Opinion
Case No. 99-3373-CIV-JORDAN
April 18, 2002
Laurence F. Valle, Esq., Valle Craig, P.A., Miami, Florida, Attorney for Plaintiffs.
Arthur Roth, Esq., Miami, FL, Co-Counsel for Plaintiffs.
Manuel A. Garcia Linares, Esq., American Southern Insurance Miami Center, Miami, FL, Attorney for Third-Party Defendant
Jason Wiseman, Esq., Kaye, Rose Partners, LLP, Miami, Florida Attorney for Defendant Orient Overseas
Richard Austin, Esq., Miami, Florida, Attorney for Defendant Intrastate Maritime Transport
For the reasons set forth below, American Southern's motion for partial summary judgment against Intrastate Maritime Trucking [D.E.82] is GRANTED and Intrastate Maritime Trucking's crossmotion for full summary judgment against American Southern [D.E. 98] is DENIED.
The original order listed an incorrect docket entry for IMT's cross-motion for summary judgment against American Southern. This amended order is issued only to correct that error.
THE SUMMARY JUDGMENT STANDARD
Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(e). A material fact is one that might affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Where the non-moving party fails to prove an essential element of its case for which it has the burden of proof at trial, summary judgment is warranted. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Hilburn v. Murata Electronics North Am., Inc., 181 F.3d 1220, 1225 (11th Cir. 1999). Thus, the task is to determine whether, considering the evidence in the light most favorable to the non-moving party, there is evidence on which a jury could reasonably find a verdict in its favor. See Liberty Lobby, 477 U.S. at 251; Hilburn, 181 F.3d at 1225; Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997).THE UNDISPUTED FACTS
The following material facts set forth by American Southern are deemed admitted because IMT "does not quarrel" with them, "except to add that certain other policy provisions must be considered in making a legal determination of the issues." IMT's Reply to Motion for Partial Summary Judgment and Cross Motion for Full Summary Judgment [D.E. 98] (July 30, 2001).
On July 30, 1998, a container, which IMT picked up for delivery from the Florida East Coast Railway for delivery to one of the plaintiffs in Miami, was allegedly lost or stolen. At this time, IMT was insured under a comprehensive motor truck cargo policy issued by American Southern. On November 17, 1999, PT Indonesia and Epson America filed an amended complaint against Orient Overseas and IMT seeking damages for the alleged loss of the container. On December 15, 1999, IMT demanded that American Southern, its motor truck cargo insurer, provide a defense in this action. American Southern refused. On December 30, 1999, Orient Overseas filed a cross-claim against IMT, claiming the right to indemnification, contract damages, and negligence. IMT filed a cross-claim against American Southern on January 8, 2001, seeking a declaratory judgment and indemnification.
AMERICAN SOUTHERN'S MOTION FOR PARTIAL SUMMARY JUDGMENT
In determining whether American Southern has a duty to defend IMT, I must interpret paragraph J of part VII of the comprehensive motor truck cargo policy issued by American Southern to IMT. That provision reads as follows:
Admission of Liability. The insured shall not voluntarily admit any liability nor settle any claims nor incur any expenses (except as provided for in the preceding paragraph) without specific authority of this [c]ompany, nor shall they interfere with any negotiations for settlements carried on between this [c]ompany and the owners of the property. In the event of legal action being brought against the insured in respect to alleged loss or damage which might constitute a claim under this policy, the insured shall give immediate notice to this [c]ompany and this [c]ompany reserves the right at its sole option to defend such action in the name and on behalf of the insured and will pay legal expenses incurred by this [c]ompany in connection with any action it undertakes to defend, also any judgment against the insured, subject however to all the valuations and limitations provided for herein.
American Southern's Motion for Partial Summary Judgment at 2-3 [D.E. 82] (June 29, 2001) (quoting Part VII, ¶ J of the comprehensive motor truck cargo policy).
American Southern moves for partial summary judgment against IMT on the ground that under the natural, plain, unambiguous language of paragraph J, it is not required to defend IMT because the language of the policy provides American Southern with the "sole option to defend," but not the duty to defend, IMT. According to IMT, the policy must be interpreted in light of the language that precedes the "sole option" clause, which requires IMT to comply with terms and conditions that give American Southern full and complete control of the investigation of a claim, the handling of a claim, and the decision to resolve a matter before litigation. IMT says that under the language of paragraph J, in its entirety, American Southern must either resolve the claim or defend it.
The "duty" to defend arises only from contract or statute, and is not a common law duty. See Allstate Ins. Co. v. RJT Enter, Inc., 692 So.2d 142, 144 (Fla. 1997). The duty to defend is distinct from, and broader than, the duty to indemnify. See id. at 143, 144. In examining the policy, I must give "practical, sensible interpretations of the policy in accordance with the natural meanings of the words employed." Saks v. Nat'l Cas. Co., 623 So.2d 853, 854 (Fla. 3rd DCA 1993). The comprehensive motor truck cargo policy explicitly reserves to American Southern the right to defend actions at its sole option. The practical, sensible interpretation of paragraph 7, in accordance with the natural meaning of its language, is that it gives American Southern the option not to provide a defense for an action against IMT.
