News Room

News Room

Coverage Update

July 19, 2019

Dear Ladies/Gentlemen:

This month we would like to share with you some recent opinions of the Florida District Courts of Appeals which may be of interest to you.


In Landmark Am. Ins. Co. v. Pin-Pon Corp., 44 Fla. L. Weekly D445 (Fla. 4th DCA February 13, 2019), the 4th DCA reversed a final judgment awarding damages to an insured after it concluded that the trial court erroneously accepted the withdrawal of a factual pre-trial stipulation. One of the parties, based on its interpretation of an insurance policy, entered into a pre-trial stipulation but later sought to withdraw it by claiming that it had misinterpreted the policy. However, a party’s purported mistake of law or subsequent change in its interpretation of the policy is not good cause for withdrawing a factual stipulation.

In MKL Enters. LLC, Am. Traditions Ins. Co., 44 Fla. L. Weekly D659 (Fla. 1st DCA March 7, 2019), the 1 DCA affirmed a trial court granting appraisal because the insurance carrier had previously tendered a check and chose appraisal as the appropriate resolution forum, which meant the carrier had admitted coverage and was just disputing the amount of damages.

In Advanced Sys., Inc. v. Gotham Ins. Co., 44 Fla. L. Weekly D996 (Fla. 3d DCA April 17, 2019), the 3 DCA held that whether an insurance carrier has a duty to defend is determined based on the allegations in the complaint; however a court may consider extrinsic evidence only in exceptionally rare circumstances such as when the evidence is uncontroverted or manifestly obvious to all so as to preclude coverage.

Landmark Am. Ins. Co. v. Pin-Pon Corp., 44 Fla. L. Weekly D445 (Fla. 4th DCA February 13, 2019)

Facts and Procedural History

This case arises out of the damage caused by Hurricanes Frances and Jeanne in September 2004 to an insured hotel. The case appeared before the 4th DCA twice. Before the first trial, the insured and insurer entered into a pretrial stipulation in which the insured agreed that the policy was limited in coverage to $2.5 million for code upgrade costs per hurricane. The insured also agreed to seek $2.5 million per hurricane. A second pre-trial stipulation stated that the carrier had paid the insured $698,774.31 prior to the filing of the lawsuit. The jury awarded $1.5 million in code upgrade costs for Hurricane Frances to the insured and found that no additional code upgrade costs were incurred from Hurricane Jeanne. The carrier appealed the Frances judgment and the 4 DCA reversed and remanded for new trial.

Following the remand, and before the new trial, the insured moved to withdraw its earlier stipulation, arguing it had misinterpreted the insurance policy. The trial court accepted the withdrawal and awarded the insured $6,295,946.95 in code upgrades to be paid by the carrier minus the $651,278.16 it found the carrier had already paid, resulting in a $5,644,668.79 judgment. The carrier appealed.

Appellate Court Decision

On appeal, the 4th DCA explained that generally stipulations of law are not binding but “when a case is tied upon stipulated facts the stipulation is biding not only upon the parties but also upon the trial and appellate courts and further that no other or different facts will be presumed to exist.” To obtain relief from a factual stipulation, a party must make a reasonable motion to withdraw the stipulation supported by an affidavit showing good cause. The 4th DCA further explained that the fact that a party subsequently changes its interpretation of law is not a valid basis for it to unilaterally reject the Joint Stipulation.

The 4th DCA noted that the insured’s interpretation that the policy was limited to $2.5 million in code upgrade costs per hurricane was a legal stipulation; the insured’s agreement to seek $2.5 million in code upgrades necessitated by Hurricane Frances was a factual stipulation. Although the trial court was not bound by the legal stipulation, the insured’s subsequent change in its interpretation of the policy was not good cause for withdrawal from its factual stipulation. The court also explained that the carrier was arguably prejudiced by the erroneous withdrawal since it may not have appealed the $1.5 million Frances award had kit known it could be liable for the full $6.3 million in claimed damages rather than the $2.5 million limit.
In addition, the parties had stipulated that the insurer had paid the insured $698,774.31 before the insured filed the lawsuit. The carrier later argued that it paid the insured $906,470.31 in code upgrade costs, yet the trial court credited it with only $651,278.16 based on the testimony of the insured’s witness. However, because neither party withdrew from this stipulation, the trial court was bound by the agreed upon amount of $698,774.31.

For the reasons stated above, the 4th DCA reversed and remanded the case for a reduction in the carrier’s code upgrade liability to $2.5 million minus the $698,774.31 it had already paid, and a recalculation of pre and post judgment interest.

