[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
____________ FILED
U.S. COURT OF APPEALS
No. 10-12613 ELEVENTH CIRCUIT
NOVEMBER 21, 2011
JOHN LEY
_____________
CLERK
D.C. Docket No. 3:09-cv-00894-HES-JRK
INTERVEST CONSTRUCTION OF JAX, INC.,
a Florida corporation,
ICI HOMES, INC.,
a Florida corporation,
Plaintiffs - Counter Defendants - Appellants,
versus
GENERAL FIDELITY INSURANCE COMPANY,
Defendant - Counter Claimant - Appellee.
______________
Appeal from the United States District Court
for the Middle District of Florida
_____________
(November 21, 2011)
Before TJOFLAT and CARNES, Circuit Judges, and MICKLE,* District Judge.
*
Honorable Stephan P. Mickle, Senior United States District Judge for the Northern
District of Florida, sitting by designation.
PER CURIAM:
CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA
PURSUANT TO FLORIDA CONSTITUTION ARTICLE V, § 3(b)(6).
TO THE SUPREME COURT OF FLORIDA AND ITS HONORABLE
JUSTICES:
This case involves unanswered questions of Florida law that are central to this
appeal. Because these questions are determinative of the cause in this case and there
are no controlling precedents from the Supreme Court of Florida, we respectfully
certify these questions for resolution.
I.
This controversy exists between the insureds, Intervest Construction of Jax,
Inc. and ICI Homes, Inc. (collectively “ICI”), and their insurer, General Fidelity
Insurance Company, over whether General Fidelity breached its obligations under a
commercial general liability insurance policy, number BAG0002112-00 (the “General
Fidelity Policy”), that ICI had with General Fidelity at the time of the accident. The
coverage dispute arose out of a personal injury lawsuit filed against ICI by an injured
homeowner.
2
In 2000, ICI contracted with Custom Cutting, Inc. for Custom Cutting to
provide trim work, including installation of attic stairs in a residence that ICI was in
the process of building. The contract between Custom Cutting and ICI contained an
indemnification provision requiring Custom Cutting to indemnify ICI for any
damages resulting from Custom Cutting’s negligence. In April 2007, Katherine
Ferrin, the owner of a residence constructed by ICI, fell while using the attic stairs
installed by Custom Cutting. This fall resulted in serious injuries. Ferrin then filed
suit against ICI for her injuries; she did not file suit against Custom Cutting. In turn,
ICI sought indemnification from Custom Cutting under the terms of the subcontract.
At the time of the accident, Custom Cutting maintained a commercial general liability
insurance policy with North Pointe Insurance Company. ICI was not an additional
insured under Custom Cutting’s policy with North Pointe. ICI, meanwhile, held the
General Fidelity Policy at the time of the accident. Contained in the General Fidelity
Policy was a Self-Insured Retention endorsement (the “SIR endorsement”) in the
amount of $1 million.
ICI, Custom Cutting, North Pointe, General Fidelity, and Ferrin participated
in a mediation of Ferrin’s suit. At the mediation, the parties agreed to a $1.6 million
settlement of Ferrin’s claim. As part of the settlement, North Pointe agreed to pay ICI
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$1 million to settle ICI’s indemnification claim against Custom Cutting. ICI, in turn,
would pay that $1 million to Ferrin. The instant dispute then arose as to whether ICI
or General Fidelity was responsible for paying Ferrin the other $600,000.
Because of General Fidelity and ICI’s disagreement over coverage, North
Pointe paid the $1 million into the trust account of ICI’s counsel; each party reserved
all rights and claims against the other. Approximately one month later, both ICI and
Custom Cutting paid $300,000 each to Ferrin, in addition to the $1 million from
North Point, in order to settle her suit for the full $1.6 million. ICI filed suit in the
Circuit Court of the Fourth Judicial Circuit of Florida for breach of contract and a
declaratory judgment regarding ICI’s rights under the General Fidelity Policy.
General Fidelity then removed the case to the United States District Court for the
Middle District of Florida.
II.
A.
