Court Opinion

ID: 66507
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:11:10+00
Date Added: 2024-06-11T17:20:46.313651
License: Public Domain

[DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS
                                                                                FILED
                            FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                              ________________________ ELEVENTH CIRCUIT
                                                                          NOV 25, 2008
                                     No. 07-14922                       THOMAS K. KAHN
                               ________________________                     CLERK

                           D. C. Docket No. 06-20618-CV-UU

FIRST SPECIALTY INSURANCE CORPORATION,

                                                                          Plaintiff-Appellee,

                                            versus

633 PARTNERS, LTD.,
BAYE CONTRACTING, INC.,
FATIMA SMITH,

                                                                    Defendants-Appellants.

                               ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            _________________________

                                   (November 25, 2008)

Before BIRCH and MARCUS, Circuit Judges, and FORRESTER,* District Judge.

       *
        Honorable J. Owen Forrester, United States District Judge for the Northern District of
Georgia, sitting by designation.
PER CURIAM:

      633 Partners, Ltd. (“633”), Baye Contracting, Inc. (“Baye”), and Fatima

Smith (collectively “Appellants”) appeal the district court’s decision granting

summary judgment for First Specialty Insurance Corporation (“First Specialty”) in

a diversity declaratory judgment action regarding the scope of First Specialty’s

duties as 633 and Baye’s insurer. Appellants contend that the district court erred

by concluding that First Specialty had no duty to defend 633 and Baye in an

underlying tort action and by finding that the applicable insurance binder contained

an assault and battery exclusion that covered the claims of that underlying action.

Additionally, Appellants assert that the district court abused its discretion by not

allowing them an opportunity to respond to new arguments and facts presented in

First Specialty’s summary judgment reply brief. For the reasons that follow, we

REVERSE the district court’s order and REMAND for proceedings consistent with

this opinion.

                                 I. BACKGROUND

A. First Specialty’s Insurance Coverage

      On 20 December 2001, 633 and Baye met with Thomas Kallman, a retail

insurance broker, to obtain insurance coverage for a building owned and operated

by them. In the course of this meeting, Kallman presented them with an insurance

                                           2
proposal which they subsequently signed. This proposal indicated that it would be

subject to policy terms and conditions and referenced an assault and battery

exclusion. Later that day, 633 and Baye received a letter from Kallman’s insurance

agency purporting to be a binder for the policy (hereinafter referred to as the “20

December binder”).1 The binder stated that coverage would be effective beginning

31 December 2001 and gave the limits on the amount of coverage; however, it did

not mention any exclusions, including for assault and battery, or any particular

conditions of coverage.

       On 27 December 2001, Bass Underwriters, an authorized agent of First

Specialty, faxed a binder dated 26 December 2001 to Kallman (hereinafter referred

to as “26 December binder”). Unlike the earlier binder, this document included a

checklist of exclusions, all of which were checked, including the one for “Assault

& Bat.” R2-56 at 22. Though this binder did not elaborate about the scope of the

assault and battery exclusion, it stated that the policy was “subject to the usual

terms and conditions in addition to” the listed exclusions. Id. The binder also

mentioned that coverage would commence on 31 December 2001 and that the

binder would be effective until 1 March 2002 or the date a policy was issued,

whichever came first.

       1
          As discussed later in this opinion, First Specialty contends that this was not a binder but
rather a notification to the companies that they were insured for particular amounts of coverage.

                                                  3
       On 16 January 2002, First Specialty issued the insurance policy (“the

Policy”), which still had an effective date of 31 December 2001. The Policy

included an assault and battery exclusion, which stated:

       In consideration of the premium charged, it is hereby understood and
       agreed that this insurance does not apply to claims or “suits” for
       “bodily injury”, [sic] “personal injury” or death caused by or arising
       directly or indirectly out of or from an assault or assault and battery of
       any nature whatsoever, whether or not committed by or at the
       direction of the Insured, his employees, patrons or any causes
       whatsoever.

R1-1, Exh. A. The 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. The term “personal injury” was not defined in the Policy, but the phrase

“personal and advertising injury” specifically covered injuries resulting from a

variety of offenses, including “false arrest, detention or imprisonment.” Id.