According to NT, this reading of the policy is not practical nor sensible because the policy also requires NT to give American Southern full and complete control of the investigation of a claim, the handling of a claim, and the decision to resolve a matter before litigation. It seems to me, however, that although IMT contracted away the right to control a claim, it did not contract for a duty to defend on the part of American Southern. Furthermore, IMT had ample opportunity to refuse these provisions even after it initially agreed to the terms and conditions in 1991, but declined to do so. See Deposition of Paul Polito at 4-5 [D.E. 82, Exh. B] (June 12, 2001) (testifying that IMT has agreed to the terms and conditions of American Southern's policy since 1991 and that Mr. Polito — the president of IMT — reviewed the policy with American Southern's agent every time he renewed it). The plain meaning of the phrase "sole discretion" indicates that the policy granted American Southern the unqualified right to refuse to defend IMT, even if IMT also agreed to allow American Southern full and complete control of the investigation of a claim, the handling of a claim, and the decision to resolve a matter before litigation.
In a case similar to this one, a district court in Rhode Island held there was no duty to defend under an insurance policy with a "sole option" provision identical to the one in this case. See B D Appraisals v. Gaudette Mach. Movers, Inc., 752 F. Supp. 554, 556 (Dist. R.I. 1990). Applying Rhode Island law, the court distinguished the "sole option" language of the policy from the typical duty to defend provision which states that the insurer "shall" defend in certain circumstances. Under the "sole option" language, the court reasoned, the assumed duty to defend is less extensive. Id. at 556-557. Because the language indicating the insurer had the right to defend the insured "at its sole option" was written into the policy and contracted to by the parties, it was binding on them. Id. at 557.
Because this is a diversity action, the substantive law of Florida applies. See, e.g., Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); Keller v. Miami Herald Pub'g Co., 778 F.2d 711, 714 (11th Cir. 1985) (citing Erie Railroad v. Tompkins, 304 U.S. 64, 78 (1938)). In determining whether American Southern owes IMT a duty to defend, I must therefore analyze Florida insurance law. See Kopelowitz v. Home Ins. Co., 977 F. Supp. 1179, 1185 (S.D. Fla. 1997) (citing Fioretti it Massachusetts Gen. Life Ins. Co., 53 F.3d 1228 (11th Cir. 1995)). Although B D Appraisals is based on Rhode Island law, it is on point and was relied upon by a court in the Middle District of Florida in granting summary judgment to American Southern under a similar "sole option" duty to defend policy. See Crowley Am. Transp., Inc. v. Jaxtainer, Inc., 3:99-civ-177-J-20-TEM (April 27, 2001).
In its reply brief, IMT cites to cases involving policies which state that the insurer "shall" defend the insured, see Nat'l Union Fire Ins. Co. it Lenox Liquors, 358 So.2d 533, 535 (Fla 1977), and Baron Oil Co. v. Nationwide Mutual Fire Ins. Co., 470 So.2d 810, 816 (Fla. 1st DCA 1985), and involving situations where at least some of the allegations set forth in the complaint require the insurer to defend the insured, see Irvine it Prudential Prop. Cas. Ins., Co., 630 So.2d 579, 580 (Fla. 3rd DCA 1993). These cases are distinguishable because the policy here explicitly states that American Southern "reserves the right at its sole option to defend."
Whether an insurer owes a duty to defend must be determined solely from the allegations on the face of the complaint. See LaFarge Corp. v. Travelers Ins. Co., 118 F.3d 1511, 1516 (11th Cir. 1997) (citing Baron Oil Co., 470 So.2d at 813). Generally, in determining whether the duty to defend arises, a court must compare the allegations in an underlying complaint with the provisions of the insurance policy. See Pepper's Steel Alloys, Inc. v. United States Fidelity and Guaranty Co., 668 F. Supp. 1541, 1546-47 (S.D. Fla. 1987); Commercial Union Ins. Co. v. R.H. Barto Co., 440 So.2d 383, 385 (Fla. 4th DCA 1983). I conclude, however, that the duty to defend does not arise where — as here — the language of the contract policy explicitly reserves the insurer the right to refuse to defend the insured. Because American Southern and IMT contracted for American Southern to reserve the right to defend at its sole option, it does not matter whether there are sufficient allegations in the complaint to otherwise trigger the duty to defend. Under the plain language of the policy, American Southern reserved the right to refuse to defend. Even though IMT presents allegations of the complaint that would be sufficient to trigger the duty to defend under a standard duty to defend clause, there is no requirement that American Southern defend under this policy. For the reasons set forth above, American Southern's motion for partial summary judgment [D.E. 82] is GRANTED.