MKL Enters. LLC, Am. Traditions Ins. Co., 44 Fla. L. Weekly D659 (Fla. 1st DCA March 7, 2019)

Facts and Procedural History

The trial court granted the insurance carrier’s motion to compel appraisal and abate litigation. The insured appealed arguing that the trial court erred by compelling appraisal prior to deciding whether an enforceable agreement existed and if the carrier was “wholly denying” coverage under the homeowner’s insurance policy.

Appellate Court Decision

On appeal, the 1st DCA explained that appraisals were appropriate when an insurer “admits there is a covered loss, but there is disagreement on the amount of the loss.” In this case, the carrier tendered a check for its estimation of covered damage. By tendering the check, the carrier waived any coverage defense it might otherwise have had. Thus, the carrier did not “wholly deny” coverage. Moreover, in choosing appraisal as the appropriate resolution, the carrier admitted there was a covered loss. Therefore, the trial court did not err in compelling appraisal and the court order was affirmed.

Advanced Sys., Inc. v. Gotham Ins. Co., 44 Fla. L. Weekly D996 (Fla. 3d DCA April 17, 2019)

Facts and Procedural History

This matter arises out of the failure of a foam fire suppressant system in an aircraft hangar that resulted in damage to several airplanes. In March 2017, the hangar’s owner filed suit against the general contractor, who brought a third-party complaint against the subcontractor that installed the hangar’s fire suppression system. The subcontractor was insured under a general commercial liability policy and tendered the defense to its insurance carrier. However, the insurer relied on the Total Pollution Exclusion and failed to tender a defense to the subcontractor. Because of the carrier’s denial, the subcontractor filed a complaint for declaratory judgment in February 2018.

In May 2018, the subcontractor filed a motion for summary judgment on the issue of the carrier’s duty to defend and indemnify. In June 2018, the carrier filed its own motion for summary judgment arguing it had neither a duty to defend nor to indemnify because coverage was barred by the Total Pollution Exclusion. In support of its motion, the carrier attached the declaration of a claim specialist and a copy of the Material Safety Data Sheet (“MSDS”) for Chemguard C2 which the carrier claimed it was the foam fire suppressant that had been released into the aircraft hangar. The carrier argued that, based on the MSDS, Chemguard C2 was a pollutant, and thus, excluded from coverage.

After the motion for summary judgement hearing, the trial court granted the carrier’s motion for summary judgment, relying on the MSDS to conclude that the Total Pollution Exclusion barred coverage and that there was no duty to defend because Chemguard C2 was a pollutant within the meaning of the policy. The subcontractor appealed.

Appellate Court Decision

On appeal, the 3d DCA explained that an insurer’s duty to defend is separate and distinct from its duty to indemnify, and it’s more extensive. It also explained that the insurer’s duty to defend is determined by the allegations in the complaint. Moreover, because the insurer relies on an exclusion to deny coverage, “it ha[d] the burden of demonstrating that the allegations in the complaint [we]re cast solely and entirely within the policy exclusion and [we]re subject to no other reasonable interpretation.”

The carrier agreed that its duty to defend had to be determined from the allegations in the complaint, but it argued that the trial court properly considered extrinsic evidence of Chemguard C2’s chemical composition because of the exception to the general rule found in Higgins v. State Farm Fire & Cas. Co., 894 So. 2d 5, 10 n2. (Fla. 2004). The carrier claimed that the exception “where an insurer’s claim that there is no duty to defend is based on factual issues that would not normally be alleged in the underlying complaint” was applicable to the facts of this case. The 3 DCA disagreed that the narrow exception outlined in the Higgins case applied here.

The 3d DCA explained that the exceptionally rare circumstances in which a court may consider extrinsic evidence would be when the evidence is uncontroverted or manifestly obvious to all so as to preclude coverage. In this case, the subcontractor contested the nature and composition of the released fire suppression foam. It also objected to the use of the MSDS as unauthenticated evidence not in the record and beyond the scope to determine whether a duty to defend existed. Therefore, the record contained no objective fact that is manifestly obvious to all involved nor there were uncontroverted facts that they simply were not pled in the underlying action. Therefore, the 3d DCA concluded that the third-party complaint potentially brought it within policy coverage and that the trial courted erred in relying on extrinsic evidence to determine that a duty to defend did not arise below. The case was reversed and remanded.

Very Truly Yours,