The parties disagree about which provisions of the General Fidelity Policy are
relevant; however, the crux of the dispute focuses on the SIR endorsement and the
transfer of rights clause. The SIR endorsement states that General Fidelity will
4
provide coverage only after the insured has exhausted the $1 million SIR.1 The
parties dispute the effect of the language in the SIR endorsement as applied to these
facts. The transfer of rights clause, on the other hand, grants the insurer some
subrogation rights, the extent of which are also disputed.2
ICI alleged in its complaint that General Fidelity failed to perform its
obligation under the General Fidelity Policy by refusing to pay $600,000 of the $1.6
million settlement. In taking this position, ICI essentially maintained that North
Pointe’s contribution of $1 million to settle ICI’s indemnification claim, which was
then passed on to Ferrin, satisfied the SIR obligation in the General Fidelity Policy,
and that General Fidelity was required to pay the remaining $600,000. General
Fidelity argued that North Pointe’s $1 million payment to settle the indemnity claim
did not reduce the SIR because that payment originated from Custom Cutting, not
1
See Exhibit A for the text of the SIR endorsement.
2
The text of the transfer of rights provision found in SECTION IV - COMMERCIAL
GENERAL LIABILITY LIMITS, 8. Transfer Of Rights Of Recovery Against Others To Us,
reads:
If the insured has rights to recover all or part of any payment we have made under
this Coverage Part, those rights are transferred to us. The insured must do nothing
after loss to impair them. At our request, the insured will bring ‘suit’ or transfer
those rights to us and help us enforce them.
5
ICI. As a result, General Fidelity maintained that the terms of the General Fidelity
Policy required ICI to pay the additional $600,000 to settle Ferrin’s claim.
To more narrowly frame this dispute, there can be no disagreement that had ICI
borrowed the $1 million from a bank, deposited those funds, and then used those
funds toward the settlement, that money would be credited toward the SIR. A more
difficult question would be whether a separate insurance policy previously obtained
by ICI to cover the retained amount could reduce the SIR. General Fidelity cites
several cases to establish that money derived from additional insurance policies
cannot be used to satisfy the SIR, and argues to this court that these decisions should
be highly persuasive to this issue before us, just as they persuaded the district court.
We are not completely convinced, however, that these cases are persuasive to the
interpretation of the General Fidelity Policy before us today.
The particular language at issue in the General Fidelity Policy is different from
the language in the policies at issue in the California cases cited by General Fidelity.
These distinctions are potentially significant. Specifically, the policies in those cases
are materially different for two reasons: (1) the General Fidelity Policy, unlike those
policies examined by other courts, does not contain an explicit provision addressing
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the precise issue in question,3 and (2) the language of the General Fidelity Policy is
arguably less restrictive than the language of the policies at issue in those cases.4
Requiring that a payment be made from one’s “own account” is not necessarily
the same as requiring that the retained limit be paid “by you.” Indeed, a strong
argument could be made that ICI exhausted its SIR because it paid for the protection
afforded in the indemnification clause; to wit, ICI paid for that indemnity protection
in the purchase price of the Custom Cutting subcontract and therefore hedged its
retained risk, just as it could have paid for a loan or paid a premium on an insurance
policy. Thus, we are not fully convinced of the district court’s analysis as to this
issue of Florida law.
3
See Ins. Co. of the State of Pa. v. Acceptance Ins. Co., 2002 WL 32515066, at *1 (C.D.
Cal. Apr. 29, 2002) (“The Endorsement additionally contains a provision that addresses the
possibility that [the insured] has other insurance covering the same claims. This provision is at
the crux of the dispute between the parties to this action.” (emphasis added)); Forecast Homes,
Inc. v. Steadfast Ins. Co., 105 Cal. Rptr. 3d 200, 205 (Cal. Ct. App. 2010) (including in the policy
a provision stating, “[p]ayments by others, including but not limited to additional insureds or
insurers, do not serve to satisfy the self-insured retention.”).
4
Compare Travelers Indem. Co. v. Arena Grp. 2000, L.P., 2007 WL 935611, at *4 (S.D.
Cal. Mar. 8, 2007) (“More importantly, a policy may prohibit the use of other insurance to satisfy
a retention by including a policy provision requiring the insured to personally pay the retained
amount. Here, subsection K.1, regarding ‘Other Insurance,’ provides that the ‘Insured shall pay
from its ‘own account’ all amounts within the Retained Amount[.]’” (emphasis added) (internal
citation omitted)) with Vons Cos. v. U.S. Fire Ins. Co., 92 Cal. Rptr. 2d 597, 605 (Cal. Ct. App.
2010) (“Nowhere does the SIR expressly state that [the insured party] itself, not other insurers,
must pay the SIR amount. Because the SIR was subject to the other insurance provisions, which
also made the [insured party’s] policy excess if there were another policy covering the accident,
[insured party] could read the policy as permitting the use of other insurance proceeds to cover
the SIR amount.”).
