage allowed); State Farm Mut. Auto. Ins. Co. v. Culver, 576 So.2d 918 (Fla. 2d DCA 1991) (determining there was no duty to defend against complaint alleging that the claimant's vehicle was struck by a 1977 Monte Carlo where the insured's policy covered a 1975 Monte Carlo and the insurance held by the insured's grandmother for a 1977 Monte Carlo lapsed after her death). Thus, this record conclusively established that Dealers clearly had the duty to defend Michael Pratt. When Dealers became insolvent, FIGA assumed that duty as if Dealers had not become insolvent and was deemed the insolvent insurer to the full extent of the policy coverage protection including the exclusive duty to defend. See § 631.57(1)(b), Fla. Stat. (1995). With scant analysis, the district court simply reversed the trial court's entry of the final judgment, concluding that Appellee's [Jones'] claims for damages, as alleged, are not covered obligations under the FIGA Act and are barred by FIGA's immunity protection. Jones, 847 So.2d at 1022 (citing Fernandez v. Florida Ins. Guaranty Ass'n, Inc., 383 So.2d 974 (Fla. 3d DCA 1980)). This conclusion is in conflict with established law and in error because it departs from the statutory construct of the FIGA Act and misinterprets and erroneously applies the only precedent upon which it relies. The district court erred in concluding that the immunity provisions of the FIGA Act bar Jones' claims. The FIGA Act provides: There shall be no liability on the part of, and no cause of action of any nature shall arise against, any member insurer, the association or its agents or employees, the board of directors, or the department or its representatives for any action taken by them in the performance of their powers and duties under this part. § 631.66, Fla. Stat. As cited by the district court, the Third District in Fernandez interpreted the immunity provision as barring only bad faith settlement claims against FIGA. However, Fernandez did not involve and does not stand for the proposition that FIGA cannot be held responsible for breaching its duties imposed by statute and flowing from the contract of the insolvent insurer, including the statutory duty to be deemed the insolvent insurer in the defense of covered claims. Indeed, even Fernandez recognized that responsibility under the circumstances presented here. In Fernandez, FIGA succeeded a defunct insurance company as a party-defendant in a personal injury action. See 383 So.2d at 975. FIGA defended the action but only refused to settle the claim for the $10,000 policy limits, and the jury returned a $54,000 verdict against the insured. See id. The insured then initiated a classic bad faith failure to settle action against FIGA seeking recovery of the $44,000 excess, claiming that FIGA had exercised bad faith in refusing to settle the claim within the policy limits. See id. The Third District determined that the immunity provision barred the bad faith action because FIGA's refusal of the $10,000 settlement offer was an action it took in the performance of [its] powers and duties under the statute to dispose of the covered claim in question. Id. at 975 (internal quotation marks omitted). The district court held, An application of the plain terms of § 631.66, which neither require nor permit judicial construction, therefore compels the conclusion that no bad faith action lies against FIGA. Id. The holding in Fernandez does not compel nor does it even support an identical conclusion in the instant matter. If it did and FIGA could totally ignore its statutory requirements, no Florida citizen could ever state a cause of action resulting therefrom. The court below clearly erroneously applied existing law concerning FIGA's immunity from bad faith claims into the present non bad faith simple coverage context. Here, Jones did not file a bad faith action against FIGA based upon its failure to settle in defending the underlying action as part of its obligations under the Act. To the contrary, Jones sought recovery based upon FIGA's refusal to satisfy the duty to defend and indemnify Pratt clearly held by Dealers Insurance and specifically imposed on FIGA by both the insurance contract and section 631.57 of the FIGA Act. Thus, the decisions in Jones and Fernandez involve similar but different factual scenarios, and the statutory/contractual duty to defend and indemnify claim is totally different and distinct from any action for bad faith failure to settle and is cognizable under Florida law. Despite these differences, the First District proceeded to incorrectly apply the rule of law set forth in the bad faith context of Fernandez to the factual situation in Jones. The First District's decision is in express and direct conflict with the Third District's decision in Florida Insurance Guaranty Ass'n v. Giordano, 485 So.2d 453 (Fla. 3d DCA 1986). The dissent is misdirected in its contention that there is no jurisdictional conflict with Giordano. In fact, an examination of that decision clearly demonstrates how the decision in Jones has created an express and direct conflict within Florida law that must be resolved. In Giordano, the widow of one killed in a gas explosion initiated a wrongful death action against an Illinois valve corporation which had conducted business in Florida and was insured by Reserve Insurance Company with a policy limit of $300,000. See 485 So.2d at 454. Reserve defended the claim for four years until the company was declared insolvent and the cause of action was transferred to and assumed by FIGA. See id. After discovering that the valve company was an Illinois corporation, FIGA attempted to assert that the Illinois Guaranty Fund (IGF), with statutory coverage limits of $150,000, was the primary carrier, and that FIGA, with statutory coverage limits of $300,000, was only an excess carrier with no obligation to the insured and no duty to defend the action. See id. [3] IGF assumed responsibility for defense of the action. See id. Settlement negotiations