Key v. Allstate Insurance Company

United States Court of Appeals,

Eleventh Circuit.

No. 95-3210.

Esther KEY, Plaintiff-Appellant,

v.

ALLSTATE INSURANCE COMPANY, a foreign corporation, Defendant-
Appellee.

Aug. 1, 1996.

Appeal from the United States District Court for the Middle
District of Florida. (No. 94-1935-CIV-T-21B), Ralph W. Nimmons,
Jr., Judge.

Before COX and BARKETT, Circuit Judges, and BRIGHT*, Senior Circuit
Judge.

BARKETT, Circuit Judge:

Appellant-plaintiff Esther Key brought this suit against

Appellee-defendant Allstate Insurance Co. seeking insurance

coverage for a bodily injury claim resulting from an accident

involving one of her vehicles. The district court granted summary

judgment in favor of Allstate, and Key appeals. We reverse the

decision of the district court.

Background

In May 1990, Key owned two cars: a Hornet, which was insured

by Underwriters Guarantee Insurance Company ("Underwriters"), and

an Astro, which was insured by Allstate. In January 1991, Key sold

her Hornet, and purchased a Fiesta on January 19, 1991. The Fiesta

replaced the Hornet under her Underwriters' policy, which covered

personal injury and property damages; however, she did not

*
Honorable Myron H. Bright, Senior U.S. Circuit Judge for
the Eighth Circuit, sitting by designation.
purchase bodily injury coverage from Underwriters. On January 23,

1991, the Fiesta was involved in an accident in which Norma Rowe

was injured and the Fiesta was totaled. Norma Rowe sued Key and in

April 1994 the jury awarded Rowe $465,404.25. On March 6, 1991,

Key added the Fiesta to her Allstate policy effective March 5,

1991, and she subsequently incurred a premium increase of $20.10

for the period March 5, 1991 to April 16, 1991.

The Allstate policy on her Astro includes a "newly acquired

ownership" provision, which reads:

Additional four wheel private passenger or utility autos you
acquire ownership of during the premium period. This auto
will be covered if we insure all other private passenger or
utility autos you own. You must, however, notify us within 60
days of acquiring the auto and pay any additional premium.

Key sought coverage from Allstate for the bodily injury damages,

claiming that on the day of the accident her Fiesta was a "newly

acquired vehicle" pursuant to her Allstate policy. Allstate denied

coverage. Key subsequently sued Allstate seeking damages,

interest, costs and attorney's fees resulting from Allstate's

refusal to defend, negotiate, settle, and provide coverage on Norma

Rowe's claim against her.

On appeal, Key argues that according to the plain language of

Allstate's "newly acquired automobile" provision, an automobile is

covered under the policy if four criteria are met: (1) the

automobile at issue was acquired during the policy's premium

period; (2) Allstate insured all other autos owned by the insured

at the time of acquisition; (3) the insured notified Allstate

within 60 days of acquiring the new automobile; and (4) the

insured pays any additional premium. Key argues that these four
elements were met with respect to the Fiesta, and therefore, her

Allstate policy covered the Fiesta at the time of the accident.

Allstate argues that the Fiesta was not covered in light of

the purpose of the contract provision and the intent of the

parties. Allstate contends that the purpose of the "newly acquired

automobile" clause is to afford an insured a temporary, reasonable

opportunity to acquire specific coverage upon purchase of a new

vehicle. According to Allstate, as soon as Key obtained specific

insurance coverage for the Fiesta with Underwriters, the Fiesta

lost its status as a "newly acquired automobile" and became a

"described automobile," i.e., an automobile described in some

insurance policy. Thus, the Fiesta was not covered by Allstate at

the time of the accident. Moreover, Allstate contends that when

Key purchased insurance from Underwriter she manifested her intent

to forgo coverage under the Allstate policy. In the alternative,

Allstate argues that even if coverage is determined by the four

criteria discussed above, Key failed to meet conditions (2) and

(4).

Discussion

Under ordinary principals of contract interpretation, a court

must first examine the natural and plain meaning of a policy's

language. Dahl-Eimers v. Mutual of Omaha Life Ins. Co., 986 F.2d

1379, 1382 (11th Cir.1993). Under Florida law, if the terms of an

insurance contract are clear and unambiguous, a court must

interpret the contract in accordance with its plain meaning, and,

unless an ambiguity exists, a court should not resort to outside

evidence or the complex rules of construction to construe the
contract. Rigel v. National Casualty Co., 76 So.2d 285, 286

(Fla.1954); Old Dominion Ins. Co. v. Elysee, Inc., 601 So.2d 1243,

1245 (Fla. 1 DCA 1992); Southeastern Fire Ins. Co. v. Lehrman, 443

So.2d 408, 408-09 (Fla. 4 DCA 1984); see also Dahl-Eimers, 986

F.2d at 1382; United Nat'l Ins. Co. v. Waterfront New York Realty

Corp., 994 F.2d 105, 108-09 (2d Cir.1993); National Fidel. Life

Ins. Co. v. Karaganis, 811 F.2d 357, 361 (7th Cir.1987); Carey v.