B. The Underlying Action

       The underlying tort claim, for which 633 and Baye sought both defense and

indemnification, derived from a series of events that took place on 31 December

2001 at a building owned and operated by 633 and Baye. The basic facts of these

occurrences appear to be undisputed.2 On that date, Fatima Smith was approached

by Maximo Almonte, who was then on duty as a security guard for 633 and Baye.

       2
        As will be discussed later on, the parties do disagree as to whether these should be
viewed as a series of discrete episodes or one continuous event.

                                                4
Almonte detained Smith in a building hallway, forced her to enter an empty,

locked stairwell, dragged her down a flight of stairs, and then tried to rape and

sexually assault her three separate times. These events took place over a thirty-five

to forty-minute time span.

       Smith subsequently sued Almonte, 633, and Baye for a number of torts.3

Her claims against 633 and Baye included: negligence4 ; false imprisonment and

assault based on respondeat superior; negligent hiring, retention and supervision

resulting in false imprisonment and rape; negligent misrepresentation resulting in

false imprisonment and rape; and derivative liability for Almonte’s actions. She

also brought claims against Almonte for assault and battery, false imprisonment,

and negligent rendition of security services.

       To date, Smith has proceeded to trial only against Almonte. She voluntarily

dismissed the assault and battery claim pre-trial; thus the jury addressed solely the

negligent rendition and false imprisonment claims. The jury found that Almonte

had falsely imprisoned Smith while acting in the scope of his employment and was

       3
         Though Smith appears to have filed a Third Amended Complaint in the underlying
action, both parties appear to agree that the Second Amended Complaint should be the operative
document for determining the duty to defend in this case. The district court made its findings
based on this same complaint.
       4
         This claim encompassed a range of different deficiencies dealing with the provision of
security services, such as failure to monitor, train, and supervise security staff, failure to inform
residents of the possibility of criminal attacks on the premises, and tacit approval or condoning
of inappropriate actions by Almonte.

                                                   5
therefore liable for $5 million in damages.5 Smith’s trial against 633 and Baye also

began but the court declared a mistrial due to concerns about a potential conflict of

interest between 633/Baye and First Specialty, which was defending the two

companies under a reservation of rights.6 Those proceedings have been stayed

pending the resolution of this action, and First Specialty continues to defend under

a reservation of rights.

C. Procedural History

       First Specialty filed suit in March 2006 in the United States District Court

for the Southern District of Florida seeking a declaratory judgment that it had no

duty to defend or indemnify 633 and Baye with respect to Smith’s tort suit against

those two companies. In its complaint, First Specialty alleged that the assault and

battery exclusion in the Policy covered Smith’s claims, and therefore that it should

have no duty to indemnify or defend either of those two companies. First Specialty

subsequently moved for summary judgment, which the district court granted in

part and denied in part.

       In analyzing First Specialty’s summary judgment motion, the district court

       5
         It is unclear whether the jury addressed the negligent rendition claim. The final
judgment did not reference it, other than noting that Almonte committed the violation in the
scope of his employment.
       6
         It is undisputed that First Specialty had no duty to defend Almonte, who was not an
insured under the Policy.

                                                6
focused on whether Smith’s claims would be covered by the language in the

assault and battery exclusion. The court initially looked at whether there would be

a duty to defend based solely on the allegations in the complaint, as required under

Florida case law. According to the court, there was language in Smith’s complaint

that seemed to indicate that the false imprisonment and the assault and battery

involved distinct acts.7 Based on this language, the court concluded that First

Specialty had a duty to defend on the false imprisonment claim and its related

negligence claims but not on those negligence claims related to the assault and

battery, since the latter group clearly “arose out of” the assault and battery.

       After concluding that there was a duty to defend, the court then looked at

whether there was a duty to indemnify, since it interpreted Florida case law to say

that the absence of the latter would preclude the existence of the former. Because

Florida law required that the duty to indemnify be determined based on the actual

facts of the case, the court looked to Smith’s testimony and read it to say that the

false imprisonment was inherently intertwined with the assault and battery.

Accordingly, the court found that First Specialty had no duty to indemnify on any

of Smith’s claims, since they all were covered by the assault and battery exclusion.