7
In sum, without the language found in the cases cited supra, ICI’s
indemnification clause appears on its face to be more permissive. The dispute here
is, in the absence of any other provision requiring payments directly from the
insured’s own account or expressly prohibiting the use of indemnification payments
to satisfy the SIR, can a bargained- and paid-for right to indemnification serve to
satisfy the SIR? Both parties agree that this is an unsettled issue.
B.
Additionally, there is a related dispute between the parties as to whether the
“made whole doctrine” applies or whether the parties contracted around that doctrine
given the language of the transfer of rights provision.5 Assuming that ICI could apply
the funds it received to satisfy its SIR, the issue then becomes whether the transfer of
rights provision in the General Fidelity Policy gave ICI or General Fidelity the
priority to recover.6
5
The “made whole doctrine” provides, absent a controlling contract provision that states
otherwise, that the insured has priority over the insurer to recover its damages when there is a
limited amount of indemnification available. See Schonau v. GEICO Gen. Ins. Co., 903 So. 2d
285, 287 (Fla. 4th Dist. Ct. App. 2005) (“Decisions applying the ‘made whole’ doctrine
essentially hold that where both the insurer and the insured simultaneously attempt to recover all
of their damages from a tortfeasor who cannot (because of insolvency, limited insurance
coverage, or other reasons) pay the full value of damages, the insured has priority of recovery
over the insurer.” (citing Fla. Farm Bur. Ins. Co. v. Martin, 377 So. 2d 827, 828–30 (Fla. 1st Dist.
Ct. App. 1979))).
6
The implication of the answer to this question is that, even if ICI was able to count the
amount it received in indemnification towards its SIR, that alone would be of little value if the
8
The transfer of rights provision found in the General Fidelity Policy reads as
follows:
If the insured has rights to recover all or part of any payment we have
made under this Coverage Part, those rights are transferred to us. The
insured must do nothing after loss to impair them. At our request, the
insured will bring ‘suit’ or transfer those rights to us and help us enforce
them.
The language of this provision on its face is clear—the insurer has subrogation rights.
Given that both ICI and General Fidelity have some rights, the language is still
completely silent as to who has priority to recover when the indemnity amount is
insufficient to “make whole” both parties. ICI’s argument is essentially two-fold:
first, General Fidelity is not entitled to recover under the subrogation agreement
because the plain language of the transfer of rights provision allows General Fidelity
to recover only for payments “we have made,” and, at the time it received the
indemnification payment from Custom Cutting, General Fidelity had not yet made
any payment; second, even if the court disregards the tense of the language, the
General Fidelity Policy did not abrogate the “made whole doctrine” and thus ICI has
priority to receive any indemnification before General Fidelity. ICI, therefore,
provides two different avenues that the court could take to rule in its favor as to this
General Fidelity Policy gave General Fidelity the priority to be made whole before ICI could use
any of the indemnity payment towards the SIR.
9
second issue. General Fidelity argues that the court cannot place excessive emphasis
on the tense of the language, and further that the transfer of rights provision in the
General Fidelity Policy abrogated the common law rule of the “made whole doctrine”
by writing into the General Fidelity Policy priority rights for General Fidelity.
ICI cites a case from the State of Washington, Bordeaux, Inc. v. Am. Safety
Ins. Co., 186 P.3d 1188 (Wash. Ct. App. 2008), for the proposition that the specific
language of the transfer of rights provision found in the General Fidelity Policy does
not write out the “made whole doctrine,” thereby preserving ICI’s right of priority.
Id. at 1192–93 (holding that “[t]he trial court properly ruled that [the insureds] were
entitled to be made whole before any third-party recovery funds are paid to the
insurers.” (citing Polygon Nw. Co. v. Am. Nat'l Fire Ins. Co., 189 P.3d 777 (Wash.
Ct. App. 2008))). ICI further highlights that the Bordeaux court relied upon two
Florida cases in crafting its analysis. Bordeaux first cited Zinke–Smith, Inc. v. Fla.
Ins. Guar. Assn., 304 So. 2d 507, 509 (Fla. 4th Dist. Ct. App. 1974), cert. denied, 315
So. 2d 469 (1975)), to explain the distinction between self-insurance and primary
insurance. See Bordeaux, 186 P.3d 1192 n.12 (citing Zinke–Smith, 304 So. 2d at
509). Bordeaux then cites Young v. Progressive Se. Ins. Co., 753 So. 2d 80, 85–86
10
(Fla. 2000), to reinforce its reasoning that self-insurance and primary insurance are
distinct concepts. See id. at 1192 n.17 (citing Young, 753 So. 2d at 85–86).