ensued, of which FIGA was aware, but which were not directly authorized by FIGA. The parties reached a settlement agreement pursuant to which they stipulated to the entry of a $525,000 judgment to be assessed as follows: IGF ($150,000), Employer's Reinsurance ($225,000), and FIGA ($150,000). See id. at 455. The insured valve company assigned to the injured party, Giordano, its rights against FIGA for the Association's portion of the judgment plus attorney's fees, costs, interest, and punitive damages, just as has occurred in the present case. See id. Thereafter, Giordano proceeded to file a two-count claim against FIGA (just as has occurred here) asserting (1) her rights as assignee for the enforcement of FIGA's statutory obligations and judgments entered on the settlement agreement; and (2) that FIGA's course of conduct had been willful, wanton, reckless and a denial of due process and equal protection. See id. at 455. The trial court dismissed the second count, but entered a summary final judgment in favor of Giordano on the first claim, concluding that FIGA had a duty to defend the insured valve company and a duty to pay the settlement. See id. Here, the same determination was made at the trial level but the underlying obligation had the dignity of a final judgment. In affirming the trial court's determination with regard to FIGA's duties, the district court concluded that when FIGA stepped into the place of the insurance carrier, Reserve, upon insolvency, it was under a statutorily imposed duty to defend the insured. Id. at 456. The district court also affirmed the trial court's dismissal of the second count, determining: The allegations of this count, though couched in the language of tort and constitutional law, still make out an action for bad faith against FIGA. Under section 631.66, Florida Statutes (1981), however, no action for bad faith lies against FIGA. Id. at 457 (citing Fernandez v. Fla. Ins. Guar. Ass'n, 383 So.2d 974 (Fla. 3d DCA 1980)). Thus, as was made clear in Giordano, a complaint alleging that FIGA has breached statutory or contractual duties owed to an insured to defend under the terms of an insurance contract is cognizable even though a different form of action alleging that FIGA exercised bad faith in handling the settlement of a claim may not be viable. The district court here erred to the extent that it conflated these two distinct concepts in holding that Jones' claims against FIGA are barred by FIGA's immunity provision. As Dealers' statutory successor, FIGA assumed the insurance company's contractual duties to defend and indemnify Pratt. See Carrousel Concessions, Inc. v. Fla. Ins. Guar. Ass'n, 483 So.2d 513, 516 (Fla. 3d DCA 1986) (determining that pursuant to the terms of the insurance contract, FIGA had a duty to defend the insured until the applicable limit of its liability had been exhausted and to pay all costs incurred in the defense). According to the dissent, Jones and Giordano do not expressly and directly conflict because in Jones, FIGA unilaterally concluded that the underlying claim was not covered under the insurance policy, and in Giordano, FIGA did not contest coverage. However, this analysis suffers from the same cart before the horse flaw that beset the district court below and creates the conflict this Court is constitutionally empowered to address. As we explain in our opinion today, it is the nature of the underlying claim that drives the duty to defend analysis. The district court below simply concluded that [a]ppellee's claims for damages, as alleged, are not covered obligations under the FIGA Act and are barred by FIGA's immunity protection. Jones, 847 So.2d at 1022. Thus, the decision below holds and affords FIGA absolute blanket immunity from all legal actions and immunizes FIGA's decisions with regard to whether a claim initiated against an insured is covered by the operative insurance policy. This holding expressly and directly conflicts with the holding in Giordano, which recognized the validity of FIGA's responsibility and duty to defend claims against insureds, but determined that only bad faith claims against it are barred by statutory immunity. Thus, contrary to the dissent's assertions, our jurisdiction in this matter is clear, and resolution of the conflict between the First and Third districts is not only proper, but it is necessary for purposes of uniformity of Florida law. See generally Wainwright v. Taylor, 476 So.2d 669, 670 (Fla.1985) (noting that the Court's concern regarding cases based on conflict jurisdiction is the precedential effect of those decisions which are incorrect and in conflict with decisions reflecting the correct rule of law). Returning to the merits of the instant case, in support of Jones' argument that the immunity provision does not defeat her claim against FIGA, Jones argues that FIGA's immunity extends only to independent actions taken within and in accordance with its statutory duties, not to damages arising from the failure to perform those statutory duties to provide a defense as specifically required by the statute and the insurance contract for which FIGA becomes responsible. This follows the analysis undertaken by the Alaska Supreme Court in Washington Insurance Guaranty Ass'n v. Ramsey, 922 P.2d 237 (Alaska 1996). In that case, the plaintiff in the underlying tort action initiated an action against the Washington Insurance Guaranty Association (WIGA) for breach of the duty to reasonably settle the underlying claim. See id. at 239. The Alaska court determined that the WIGA Act [4] imposed a statutory duty on WIGA to reasonably settle claims and therefore held that the immunity provision did not preclude an action for failure to settle a claim. See id. at 243. The court reasoned that any action taken by the Association in violation of its duties, such as the duty to reasonably settle claims, was not an action taken pursuant to statutory authority warranting application of the immunity provision. See id. at 244. [5] FIGA attacks the decision in Ramsey as an outlier, contravening the well-reasoned decisions in T & N PLC v. Pennsylvania Insurance Guaranty Ass'n, 800 F.Supp. 1259 (E.D.Pa.1992); Bills v. Arizona Property & Casualty Insurance Guaranty Fund, 194 Ariz. 488, 984 P.2d 574 (Ct.App.1999); Isaacson v. California Insurance Guarantee Ass'n, 44 Cal.3d 775, 244 Cal.Rptr. 655, 750 P.2d 297 (1988); Veillon v. Louisiana Insurance Guaranty Ass'n, 608 So.2d 670 (La.Ct.App.1992); Schreffler v. Pennsylvania Insurance Guaranty Ass'n, 402 Pa.Super. 