       7
          In particular, paragraph 19 of Smith’s second amended complaint describes how
Almonte approached and detained Smith in the hallway against her will. Paragraph 20 discusses
how Smith was sexually assaulted and subjected to verbal and physical abuse “[s]ubsequent to
the initial detention.” R2-40 at 3.

                                              7
As a result, all of Smith’s claims would be precluded from coverage. After

reaching this conclusion, the court noted that there were disputed issues of fact

regarding whether the policy in effect at the time of Smith’s incident included the

assault and battery exclusion. The court therefore denied without prejudice First

Specialty’s summary judgment motion on that issue and granted Appellants leave

to conduct further discovery solely on that topic.

      In the midst of the initial summary judgment briefing, Appellants filed a

motion to strike, contending that First Specialty’s references to Smith’s testimony

constituted raising of new factual issues in a reply brief, since First Specialty had

not referenced the testimony previously. They requested that the court either strike

this new material or deny the summary judgment motion and allow them a chance

to respond to this new evidence. The court rejected their claim, determining that

First Specialty had not raised a new issue but rather was citing the testimony as

evidence to rebut Appellants’ assertion that the false imprisonment and assault and

battery were independent.

      After discovery, First Specialty again moved for summary judgment, which

the court granted. The court initially found that there was no genuine issue of

material fact regarding whether the 26 December binder was in force at the time of

the incident since there was no evidence that Kallman had actual or apparent

                                           8
authority to issue the 20 December binder on behalf of First Specialty. That binder

thus was not enforceable against First Specialty. Additionally, the court found that

the assault and battery exclusion in the Policy applied to Smith’s incident based on

provisions in the 26 December binder. As a result, the court determined that all of

Smith’s claims fell under the assault and battery exclusion, which meant First

Specialty had no duty to defend or indemnify 633 and Baye on any of the claims.

Based on this conclusion, the court granted First Specialty’s motion for summary

judgment.8 633, Baye, and Smith now appeal this order.

                                     II. DISCUSSION

       Appellants raise three issues on appeal: (1) whether the district court erred

by looking at facts not included in Smith’s complaint in determining whether First

Specialty had a duty to defend; (2) whether the district court abused its discretion

by granting summary judgment without allowing Appellants the opportunity to

respond to new material in First Specialty’s reply brief; (3) whether the district

court erred by finding that the 26 December binder was in effect and that it

included the same assault and battery exclusion listed in the Policy.

A. Duty to Defend

       We review a district court’s grant of summary judgment de novo and apply

       8
       Appellants subsequently filed a motion for rehearing and/or to alter or amend the
judgment, which the court rejected. This decision has not been appealed.

                                               9
the same legal standards the district court used. See Smith v. Allen, 502 F.3d
1255, 1265 (11th Cir. 2007). Summary judgment would be appropriate where

“there is no genuine issue as to any material fact and . . . the movant is entitled to

judgment as a matter of law.” Federal Rule of Civil Procedure 56(c). In making

this determination, “[w]e draw all factual inferences in a light most favorable to the

non-moving party.” Smith, 502 F.3d at 1265.

       Under Florida law9 , “[i]t 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.” Jones v. Florida Ins. Guar.

Ass’n, Inc., 908 So. 2d 435, 442–43 (Fla. 2005). Courts thus must determine the

existence of a duty to defend based solely on the allegations in the complaint, with

all doubts resolved in favor of the insured. See id. at 443. The Florida Supreme

Court has found the duty to defend is both distinct from and broader than the duty

to indemnify, meaning that insurers are obligated to defend even if the allegations

in the complaint are inconsistent with the actual facts or completely meritless. See

id. This duty would extend to all claims, even those not within the scope of

coverage. See Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So. 2d 810,

       9
         As the district court’s jurisdiction was premised on diversity, we apply Florida
substantive law to this action. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817,
822 (1938).

                                               10
813–14 (Fla. Dist. Ct. App. 1985).

