Court Opinion

ID: 150958
Source: CourtListenerOpinion
Date Created: 2010-07-19 19:05:23+00
Date Added: 2024-06-11T17:24:22.692759
License: Public Domain

[DO NOT PUBLISH]

                        IN THE UNITED STATES COURT OF APPEALS

                               FOR THE ELEVENTH CIRCUIT           FILED
                                ________________________ U.S. COURT OF APPEALS
                                                                 ELEVENTH CIRCUIT
                                       No. 10-10608                 JULY 19, 2010
                                   Non-Argument Calendar             JOHN LEY
                                                                       CLERK
                                 ________________________

                          D.C. Docket No. 3:08-cv-00586-HLA-MCR

THE BURLINGTON INSURANCE COMPANY,

lllllllllllllllllllll                                          Plaintiff - Appellee,

                                            versus

INDUSTRIAL STEEL FABRICATORS, INC.,
a Florida corporation, et al.,

lllllllllllllllllllll                                          Defendants,

GEORGES BAHRI,
as Personal Representative of the Estate of Michel Abi Nasr, deceased,

lllllllllllllllllllll                                          Defendant - Appellant.

                                ________________________

                          Appeal from the United States District Court
                              for the Middle District of Florida
                                ________________________

                                        (July 19, 2010)
Before TJOFLAT, MARTIN and FAY, Circuit Judges.

PER CURIAM:

      On April 18, 2006, Michel Abi Nasr was killed in a construction accident

when a 1,200 pound steel beam fell on his head. His estate subsequently filed suit

against Industrial Steel Fabricators, Inc. (“ISF”) and its subcontractor A&K

Erectors, Inc. (“A&K”) for negligence. Pursuant to ISF’s general liability

insurance policy, the Burlington Insurance Company (“Burlington”) is

indemnifying and defending ISF in that lawsuit to the extent of ISF’s coverage

under the policy.

      The parties dispute the policy’s coverage limit for Nasr’s accident.

Burlington believes that the limit was reduced from $1 million to $25,000 because

ISF failed to require A&K to obtain, maintain, and submit certified proof of its

own insurance policy with coverage and limits of liability at least equal to those in

ISF’s policy with Burlington. To obtain a declaratory judgment regarding the

coverage limit, Burlington initiated a separate suit against ISF, A&K, and the

estate. Each of the parties in that case, except for A&K against whom a default

judgment was entered, moved for summary judgment. The district court granted

summary judgment in favor of Burlington, a decision appealed only by Nasr’s

estate. After thorough review, we AFFIRM the district court’s ruling.

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                                          I.

      We review de novo a district court’s grant of summary judgment, applying

the same legal standards that governed the district court’s analysis. Penley v.

Eslinger, 605 F.3d 843, 848 (11th Cir. 2010). In doing so, we would normally

examine the record to determine whether a genuine issue of material fact exists,

but here the parties stipulated that there are no triable issues of fact and waived

their right to a jury trial. Therefore, we need only determine whether the district

court properly entered judgment in favor of Burlington based on its interpretation

of the ISF insurance policy. See Hercules Bumpers, Inc. v. First State Ins. Co.,

863 F.2d 839, 841 (11th Cir. 1989).

      This declaratory judgment action was brought on the basis of diversity

jurisdiction under 28 U.S.C. § 1332. The district court implicitly determined that

Florida law controls Burlington’s legal obligations under its insurance policies,

and the parties have not objected to that determination on appeal. Accordingly,

we apply Florida law in analyzing the policy’s terms. See LaTorre v. Conn. Mut.

Life Ins. Co., 38 F.3d 538, 540 (11th Cir. 1994) (“Florida adheres to the traditional

rule that the legal effects of terms of the insurance policy and rights and

obligations of persons insured thereunder are to be determined by the law of the

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state where the policy was issued.”) (citing Wilson v. Ins. Co. of N. Am., 415 So.

2d 754, 755 (Fla. Dist. Ct. App. 1982); see also Cavic v. Grand Bahama Dev. Co.,

701 F.2d 879, 882 (11th Cir. 1983) (“Because the parties did not raise any conflict

of laws issue in the district court and do not raise it on appeal, under applicable

conflict of laws principles the law of the forum ([Florida]) would govern the

substantive issues due to the absence of facts justifying the application of the law

of some other jurisdiction.” (alteration in original) (quoting Montgomery Ward &

Co. v. Pac. Indem. Co., 557 F.2d 51, 58 n.11 (3rd Cir. 1977)).

