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Zurich American Insurance Co. v. Southern-Owners Insurance Co.

United States District Court, M.D. Florida, Jacksonville Division

May 21, 2018




         THIS CAUSE is before the Court on (1) Plaintiff, Zurich American Insurance Company's Motion for Final Summary Judgment (Doc. 88; ZAIC's Motion), filed on October 6, 2017; and (2) Defendant, Southern-Owners Insurance Company's Motion for Final Summary Judgment (Doc. 94; SOIC's Motion), filed on November 20, 2017. On October 20, 2017, Defendant Southern-Owners Insurance Company (“SOIC”) filed Defendant Southern-Owners Insurance Company's Response in Opposition to Zurich American Insurance Company's Motion for Final Summary Judgment (Doc. 91; SOIC's Response), and on December 1, 2017, Plaintiff Zurich American Insurance Company (“ZAIC”) filed Zurich American Insurance Company's Response to Southern Owners Insurance Company's Motion for Final Summary Judgment (Doc. 98; ZAIC's Response). With leave of Court, see Order (Doc. 96), ZAIC filed Zurich American Insurance Company's Reply to Southern Owners Insurance Company's Response to Zurich's Motion for Final Summary Judgment (Doc. 97; ZAIC's Reply) on November 28, 2017. Accordingly, these motions are ripe for review.

         I. Background and Undisputed Facts

         This dispute between two insurers arises from an underlying premises liability action, Case No. 2012-CA-13359 (“Underlying Action”), filed by Charles McMillan (“McMillan”) in the Circuit Court, Fourth Judicial Circuit, In and For Duval County, Florida. In the Underlying Action, McMillan asserted a negligence claim against Catamount Constructors, Inc. (“Catamount”). See generally Amended Complaint (Doc. 91-1; Underlying Amended Complaint). ZAIC undertook Catamount's defense and settled McMillan's claims against Catamount. See Plaintiff, Zurich American Insurance Company's Third Amended Complaint (Doc. 77; Third Amended Complaint) ¶¶18, 22; see generally ZAIC's Response to SOIC Second Request for Production (Docs. 88-9, 88-10, 88-11 and 88-12; collectively, Bill Analysis Report). In the instant action, ZAIC brings a claim for equitable subrogation to recover its defense costs and indemnity payment made on behalf of Catamount, or in the alternative, a claim for equitable contribution as to ZAIC's indemnity payment, based on the following undisputed facts. See generally Third Amended Complaint ¶24.

         A. The Subcontract Between Catamount and Duval

         Catamount served as the general contractor for a construction project in which it contracted to furnish and install a complete gravel/sand sub-base package (the “Project”) at the Dr. Pepper West Point Trade Center, a distribution warehouse located at 2300 Pickettville Road, Jacksonville, Florida 32220 (the “Site”). See Subcontract Agreement Between Catamount and Duval (Doc. 88-1; Subcontract) at 2 ¶1. On April 12, 2012, Catamount and Duval Concrete Contracting (“Duval”) executed the Subcontract, whereby Duval agreed to “furnish[ ] all labor, materials, tools, equipment and insurance necessary to” complete the Project. Id. Additionally, Duval agreed to “indemnify and hold Contractor [Catamount] harmless from all claims, losses, fines, penalties, assessments of damages arising out of Subcontractor's [Duval's] work or from Subcontractor's breach of any term hereof.” Id. at 5 ¶19. Further, Duval agreed to maintain liability insurance which named Catamount as an additional insured, and would provide primary coverage to Catamount for any “liability arising out of” Duval's work. Id. at 4 ¶11, Attachment C.

