PMT: Newsletter: February 2005

VOLUME XVII, NUMBER 3
March, 2005

FROM THE CORNER OFFICE

Powers, McNalis, Torres & Teebagy is proud to announce Robin B. Rothman has re-joined our firm and will continue her practice in the areas of third party insurance defense, liability coverage and insurer bad faith. We also welcome back Rebecca L. Jenkins who has returned from her family leave of absence and will continue to practice in insurance defense, personal injury, products liability and subrogation.

Welcome back Robin & Rebecca!

We are pleased to announce our newest associates Robert A. Reynolds, J.D., 2001 from Roger Williams University School of Law, Bristol, RI; and Joshua D. Selmyer, J.D., Cum Laude, 2002, from the University of Miami School of Law, Florida. They will help us to continue to provide the consistent, high level of legal services that you expect from us.

* * *

“DRINK UP, JOHNNY!”

Since 1978 the Florida Supreme Court has held that social hosts are not subject to liability for the injuries or actions of their drunken guests to whom they have furnished alcoholic beverages. In 1980, §768.125, Florida Statutes was enacted shielding vendors from liability of the injuries or damages caused by customers of legal drinking age after their purchasing of alcohol beverages, so long as the person is not known to be habitually addicted to alcohol by the vendor. Furthermore, cases decided after the statute was enacted have concluded that it does not confer liability upon social hosts for serving alcohol to a minor, nor for serving a known alcoholic. However, this does not mean that a social host is completely immune from liability from alcohol related injuries sustained by her guests.

Recently, in the Estate of Roger P . Massad v. Dee Janet Granzow and Richard B. LaFrance, 29 FLW D2599 (Nov. 17, 2004) a wrongful death suit which had been dismissed by the trial court on the basis of failing to state a claim against the social host was reversed by an appellate court. Apparently, the defendant’s party guest became intoxicated on alcohol supplied by the hostess and fell down, struck his head and sustained a concussion. Subsequently, the hostess undertook to provide care for the guest, including giving him a prescription pill not prescribed for his use. This caused his intoxication to worsen to a near unconscious state, at which time the hostess left the guest alone near an unfenced pool. Later, while still unattended, the guest fell into the pool and drowned.

The trial court dismissed the complaint citing Florida law’s complete limitation on liability of social hosts from the injuries of their intoxicated guests. However, the appellate court found that it is a well-established rule of law that a person who takes charge of another person who is in state rendering him/her unable to aid or protect him/herself, is subject to liability for any bodily harm caused to the helpless person by either failing to exercise reasonable care in terms of the safety of that person or by discontinuing the aid to the helpless person and leaving him/her in a worse position than when charge was taken over that helpless person. Thus, when the hostess took control over her intoxicated guest and then left him in a near unconscious state near an unfenced pool, she became liable for his later drowning. As such, the moral of the story is, if you are a social host, once you take charge of an intoxicated guest who is unable to help themselves, make sure the guest suffers no further injuries, lest the specter of liability fall over you.

Robert A.Reynolds

FLORIDA SUPREME COURT: DECLARATORY ACTIONS ARE PROPER IN FACTUAL COVERAGE DETERMINATION

The Florida Supreme Court recently addressed disagreements amongst the Florida District Courts of Appeal regarding the practice of seeking resolution of coverage disputes by actions for declaratory relief. Charles B.Higgins v. State Farm Fire and Cas. Co., 29 FLW S533 (Fla. 2004).

The factual background of the case is one familiar to most liability insurers. State Farm issued a homeowners policy to Higgins. One day, a drunk Higgins went to his estranged wife’s (Bradley) home (which was also the insured location) where he assaulted Bradley and Bradley’s friend, Cheryl Ingalls. Ingalls sued Higgins, asserting causes of action for the intentional torts of assault and battery, alleging that Higgins had acted “willfully, intentionally and with malice.” The alleged conduct included pushing Ingalls, grabbing her and throwing her into a pile of wood, throwing her down onto the porch, punching her in the face and threatening to kill her if she did not get out of the way. As often happens, the complaint was amended to exclude all of the “intentional” acts, allegations and to assert that the insured came upon the property and “while under the influence of and impaired by alcohol” and “violently threatened, touched and injured” Ingalls. The amended complaint also added a count for negligence against Bradley for failure to warn or protect Ingalls. After a settlement with Bradley, the complaint was again amended to allege that Higgins “negligently injured” the plaintiff. Thus eliminating any reference to the assault.Higgins sought a defense and indemnification under the State Farm policy, which provided coverage for bodily injuries “caused by an occurrence,” defined as “an accident,” and which excluded coverage for bodily injury “which is either expected or intended by an insured.” The policy also excluded bodily injury “to any person. . . which is the result of the willful and malicious acts of an insured.” State Farm filed its declaratory action, seeking a determination of its duty-to-defend and indemnify Higgins on the grounds that the conduct did not constitute an “occurrence” and fell within the policy exclusions, despite the “negligence label” placed upon the conduct.