                                          II.

      Under Florida law, “insurance contracts must be construed in accordance

with the plain language of the policy.” Swire Pac. Holdings, Inc. v. Zurich Ins.

Co., 845 So. 2d 161, 165 (Fla. 2003). But if the relevant policy language is

ambiguous then extrinsic evidence of the parties’ intentions may be introduced to

explain the ambiguity. Reinman, Inc. v. Preferred Mut. Ins. Co., 513 So. 2d 788,

788 (Fla. Dist. Ct. App. 1987). Ambiguity exists if the policy language is

“susceptible to more than one reasonable interpretation,” such as “one providing

coverage and the another limiting coverage.” Auto-Owners Ins. Co. v. Anderson,

756 So. 2d 29, 34 (Fla. 2000). In making that determination, the policy as a whole

must be examined and ordinary rules of contract construction apply. Swire, 845

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So. 2d at 166. An ambiguous provision, particularly a provision that excludes or

limits coverage, is liberally construed in favor of the insured and strictly against

the insurer who prepared the policy in order to achieve the greatest possible

coverage. Flores v. Allstate Ins. Co., 819 So. 2d 740, 744 (Fla. 2002).

      A “warranty endorsement” in the insurance policy underwritten by

Burlington is the sole focus of the parties’ dispute. That endorsement reduces

ISF’s coverage from $1 million to $25,000 per occurrence if ISF breaches two

warranties regarding contractors:

              WARRANTY - INSURANCE FOR LEGAL LIABILITY
                           (CONTRACTORS)

      This endorsement modifies insurance provided under the following:

      COMMERCIAL GENERAL LIABILITY COVERAGE PART

      1.     In consideration of our agreeing to to [sic] issue this policy, you
             agree, covenant and warrant that you require without exception
             that those who undertake a job for or in your behalf obtain and
             maintain insurance, during the duration of the job, for legal
             liability arising out of their operations with coverage and limits
             of liability equal to or greater than those provided by this policy.

      2.     You further warrant that you obtain [certified proof or the
             equivalent] of such insurance prior to commencement of any
             work performed for or in your behalf.

      3.     For any “occurrence” arising out of your failure to comply with
             the warranties in Paragraph 1 and 2 above the limits of insurance

                                           5
             [are reduced as set forth in the schedule]. These limits are
             inclusive of and are not in addition to the limits being replaced.

The policy defines “occurrence” as “an accident, including continuous or

repeated exposure to substantially the same general harmful conditions.”

Not surprisingly, the parties agree that the “occurrence” in this case is

Nasr’s death. They also agree that A&K, as ISF’s subcontractor, did not

have the requisite insurance policy and that ISF never obtained certified

proof of insurance from A&K.

      In construing paragraph three of the warranty endorsement, Nasr’s

estate urges us to strictly adhere to the policy’s explicit language in such a

way that strains logic. It argues that the “arising out of” language requires

Nasr’s death to be causally connected to ISF’s breach of the two warranties.

Under this interpretation, the coverage limitation would not apply because

ISF’s failure to require A&K to obtain, maintain, and submit certified proof

of the required insurance policy did not cause Nasr’s death. The estate

acknowledges that the endorsement makes little sense given this

interpretation but urges that Burlington should have brought a reformation

action if it wanted to avoid the effect of the provision’s “plain, easily

understandable English.”

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      We agree with the district court and Burlington that the estate’s

interpretation is not reasonable. The limitation provision follows the two

warranties and thus must be read in conjunction with them. No reasonable

interpretation of all three provisions in context would require a causal

connection between the occurrence and the breach of warranties. To hold

otherwise would have us accept the illogical proposition that fatal accidents

could result from ISF’s failure to ensure that its contractors had the requisite

insurance. Rather, the only reasonable interpretation of the endorsement is

that the uninsured (or underinsured) subcontractor employed by ISF, here

A&K, must somehow be implicated in the accident or occurrence.