         B. Duval's Policy with SOIC

         In accordance with the terms of the Subcontract, Duval purchased, and on April 19, 2011, SOIC issued a commercial general liability policy effective from June 15, 2011, through June 15, 2012. See Southern-Owners Insurance Company's Certified General Liability Insurance Policy No. 072322-78005160-11 (Doc. 88-2; SOIC Policy). According to the Blanket Additional Insured Endorsement (SOIC Policy at 42; the “Endorsement”), “[a] person or organization is an Additional Insured, only with respect to liability arising out of ‘your work' for that Additional Insured by or for you [Duval]… If required in a written contract or agreement.” See Endorsement (emphasis added). Further, the SOIC Policy “is primary for the Additional Insured, but only with respect to liability arising out of ‘your work' for that Additional Insured by or for you. Other insurance available to the Additional Insured will apply as excess insurance and not contribute as primary insurance to the insurance provided by this endorsement.” Id. (emphasis added). The SOIC Policy defines “your work” as “(1) [w]ork or operations performed by you or on your behalf; and (2) [m]aterials, parts or equipment furnished in connection with such work or operations.” See SOIC Policy at 41 ¶27.

         C. Catamount's Policy with ZAIC

         ZAIC issued a commercial insurance policy to Catamount, effective from March 1, 2012 through March 1, 2013. See Zurich American Insurance Company's Policy No. GLA 5490400-00 (Docs. 88-3 and 88-4; collectively, ZAIC Policy). The ZAIC Policy provided excess insurance “over [a]ny other primary insurance available to you [Catamount] covering liability for damages arising out of the premises or operation, or the products and completed operations, for which you have been added as an additional insured by attachment of an endorsement.” Id. (Doc. 88-3) at 58 ¶4(1)(b). Further, the ZAIC Policy provided that “[w]hen this insurance is excess, we will have no duty . . . to defend the insured against any ‘suit' if any other insurer has a duty to defend the insured against that ‘suit.'” Id. at 58 ¶4(2).

         D. The Underlying Action and ZAIC's Defense of Catamount

         McMillan initiated the Underlying Action on December 13, 2012. See Underlying Action Docket (Doc. 90-2). On May 6, 2013, the state court granted McMillan's motion to file an amended complaint to add Catamount as a defendant. See Underlying Action Docket; Underlying Amended Complaint. On April 15, 2014, with leave of court, Catamount filed a third-party complaint against Duval for indemnification, contribution, and negligence.[1] See Underlying Action Docket at 6. On January 6, 2015, McMillan, with Duval's consent, sought leave to file the Second Amended Complaint (Doc. 88-5; Underlying Second Amended Complaint) to add Duval as a defendant. See Plaintiff's Motion for Leave to Amend Complaint (Doc. 91-2; McMillan's Motion to Amend). The Underlying Action Docket shows no order resolving McMillan's Motion to Amend. See generally Underlying Action Docket. Nevertheless, on February 10, 2015, Duval filed an answer to the Underlying Second Amended Complaint, and then, as reflected by the filings on the Underlying Action Docket, Duval and the other named defendants litigated the Underlying Action based upon the Underlying Second Amended Complaint until the parties reached a settlement. See id.

         In the Underlying Second Amended Complaint, McMillan asserted negligence claims against Catamount and Duval based on the following allegations. See Underlying Second Amended Complaint ¶¶25-42. On May 30, 2012, McMillan visited the Site and “slipped and fell due an accumulation of debris as he walked across an outside parking lot area of the bottling plant towards a port-o-let[2] where Defendant Catamount had begun construction work and established a construction site, ” id. ¶28, and where “Duval had previously begun concrete cutting work and had established a construction site, ” id. ¶37. “The accumulation of debris on the outside walk ways was a defectively dangerous condition and/or the causes and/or origins thereof were created by and/or known to” Catamount and Duval, “or had existed for a sufficiently long period of time that said Defendant[s] in the exercise of reasonable care, should have known of said condition.” Id. ¶¶30, 39. Catamount and Duval, each acting “for themselves or by and through their respective agents, employees or servants acting within the course and scope of their respective employments and authority, ” breached their respective duties of care owed to McMillan by:

a) failing to properly instruct their respective employees, agents, and/or servants as to the proper care and maintenance of the outer areas and walkways, and thereby knowingly permitting a dangerous condition(s) to remain on the premises to the peril of the Plaintiff, and/or
b) failing to provide reasonable and adequate warnings of the actually or constructively known dangerous condition(s) and/or the potential for danger and injury to the Plaintiff, and/or
c) failing to operate or maintain the premises in a reasonably safe condition for protection of the Plaintiff. [sic]
d) failing to maintain the outer area of the Defendant's business was [sic] caused a debris/slip condition and failing to provide a safe, slip-free walkway surface.