      Based on these principles, we must determine whether the district court

correctly concluded that First Specialty had no duty to defend, either because it had

no duty to indemnify or on some other grounds. See Lucas v. W.W. Grainger, Inc.,

257 F.3d 1249, 1256 (11th Cir. 2001) (noting that a district court’s decision could

be affirmed “on any ground that finds support in the record”) (quotation marks and

citation omitted). First Specialty identifies three bases for affirming the district

court’s grant of summary judgment on the issue of duty to defend. First, it

contends that there was no duty to defend based on the facts alleged in Smith’s

complaint. Second, it asserts that even if there was a duty to defend based on the

facts in the complaint, the actual facts showed that Smith’s allegations only

involved non-covered claims for which there was no possibility of recovery.

Third, it contends that the court’s finding of no duty constituted harmless error

because First Specialty continued to defend 633 and Baye throughout the

underlying litigation. We will address these arguments in turn.

      1. Existence of a Duty to Defend

      We must first examine whether Smith alleged facts in her complaint that

would give rise to a duty to defend under the Policy. The only way that such a

duty would not exist is if all of the claims fell under the assault and battery

                                           11
exclusion.10 See State Farm Fire & Cas. Co. v. Tippett, 864 So. 2d 31, 35 (Fla.

Dist. Ct. App. 2003) (noting that “if the pleadings show the applicability of a

policy exclusion, the insurer has no duty to defend”). This exclusion covered all

claims “for ‘bodily injury’ [or] ‘personal injury’” that were “caused by or ar[ose]

directly or indirectly out of or from an assault or assault and battery of any nature

whatsoever.” R1-1, Exh. A. Florida courts have interpreted the phrase “arising out

of” to mean something broader than pure causation and closer to “‘originating

from,’ . . . ‘incident to’ or ‘having a connection with.’” Taurus Holdings, Inc. v.

United States Fid. & Guar. Co., 913 So. 2d 528, 539 (Fla. 2005).

       As the district court correctly noted, Smith’s claims can essentially be

separated into two different categories — those connected to the assault and

battery and those related to the false imprisonment. Of these two groups, only the

false imprisonment claims could serve as a potential basis for a duty to defend.

The negligence claims connected solely to the assault would necessarily “hav[e] a

connection with” that crime and thus would “arise out of” the assault pursuant to

how Florida courts have interpreted that phrase. Id. at 539. This interpretation

accords with how Florida courts generally have treated negligence claims relating

       10
          We note that the scope and applicability of this exclusion to these parties is also an
issue on appeal. For this portion of the opinion, we will assume that the assault and battery
exclusion included in the Policy should control. If First Specialty had a duty to defend under
this exclusion, it would obviously also have one under any narrower exclusion.

                                                 12
to assaults. See, e.g., Miami Beach Entm’t Inc. v. First Oak Brook Corp.

Syndicate, 682 So. 2d 161, 162 (Fla. Dist. Ct. App. 1996); Britamco Underwriter’s,

Inc. v. Zuma Corp., 576 So. 2d 965, 965 (Fla. Dist. Ct. App. 1991). There is one

Florida case, Mactown, Inc. v. Continental Ins. Co., 716 So. 2d 289 (Fla. Dist. Ct.

App. 1998), which rejected applying an assault and battery exclusion to a

negligence claim. That decision, however, was premised on the fact that the

exclusion also referenced a number of other intentional torts, which the court read

to create ambiguity regarding the exclusion’s applicability to negligence-based

torts. See id. at 291–92. Here, though, the exclusion is focused on only one tort

and appears to encompass all claims related to that tort, regardless of whether they

are intentional or not. Accordingly, if there is a duty to defend in this case, it

would have to derive from Smith’s claims relating to the imprisonment.

      Under the Policy, all false imprisonment claims are covered, subject to any

exclusions, as part of the larger category of “personal and advertising injury.” First

Specialty contends that Smith’s false imprisonment claims should not be covered

because they would fall under the ambit of the assault and battery exclusion as a

form of “personal injury” that arose out of an assault or battery. As previously

noted, the Policy does not define the term “personal injury.” Since the use of

quotation marks around a phrase in an insurance policy identifies it as an official

                                           13
term of that policy, we need to define “personal injury” to discern the full meaning

of the Policy. We agree with the district court that there is no ambiguity between

the terms “personal injury” and “personal and advertising injury” and that the only

plausible interpretation is to treat “personal injury” as part of “personal and

advertising injury” rather than as a distinct concept. Based on this reading, the

assault and battery exclusion would bar all claims alleging injury arising out of a

false imprisonment that are “caused by or aris[e] directly or indirectly out of or

from an assault or assault and battery of any nature whatsoever.” R1-1, Exh. A.