      Because we find the contractual language in paragraph three

susceptible to only one reasonable interpretation, that paragraph is not

ambiguous and we need not consider any extrinsic evidence. See

Acceleration Nat’l Serv. Corp. v. Brickell Fin. Servs. Motor Club, Inc., 541

So. 2d 738, 739 (Fla. Dist. Ct. App. 1989) (“Before extrinsic matters may be

considered by a court in interpreting a contract, the words used on the face

of the contract must be ambiguous or unclear.”). But even if we were

inclined to do so, our conclusion would remain unchanged. Not

surprisingly, the estate has not set forth a single piece of evidence

                                           7
suggesting that ISF and Burlington intended the reduction in coverage to

apply only if the accident was somehow causally connected to a breach of

the warranties. Notably, while ISF’s general manager perhaps did not

appreciate the effect of the warranty endorsement when he signed an

identical version in the previous year’s policy, he has admitted that the

language has “become clear as rain” in that there is “[n]o ambiguity at all.”

Without any evidence refuting the inescapable conclusion that even ISF’s

general manager ultimately drew, a reasonable trier of fact surely could not

conclude otherwise.

      The estate also argues, in the alternative, that there should not be any

reduction in coverage because ISF did not breach the warranties in

paragraphs one and two. To support its argument, the estate urges that the

warranties should not be construed as creating prospective obligations but

rather as only representations of present facts given that they are written in

the present, not future, tense. Under this interpretation, a breach of the

warranties could only occur if ISF, at the time the policy was “applied for

and issued,” did not have a standard operating procedure requiring its

contractors to obtain and submit proof of the requisite insurance coverage.

Because ISF had such a procedure at that time, the estate says that ISF’s

                                          8
inadvertent failure to follow that procedure with respect to A&K following

the underwriting of ISF’s insurance contract is irrelevant and could not have

resulted in a breach of the warranties.

      The estate’s argument implores us to ignore all context and limit our

attention to only the words it selects to make its case, namely the ones

written in present tense. Courts, however, “may not isolate a single

sentence or group of words in an insurance policy and read the isolated part

alone and apart from other provisions; the goal is to arrive at a reasonable

interpretation of the entire policy to accomplish its stated meaning and

purpose.” Brown v. Travelers Ins. Co., 649 So. 2d 912, 914–95 (Fla. Dist.

Ct. App. 1995).

      When reading the warranties in context, they clearly create

prospective obligations rather than represent existing facts. Burlington’s

obligation to provide $1 million in coverage without any reduction was

conditional on ISF requiring its subcontractors to have the requisite

insurance and obtaining proof of that coverage “prior to commencement of

any work.” If the existence of a standard operating procedure to this effect

when the policy was issued was sufficient, there would be no need for the

policy to spell out different coverage limits depending on whether ISF

                                          9
complied with the warranties in the context of a particular accident. In other

words, the warranties had to be prospective obligations or else the language

in paragraph three regarding “occurrences” would be superfluous. Under

the estate’s interpretation, the reduction in coverage would apply if the

warranties were untrue when the policy was issued regardless of what

particular occurrence later gave rise to coverage. That interpretation is

unreasonable in light of the endorsement as a whole. We therefore reject

the estate’s argument that the provision is ambiguous so as to require liberal

construction of the provision in favor of the insured.1

       For these reasons, we AFFIRM the district court’s order granting

Burlington’s motion for summary judgment.

       1
         The estate urges us to consider that ISF’s policy is a renewal from the previous year and
in that year ISF’s policy contained not only the same warranty endorsement but also a conflicting
endorsement called the “Contractors Special Conditions.” That endorsement contained virtually
the same provisions as the warranty endorsement but used the future tense and did not reduce
coverage in the event of a breach of the provisions. The only way to resolve this conflict, the
estate says, is to interpret the warranty endorsement as only requiring ISF to have a standard
operating procedure when the policy is applied for and issued. The estate urges us to give the
warranty endorsement in the policy here the same meaning.
        Even if we were inclined to consider this extrinsic evidence, the estate’s resolution of the
conflict does not work a reasonable reconciliation. As discussed above, it is unreasonable to
construe the warranty endorsement as creating no prospective obligations even though it fails to
use the future tense. In any event, the Contractors Special Conditions endorsement is irrelevant
given that it has been removed from the policy at issue. See Hercules Bumpers, Inc., 863 F.2d at
842 (“It is a basic tenet of insurance law that each time an insurance contract is renewed, a
separate and distinct policy comes into existence.”).

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