State Farm Mutual Ins. Co., 367 F.2d 938, 941 (4th Cir.1966);

Imperial Casualty & Indemnity Co. v. Relder, 308 F.2d 761, 764-65

(8th Cir.1962). This is so because the terms of a contract provide

the best evidence of the parties' intent, see McGhee Interests,

Inc. v. Alexander Nat'l Bank, 102 Fla. 140, 135 So. 545, 547

(1931), and where the language is plain a court should not create

confusion by adding hidden meanings, terms, conditions, or

unexpressed intentions, see Dahl-Eimers, 986 F.2d at 1382; Carey,

367 F.2d at 941. Moreover, in determining whether a contract is

ambiguous, the words should be given their natural, ordinary

meaning, Emergency Assoc. of Tampa v. Sassano, 664 So.2d 1000, 1003

(Fla. 2 DCA 1995); Continental Casualty Co. v. Borthwick, 177

So.2d 687, 689 (Fla. 1 DCA 1965), and ambiguity does not exist

simply because a contract requires interpretation or fails to

define a term, Dahl-Eimers, 986 F.2d at 1382.

If, on the other hand, a court determines that the terms of

an insurance contract are ambiguous, or otherwise not susceptible

to a reasonable construction, a court may look beyond the

contractual language to discern the intent of the parties in making

the agreement. In general, ambiguities in contracts are construed
against their drafters. Hurt v. Leatherby Ins. Co., 380 So.2d 432,

434 (Fla.1980). With respect to insurance policies in particular,

which are often long, detailed, and difficult for most insureds to

decipher, insurers, as drafters of insurance policies, have an

obligation to state explicitly their intentions to limit coverage

upon the happening of certain events or under certain

circumstances. Fireman's Fund Ins. Co. v. Vordermeier, 415 So.2d

1347, 1350 (Fla. 4 DCA 1982); National Merchandise Co., Inc. v.

United Service Automobile Assoc., 400 So.2d 526, 530 (Fla. 1 DCA

1981); see also Carey, 367 F.2d at 941-42. Thus, ambiguities in

insurance contracts generally are construed in favor of providing

coverage. Rigel, 76 So.2d at 286; Old Dominion, 601 So.2d at

1245; Lehrman, 443 So.2d at 409; Relder, 308 F.2d at 764-65.

We find no ambiguity in the "newly acquired automobile"

provision, and therefore, find it unnecessary to analyze the

unstated intentions of the parties or the purposes of the

provision. Under the plain language and natural reading of the

provision, Allstate's insurance coverage automatically extends to

an automobile as long as four conditions are met: (1) ownership of

the car was acquired during the premium period; (2) Allstate

insured all other vehicles that the insured owned; (3) the insured

notified Allstate within 60 days of acquiring the car; and (4) the

insured pays any additional premium. If Allstate intended to

insure such automobiles only so long as no other specific insurance

was taken out on them, or only until some other event occurs, then

Allstate should have stated so expressly. See Carey, 367 F.2d at

941-42.
 We recognize, however, that a court is required to give

effect to the terms of a contract only if doing so is reasonable

and does not contravene public policy. National Merchandise Co.,

400 So.2d at 530; United States Fire Insurance Co. v. Morejon, 338

So.2d 223, 225 (Fla. 3 DCA 1976). To that end, Allstate's newly

acquired automobile clause does not provide coverage under

circumstances that would lead to a double recovery. See

Pennsylvania National Mutual Casualty Insurance Co. v. Ritz, 284

So.2d 474, 478 (Fla. 3 DCA 1973).

Allstate is liable for the bodily injury damages at issue in

this case because all four conditions were met, and the Fiesta is

not otherwise insured for bodily injury damage so as to afford Key

a double recovery. With respect to the four criteria, compliance

with conditions (1) and (3) is uncontested, and therefore need not

be analyzed. We find that Key satisfied condition (2) because shw

owned only one other car, the Astro, at the time she acquired the

Fiesta, and the Astro was insured through Allstate. We also find

that Key complied with her obligation to pay additional premium

pursuant to condition (4).

Allstate first argues that requirement (2) was not satisfied

because Key insured her Hornet through Underwriters prior to

acquiring the Fiesta. An ordinary reading of the "newly acquired

automobile" provision makes clear, however, that the four

conditions of that provision are not triggered until an automobile

is actually acquired. Thus, it is irrelevant whether Key insured

vehicles with other insurance companies prior to acquiring the

automobile at issue. The relevant sentence in the "newly acquired
automobile" provision reads: "This [newly acquired] auto will be

covered if we insure all other private passenger or utility autos

you own." "Insure" and "own" are in the present tense, indicating

that coverage of the new automobile depends upon whether Allstate

currently insures all other cars currently owned. Because the

provision is irrelevant unless and until a car has been newly

acquired, the earliest possible point at which anyone would assess

whether other cars are "currently" insured elsewhere is at the

point of acquisition. To read the provision retroactively, as

Allstate urges us to do, is both unnatural and unreasonable. In

this case, at the time Key acquired her Fiesta, the only other auto

she currently owned was insured by Allstate, and therefore, she

satisfied condition (2).

