VOLUME XVI, NUMBER 11
November, 2004

WORK PRODUCT PROTECTION DID NOT ATTACH TO CLAIM FILE UNTIL FILE WAS SENT TO COUNSEL

In a September 29, 2004 opinion, the Fourth District Court of Appeal rejected Liberty Mutual’s contention that its claim file was protected by the work product privilege. Liberty Mutual Fire Ins. Co. v. Harvey D. Bennett, 29 FLW D2190 (Fla. 4th DCA, 2004). Liberty Mutual sought certiorari review by the Fourth District of a trial court order directing it to produce portions of its file during discovery in a bad faith action. Liberty Mutual argued that privilege attached to the file when counsel for the claimant informed Liberty that a bad faith lawsuit would be filed if a settlement within the policy limits was not reached. However, the court disagreed, ruling that Liberty did not begin to treat the claim as one for bad faith until it sent the file to a lawyer to defend the bad faith claim. The court relied on Allstate Indemnity Co. v. Ruiz, 780 So.2d 239 (Fla. 4th DCA), for the proposition that the “key inquiry is whether the probability of litigation is ‘substantial and imminent’.” According to the Fourth District, under the Ruiz analysis, the lower court did not depart from the essential requirements of law in finding that the bad faith litigation did not become “substantial and imminent” until the file was sent to the lawyer to defend the bad faith claim.

Anna D. Torres

DISTRICT COURT DISALLOWS CLASS ACTION BREACH OF CONTRACT LAWSUIT AGAINST CARRIER BASED ON ALLEGED VIOLATIONS OF FLORIDA’S INSURANCE CODE

In Susan J. Friedman v. New York Life Ins. Co., 17 FLW Fed. D496 (April 16, 2004), the District Court for the Southern District of Florida dismissed a class action breach of contract lawsuit asserting violations of the Florida Insurance Code by an insurance carrier. The court rejected the named plaintiff’s argument that Florida’s Insurance Code was integrated into the subject policy by law, thereby allowing a private action against the Defendant/Insurance Carrier, on the grounds that the legislature did not intend this outcome when these statutes were enacted.

The named plaintiff in Friedman instituted a class action breach of contract lawsuit in a Florida state court against her insurance carrier claiming violations of the Florida Insurance Code which she argued was made part of the terms and conditions of her policy by law. The plaintiff alleged that she and the other members of the class suffered monetary losses as a result of the breach of contract by the carrier. In another count, the plaintiff sought a declaratory judgment from the court finding that the defendant’s alleged practice of charging different premiums based on “claims history and/or health status violated Florida law.” She also sought a court order requiring the defendant to comply with all applicable sections of Florida’s Insurance Code.

Shortly after removing the action to federal district court, the defendant moved to dismiss the complaint for failure to state grounds upon which relief could be granted. The defendant stated that the Florida Insurance Code did not give rise to private causes of action under the specific statutes that the plaintiff claimed were breached. The defendant further argued that the plaintiff failed to allege an injury associated with her breach of contract claim, that her premiums were not higher than anyone else in her rating class, and that her insurance policy remained in force.

The court determined that the central thrust of the plaintiff’s claim was whether the Florida Statutes were incorporated into the New York policy, thereby providing her with a basis to sue the insurance carrier for breach of contract. The plaintiff cited State Farm Fire and Cas. Co. v. Palma, 629 So.2d 830 (Fla. 1993) as authority for this proposition.

The district court observed that the main issue before the Florida Supreme Court in Palma was whether a statute which required an insurer to pay the insured’s prevailing party attorney’s fees was applicable to a lawsuit where the parties were specifically litigating entitlement to fees. The Friedman court then explained that the Palma decision did not stand for the notion that any statutory violation of the Florida Insurance Code would lead to a private right of action against an insurance carrier as suggested by the plaintiff. Rather, the court determined that the holding in Palma centered on whether a state statute providing for attorney’s fees applied to a specific fact situation.

The district court felt that the plaintiff’s claim was more analogous to two federal court decisions where the Eleventh Circuit declined to allow private lawsuits based on statutory violations of Florida law. In one case, the Eleventh Circuit denied a private right of action involving a Florida health care law. Swerhun v. Guardian Life Ins. Co. of Am., 979 F.2d 195 (11th Cir. 1992). In another case, the court refused to allow a private lawsuit based on Florida’s Unfair Insurance Trade Practices Act. Keehn v. Carolina Cas. Ins. Co., 758 F.2d 1522 (11th Cir. 1985). The Friedman court relied on these Eleventh Circuit cases to conclude that an insured is not permitted to bring a breach of contract claim against an insurance company based on alleged violations of state statutes where no evidence existed that the state legislature intended such a result.

The Friedman court granted the defendant’s motion to dismiss on the grounds that there was no legal authority whatsoever for the plaintiff’s claim that she was entitled to sue her insurance provider for breach of contract based on violations of the Florida Insurance Code.