Id. ¶¶31, 40.

         ZAIC initially assumed Catamount's defense. See Letter dated April 15, 2014, from Tom Finch, Claim Specialist, with Zurich American Insurance Company to Duval Concrete Contracting (Doc. 77-6; First Tender) at 2. Having done so, ZAIC hired the law offices of Conroy Simberg to represent Catamount. See generally Bill Analysis Report.

         On the same day that Catamount filed the third-party complaint against Duval, ZAIC, pursuant to the Subcontract, tendered the defense and indemnity of Catamount to Duval and requested that Duval notify its insurer. See First Tender at 2-3. Upon ZAIC's discovery that SOIC issued a commercial general liability policy to Duval, ZAIC made a second tender to Duval, and a first tender to SOIC, on June 22, 2015. See Letter dated June 22, 2015 from Michele Mecca, MCU Specialist with Zurich American Insurance Company to O'Hara Law Firm, Southern-Owners Insurance Company and All Lines Insurance Agency, Inc. (Doc. 77-7; Second Tender).[3] SOIC denied the Second Tender on July 30, 2015. See Letter dated July 30, 2015 from Mark F. Shannahan, AIC, with Southern-Owners Insurance Company to Michele Mecca, with Zurich American Insurance Company (Doc. 77-8; SOIC Denial).

         On November 9, 2015, ZAIC issued a check in the amount of $275, 000 to settle McMillan's claims against Catamount. See Bill Analysis Report (Doc. 88-12) at 37. ZAIC incurred and expended $83, 474.82 in attorney's fees and defense costs in defense of Catamount in the Underlying Action. See generally Bill Analysis Report.

         On September 29, 2017 (Doc. 90-1; State Court Order), some two years after the settlement of McMillan's claims and the filing of this action, the Honorable Karen Cole granted summary judgment in favor of Duval on Catamount's third party claim for indemnification based on her determination that Duval was not obligated to indemnify Catamount for its liability to McMillan. See generally id. In reaching her conclusion, Judge Cole determined that “the only claim ever made by the Plaintiff [McMillan] against the Defendant general contractor Catamount was for direct liability arising out of negligent acts by Catamount rather than for vicarious liability arising out of negligent acts by Catamount's subcontractor, Duval Concrete.” Id. at 4. Construing the indemnification provision of the Subcontract, Judge Cole concluded that Catamount was not entitled to indemnification for its own negligence. Id. Thus, Duval prevailed in the state court indemnification action.

         E. The Instant Action

         On August 21, 2015, ZAIC initiated this action to recover its attorney's fees, defense costs, and the settlement payment from SOIC. See Plaintiff, Zurich American Insurance Company's Complaint for Declaratory Judgment (Doc. 1; Complaint); see also Bill Analysis Report. Because ZAIC has amended its pleading several times, [4] the Third Amended Complaint, filed with leave of Court on June 1, 2017, see Order Granting Plaintiff's Unopposed Motion for Leave to Amend (Doc. 75), is the operative pleading.

         In the Third Amended Complaint, ZAIC asserts two causes of action against SOIC: a claim in Count I for equitable subrogation in which it seeks reimbursement of the attorney's fees and costs incurred in the defense of Catamount in the Underlying Action, as well as indemnity or reimbursement for the sum paid in the settlement of McMillan's claim against Catamount, see Third Amended Complaint at 7-8; and in Count II, an alternative claim for contribution in which it seeks reimbursement of any amount paid in excess of Catamount's pro rata share of the insurers' common liability, see id. at 8-10.

