VOLUME XVII, NUMBER 9
September, 2005

FROM THE CORNER OFFICE

We are excited to announce the good news that our three (3) law clerks, Collett P. Small, St. Thomas University School of Law, J.D. 2005, Shaun J. Marker , New England School of Law, J.D. 2005 and David K. McGill , University of Miami , J.D. 2005 have passed the Florida Bar. We look forward to mentoring them toward a successful legal career.

At this time we would like to introduce them to you through our September issue.

CONGRATULATIONS ATTORNEYS !

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THOU SHALT NOT BE REWARDED FOR MISREPRESENTATIONS!

That was generally the tone of the Third District Court of Appeal in the case of GRG Transport, Inc. v. Certain Underwriters at Lloyd's London , et al. , 896 So.2d 922 (3rd DCA, March 2, 2005). The Third District Court of Appeal held that the policy was voided by an insured's misstatement in the application for insurance that no insurer in the past five years refused to renew or cancelled insurance.

In December 1998, GRG, a cargo-transportation company, with the assistance of their insurance agent, South Pacific Professional Insurance, Inc., applied to Lloyd's of London (Lloyd's) for cargo insurance with a policy limit of $250,000 per truck. As with most applications for insurance, GRG were required to fill out an insurance application form. Question 16 of the insurance application inquired about the applicants' "loss experience whether insured or not on All Risks/Broad Form basis from first dollar/with no deductible for the past five years." GRG responded "none." Question 19 of the application asked whether any insurer had refused to renew or cancel the applicant's insurance in the past five years. Again, GRG responded in the negative. In question 22, GRG declared that the statements and particulars given on its application for insurance "are true to the best of my/our knowledge and belief. ." Based on GRG's representations on the application for insurance, Lloyd's issued a cargo policy.

Sometime later, GRG's truck was hijacked and over $500,000 in cargo was stolen. GRG's claim to Lloyd's was denied and GRG filed suit for breach of contract. During discovery it came to light that before completing the application for insurance with Lloyd's, GRG's commercial automobile liability policy was refused renewal by its carrier due to the theft of empty trucks. It was also discovered that after GRG was refused renewal it secured insurance through Progressive. The policy with Progressive was later cancelled for lack of payment. However, none of this information was made known to Lloyd's in answer to question 19 on the application for insurance.

Armed with this information, Lloyd's filed a motion for summary judgment arguing that GRG misrepresented material facts when it answered question 19 of the application for insurance and therefore the policy was void ab initio . GRG in its written response to Lloyd's motion for summary judgment argued that GRG believed question 19 referred only to cargo loss policies and not all insurance policies. GRG further agued that Lloyd's waived its right assert a defense of material misrepresentation in regards to question 19 because it did not notify GRG of this defense by registered or certified mail as required by the Claims Administration Statute, section 627.426(2), Florida Statutes (2003). On December 3, 2003, the trial court heard Lloyd's motion for summary judgment and entered final judgment in favor of Lloyd's. GRG appealed.

The trial court's order was subject to de novo review because the issue of ambiguity of the insurance application is a question of law. The court held that question 19 of the application was not ambiguous as it clearly requested GRG to disclose whether any insurance company had refused to renew or had cancelled a policy issued to GRG within the past five years. Concerning the issue of Lloyd's failing to comply with the Claims Administration Statute, section 627.426 (2); the court agreed that Lloyd's did not strictly comply with the statute. However, the court held that GRG's material misrepresentation rendered the policy void from the date of the inception and adherence to the Claims Administration Statute was then irrelevant.

Collett P. Small

11th CIRCUIT HOLDS "HOUSEHOLD" TO BE AMBIGUOUS

The Eleventh Circuit Court of Appeals (U.S. Middle District) recently addressed the question of whether the undefined term "household" was ambiguous as used in a liability policy and therefore had to be interpreted in favor of the insured. Continental Ins. Co. v. Polly Roberts , 410 F.3d 1331 (11 th Cir. 2005).

In July of 2001, Stephen Gimopoulos was rendered a quadriplegic due to severe spinal injuries after he dove head first off his girlfriend, Polly Roberts' boat into shallow water. Roberts owned the boat and carried a liability policy providing for $100,000.00 in coverage for bodily injury resulting from operation of the boat. However, the policy contained a limiting provision which limited boating liability coverage involving "family member(s)" to $25,000.00 per accident. Limitation provisions of this nature intend to discourage collusive claims by persons in a close relationship with the insured. While the policy defined "family member" as "any member of the named insured's household," it did not define the term "household."

After the accident, Gimopoulos made a claim for his injuries under Roberts' policy, which was issued by Continental Insurance Co., Continental investigated the claim and discovered that the claimant and the insured had been cohabiting "in an intimate relationship" for twenty months prior to the accident. Continental found that the two had also shared meals and expenses, entertained their mutual friends in the same dwelling, and Roberts allowed Gimopoulos to carry a cellular phone and credit card bearing her name.

