United States District Court, M.D. Florida, Jacksonville Division
Morales Howard, Judge
CAUSE is before the Court on Plaintiff, Philadelphia
Indemnity Insurance Company's Renewed Motion for Final
Summary Judgment and Supporting Memorandum of Law (Doc. 98;
Renewed Motion), filed on January 30, 2018. On February 2,
2018, Plaintiff Philadelphia Indemnity Insurance Company
(“PIIC”) filed supplemental authority in support
of the Renewed Motion. See Plaintiff, Philadelphia
Indemnity Insurance Company's Notice of Filing
Supplemental Authority in Support of its Renewed Motion for
Final Summary Judgment (Doc. 101; Supplement). Defendant
Stonehurst Plantation Master Association, Inc.
(“Stonehurst”) responded to the Renewed Motion on
February 13, 2018, see Defendant, Stonehurst
Plantation [sic] Master Association, Inc.'s Response to
Plaintiff, Philadelphia Indemnity Insurance Company's
Renewed Motion for Final Summary Judgment (Doc. 102;
Stonehurst Response), Defendant Greenland Chase
Homeowner's Association, Inc. (“Greenland”)
responded on February 20, 2018, see Defendant
Greenland Chase Homeowner's Association, Inc.'s
Memorandum in Opposition to Plaintiff's Renewed Motion
for Final Summary Judgment (Doc. 106; Greenland Response),
and Defendants Stazac Management, Inc.
(“Stazac”), Lauren E. Carr, and Ronald L. Carr
(collectively, the “Stazac Defendants”) responded
on February 27, 2018, see Defendants' Response
and Memorandum of Law in Opposition to Plaintiff's
Renewed Motion for Final Summary Judgment (Doc. 111; Stazac
Response). Defendant Amelia View Homeowners Association, Inc.
(“Amelia”) has not responded to the Renewed
Motion, and therefore, to the extent PIIC seeks relief
against Amelia, the Renewed Motion is
unopposed. See generally Docket.
Accordingly, this matter is ripe for review.
action, PIIC, an insurance company, seeks declarations
regarding its duties to defend and indemnify the Stazac
Defendants in three state-court actions (the
“Underlying Actions”) brought by Stonehurst,
Greenland, and Amelia (collectively, the “Homeowners
Associations”) against Stazac and the Carrs. See
generally Complaint for Declaratory Judgment (Doc. 1;
Complaint). The Homeowners Associations each hired Stazac, a
property management company run by Lauren and Ronald Carr, to
manage their properties. See Cover-Pro Application
(Doc. 98-2) at 2, 8, 10; see also Stonehurst
Association Management Agreement (Doc. 98-4; Stonehurst
Agreement); Greenland Association Management Agreement (Doc.
98-7; Greenland Agreement); Amelia Association Management
Agreement (Doc. 98-11; Amelia Agreement) (collectively, the
“Management Agreements”). The Underlying Actions
arose out of the Stazac Defendants' alleged mismanagement
of the Homeowners Associations' funds. See
generally Statement of Claim (Doc. 98-3;
Stonehurst's Underlying Statement of Claim); Amended
Complaint (Doc. 98-6; Greenland's Underlying Amended
Complaint); Complaint (Doc. 98-10; Amelia's Underlying
Complaint) (collectively, the “Underlying
The Management Agreements
property manager for the Homeowners Associations, Stazac
assumed a variety of duties, several of which relate to
managing the Homeowners Associations' finances.
See Management Agreements at 5-8 §5.
Specifically, Stazac agreed to:
(c) Collect and receive . . . all assessment charges which
may be due from owners of the units in the Association, . . .
[and] all fees and assessments for the boat and RV storage
(if applicable) . . .
(d) Provide the day to day accounting services necessary to
pay the bills of the Association, and any other debts
approved by the Board. This shall include keeping the proper
records of accounts; preparation of all checks for payment of
bills and such other items as may be provided for in the
(e) Supervise and maintain, for the account of the
Association, complete and adequate books of account and other
records reflecting the results of the operation of the
Association, in accordance with generally accepted accounting
principles constantly applied.
(f) Prepare, review, and analyze the monthly financial
statements with comparative budget figures and submit such to
the Board. . . .
(i) Maintain all accounting records of the Association in a
manner to facilitate annual audits and reviews. Provide
records to auditors hired by the Association to review
accounting and financial statements. . . .
Id. at 6-7 §5.
