VOLUME XVI, NUMBER 6
June, 2004

INSTITUTE OF MEDICINE RELEASES MOLD REPORT

On May 25, 2004, the Institute of Medicine (IOM) at the request of the Center for Disease Control and Prevention released its report entitled “Damp Indoor Spaces and Health” which addresses the impact of damp or moldy indoor spaces on health. In brief, the IOM concluded that there exists sufficient scientific evidence to support an association between exposure to damp indoor environments and mold and upper respiratory tract symptoms, cough, wheeze, asthma symptoms in sensitized persons and hypersensitivity to mold in susceptible persons. There was inadequate or insufficient evidence to support an association between health outcomes and the presence of mold or other agents in damp indoor environments as to shortness of breath, asthma developments, skin symptoms, fatigue, reproductive effects, cancer, rheumatologic and other immune diseases, acute idiopathic pulmonary hemorrhage in infants, chronic obstructive pulmonary disease, lower respiratory illness in otherwise healthy adults, etc. The 380 page report and the 14 page executive summary can be viewed, downloaded or ordered at www.iom.edu/reports.asp. Please also feel free to contact Anna D. Torres, if you would like a copy of the executive summary faxed to you.

Anna D. Torres

INSURED CAN PURSUE COMMON LAW CLAIM FOR INTEREST ON UNEARNED PREMIUM UNDER COMMON LAW THEORY

Marlene Isasi purchased automobile insurance from American Colonial Insurance Company. Subsequently, the carrier sent a notice of cancellation effective July 26, 1999. However, American Colonial did not return the unearned premium until January 20, 2000, nearly six months later, but did not include interest on the unearned premium. The plaintiff sued American Colonial under a common law claim for interest on the unearned premium. American Colonial moved for summary judgment on the grounds that Florida Statute §627.7283 requires a claim for unearned premiums to be filed pursuant to Florida Statute §624.155 (the bad faith statute) and that the plaintiff failed to provide notice to the Department of Insurance sixty (60) days prior to filing suit as required by the statute. The insurer argued that the plaintiff did not notify the Department of Insurance and moved for summary judgment which was granted by the trial court.

In Marlene Isasi v. American Colonial Ins. Co., 29 FLW D114 (Fla. 4th DCA December 31, 2004), the Fourth District Court of Appeal reversed the lower court’s granting of summary judgment on the grounds that Florida Statute §627.7283 in conjunction with §624.155 are not the only grounds which allow a plaintiff to pursue an interest claim on unearned premium. Because a common law cause of action for interest on unearned premiums is still allowed, the plaintiff may pursue the interest claim without fulfilling the requirements of Florida Statute §624.155. Thus, if an insurance company fails to return the unearned premium after 30 days of cancellation, then the insured has the option of bringing a claim under Florida Statute §624.155 or can assert a common law cause of action for interest on unearned premium.

It is important to note, however, that the Fourth District Court of Appeal recently ruled in Parsons v. Harbor Specialty Ins. Co., 839 So. 2d 742 (Fla. 4th DCA 2003), that an insured cannot bring a common law claim for interest on unearned premium so long as the insurance company returns the unearned premium within 30 days following cancellation as required by Florida Statute §627.7283.

Steven C. Teebagy

FLORIDA’S “COMPLETED AND ACCEPTED” RULE

The Fifth District Court of Appeal in Foreline Security Corporation v. Marishia Scott, 29 FLW D511 (Fla. 5th DCA February 27, 2004), addressed three issues: the issue of a security system contractor’s liability for injuries to third parties after the system had been completely installed and accepted by the owner (the “Slavin doctrine”); the issue of proof of reliance to recover on a fraudulent or negligent misrepresentation claim; and the issue of a trial court’s post-verdict award of 100% of the damages against one defendant despite the jury’s verdict of comparative fault.

In 1993, during the construction of one of United Southern Bank’s branch facilities (“USB”), a bank security system was installed by Foreline Security Corporation (“Foreline”). After the installation, USB operated the Foreline security system without a mishap until March of 1999, when USB was burglarized by parolee, Fred Anderson. Anderson, who had evidently been “casing the joint” for several days, entered USB on the morning of March 20, 1999 with orange juice and doughnuts for the two female tellers on duty that day, Heather Young and Marishia Scott. At some point, Anderson retrieved a gun from his car, returned to the bank, and threatened Young and Scott at gunpoint. Anderson warned the two tellers not to set off any alarms and forced them into the vault where he shot and killed Young, and then shot Scott in the neck, rendering her a quadriplegic. Anderson was caught as he exited the bank, and was later tried and convicted for Young’s murder.

Scott sued both Foreline and USB adopting several theories of liability. The jury returned a verdict in favor of Scott on her negligence claims, apportioning fifty percent fault to Foreline and fifty percent fault to USB. The jury awarded Scott $26,917,000 in total damages. The trial court determined that allocation of damages for comparative negligence under Florida’s comparative negligence statute did not apply, and entered judgment against Foreline for the full amount.

Foreline appealed the final judgment, contending that the trial court erred by: refusing to instruct the jury under theSlavin doctrine; refusing to enter a directed verdict in favor of Foreline for fraudulent and negligent misrepresentation; and by holding Foreline liable for the full amount of damages.