In June of 2003, Continental filed a lawsuit in Federal District Court seeking a declaration that Gimopoulos was subject to the family member limitation provision, and therefore entitled to only $25,000.00 because he was a member of the Roberts' "household" at the time of the accident. Continental asserted that the definition of "household" includes all people living together in a dwelling regardless of whether they are related by blood, marriage, or adoption. Gimopoulos and Roberts argued that "household" was limited to people sharing a dwelling that are also related by blood, marriage, or adoption, and that since Gimopoulos was not related to Roberts in any of these ways, he was not subject to the limitation, and was entitled to the full $100,000.00 in coverage.

In support of their position, Gimopoulos and Roberts relied on dicta in five Florida Appellate Court decisions which state that an essential characteristic of a "household" member is "close ties of kinship," and several dictionaries similarly defining "household."

The District Court held that there were two reasonable interpretations of "household" in light of the dicta in the Florida appellate court opinions, and various dictionary definitions of the term. As such, the District Court concluded that the policy term "household" was ambiguous and had to be construed in favor of insured. Consequently, Mr. Gimopoulos was held not to be a member of Ms. Roberts' "household," was not subject to the limitation provision, and was entitled to recover the full $100,000.00 in coverage.

The Court of Appeals affirmed the District Court's ruling in all respects, and refused to certify to the Florida Supreme Court the question of what the term "household" means in the context of a liability insurance policy. The Court of Appeals ended its opinion by stating "[w]e do not need to impose on the Florida Supreme Court's time with that question."

In light of this precedent, liability insurers that issue policies containing similar family member limitation provisions but which leave the term "household" undefined may find an increasing number of challenges to the limitation provisions where there is a claim by one member of a cohabiting couple against the named insured.

Shaun J. Marker

SUPREME COURT RULES FOR DRIVERS

In, Walter Goldberg v. Florida Power & Light Company , 30 FLW S224 (April 8, 2005), the Florida Supreme Court addressed the duty owed to motorists by a utility company when making repairs that renders traffic lights inoperable.

On a rainy Friday, a power line came down behind a private residence. FP&L dispatched six repair trucks and seven repair personnel to the residence. The repairs undertaken by the FP&L employees involved de-energizing an adjacent power line by disabling a fuse on a nearby utility pole. Unfortunately, that fuse also controlled the traffic signal at a nearby intersection. The FP&L employee who disabled the fuse later denied knowledge that the fuse also controlled the signal.

Shortly after 5p.m., the Goldberg's were traveling upon the busy intersection following a line of vehicles, none of which were stopping at the inoperable traffic light. Another driver, attempting to find an opening in the line of vehicles driving through the intersection, clipped the rear of the Goldberg's vehicle, causing it to collide with a vehicle traveling the opposite direction. The Goldberg's 12-year-old daughter, Jill died the next day from injuries sustained from the collision.

Walter and Rosalie Goldberg sued FP&L for wrongful death and negligence. The Goldberg's contended that as a result FP&L's breach of duty "not to create a hazardous condition" the traffic proceeded through the intersection in an uncontrolled manner and their daughter was killed. FP&L argued that it had no common law duty to the general public for the operation of traffic signals.

The jury found FP&L liable for $37 million in damages with no negligence attributable to Rosalie Goldberg or the other driver in the accident. FP&L was denied a directed verdict in its favor. The trial court refused to apply a line of cases holding that a driver's negligence in failing to treat an inoperable signal as a four-way stop as required by Florida law always constitutes an intervening superseding cause as a matter of law. Interestingly, in the initial appeal a Third District Court of Appeal three-judge panel affirmed the trial court's denial of the directed verdict, but remanded the case for a remittitur to $10 million. Then the Third District sitting en banc reversed the decision of the panel and remanded the case to the trial court with instructions that a directed verdict and judgment should be entered for FP&L. However, the Florida Supreme Court quashed the decision of the Third District and remanded the case for reinstatement of the initial decision by the Third District's three-judge panel.

The Supreme Court decided that the trial court correctly viewed the record evidence and determined that the accident was an entirely foreseeable consequence of FP&L's negligence in creating a dangerous condition by rendering the traffic light inoperable. Although agreeing with the principle that FP&L should not be held responsible every time power to a traffic signal ceases, the court noted that in this case an FP&L employee deliberately chose a hazardous repair action that he knew or should have known would deactivate a single, nearby, in-sight traffic signal which controlled a very active intersection and did not take even minimal precautions to address the hazard. Thus, the court concluded it was foreseeable that the drivers approaching a busy intersection with an inoperable traffic light will fail to stop despite traffic laws and FP&L had a legal duty, while repairing the electric wire, to warn the motorists that it had deactivated the traffic signal.