      In determining whether Smith’s claims related to the false imprisonment

would fall under this interpretation of the exclusion, we look only at the text of the

complaint. See Jones, 908 So. 2d at 443. Appellants assert that the complaint

describes the false imprisonment as a separate and distinct event from the assault.

In particular, they focus on paragraphs 19 and 20 of Smith’s Second Amended

Complaint, which state, in relevant part:

      19. On December 31, 2001, . . . Plaintiff FATIMA SMITH . . . was
      detained in the hallway by the security guard (ALMONTE) who then
      required her to enter an empty, locked stairwell. This detention was
      against Plaintiff, FATIMA SMITH’S will.

      20. Subsequent to the initial detention Plaintiff FATIMA SMITH was
      subjected to verbal and physical threats, abuse and indignities.
      FATIMA SMITH was placed in immediate fear of her person and
      safety. FATIMA SMITH was sexually assaulted and raped against her
      will, and in violation of all laws and human decency.

                                            14
R2-40 at 3. They also emphasize that the counts in Smith’s complaint describing

her false imprisonment do not reference the assault at all. However, as First

Specialty notes, those allegations all discuss pain, suffering, and bodily injury

resulting from the false imprisonment, which would seem to have to result

logically from some form of assault and battery.11

        After examining the underlying complaint, we agree with the district court’s

finding that the allegations contained within are sufficient to create a duty to

defend. The district court focused principally on the complaint’s description of the

sexual assault as an event “subsequent to” the initial false imprisonment, which the

court believed showed that these were two separate events and that the false

imprisonment could not have arisen out of the assault. Based on our own analysis,

we find it reasonable to read the pleadings as depicting Smith’s false imprisonment

as a distinct, preceding incident that did not necessarily have to result in her assault

and battery, even if that was a potential outcome. In particular, we note that the

        11
             For example, paragraph 26 states:

        As a direct and proximate result of Defendant ALMONTE’s false imprisonment,
        Plaintiff FATIMA SMITH sustained bodily injury and resulting pain and
        suffering, disability, disfigurement, mental anguish, loss of capacity for the
        enjoyment of life, expense of hospitalization, medical and nursing care and
        treatment. The damages, injuries and losses are permanent and continuing in
        nature and Plaintiff will suffer the losses and impairment in the future.

Id. at 4–5.

                                                 15
complaint repeatedly discussed the assault as a separate event later in time than the

original false imprisonment, as evidenced by the “subsequent to” language

referenced by the district court and by references to the assault occurring “at some

point after the initial detention.” R1-9, Exh. A at 12. Though temporal

displacement does not automatically imply narrative disjunction, it provides a basis

for differentiating between the two events, especially since the complaint lacks any

clear evidence of connectedness. Accordingly, we find that Smith’s complaint did

not allege that her false imprisonment arose out of, originated from, or was

connected with an assault or battery, and thus those claims relating to the false

imprisonment would not fall under the assault and battery exclusion.

       We acknowledge that this conclusion is somewhat technical and that

alternate interpretations, such as First Specialty’s, also would be reasonable. In

particular, we agree that bodily injury typically would not result from an act of

false imprisonment absent some form of assault or battery.12 However, a false

imprisonment by itself could create a bodily injury, and an assault or battery is not

a necessary precondition for such an injury. We thus have a situation in which

       12
          Smith’s deposition testimony may support this reading, since it seems to describe her
interaction with Almonte as one long encounter that included both sexual assault and false
imprisonment rather than as separate and discrete incidents. However, the duty to defend
derives exclusively from the allegations in the complaint and other pleadings, so these
statements do not affect our analysis of that duty, though they would be applicable in
determining the existence of a duty to indemnify. See Jones, 908 So. 2d at 442–43.