General Fidelity argues that Bordeaux is not on point, or, in any event, is not
persuasive as to the ultimate issue. Instead, General Fidelity argues that the language
of the transfer of rights provision is sufficient to give General Fidelity priority to
receive indemnity for the amounts it may have paid. The parties do agree, however,
that the Supreme Court of Florida has also not yet decided the precise issue as to
whether the language found in the General Fidelity Policy displaces the background
rule of the “made whole doctrine” under Florida law.
C.
After hearing arguments, the district court found in favor of General Fidelity,
and ICI appealed to this court.7 Relying on the express language of the General
Fidelity Policy, the district court emphasized that the General Fidelity Policy required
that the payments be made “by you [the insured]” and in other clauses required
payments “by the insured.” See Order at 6, Intervest Constr. of Jax Inc., v. Gen. Fid.
Ins. Co., No. 3:09-cv-00894-HES-JRK (M.D. Fla. Apr. 22, 2010) (citing several
California cases as persuasive authority, despite acknowledging that none of the cases
7
The District Court did not address the impact of the Bordeaux decision because ICI
cited that decision for the first time in its reply brief to this court on appeal.
11
it relies upon have the same policy language). The district court then concluded that,
because the payments did not originate from ICI, Custom Cutting’s contribution to
the settlement did not count against ICI’s self-insured retention. Id. at 8.
III.
Resolution of the contrasting interpretations of the policy language raised by
the parties is determinative of the cause in this case. In light of the absence of
controlling precedent from the Supreme Court of Florida, we decline to predict how
these policy provisions would be construed under Florida law. Instead, we
respectfully certify the following questions for resolution:
1. DOES THE GENERAL FIDELITY POLICY ALLOW THE
INSURED TO APPLY INDEMNIFICATION PAYMENTS RECEIVED
FROM A THIRD-PARTY TOWARDS SATISFACTION OF ITS $1
MILLION SELF-INSURED RETENTION?
2. ASSUMING THAT FUNDS RECEIVED THROUGH AN
INDEMNIFICATION CLAUSE CAN BE USED TO OFFSET THE
SELF-INSURED RETENTION, DOES THE TRANSFER OF RIGHTS
PROVISION FOUND IN THE GENERAL FIDELITY POLICY
GRANT SUPERIOR RIGHTS TO BE MADE WHOLE TO THE
INSURED OR TO THE INSURER?
We do not intend the phrasing of these questions to limit the court in its
consideration of the problem posed by the case. As we have previously noted:
[T]he particular phrasing used in the certified question is not to restrict
the Supreme Court’s consideration of the problems involved and the
12
issues as the Supreme Court perceives them to be in its analysis of the
record certified in this case. This latitude extends to the Supreme
Court’s restatement of the issue or issues and the manner in which the
answers are given, whether as a comprehensive whole or in subordinate
or even contingent parts.
Swire Pac. Holdings v. Zurich Ins. Co., 284 F.3d 1228, 1234 (11th Cir. 2002)
(alteration in original) (quoting Martinez v. Rodriquez, 394 F.2d 156, 159 n.6 (5th
Cir. 1968)).
In order to assist the court's consideration of the case, the entire record, along
with the briefs of the parties, shall be transmitted to the court.
QUESTION CERTIFIED.
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EXHIBIT A
THIS ENDORSEMENT CHANGES THE POLICY.
PLEASE READ IT CAREFULLY
SELF-INSURED RETENTION
Per Occurrence
Self-Insured Retention: $1,000,000 Per Occurrence
Including Loss Adjustment Expense
In consideration of the premium charged, it is agreed the insurance
afforded by the policy to which this endorsement is attached is subject
to the following additional terms, conditions and provisions. In the
event of a conflict between any of the terms, conditions or provisions of
the policy and this endorsement, this endorsement will control the
application of insurance to which the policy applies.
Unless otherwise specified, all terms used in this endorsement have the
meaning set forth in the policy.
1. The Self-Insured Retention, shown above, applies to each and
every “occurrence” or offense made against any insured, to which
this insurance applies, irrespective of the number of claims which
may be joined in to any one “suit” or claim.
2. Our total liability will not exceed the Limits of Insurance as
specified in the policy Declarations, Coverage Parts or
endorsements. The Limits of Insurance will apply only in excess
of the Self-Insured Retention, hereinafter referred to as the
“Retained Limit.”