Florida follows the Slavin doctrine, also known as the “completed and accepted rule,” which extinguishes liability of a contractor to third parties for a patent defect, after the owner has accepted the work. Slavin v. Kay, 108 So.2d 462, 466-67 (Fla. 1959). In the instant case, the trial court refused to give the jury instructions on the law based on Slavin. The Fifth District determined that this refusal constituted reversible error, as Foreline had a right to have the trial court instruct the jury on the law applicable to the evidence under the issues presented during trial. The trial record included evidence supporting the fact that the security systems had been completely installed by Foreline six years prior to the robbery, that USB had accepted the security systems as designed and installed, and that any defects in the system were patent. Based on this, the Fifth District ruled that Foreline had presented sufficient evidence at trial to entitle them to a jury instruction on the Slavin rule.

The Fifth District also addressed Foreline’s contention that the trial court erred in refusing to grant its motion for a directed verdict on Scott’s claims of fraudulent and/or negligent misrepresentation. Scott alleged that Foreline fraudulently or negligently misrepresented to USB that the bank security system they installed at USB was UL listed or approved. At trial, Scott’s security alarm expert opined that Foreline had not installed a “UL listed hold-up and alarm system.” In order to recover on a claim of fraudulent or negligent misrepresentation, Scott must prove, among other things, “reliance” on the fraudulent or negligent misrepresentation. Johnson v. Davis, 480 So.2d 625 (Fla. 1985); Baggett v. Electrician’s Local 915 Credit Union, 620 So.2d 784, 786 (Fla. 2d DCA 1993). “Reliance” means that Scott was required to show that Foreline made a misrepresentation that she personally relied upon. The Fifth District found no evidence in the record that Foreline communicated any misrepresentation of fact to Scott upon which she relied, and determined that Scott cannot recover on a claim of fraudulent or negligent misrepresentation by alleging reliance on statements allegedly made by Foreline to USB, about which Scott had no knowledge. Therefore, the Fifth District ruled that the trial court erred in failing to grant Foreline’s motion for directed verdict on these claims, as Scott neither knew of any misrepresentations of fact, nor could she have relied on any such statements.

As mentioned above, the trial court entered final judgment against Foreline for 100% of the damages awarded to Scott. Foreline, throughout the trial, pursued a comparative negligence theory of liability. Prior to deliberations, the trial court instructed the jury that it would take into account the jury’s allocation of fault in entering its final judgment. However, in spite of the fact that the jury found USB 50% liable and Foreline 50% liable, the trial court ignored the jury’s allocation of fault and ruled that Scott was entitled to judgment solely against Foreline for 100% of the damages. The Fifth District concluded that the trial court erred by not applying the comparative negligence statute when it misled the jury into thinking that their allocation of fault would have been considered, and reasoned that the jury may have reached a different verdict on the amount of damages had they known Foreline would have to bear the entire amount.

Debbie R. Moore

UNITED STATES DISTRICT COURT HOLDS THAT THE PLAIN MEANING OF THE LANGUAGE OF AN INSURANCE POLICY CONTROLS IN THE ABSENCE OF AMBIGUITY IN THE CONTRACT

In Ohio Casualty Ins. Co. v. Continental Casualty Co. and Federal Ins. Co., 279 F. Supp. 2d 1281 (S.D. Fla. 2003), the United States District Court for the Southern District of Florida held that in the absence of ambiguity in the language of an insurance policy, rules of construction are unnecessary and courts will apply the plain language of the policy. Unambiguous policy language is to be construed according to its plain meaning, and it is to be interpreted according to its everyday meaning as it is understandable to a layperson. With respect to auto exclusions, the court stated that the use of the vehicle at the time of the injury governs the applicability of the exclusion.

In this case, a dispute among insurance companies arose from a car accident on a roadway owned and maintained by the Hunter’s Run Property Owner’s Association, Inc. The accident occurred when Priyesh Parbhoo, operating a Hunter’s Run-owned vehicle was involved in a single car accident. The passenger, Marcela Jaramillo, died in the accident.  Jaramillo’s personal representative filed suit in state court alleging that Hunter’s Run was negligent in allowing the roadway to remain in a dangerous and defective condition and that Parbhoo operated the vehicle in a negligent manner. Ohio and Everest National Insurance Company, two of Hunter’s Run’s Insurers, reached a $2.8 million dollar settlement. CNA and Federal also insured Hunter’s Run as umbrella carriers. CNA and Federal did not participate in the settlement negotiations. Ohio asserted that equity and the terms of the umbrella policies, required indemnification, contribution and subrogation by the umbrella carriers.

CNA and Federal claimed that they have no liability for the accident because their policies exclude coverage for injuries resulting from automobiles. Exclusionary clauses, generally considered contrary to the protective purpose of insurance, are construed narrowly against the insurer. In the absence of ambiguity in the policy language, however, rules of construction are unnecessary and courts will apply the plain language of the policy. With respect to auto exclusions, “the use to which the vehicle was being put at the time governs the applicability of the exclusion.”

The court notes that the language “arising out of” is not vague because it is undefined, any more than the presence of a definition in a policy changes the meaning of a common word used in its normal context. Courts have defined the language “arising out of” as broad, general, and comprehensive terms effecting broad coverage. “Arising out of” are words of much broader significance than “caused by.” They are ordinarily understood to mean “originating from,” “having its origin in,” “growing out of” or “flowing from,” or in short, “incident to or having connection with.” Of the possible definitions of the phrase “arise from,” coverage for this accident would be excluded under the most common usages. The accident in the instant case “arose from” the use of an automobile because the loss would not have occurred but for the use of the automobile. Accordingly, neither CNA, nor Federal were required to contribute to the settlement.

Jamila V. Alexander