                                               16
there are plausible readings supporting and rejecting a duty to defend based on the

applicability of the exclusion.13 Under Florida law, “[i]f the allegations of the

complaint leave any doubt regarding the duty to defend, the question must be

resolved in favor of the insured requiring the insurer to defend.” Baron Oil, 470
So. 2d at 814. We therefore conclude that, in the absence of any clear evidence to

the contrary, First Specialty had a duty to defend 633 and Baye on all of Smith’s

claims, even those unrelated to false imprisonment. See id. at 813–14 (“[I]f the

complaint alleges facts showing two or more grounds for liability, one being within

the insurance coverage and the other not, the insurer is obligated to defend the

entire suit.”).

       2. Duty to Defend v. Duty to Indemnify

       The district court agreed that First Specialty had this duty to defend, but also

determined that the duty to defend should stop once the actual facts of the case

showed that there was no possibility for coverage, i.e., when it had no duty to

indemnify. We find that this rationale is not a valid basis for finding no duty to

defend and thus conclude that the district court should not have addressed the

issue. The district court cited a number of cases in support of its approach, though

only two involved the application of Florida law — Underwriters at Lloyds

       13
         The plausibility of the pro-duty reading can be seen in the district court’s decision,
which accepts that argument after engaging in a detailed analysis.

                                                 17
London v. STD Enters., Inc. (Underwriters), 395 F. Supp. 2d 1142 (M.D. Fla.

2005) and Nationwide Mutual Fire Ins. Co. v. Keen (Keen), 658 So. 2d 1101 (Fla.

Dist. Ct. App. 1995). Both of these cases depart from the general principle of

determining the duty to defend only from the allegations in the complaint and are

also readily distinguishable from the present case.

      Underwriters and Keen both involve underlying complaints that omitted a

reference to an uncontroverted fact that, if pled, would have placed the claim

clearly outside the scope of coverage. In Underwriters, for example, the

underlying suit involved an employee seeking damages from his employer for an

injury in an car accident. See Underwriters, 395 F. Supp. 2d at 1144. The

employer’s insurance policy contained a cross-liability exclusion, which

disclaimed coverage for suits brought by one insured party against another under

that policy. See id. The employee failed to mention in his complaint that he was

using the vehicle for business purposes, a fact that would have barred coverage

under the exclusion. See id. at 1146. Neither party disputed this fact and the

employee’s deposition testimony clearly supported its veracity. See id. at 1150.

As a result, the court determined that, though there would have been a duty to

defend looking exclusively at the complaint, the absence of any possibility for

coverage under the policy eliminated this duty. See id. In Keen, the underlying

                                          18
plaintiff was piloting a water craft which used an engine that was too powerful to

be covered under the insurance policy. See Keen, 658 So. 2d at 1102–03. He

presented no evidence to dispute this characterization and conceded that the craft

had a non-covered engine. See id. Based on these facts, the court found it

appropriate to relieve the insurer of its duty to defend. See id. at 1103.

       Apart from the situations in Keen and Underwriters, Florida courts have

focused exclusively on the facts of the complaint in determining the duty to

defend, regardless of post-complaint developments.14 They have deemed these

facts to control even “[w]hen the actual facts are inconsistent with the allegations

in the complaint.” See Jones, 908 So. 2d at 443 (quotation marks and citation

omitted). Additionally, once a court finds that there is a duty to defend, it will

“continue[] even though it is ultimately determined that the alleged cause of action

is groundless and no liability is found within the policy provisions defining

coverage.” Baron Oil, 470 So. 2d at 814. Against this backdrop, Keen and

Underwriters are best seen as exceptional cases in which courts have crafted an

equitable remedy when it is manifestly obvious to all involved that the actual facts

       14
           There are instances in which Florida courts have reached similar equitable results as
Underwriters and Keen based on facts outside of the complaint, but those courts found no initial
duty to defend rather than that the duty to defend was eliminated by the new facts. See, e.g.,
Wilson ex rel. Estate of Wilson v. General Tavern Corp., 469 F. Supp. 2d 1214, 1220–21 (S.D.
Fla. 2006) (finding no duty to defend when the underlying plaintiff deliberately failed to mention
a fact in order to “plead into coverage”).

                                                19
placed the claims outside the scope of coverage.15 See Sphinx Int’l, Inc. v.

National Union Fire Ins. Co. of Pittsburgh, Pa., 226 F. Supp. 2d 1326, 1338 (M.D.