3. We have no duty to defend or indemnify unless and until the
amount of the “Retained Limit” is exhausted by payment of
settlements, judgments, or “Claims Expense” by you.
14
4. Should any claim under this policy result in a settlement or
judgment not exceeding the “Retained Limit,” including “Claims
Expense,” then no “Claims Expense,” damages or indemnity will
be payable by us.
5. Should any claim arising under this policy result in a settlement
or judgment, including “Claims Expense” incurred by the insured
or on the insured's behalf, in excess of the “Retained Limit,” we
will pay those amounts in excess of the “Retained Limit” to which
this insurance applies subject to the Limits of Insurance as
specified in the Declarations.
6. The “Retained Limit” will only be reduced by payments made
by the insured.
7. No “Claims Expense” will be incurred on our behalf without
our prior consent, nor will the insured voluntarily enter into a
settlement which is in whole or in part in excess of the “Retained
Limit,” without our express written approval.
8. Should any claim within the terms of the coverage be subject
to a demand for settlement whether below the amount of the
“Retained Limit,” or in excess of it, and should the insured
decline to settle such a claim or demand, or to tender the
remainder of the “Retained Limit” to us, our maximum liability
will be limited to the amount for which the claim could have been
settled, but only for that portion of the settlement or judgment in
excess of the “Retained Limit.”
9. Based upon the unique nature of this program and the need to
coordinate the warranty program with the general liability
insurance program, the insured agrees to retain Bridgeworks
Commercial Management as its self-insurance service company
for the purposes of providing claims service at its expense.
Bridgeworks Commercial Management will provide service and
15
coordination for claims under the “Retained Limits” on behalf of
the insured and under the control of the insured. However, this
service will not be terminated or altered without our express
written permission (or this policy will be declared null and void).
The insured's agreement to enter into and abide by the terms and
conditions of the contract with Bridgeworks Commercial
Management, including payment and advance deposit of funds
when a claim is reported, is a material representation under this
policy.
10. Loss settlements made by the insured or its self-insurance
company, in excess of the “Retained Limit,” will not be binding
against us.
11. With respect to any claim payable under this insurance and
subject in whole or in part to the “Retained Limits” as provided
in this endorsement, we will have the right, but not the obligation
to assume the control of said claim and to pay any part of or all of
the amount of any such loss including “Claims Expense” within
the “Retained Limit” on behalf of and for the account of the
insured to affect settlement of said claim. Amounts paid by us
pursuant to this paragraph will be reimbursed to us by the insured
within ten (10) days from the date of our written request to the
insured. We will have the right to make partial recoveries from
the insured when partial settlements or “Claims Expense” are
incurred by us within the “Retained Limit” as provided by this
endorsement.
12. We will have the right, but not the duty, to defend any “suit.”
The insured will have the obligation to defend any claim or “suit”
which may involve this coverage without respect to the “Retained
Limit,” and to settle same within the "Retained Limit" where
possible. Said obligation to defend continues until the “Retained
Limit” has been exhausted by settlements or “Claims Expense,”
or until written permission to discontinue said defense is granted
by us.
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13. For purposes of this endorsement, the term “Claims
Expense”will include all fees, costs, charges and expenses
generated by attorneys designated to represent the insured, and all
other costs, charges and expenses incurred in the investigation,
adjustment, settlement, arbitration, defense or appeal of any claim
to which this insurance otherwise applies. “Claims Expense” will
not include the cost of investigating or adjusting a claim by
salaried employees of the insured, the insured's self-insurance
service company, wages or salaries of any employee of any
insured and/or operating expense of any insured.
14. The insolvency, bankruptcy, receivership of the insured, or
any refusal by or inability of the insured to satisfy its obligations
pursuant to this endorsement will not reduce the “Retained Limit”
as set forth in the endorsement, nor will it require us to pay any
amounts within the “Retained Limit.” The payment of the
"Retained limits" by the insured is a condition precedent for our
obligation to pay any sums either in defense or indemnity and we
shall not pay any such sums until and unless the insured has
satisfied its “Retained limits.”
15. The “Retained limits” shall not be exhausted or satisfied by
any payments or claims expenses for damages that would not
have been covered by the terms of this policy. The “Retained
limits” shall not be utilized in response to any “claims” that are
not otherwise covered by the terms and conditions of this policy.
All other terms and conditions of the Policy remain unchanged.
(emphasis added by the parties).
17