September 8, 2011, PIIC issued a professional liability
insurance policy to Stazac. See Policy Number
PHSD1065087 (Doc. 98-1; the Policy); Cover-Pro Application at
8. PIIC issued renewal policies each year providing coverage
through September 8, 2016. See Policy at 2; Renewed
Motion at 4 n.3. Although Stazac is the named insured under
the Policy, Lauren and Ronald Carr are individual insureds.
See Policy at 2, 5-6 §I.G. The Policy provides
coverage for damages “arising out of a wrongful act,
” defined as “a negligent act, error, or omission
committed or alleged to have been committed by you or any person for
whom you are legally responsible in the rendering of
professional services.” Id. at 4 §I.A, 7
the Policy contains several coverage exclusions. Id.
at 7-9. In relevant part, Exclusion A excludes coverage for
“any claim or claim expenses arising out of, resulting from,
based upon or in consequence of, any dishonest, fraudulent,
criminal or malicious act, error or omission, or any
intentional or knowing violation of the law, or gaining of
any profit or advantage to which [the insured is] not legally
entitled.” Id. at 7 §III.A. Nevertheless,
in the Policy, PIIC agrees to “defend suits alleging
the foregoing until there is a judgment, final adjudication,
adverse admission, plea nolo contendere or no
contest or finding of fact against you as to such
conduct.” Id. Notably, under Exclusion A,
“[n]o wrongful act of any individual insured nor any
fact pertaining to any individual insured shall be imputed to
any other partner, director, officer or employee.”
Id. at 8-9 (the “No Imputation Clause”).
the Policy excludes coverage for any claim or claim expenses
“arising out of, resulting from, based upon or in
consequence of, directly or indirectly, any failure to effect
or maintain any insurance or bond.” Id. at 8
§III.E (“Insurance Exclusion”). The Policy
also contains several endorsements with additional
exclusions. The Commingling and Failure to Pay Endorsement,
as well as the Pro Pak Elite Endorsement, exclude coverage
for “any claim arising out of any actual or alleged
commingling of or inability or failure to pay, collect or
safeguard funds.” Id. at 16, 20 §III.CC
(collectively, the “Commingling Exclusion”).
Additionally, the Knowledge of Wrongful Act Endorsement
excludes coverage for “any wrongful act committed with
the knowledge that it was a wrongful act.” Id.
the Policy specifies that if PIIC and an insured disagree
with regard to PIIC's coverage obligations, PIIC may
elect to defend the insured, but “reserve [its] rights
to deny and reject any claim for damages, ” pursuant to
a reservation of rights agreement. Id. at 12
§V.O. Under this provision, the Policy states that if
“it is finally established by judgment or agreement
that [PIIC] ha[s] no liability with respect to such a claim,
” PIIC is entitled to reimbursement for “all sums
and monies paid . . . to defend and/or settle such
April 6, 2015, Michael Goldsberry, counsel for the Homeowners
Associations, advised his clients to “conduct an audit
[i]n reference to their finances.” See Arrest
and Booking Report (Doc. 98-16; Arrest Report) at 18. The
Underlying Actions arose out of the Homeowners
Associations' findings from those investigations. See
generally Underlying Pleadings.
Stonehurst's Underlying Action
receipt of Goldsberry's advice, Stonehurst hired special
counsel and a forensic accountant to audit its finances.
See Stonehurst's Underlying Statement of Claim
¶14. As of July 22, 2015, Stonehurst was aware that it
was missing $49, 811.89. See generally
Stonehurst's Communications with Stazac Defendants (Doc.
98-5; Stonehurst's Communications). Stonehurst's
counsel advised the Stazac Defendants that Stonehurst
intended to pursue a claim for civil theft pursuant to
Florida Statutes section 772.11 (Section 772.11) if they did
not return the missing funds by 3:00 p.m. on July 24, 2015.
Id. at 2-3. Daniel M. Copeland, counsel for the
Stazac Defendants, responded that his clients would not issue
any payments until they conducted their own investigation.
Id. at 5-6.
August 28, 2015, Stonehurst initiated No. CA15-946 in the
Circuit Court, Seventh Judicial Circuit, In and For St. Johns
County (“Stonehurst's Underlying Action”).
See Status Report (Doc. 75; Stonehurst's June
12, 2017, Status Report) ¶1. On September 3, 2015,
Stonehurst amended its pleading. See Amended
Complaint (Doc. 1-3; Stonehurst's Underlying Amended
Complaint). On December 21, 2015, PIIC agreed to defend the
Stazac Defendants under a reservation of rights agreement.
