VOLUME XXI, NUMBER 10
October, 2009

THIRD DISTRICT COURT DETERMINES THAT APPLES ARE NOT ORANGES

In Costa De Sol Association, Inc. v. State of Florida, Department of Business and Professional Regulation, 33 Fla. L. Weekly, D1693 (Fla. 3d DCA 2009), the Third District Court held that items that have been purchased, installed, may be removed and are usable only by individual unit owners are not “condominium property!”

In a declaratory statement the Department of Business and Professional Regulation, Division of Florida Land Sales, Condominiums, and Mobile Homes (“Department”) held that items such as Jacuzzis, trellises, and elaborate screen enclosures which were purchased, installed, may be removed and are usable only by individual unit owners are “condominium property.” Under Florida Statute 718.111(11), a condominium association is required to insure “condominium property.” The Department’s decision was based upon the notion that these items are located outside of a unit rather than inside the individual unit.

The Third District Court reversed the ruling and determined that the Administrative Court’s ruling was inconceivable and contrary to prior rulings. According to the Court, there was no cognizable legal basis for the inside-outside distinction. Such interpretation of Statute 718.111(11) is entirely contrary to any acceptable interpretation of the statutory language. Furthermore, such a ruling implies that the owner of such property is not the owner, and that someone or something else is. The Third District Court stated that the Department’s decision would require members of the association to insure property that they do not use, cannot use, derive no benefit from and have no insurable interest in. In addition, without an insurable interest, the association may not even be able to maintain valid insurance for such items. The Third District Court found this utterly unfair and unacceptable.

The Third District Court finalized its ruling by stating, “[i]n sum, it is bad enough to compare apples to oranges; it is much worse to find that apples are oranges.” The Third District Court reversed the ruling.

Andrea R. Zigelsky

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PRESUMPTION OF NEGLIGENCE IN REAR-END MOTOR VEHICLE ACCIDENT APPLIES EVEN WHEN PLAINTIFF IS THE REAR DRIVER

In Cevallos v. Rideout, 37 Fla. L. Weekly D1852 ( Fla. 4th DCA 2009), the Fourth District Court of Appeal upheld the trial court’s direction of a verdict in favor of the defendant, where the plaintiff could not overcome the legal presumption that, as the rear driver in a rear-end collision, she was negligent.

In Cevallos, the plaintiff and defendant were involved in a five-vehicle accident. The defendant’s vehicle was driving immediately in front of the plaintiff’s vehicle, but immediately behind a vehicle driven by a non-party. The plaintiff claimed that the defendant rear-ended the non-party vehicle, which caused the plaintiff to be unable to stop in time to avoid rear-ending the defendant. The defendant claimed that the plaintiff rear-ended her before the defendant ran into the lead vehicle.

In Florida, there is a rebuttable presumption that the negligence of the rear driver in a rear-end eccident is the sole proximate cause of the accident. Such a presumption can, of course, be overcome if the rear driver presents sufficient evidence that the lead driver stopped abruptly and arbitrarily.

The plaintiff in this case argued that she should not be required to prove the absence of negligence on her part in order to prevail, because the defendant could have been comparativly negligent. The Fourth District Court of Appeal rejected this argument, holding that the presumption serves the public policy of encouraging drivers to leave an adequate space between themselves and the lead car so that they can stop, if necessary.

The appellate court further held that, although there are instances where a rear-driver plaintiff may overcome this presumption, in this particular case, the plaintiff failed to adduce sufficient evidence to reasonably infer that the defendant’s sudden stop was one that could not easily have been anticipated.

Erik Bell

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ELEVENTH CIRCUIT FINDS CONDOMINIUM UNIT OWNER'S POLICY DOES NOT COVER ASSESSMENTS RESULTING FROM CONDOMINIUM ASSOCIATION'S MASTER POLICY DEDUCTIBLE

In Grife v. Allstate Floridian Insurance Company, 28 Fla. L. Weekly Fed. C299, (11th Cir. 2009), the United States Court of Appeals for the Eleventh Circuit held that Allstate Floridian did not breach its condominium unit owner’s personal owner’s policy by denying coverage for assessments levied against the unit owners to cover damages to common elements that fell under the deductible of the condominium association’s master policy.

Grife owns a condominium unit at the Admiral’s Port Condominiums in North Miami Beach, Florida, which was insured by Allstate Floridian Ins. Co. The Admiral’s Port Condominiums sustained damages to its common property as a result of Hurricane Wilma. Admiral’s Port Condominium Association (“Condominium Association”) submitted a claim to its insurance carrier. However, $719,080.00 of the Condominium Association’s Hurricane Wilma damages fell under the policy’s deductible. The Condominium Association levied special assessments against the individual unit owners to cover the damages not paid by its insurance carrier because of the deductible.