IMT's CROSS-MOTION FOR FULL SUMMARY JUDGMENT
In its cross-motion for full summary judgment, IMT contends that if it is held liable for the alleged non-delivery of cargo of the allegedly hijacked container, American Southern is fully responsible for IMT's liability up to the lesser of(1) the amount set forth in the declaration page of the policy or (2) the amount IMT is found to owe. IMT also claims that American Southern has failed to demonstrate why there is no coverage for IMT's claim under the motor truck cargo policy and has instead merely denied coverage. American Southern says that it asserted, in its answer and affirmative defenses, that coverage for the damages sought in this action were limited by an exclusionary clause for theft by IMT employees.
The exclusion provision for theft by IMT employees reads in pertinent part:
THIS POLICY DOES NOT INSURE THE LIABILITY OF THE INSURED FOR: . . . P. Loss or damage resulting from infidelity, conversion, theft or robbery by any person or persons in the employ or service of the [i]nsured whether occurring during the hours of such employment or at any other time; and excluding pilferage by any other person or persons.See American Southern's Response to IMT's Reply to American Southern's Motion for Partial Summary Judgment and IMT's Cross Motion for Full Summary Judgment at 2-3 [D.E. 103] (August 27, 2001) (quoting Part VI, ¶ P of the comprehensive motor truck cargo policy).
Because I find as a matter of law that American Southern does not have a duty to defend IMT, I also deny IMT's cross-motion for full summary judgment. But if American Southern had a duty to defend in spite of the "sole option" language of the policy, I would still deny IMT's cross-motion for full summary judgment because there is sufficient evidence to create a genuine issue of material fact as to whether IMT's employee, Orestes Perez — the driver of the allegedly hijacked truck transporting the cargo container — was involved in the alleged non-delivery of the contents of the container so that the policy's exclusionary clause might preclude coverage in this case.
Although American Southern must bear the burden — as the insurer — to establish that the loss falls within the exclusionary provision (because it is undisputed that the loss of the container falls within the terms of the comprehensive motor cargo truck policy), see West Best, Inc. v. Underwriters at Lloyds, 655 So.2d 1213, 1214 (Fla. 4th DCA 1995), the evidence must be considered in the light most favorable to American Southern in ruling on IMT's cross-motion for summary-judgement. In so doing, I find that there is evidence upon which a jury could reasonably find that the exclusionary clause precludes coverage in this case because the loss of the container was caused by infidelity, conversion, theft, or robbery by Mr. Perez, an IMT employee. See Liberty Lobby, 477 U.S. at 251; Hilburn, 181 F.3d at 1225; Allen, 121 F.3d at 646.
In particular, Mr. Perez testified at his deposition that the keys to the truck, his wallet, and all of the contents of his wallet — including one hundred and fifty dollars — were still in the truck when it was found after the alleged hijacking; only his cell phone and the company radio were missing. See Deposition of Ortestes Perez at 64 [D.E. 74] (April 6, 2001). The police report from the incident states that the victim — Mr. Perez — recovered his own truck near his home and reported it to the police. See Metro-Dade Police Department Offense-Incident Report at 5 [D.E. 31, Exh. C] (September 5, 2000). At his deposition, however, Mr. Perez denied finding the vehicle and instead testified that a dispatcher called him at home to tell him that his truck was seen, and that this prompted him to call the police. See Perez Depo. at 64. The police report also notes that the police suspected Mr. Perez of being involved in the theft. See Offense-Incident Report at 5. I find that this evidence — viewed in the light most favorable to American Southern — is sufficient to present an issue of material fact as to whether Mr. Perez, an IMT employee, was involved in the alleged theft of the cargo container to trigger the relevant exclusionary provision of the insurance policy. See, e.g., United States Fid. Guar. Co. v. J.D. Johnson Co., Inc., 438 So.2d 917, 920 (Fla. 1st DCA 1983) (denying summary judgment to the insured and the insurer because there was a dispute regarding the actual physical disposition of property, and such facts must be determined before ruling on the applicability of a policy exclusion for losses caused by voluntary parting with title or possession by the insured or others if induced to do so by fraudulent scheme, trick, device, or false pretense). Cf. Nat'l Union Fire Ins. Co. v. Carib Aviation, Inc., 759 F.2d 873, 875 (11th Cir. 1985) (holding that a provision excluding coverage for conversion applied where the essential facts were not in dispute and only legal questions remained regarding whether the exclusion clause was ambiguous and whether the lessee's actions constituted conversion under Florida law); West Best, Inc., 655 So.2d at 1214 (reversing the trial court's grant of summary judgment in favor of an insurer where the insurer failed to show that the circumstances of the loss of a ring fell within an exclusion for unexplained loss, mysterious disappearance, or loss or shortage disclosed on taking inventory where the insured stated that the ring was probably stolen by a supplier or dealer).
CONCLUSION
In sum, I find that under the plain language of the policy, American Southern has no duty to defend PAT in this action, and even if American Southern does have such a duty, there is a genuine issue of material fact as to whether IMT's employee, Mr. Perez, was involved in the alleged nondelivery so as to preclude coverage. Accordingly, American Southern's motion for partial summary judgment against IMT [D.E. 82] is GRANTED, and IMT's cross-motion for full summary judgment [D.E. 98] is DENIED.