See December 21, 2015, Letter from PIIC to
Stonehurst (Doc. 98-13; Stonehurst Reservation of Rights) at
2. The state court subsequently stayed
Stonehurst's Underlying Action pending completion of
mediation and an arbitration. See Stonehurst's
June 12, 2017, Status Report ¶3.
December 13, 2017, Stonehurst filed Stonehurst's
Underlying Statement of Claim in arbitration. See
generally id. As of that date, Stonehurst knew that
$432, 086.08 went missing from its account while the account
was under Stazac's management. Id. ¶14. In
Counts I and II of its arbitration statement, Stonehurst
asserts claims for negligence against the Stazac Defendants
based on their failure to properly deposit payments to
Stonehurst and notify Stonehurst that deposits or other
payments for Stonehurst were missing, and their failure
“to recommend that the Association obtain insurance to
cover against” misappropriated funds, respectively.
Id. ¶¶20-29, ¶35. Stonehurst also
alleges that the Stazac Defendants violated Florida's
Deceptive and Unfair Trade Practices Act
(“FDUTPA”), Florida Statutes section 501.2105
(Count IV), id. 44-49, and that Stazac breached the
Stonehurst Agreement (Count III), id.
¶¶38-43. Stonehurst's remaining claims for
damages (Count V), civil theft pursuant to Section 772.11
(Count VI), and conversion (Count VII) are based on its
allegations of intentional misappropriation. Id.
Greenland's Underlying Action
also conducted an investigation which concluded that the
Stazac Defendants misappropriated $437, 059.43 by depositing
checks made payable to Greenland into Stazac's account,
and electronically transferring funds from Greenland's
account into Stazac's account. See February 2,
2016 Letter from Bedell Firm to the Stazac Defendants (Doc.
98-9; Greenland Letter) at 2-3. On February 2, 2016,
Greenland's counsel notified the Stazac Defendants that
it intended to pursue a claim for civil theft pursuant to
Section 772.11. See id. On the same day, Greenland
initiated No. 2016-CA-698 in the Circuit Court, Fourth
Judicial Circuit, In and For Duval County
(“Greenland's Underlying Action”) by filing
Greenland's Underlying Complaint. See generally
Greenland's Underlying Complaint. PIIC agreed to defend
the Stazac Defendants against Greenland's claims pursuant
to a reservation of rights agreement on February 25, 2016.
See February 25, 2016, Letter from PIIC to Greenland
(Doc. 98-14; Greenland Reservation of Rights) at 2.
16, 2016, Greenland filed Greenland's Underlying Amended
Complaint. See generally Greenland's Underlying
Amended Complaint. Greenland asserts claims against the
Stazac Defendants for civil theft pursuant to Section 772.11
(Count III) and conversion (Count IV), and against Stazac for
negligence (Count V) and breach of the Greenland Agreement
(Count VI). Id. ¶¶27-51.
Amelia's Underlying Action
Amelia conducted an investigation and determined that the
Stazac Defendants misappropriated $206, 040.34 of its funds
by depositing checks made payable to Amelia into Stazac's
account, electronically transferring funds from Amelia's
account into Stazac's account, and improperly recording
payments to Amelia. See Civil Theft Demand Pursuant
to Section 772.11 (Doc. 98-12; Amelia's Demand) at 2;
March 16, 2016, Letter from Amelia to Stazac Defendants (Doc.
1-5; Amelia's Settlement Communication) at 2-4. On March
16, 2016, counsel for Amelia advised PIIC of its potential
claim, and offered to accept $206, 040.34 to settle the
matter. See Amelia's Settlement Communication at
4. Although PIIC did not accept Amelia's offer, on March
30, 2016, PIIC advised Amelia and Copeland that if Amelia
commenced a lawsuit, PIIC would defend the Stazac Defendants
under a reservation of rights agreement. See March
30, 2016, Letter from PIIC to Amelia (Doc. 98-15; Amelia
Reservation of Rights) at 2. On June 23, 2016, Amelia sent a
demand letter to the Stazac Defendants and warned them of its
intention to pursue a claim for civil theft under Section
772.11. See June 23, 2016 Letter from Amelia to
Stazac (Doc. 98-12; Amelia's June 23, 2016, Demand
Letter) at 2.