         On June 14, 2017, SOIC moved to dismiss the Third Amended Complaint for lack of subject matter jurisdiction. See Defendant Southern-Owners Insurance Company's Motion to Dismiss Plaintiff's Third Amended Complaint for Lack of Subject Matter Jurisdiction (Doc. 79; Motion to Dismiss). ZAIC filed a response on June 28, 2017. See Plaintiff, Zurich American Insurance Company's, Response to Defendant, Southern-Owners Insurance Company's, Motion to Dismiss Zurich's Third Amended Complaint (Doc. 80). Upon review, the Court determined that it had subject matter jurisdiction over the claims in the Third Amended Complaint and denied SOIC's Motion to Dismiss on February 26, 2018. See Order (Doc. 101; Order Denying Motion to Dismiss).[5]

         Thereafter, the parties filed their respective cross-motions for summary judgment. See generally ZAIC's Motion and SOIC's Motion. In ZAIC's Motion, ZAIC purports to seek entry of final summary judgment in its favor on both its claim for equitable subrogation, and its claim for contribution. See ZAIC's Motion at 1-3. However, although mentioning its claim for contribution in passing, see ZAIC's Motion at 1-2, 9-10, 12, ZAIC's arguments in support of entry of summary judgment focus almost entirely on its claim in Count I for equitable subrogation. With regard to that claim, ZAIC's position is that McMillan's allegations in the Underlying Second Amended Complaint triggered SOIC's obligation to provide primary coverage to Catamount as an additional insured. Id. at 13-14; ZAIC's Response at 6-10. As such, pursuant to the other insurance clause in the ZAIC Policy, ZAIC was Catamount's excess insurer and SOIC was its primary insurer. Id. at 6-7, 13-14. Under a theory of equitable subrogation, ZAIC maintains that SOIC is obligated to reimburse ZAIC for all of the defense costs and attorney's fees expended on Catamount's behalf in the Underlying Action, as well as the settlement sum. See ZAIC's Motion at 14-21. Further, ZAIC contends that SOIC's failure to defend Catamount under a reservation of rights agreement precludes SOIC from challenging the amount of its defense costs or the settlement. Id.; ZAIC's Reply at 6-7. ZAIC also asserts that it is entitled to recover the attorney's fees it incurred in this litigation pursuant to Florida Statute section 627.428. Id. at 22-24.

         SOIC views the matter very differently. Generally, SOIC disputes ZAIC's premise that Catamount was an additional insured under the SOIC Policy with respect to the claims raised in the Underlying Action. See SOIC's Response at 3; SOIC's Motion at 16-21. Specifically, SOIC disputes ZAIC's contention that the Underlying Second Amended Complaint is the operative pleading, and contends that the Court should determine its coverage obligations based on the Underlying Amended Complaint. See SOIC's Response at 2-3; SOIC's Motion at 4. Nevertheless, SOIC asserts that none of McMillan's pleadings in the Underlying Action triggered additional insured coverage for Catamount because McMillan did not sue Catamount based on a theory of vicarious liability for Duval's negligence. See SOIC's Motion at 16-21. SOIC contends that Judge Cole's finding in the State Court Order that McMillan sought to hold Catamount directly liable for its own negligence rather than vicariously liable for Duval's negligence is binding on the Court under the doctrine of collateral estoppel. See SOIC's Response at 6-13. In support of this argument, albeit in a separate motion, SOIC requests that the Court take judicial notice of the State Court Order and the Underlying Action Docket. See Defendant Southern-Owners Insurance Company's Motion Requesting the Court Take Judicial Notice of State Court Order and State Court Docket (Doc. 90; Motion for Judicial Notice). In response to this request, ZAIC contends that the Court may not take judicial notice of a state court's order to establish the facts and legal conclusions within the order, and regardless, collateral estoppel is inapplicable here because the issues before the state court and this Court are not identical. See generally Plaintiff, Zurich American Insurance Company's Opposition to Defendant's Motion for Judicial Notice (Doc. 92; ZAIC's Opposition); see also ZAIC's Reply at 7-10.