309, 586 A.2d 983 (1991); and Vaughn v. Vaughn, 23 Wash.App. 527, 597 P.2d 932 (1979). However, proper analysis of each of these cases only supports our conclusion and confirms the holding in Fernandez that insurance guaranty associations are only immune from bad faith actions pertaining to claims handling, not actions such as that in the present case. See T & N, 800 F.Supp. at 1265 (holding state association immune from suit for bad faith handling of claim); Veillon, 608 So.2d at 672 (affirming dismissal of claims against association for bad faith, negligence, and breach of fiduciary duty arising from the failure to settle claim within policy limits); Schreffler, 586 A.2d at 985 (citing Fernandez and holding association immune from suit for bad faith failure to settle a claim); Vaughn, 597 P.2d at 934 (holding that because state courts had determined that bad faith claims sound in tort rather than contract, bad faith damages are not covered claims under the state's guaranty act). Not a single one of these decisions directly contravenes Ramsey, or stands for the proposition that an action cannot be sustained against an insurance guaranty association for the breach of statutory or contractual duties under the contract for which the association is deemed the insolvent insurer. The clear distinction between classic bad faith settlement actions and those arising from the breach of statutory duties is best highlighted in Bills. There, the insolvent insurer's assignee initiated an action against the guaranty association for negligence, breach of contract, and bad faith alleging that the association had refused to settle a wrongful death claim. See 984 P.2d at 576. The trial court entered a partial summary judgment dismissing the causes of action sounding in tort, which included only the negligence and bad faith claims. In affirming that decision, the Arizona appellate court noted that the majority view rejects the viability of bad faith claims against insurance guaranty associations. See id. at 581 (citing T & N PLC, Fernandez, Veillon, Schreffler, Vaughn, and Isaacson ). The Bills court specifically determined that the decision in Ramsey was inapposite to determining the viability of bad faith claims because the plaintiff in that case, (Ramsey) sued merely to enforce the guaranty fund's statutory obligations. Id. While the Bills court did not need to adopt the Ramsey court's analysis that an association's refusal to settle a claim is not an action taken pursuant to its statutory duties, it acknowledged that such reasoning was nonetheless inapplicable in a case where the plaintiff sought noncontractual and nonstatutory damages under a common law bad faith theory. Id. Thus, Bills cannot be invoked for the proposition that the FIGA Act immunity provision defeats the instant claim. Likewise, in Isaacson, the California Supreme Court held the state's guaranty association immune from liability under a variety of tort theories, [6] but specifically determined that the association could be subject to liability for payment of an adverse judgment for breaching its statutory duty to pay and discharge covered claims, circumstances identical to those in the case before us. See 750 P.2d at 300-01. The California court specifically stated that if the association refuses to defend a covered claim arising under an insolvent insurer's insurance policya duty which is defined in terms of the underlying policy provisionsthen it has breached its statutory duties under the state's guarantee act. See id. at 308. Setting aside the soundness and wisdom of the clear reasoning employed by the Ramsey court, the FIGA Act immunity provision does not defeat Jones' claim. Under the total immunity interpretation espoused by FIGA and seemingly endorsed by the district court and encouraged by the dissent, FIGA would be permitted to totally ignore the statutory and contractual obligations, to withdraw from representation undertaken by the insurer prior to insolvency, or unilaterally refuse to defend any claim arising after insolvency, with absolutely no legal repercussions or responsibility for its actions or recourse for the insured. Surely this cannot be the statutory plan. FIGA could, in its theory, just simply refuse to defend or pay a single claim, with total immunity from legal action. Such an overly broad interpretation of the immunity provision would undermine and emasculate a fundamental canon of statutory construction by effectively negating the balance of the FIGA Act, including the provisions imposing on FIGA the same rights and obligations of the insolvent insurer. See Acosta v. Richter, 671 So.2d 149, 153-54 (Fla.1996) (reiterating that statutes should be interpreted to give effect to every clause and accord meaning and harmony to all of their parts). FIGA would have no duty to do anything and no action would ever be available to provide relief, a result contrary to logic and common sense. As evidenced by the decisions in Giordano and Carrousel, Florida courts have not taken the position that actions against FIGA alleging a violation of statutory and contractual duties are not cognizable, or are in all instances barred by the FIGA Act immunity provision. The applicable statute itself clearly provides that FIGA may be sued. § 631.57(2)(c), Fla. Stat. (1995). It was thus error for the district court to conclude that Jones' claims were not cognizable as a matter of law by operation of the FIGA Act's immunity provision.