Allstate also argues that because Key insured the Fiesta

through Underwriters, she did not insure all other vehicles with

Allstate as required by condition (2). This argument is just as

untenable. The "newly acquired automobile" provision clearly

states that coverage of the newly acquired automobile depends on

whether Allstate insures "all other private passenger or utility

autos you own."1 "Other" in this context means "different from

1
Allstate cites a number of cases to support its argument
that under the "newly acquired automobile" provision, all cars,
including the newly acquired car, must be insured solely through
Allstate. Those cases are clearly distinguishable, however,
because the relevant insurance provisions in the cited cases do
not contain the word "other." The policy language in those cases
state that coverage attaches if the company insures "all private
passenger ... automobiles." See Pennsylvania National Mutual
Casualty Insurance Co. v. Ritz, 284 So.2d 474, 477 (Fla. 3d DCA
1973); see also Michel v. Aetna Casualty & Surety Co., 252 F.2d
40, 41 (10th Cir.1958); See Cook v. Suburban Casualty Co., 54
Ill.App.2d 190, 203 N.E.2d 748, 750-51 (1964); Beck v. Aetna
Casualty and Surety Co., 38 Colo.App. 77, 553 P.2d 397, 398
that or those implied or specified." The American Heritage

Dictionary 931 (1981). Because the newly acquired automobile is

the only auto specified, it necessarily is not an "other" auto.

Therefore, the requirement that Key insure her other autos with

Allstate applies only to autos other than the newly acquired one,

and the fact that Key partially insured the Fiesta through

Underwriters is irrelevant to whether she satisfied the plain

language of condition (2).

With respect to condition (4), Allstate argues that Key never

paid any additional premium for insuring the Fiesta from January

19, 1991, the date of acquisition, until March 5, 1991, the date

Allstate first requested and Key agreed to pay additional premium

for insuring the Fiesta with Allstate.2 This argument misconstrues

how newly acquired automobile coverage works. As long as the other

conditions are met, coverage on newly acquired automobiles

automatically attaches at the time of acquisition and extends for

the earlier of 60 days or until the insured notifies Allstate of

acquisition but refuses to pay any additional premium which is

requested. Moreover, under Florida law, an insurer may cancel

existing coverage for non-payment of premium only after giving the

insured "notice sufficiently in advance of the due date to afford

the insured a reasonable opportunity to make payment without lapse

(1976).
2
The costs of covering the additional liability for newly
acquired automobiles from the time of acquisition until
additional premium is paid is actuarially accounted for in
pricing the underlying policies. Thus, any argument that
suggests that the insurance companies are "giving away" insurance
during this period of time is disingenuous.
or interruption of continuous coverage." Hepler v. Atlas Mutual

Ins. Co., 501 So.2d 681, 686 (Fla. 1 DCA 1987); see also Allstate

Insurance Co. v. Crawford, 365 So.2d 408, 409 (Fla. 3 DCA 1979).

In this case, Key's coverage under the newly acquired

automobile provision began on the date of acquisition, January 19,

1991. She reported her acquisition within 60 days, and began

paying additional premium for the additional coverage on March 5,

1991. She was never notified that an additional premium was due

earlier, or that Allstate was canceling her coverage. Therefore,

Key complied with condition (4) and the Fiesta was covered as a

newly acquired automobile under the Allstate policy on January 23,

1991, the day of the accident.

In sum, we hold that the "newly acquired automobile" provision

in Key's Allstate policy is clear and unambiguous, and that Key

satisfied the four conditions necessary for coverage to attach.

Because neither the language used in the policy nor independent

notification from Allstate notified Key that the insurance coverage

had been canceled, Allstate is liable for the bodily injury damages

arising from the accident on January 23, 1991. Accordingly, the

order of the district court is reversed, and this case is remanded

for a calculation of damages consistent with this opinion and

attorney's fees.

REVERSED and REMANDED.

COX, Circuit Judge, dissenting:

The district court concluded that Key had demonstrated an
intention not to insure her Ford Fiesta with Allstate, but rather

to insure it with Underwriters. The court found that Key had

stated that she chose to have insurance with one company for one

car and with another company for another car because she thought it

would be cheaper.

The district court understood Florida law to hold that the

intent of the insured is controlling under circumstances such as

these, citing Pennsylvania Nat'l Mutual Casualty Ins. Co. v. Ritz,

284 So.2d 474 (Fla. 3d DCA 1973). My understanding of Florida law

is the same as that of the district court. I would affirm for the

reasons stated in the district court's well-reasoned memorandum

opinion.