Burlington Insurance v. Industrial Steel Fabricators, Inc. , 387 F. App'x 900 ( 2010 )

[DO NOT PUBLISH]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
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[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
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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
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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
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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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