         Although arguing that no issues of fact prevent entry of judgment in its favor, SOIC also argues that issues of fact do preclude entry of judgment in favor of ZAIC. Specifically, SOIC contends that even if it owed Catamount a defense in the Underlying Action, ZAIC is not entitled to reimbursement for the full settlement payment because there are material issues of fact regarding how to apportion the settlement amount between the amount attributable to Duval's negligence and that attributable to Catamount's negligence. See SOIC's Response at 5-6. Further, SOIC argues that if the Court were to find that it owed Catamount a defense based on the Underlying Second Amended Complaint, it would not be obligated to reimburse ZAIC for the defense costs and attorney's fees incurred prior to ZAIC's Second Tender dated June 22, 2015. See id. at 4-5.

         Notably, like ZAIC, although purporting to seek entry of final summary judgment on all claims in this action, SOIC does not specifically address ZAIC's alternative claim for contribution in SOIC's Motion. See generally SOIC Motion. Nor does SOIC address that claim in SOIC's Response. See generally SOIC Response.

         II. Standard of Review

         Under Rule 56, Federal Rules of Civil Procedure (Rule(s)), “[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Rule 56(a). The record to be considered on a motion for summary judgment may include “depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials.” Rule 56(c)(1)(A).[6] An issue is genuine when the evidence is such that a reasonable jury could return a verdict in favor of the nonmovant. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (quoting Hairston v. Gainesville Sun Publ'g Co., 9 F.3d 913, 919 (11th Cir. 1993)). “[A] mere scintilla of evidence in support of the non-moving party's position is insufficient to defeat a motion for summary judgment.” Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d 1243, 1247 (11th Cir. 2004) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).

         The party seeking summary judgment bears the initial burden of demonstrating to the court, by reference to the record, that there are no genuine issues of material fact to be determined at trial. See Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). “When a moving party has discharged its burden, the non-moving party must then go beyond the pleadings, and by its own affidavits, or by depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir. 1995) (internal citations and quotation marks omitted). Substantive law determines the materiality of facts, and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248. In determining whether summary judgment is appropriate, a court “must view all evidence and make all reasonable inferences in favor of the party opposing summary judgment.” Haves v. City of Miami, 52 F.3d 918, 921 (11th Cir. 1995) (citing Dibrell Bros. Int'l, S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1578 (11th Cir. 1994)).

         III. Applicable Law[7]

         In this action, ZAIC brings claims for equitable subrogation, or alternatively, contribution. See generally Third Amended Complaint. Under Florida law, “subrogation is a cause of action in equity which is designed to afford relief to one who is required to pay a legal obligation of another.” Phoenix Ins. Co. v. Fla. Farm Bureau Mut. Ins. Co., 558 So.2d 1048, 1050 (Fla. 2d DCA 1990). Equitable subrogation “is based on the policy that no person should benefit by another's loss, and it ‘may be invoked wherever justice demands its application, irrespective of technical legal rules.'” State Farm Mut. Auto. Ins. Co. v. Johnson, 18 So.3d 1099, 1100 (Fla. 2d DCA 2009) (quoting W. Am. Ins. Co. v. Yellow Cab Co. of Orlando, 495 So.2d 204, 207 (Fla. 5th DCA 1986)). In practice, subrogation entails “the substitution of one person in the place of another with reference to a lawful claim or right.” W. Am. Ins. Co., 495 So.2d at 206 (quoting Boley v. Daniel, 72 So. 644, 645 (Fla. 1916)). In the insurance context, the insurer is “put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss paid by the insurer.” Monte De Oca v. State Farm Fire & Cas. Co., 897 So.2d 471, 472 n.2 (Fla. 3d DCA 2004) (quotation and citation omitted). More specifically, “in a dispute between a primary and excess insurer arising from the payment of a claim by the excess insurer, ” Phoenix Ins. Co., 558 So.2d at 1050, “[t]hrough equitable subrogation, ‘the excess insurer ‘stands in the shoes' of the insured and succeeds to the rights and responsibilities that the insured would normally have against the primary insurer.'” Mount Vernon Fire Ins. Co. v. National Fire Ins. Co. of Hartford, No. 8:07-cv-1593-T-24-EAJ, 2008 WL 2074427, at *2 (M.D. Fla. May 15, 2008) (citations omitted); see also Galen Health Care, Inc. v. Am. Cas. Co. of Reading, 913 F.Supp. 1525, 1531 ...

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