The Supreme Court took advantage of the opportunity provided by the case to address two issues: (1) whether an insurer may pursue a declaratory action in order to determine its obligations under an unambiguous policy even if the court must determine the existence or non-existence of a fact in order to decide the coverage issue and; (2) whether the trial court has discretion to order that the trial of the declaratory action take place before the trial of the underlying tort action.

After a lengthy and in-depth discussion about the historical application of Florida’s declaratory judgment statute, the court concluded that the statute does authorize declaratory judgments in coverage actions even where it is necessary to determine the existence or non-existence of facts in order to reach a decision. The court correctly noted that a contrary result would be illogical and unfair to both insurers and insureds. A prompt determination of coverage potentially benefits the insured, the insurer and the injured party, in that every party may thus determine its position and make intelligent judgments about the suit.

As to the question of whether the underlying tort case or the coverage action should proceed to trial first, the court declined to establish a bright line rule, choosing instead to affirm the trial court’s discretion in making the decision. The court noted that there are an infinite variety of circumstances that might arise and which the trial court may take into account in exercising its discretion. Amongst the factors to be considered are whether the resolution of one issue necessarily resolves the other; whether proceeding to a decision as to the coverage issue will promote settlement and avoid the problem of collusive actions between claimants and insureds in order to create coverage where none exists; whether the insured has other resources independent of insurance such that it would be immaterial to the claimant whether the insured’s conduct was or was not covered; and the relative weight of the hardship in delaying the claimant in proceeding to judgment and the prejudice to the insurer. However, the court emphasized that while these are some of the factors to be considered by the trial court, the list is by no means exhaustive and the trial court should consider these factors, as well as factors specific to the particular case.

In short, the Higgins decision is good news for liability insurers who may now pursue resolution of coverage issues through declaratory actions, even where the facts are in dispute and even where resolution of the coverage issues involves facts common to the underlying tort case.

Anna D. Torres

ADJUSTERS BEWARE!

In the recently decided case The Home Ins. Co. v. Crawford and Co., 30 FLW D157 (4 th DCA, January 5, 2005), the Fourth District Court of Appeal more clearly defined the relationships of adjusters to insurers and demonstrated what constitutes an example of negligent behavior by adjusters in the handling of claims.

In December of 1992, a Rinker cement truck collided with a vehicle in which a man named James was a passenger. James suffered severe injuries in the collision. The Home Insurance Company (“Home”) insured Rinker and had retained Crawford and Company (Crawford) to service its claims with an authority to settle of $250,000, which was later reduced in 1996 to $99,000. Early in its investigation Crawford determined that the claim was one of “clear liability.” In January 1996, James extended an offer to settle of $950,000 which Crawford rejected, after which James filed suit against Rinker. During discovery, an economist’s expert report was turned over to Crawford indicating that James’ injuries would cause him to suffer a future economic loss between $283,000 and $876,000. In July of 1998, James served a formal offer of judgment for a mere $100,000, which Crawford did not accept. The case was tried to a jury in September 1998 and a judgment of $743,537 along with an award of fees and costs of $165,463 was returned in favor of James on October 1, 1998. On December 7, 1998, Crawford finally dropped the bomb on Home, providing for the first time a report of any kind to Home concerning the James claim. Home ultimately settled with James for $743,537 and filed suit against Crawford asserting claims for breach of contract, fraudulent concealment, and breach of fiduciary duty, eventually amending the claim to include punitive damages.

The trial court directed a verdict against Home’s claims of fraudulent concealment and breach of fiduciary duty, thus eliminating any claim for punitive damages, but sending the breach of contract claim to a jury. The jury found Crawford liable for the breach of contract and returned a judgment of the full $243,537 claimed by Home ($743,537 minus Rinker’s $500,000 deductible.) The trial court also awarded interest and costs to Home. Both sides appealed the final judgment: Crawford appealed the final judgment and Home appealed the court’s directed verdicts on its claims for fraud and breach of fiduciary duty.

The Fourth District affirmed the trial court in all respects, except for the pre-judgment interest award. In Florida, the relationship between insurer and adjuster is defined by the contract between the two parties, which in this case did not provide for any fiduciary duty. Furthermore, a breach of a duty under such a contract by an adjuster subjects that adjuster to liability for the insurer’s loss. Thus, the court held that there was ample evidence on the record for a jury to reach the conclusion that Crawford was negligent in discharging its duty under the contract, but also holding the trial court’s dismissal of the fraudulent concealment claim was proper.

Crawford also argued that there was no evidence of proximate cause as to the damages claimed by Home, claiming that damage to Home was little more than “an amorphous lost opportunity.” The court disagreed and ruled that the evidence offered by Home, including its assertion that it would have settled the claim for $100,000.00 due to its clear liability, was enough for the jury to determine liability and damages.

Robert A. Reynolds