Kathleen M. Bonczyk

DANGEROUS INSTRUMENTALITY DOCTRINE MAY APPLY EVEN IF THE VEHICLE IS USED FOR INTENTIONAL MISCONDUCT

In Laverica Burch, etc., et al v. Sun State Ford, Inc., 864 So.2d 466 (Fla. 5th DCA 2004), Florida’s Fifth District Court of Appeal held that liability under the dangerous instrumentality doctrine ("the doctrine") is not limited to the negligent operation of a vehicle but may include reckless driving or other intentional misconduct by an operator.

The case involved an incident between the driver of a vehicle, Willie Gene Beauford, Jr., and the deceased, Aaroyn Miles, which culminated in a fatal car accident. After Beauford saw Miles leave a local nightclub with Beauford’s girlfriend, Beauford followed Miles’ vehicle. A chase ensued and both vehicles began to travel at high rates of speed. Miles then lost control of his vehicle and hit a tree resulting in his death and severe injuries to the passengers of his vehicle. Beauford was convicted of willful or wanton reckless driving. Because of the conviction, the trial court held that his conduct equated to intentional misconduct. The vehicle Beauford was driving was owned by Sun State Ford, Inc.. Sun State Ford had rented the vehicle to Beauford’s sister who, in turn, had loaned it to Beauford.

The doctrine imposes strict liability upon the owner of a vehicle allowing another driver to operate the owner’s vehicle, by either express or implied consent. However, liability is not imposed on the owner if the vehicle is used in a weapon-like manner with the intent to cause physical injury.

The court held that the doctrine applies even when an operator is involved in intentional misconduct, unless the operator makes weapon-like use of the vehicle with the intent to cause physical harm. However, the court stated that even if the weapon-like use of the vehicle is reasonably foreseeable to the owner, liability will be imputed nevertheless. Beauford denied that he intended to harm any of the occupants of the vehicle. He stated that he followed Miles’ vehicle because it looked like the passengers were arguing and he was curious and concerned for the safety of the passengers. Because the analysis for application of the doctrine involves the operator’s state of mind, it will ordinarily be a question of fact for the jury. The appellate court found that trial court erred in ruling that the driver’s intentional misconduct precluded application of the doctrine. Therefore, summary judgment in favor of the owner of the vehicle was improper as the driver’s intent in following and then chasing the decedent’s vehicle was unclear.

Jamila V. Alexander

DEDUCTIBLE APPLIES ONLY TO COVERED LOSSES

In 1998 Hurricane Georges damaged the West Florida Village Inn (West Florida) which was insured by General Star Indemnity Co. (General Star). West Florida submitted a claim to General Star for $476,522.07. General Star rejected the claim stating that damage caused by wind driven rain was excluded under the policy.

The policy provided that the dispute be referred to arbitration. The arbitration panel issued an award for $154,710.25 which was the amount of the loss payable minus West Florida’s portion of the arbitration expenses.

General Star applied an $83,712 deductible to the $154,710.25 and paid West Florida $70,998.25. West Florida filed a breach of contract suit against General Star arguing that the deductible provision was ambiguous and that the correct deductible was $5000 and not $83,712. Further, West Florida argued that the deductible should have been applied to the entire loss of the claim which was $476,522.07, not just the covered portion of the loss.

The trial judge agreed with West Florida and ordered General Star to pay the remaining $83,712. General Star appealed to the Second District Court of Appeal. In General Star Indemnity Co. v. West Florida Village Inn, Inc., 874 So.2d. 26 (Fla. 2d DCA, April 30, 2004) two questions were considered. The first question was whether a court could take into consideration the unambiguous provisions of an insured’s’ policy application when the policy language is ambiguous. The second issue, and most important, was whether the amount of the deductible applied to non-covered losses as well as covered losses under the policy.

The appellate court reviewed the deductible language which provided for a $5000 deductible to be applied to “Special” losses and a $83,712 deductible to be applied to “Windstorm and Hail.” The appellate court concluded that the deductible provision was “not a model of clarity” when read alone.  However, when the deductible provision was read together with the policy application, any ambiguity was resolved. The policy application clearly provided that the $83,712 amount was to be applied to losses caused by “Windstorm and Hail.” The appellate court concluded that the policy application did not conflict with the policy language and thus could be considered in determining whether the policy language was ambiguous. Further, the appellate court relied upon the decision in Mathews v. Ranger Ins. Co., 281 So.2d 345 (Fla. 1973) which held that the policy application, agreement between the parties, and the policy form the contract of insurance. Thus the $83,712 deductible was properly applied.

As for the second issue, the court also sided with General Star that the deductible could only be applied to covered losses. The court noted that “the notion that a deductible could be applied to loss that is not covered by the policy is fundamentally unreasonable.”

The appellate court considered the effect of applying deductibles to non-covered losses would have on the insurance industry. For instance, insurance companies would be forced to adjust non-covered losses in addition to covered losses. This would increase the administrative costs for insurance companies. Furthermore, insurance companies would be unable to set predictable rates in order to maintain solvency because the amount payable would depend on factors outside the contemplation of the insurance contract. Therefore, the appellate court reversed the trial court and remanded for entry of judgment in favor of General Star.

Jacqueline A. Grady