Fla. 2002) (deeming Keen to be “an apparent aberration”).

       To the extent that Florida law permits a equitable departure from the general

treatment of a duty to defend, it would not apply in this case. The court in Keen

indicated that this relief would only be proper “if uncontroverted evidence places

the claim outside of coverage, and the claimant makes no attempt to plead the fact

creating coverage or suggest the existence of evidence establishing coverage.”16

Keen, 658 So. 2d at 1103. Here Appellants explicitly contest the district court’s

finding that the false imprisonment and the assault and battery are so inherently

       15
           The other case cited by First Specialty as interpreting Florida law to defeat an existing
duty to defend would fall under the same descriptor. See Prime Ins. Syndicate, Inc. v. Soil Tech
Distribs., 2006 WL 1823562 (M.D. Fla. June 30, 2006). Like Underwriters, that case involved a
cross-liability exclusion that would have applied to the actual facts but not to what was alleged
in the complaint. See id. Given that neither party disputed these facts, this also represented a
situation in which it was obvious to all that there was no potential for coverage. See id. at *5–7.
        Additionally, we note that even this exception is not universally applied throughout
Florida. In Baron Oil, for example, both parties conceded that the plaintiff suing Baron in the
underlying suit was an employee of the company — a fact which triggered an exclusion in
Baron’s insurance policy. See Baron Oil, 470 So. 2d at 811–12. However, the complaint itself
did not mention this fact and the court thus found that the insurer had a duty to defend even
when the actual facts clearly showed that the claims were not covered. See id. at 814.
       16
           This characterization is also consistent with the non-Florida decisions cited by the
district court, all of which find the duty to defend to have been eliminated when the actual facts
indisputably show that there is no possibility of coverage. See, e.g., Liberty Mut. Ins. Co. v.
FAG Bearings Corp., 153 F.3d 919, 924 (8th Cir. 1998); Conway Chevrolet Buick, Inc. v.
Travelers Indem. Co., 136 F.3d 210, 214 (1st Cir. 1998); North Bank v. Cincinnati Ins. Cos., 125
F.3d 983, 986 (6th Cir. 1997); Snug Harbor, Ltd. v. Zurich Ins., 968 F.2d 538, 545 (5th Cir.
1992).

                                                 20
intertwined as make the former arise out of the latter. In addition, Smith pled

sufficient evidence to support a finding of coverage based on a separate and

distinct incident of false imprisonment, and, unlike the parties in Underwriters and

Keen, she did not omit any crucial facts that would have taken her claims outside

the scope of coverage. We therefore find that there was no basis for the district

court to conclude that First Specialty had no duty to defend based on facts outside

those alleged in the complaint.

      3. Harmless Error

      First Specialty also asserts that even if the district court erred in concluding

that there was no duty to defend, the error was harmless. In particular, it notes that

it has continued to defend 633 and Baye at all times in the state court proceedings.

However, all parties agree that the state court action against 633 and Baye remains

pending, which means that they are still in need of a defense. In the absence of a

court order determining the existence of a duty to defend, First Specialty could

refuse to provide such a defense. Additionally, First Specialty has entered into a

settlement agreement pursuant to which it will pay Smith, 633 and Baye amounts

that depend on the outcome of this declaratory action. Accordingly, we reject First

Specialty’s contention that the district court’s duty to defend finding could

                                          21
constitute harmless error.17

B. Issues Related to Duty to Indemnify

       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 non-

moving 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
                                 III. CONCLUSION

      Baye, 633, and Smith appeal the district court’s grant of summary judgment

based on a determination that First Specialty had no duty to defend or indemnify

633 and Baye in an underlying suit involving Smith. In determining the scope of

the duty to defend, the district court incorrectly looked to the actual facts of the

case rather than the allegations of the complaint, which were sufficient to create

such a duty under the Policy. We thus find that the district court should not have

granted summary judgment on those grounds, although the court correctly

determined that 633 and Baye were not entitled to an opportunity to respond to

First Specialty’s summary judgment reply brief and that the assault and battery

exclusion in the Policy was applicable. For the foregoing reasons, we REVERSE

the district court’s order of summary judgment and REMAND for further

proceedings consistent with this opinion.

REVERSED AND REMANDED.

                                            32