Grife subsequently filed a claim for the special assessment he was charged by the Association under his personal owner’s policy. Pursuant to the policy’s Loss Assessment Provision, Allstate Floridian agreed to pay Grife’s share of any special assessments charged against the condominium owners by the Association as a result of a loss to the common property. This provision, however contained the following exclusion: “Any reduction or elimination of payments for losses because of any deductible applying to the insurance coverage of the association of building owners collectively is not covered under this protection.” Allstate Floridian denied Grife’s claim based on this policy exclusion. Allstate Floridian asserted that the assessment was the result of the deductible in the Condominium Association’s policy, and thus not covered under Grife’s personal owner’s policy.

Grife subsequently filed a class action lawsuit on behalf of himself and others similarly situated. The United States District Court for the Southern District of Florida granted Allstate’s motion for judgment on the pleadings, holding that Grife’s owner’s policy did not provide coverage for the assessment levied by the Condominium Association due to the Condominium Association’s policy deductible. The Eleventh Circuit Court of Appeals affirmed the District Court’s ruling, finding that the plain language of the Allstate policy excluded coverage for any assessment due to losses that fell within the Condominium Association’s policy deductible.

Deidrie A. Buchanan

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JURIES CAN DEFINE THE WORD ‘DISHONESTY’ IF THE UNDERLYING INSURANCE POLICY DOES NOT

In St. Paul Mercury Insurance Co. v. Coconut Grove Bank, 34 Fla. L. Weekly, D1841 (3d DCA, September 9, 2009), the Third District Court of Appeal was faced with the issues of (1) whether the trial court was correct in allowing the jury to determine a definition of “dishonesty” when the underlying insurance policy did not provide a definition; and (2) whether the plaintiff was entitled to recover a contingency fee multiplier.

In the late 1980’s, the plaintiff bank hired an individual named Aldo Morales to work as a cashier. One day in 1988, Mr. Morales’ cash drawer came up short in the amount of $450. Rather than inform his manager of the shortage, Mr. Morales simply replaced the $450 with money he borrowed from his father. Several days later, the customer who had received the extra $450 returned the funds to the bank. When the bank learned of Mr. Morales’ actions, it placed him on a 60-day probation and filed a report of this incident in his permanent file.

During the subsequent years, Mr. Morales received promotions, and eventually helped create a program for underwriting used car loans. It appears, however, that the bank suffered large losses under this program. During this period of time, the bank received a telephone call from a former employee of a used car dealership who informed the bank of Mr. Morales’ involvement in ‘fake deals’ of which Mr. Morales was a party. The bank also came to learn that Mr. Morales was misusing certain bank accounts, and that he had manipulated data in the bank’s computer system.

Since the bank had purchased a fidelity bond from the defendant insurance company that provided coverage for “Dishonesty of Employees,” the bank filed a claim for losses it suffered as a result of 571 purported bad loans that Mr. Morales had written. Although the decision is unclear as regard to the insurance company’s response, it appears that it denied the claim because the policy excluded coverage for the wrongful acts of the bank’s employees if the bank had prior knowledge that its employee had previously engaged in ‘dishonest’ conduct. The matter eventually went to trial. The jury, after hearing testimony of Mr. Morales’ alleged practice of writing bad loans in exchange for kickbacks, falsifying records, and mismanaging accounts, awarded the bank $3,075,000, along with prejudgment interest and attorneys fees.

The insurance company appealed the jury verdict and award on several grounds. Pertinent to this discussion, is the issue of whether the trial court was correct in allowing the jury to determine the definition of the word ‘dishonesty.’ The Third District held that the trial court was correct in allowing the jury to define this word since the policy itself did not contain a definition. Further, since the jury determined that Mr. Morales’ conduct in 1988 with respect to the missing $450 from the cash drawer was not ‘dishonest,’ the insurance company could not avoid liability for Mr. Morales’ fraudulent acts.

The bank filed a cross-appeal with regard to the trial court’s refusal to allow the bank to recover a contingency fee multiplier to its award of attorney’s fees. The Third District held that despite the complexity of the case, the “relevant market did not require a contingency fee multiplier in order to obtain competent counsel.” In other words, the court found that there was evidence that the bank should have been able to hire local counsel that could have handled this case at an hourly rate.

Robert C. James