August 3, 2016, Amelia initiated No. 2016-CA-5132 in the
Circuit Court, Fourth Judicial Circuit, In and For Duval
County (“Amelia's Underlying Action”) by
filing Amelia's Underlying Complaint. See
generally Amelia's Underlying Complaint. Amelia
filed a motion to amend its pleading via interlineation on
January 13, 2017. See Defendants, Stazac Management,
Inc., Lauren E. Carr and Ronald L. Carr's Status Report
(Doc. 114; Stazac's March 9, 2018, Status Report) at
¶1. The state court has not ruled on Amelia's motion
to amend its complaint via interlineation. Id.
Amelia's Underlying Complaint, Amelia asserts six claims
based on the Stazac Defendant's misappropriation of
Amelia's funds. See generally id. Specifically,
Amelia asserts claims against the Stazac Defendants for civil
theft pursuant to Section 772.11 (Count I), conversion (Count
II), breach of fiduciary duty (Count IV), unjust enrichment
(Count V), and conspiracy (Count VI), and against Stazac for
breach of the Amelia Agreement (Count III). Id.
Criminal Charges Against Lauren Carr
January 27, 2017, law enforcement arrested Lauren Carr
pursuant to a warrant for two first degree felonies: (1)
grand theft in violation of Florida Statutes section
812.014(2)(A)(1), and (2) organized fraud in violation of
Florida Statutes section 817.034(4)(a)(1). See
generally Arrest Report. The next day, the state of
Florida commenced No. 17CF004335AD in the Circuit Court of
the Fourth Judicial Circuit in and for Duval County, Florida
(“Underlying Criminal Case”). See
generally Underlying Criminal Case Docket (Doc. 98-17).
Lauren Carr proceeded to trial, at the conclusion of which,
on December 13, 2017, a jury found her guilty of organized
fraud. See Verdict (Doc. 98-20) at 2. The court
sentenced her to serve twelve years in jail, and ordered her
to pay restitution to Stonehurst, Greenland and Amelia in the
amounts for $424, 558.24, $437, 059.43, and $284, 633.47,
respectively. See Judgment and Sentence (Doc. 98-21)
at 5; Judgment and Restitution Order (Doc. 101-1; Stonehurst
Judgment) at 2 ¶1; Judgment and Restitution Order (Doc.
101-2; Greenland Judgment) at 2 ¶1; Judgment and
Restitution Order (Doc. 101-3; Amelia Judgment) at 2 ¶1.
initiated the instant action on March 29, 2016, by filing the
Complaint to determine its obligations under the Policy.
See generally Complaint. In Count I, PIIC seeks a
declaration that it does not have a duty to defend the Stazac
Defendants in the Underlying Actions. Id.
¶¶28-32. In Count II, PIIC seeks a declaration that
even if it has a duty to defend its insureds, it does not
have a duty to indemnify them based on Exclusion A, the
“Knowledge of Wrongful Act” exclusion, or
Exclusion P. Id. ¶¶33-39. Similarly, in
Count III, PIIC seeks a declaration that it does not have a
duty to indemnify its insureds because the damages sought are
uninsurable as a matter of law. Id. ¶44;
see also id. ¶¶40-43. On March 28, 2017,
the Court stayed Counts II and III of the Complaint pending
resolution of the Underlying Actions. See generally
Order (Doc. 46; Stay Order) (adopting Report and
Recommendation (Doc. 41; Report)).
April 20, 2017, PIIC filed a motion seeking entry of summary
judgment on Count I of the Complaint. See Plaintiff,
Philadelphia Indemnity Insurance Company's Motion for
Final Summary Judgment and Supporting Memorandum of Law (Doc.
50; Motion). After the matter was fully briefed,
 the Court set a hearing to determine
the status of motions pending in the Underlying Actions to
amend the Underlying Pleadings in order to identify which
pleadings to consider to resolve the Motion. See
Order (Doc. 81) and Endorsed Order (Doc. 84). At that time,
Amelia's motion to amend its pleading via interlineation
was pending before the state court, and Stonehurst had
prepared a proposed second amended complaint that it had not
yet filed. See Amelia's First Response at 7;
Stonehurst's First Response at 2. At the hearing, after
hearing from all parties, the Court denied the Motion without
prejudice, and set a deadline of January 30, 2018, for the
filing of a renewed motion for summary judgment if amended
operative pleadings were filed with the appropriate tribunal.
See Clerk's Minutes (Doc. 85). Since the
hearing, Stonehurst filed Stonehurst's Underlying
Statement of Claim, and Amelia advised ...