VOLUME XXII, NUMBER 3
March, 2010

HOMEOWNER IS LIABLE FOR ATTORNEY'S FEES INCURRED BY LEAK DETECTION SERVICES IN SUBROGATION ACTION BY HOMEOWNER'S INSURER

In On Target, Inc. v. Allstate Floridian Insurance Company, as Subrogee of Anthony and Nancy Podorski; and Anthony Podorski , 34 Fla. L. Weekly, D2237 (2 nd DCA, October 30, 2009), the Second District Court of Appeals was faced with the issue of whether a leak detection service was entitled to be indemnified by a homeowner for costs and attorneys fees it incurred defending a subrogation suit brought by the homeowner’s insurer. Critical to the decision was the fact that the property was damaged during the leak detection service’s locating procedures and the fact that the leak detection service and homeowner had a contract that provided that the homeowner would hold the leak detection service harmless for damages caused by the leak detection service while undertaking locating procedures.

In On Target, the homeowners experienced a leak under the floor of their residence. The homeowners then contracted with On Target, a leak detection service, to use specialized equipment and techniques to detect the location of the leaks. As part of On Target’s service, at times it would expose a leaking pipe and make temporary repairs. The On Target technician responded to the homeowners’ residence and presented the homeowners with a two-page form that contained “customer information” and an “authorization to proceed with work.” The form also contained an indemnification provision. That provision explained that “tiles or linoleum may need to be lifted and/or other non-tech tasks performed including excavations.” The provision went on to state that On Target, “shall not be responsible for any damage whatsoever, actual or perceived, which may result from any locating procedures.” Finally, the provision stated that the “[P]roperty owner…agrees to hold harmless On Target…absolutely in this regard and to defend same in any action which may develop pursuant to any of these activities.” One of the homeowners signed the form and left the residence.

Thereafter, an On Target technician made a hole through a single floor tile and into the slab of the residence’s foyer while performing a temporary repair of the leaking pipe. The homeowners were unable to find a matching tile to replace the damaged tile and filed a claim with their homeowner’s insurance carrier. The insurer approved the replacement of all of the tile in the homeowner’s residence at a cost of $17,290. The insurer then demanded reimbursement from On Target but On Target denied liability. The insurer, as subrogee of the homeowners, then filed an action against On Target. On Target in turn filed a third-party complaint against the homeowners. The insurer eventually dismissed the case against On Target, but On Target sought the recovery of its costs and fees from the homeowners for defending the insurer’s subrogation action. The trial court ruled in favor of the homeowners reasoning that the contract’s language was vague and ambiguous rendering any intended indemnification unenforceable, in so doing, the court relied upon Cox Cable Corp. v. Gulf Power Co., 591 So.2d 627 (Fla. 1992).

In Cox, the Supreme Court of Florida held that certain contractual indemnification language was insufficient to require Cox to indemnify Gulf against the results of its own negligence. The Court went on to explain that in order for an indemnity contract that attempts to indemnify a party against its own wrongful act to be enforced, the intent to do so must be “clear and unequivocal.” The court in On Target distinguished Cox on the grounds that the insurer sued On Target for breach of contract, not negligence. The On Target court went on to explain that the Cox court found the indemnification provision insufficient because it did not have language specifically providing for indemnification against one’s own negligence, where in On Target the indemnification provision stated that the homeowners would hold On Target harmless for damage caused by “any locating procedures.”

The Second District Court of Appeals held that the language of indemnity clause in the agreement between the homeowners and On Target was specific enough to put the homeowners on notice that the locating procedures may cause damage and that On Target could not be held liable for that damage. Further, the indemnity clause was applicable to On Target’s defense of the insurer’s lawsuit against it, because the insurer sought to recover damages caused to the insured premises by On Target’s locating procedures. Therefore, the Second District Court of Appeals reversed the lower court’s decision and remanded the case to the lower court to determine and award On Target costs and attorneys fees it incurred defending the insurer’s action against it.

Alemayhu B. Kassahun  

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CLERICAL SERVICES BY PHYSICIAN EMPLOYEE MAY BE CONSIDERED EXCLUDED PROFESSIONAL SERVICS UNDER BUSINESS OWNER'S POLICY

In Estate of Tinervin v. Nationwide Mutual Ins. Co., 34 Fla. L. Weekly D2439 (Fla. 4 th DCA 2009), the Fourth District Court of Appeals essentially held that the professional services exclusion in a physician’s business owner’s insurance policy applied to the acts of the physician’s employee in opening the mail and attaching a lab report to a patient’s chart, even though such acts required no professional skill.

The insured doctor employed his wife in his office. The employee-wife’s duties included the filing of lab reports in the patient’s chart and providing them for the doctor’s review. One of the doctor’s patients was diagnosed as obese and as having high blood pressure. An outside lab performed tests on that patient, revealing abnormal values. However, although the lab mailed the results to the doctor in February 2005, the doctor only recalled seeing the results in May 2005. The patient later died on June 2, 2005. The doctor admitted that if he had seen the lab results earlier, he would have taken different actions in his treatment of the patient.

The patient’s estate then brought a wrongful death action against the doctor, his employee-wife, and his professional association. However, the insurer refused to defend or indemnify the doctor and the doctor’s employee based on the policy’s exclusion for injuries arising from professional services. Of note, pursuant to a $5 million consent judgment, the doctor and his employee assigned their coverage claim to the patient’s estate which then brought an action against the insurer alleging that the insurer breached its duties to defend and indemnify. The trial court held that while the insurer did not have a duty to indemnify because the professional services exclusion applied, the insurer did have a duty to defend the wrongful death claim based on the allegations of the complaint that the employee was a non-professional employee. The Fourth Circuit Court of Appeals affirmed the trial court’s holdings.

The Court, in so doing, stated that the policy clearly excludes coverage for claims “arising out of” the providing or failing to provide professional services and claims “due to” the rendering or failing to render any professional service. Professional services include medical or nursing services. The Court further found that the employee’s acts were causally connected to the professional services rendered by the doctor. The policy clearly excluded medical services and the employee’s duties were an intricate part of the medical services provided by the doctor. The Court specifically disagreed with the contention that the employee’s act of opening the mail and attaching a lab report required no professional skill and that those acts were not excluded from coverage.

The Court stated that whether an act results from the nature of a professional service is determined by focusing upon the particular act itself, as opposed to the character of the individual engaging in the act. The Court agreed with the trial court’s finding that the employee was a medical assistant under Florida Statute § 458.3485 which defined “Medical Assistant” as a “professional multi-skilled person dedicated to assisting in all aspects of medical practice under the direct supervision and responsibility of a physician.” The Court said that here the employee assisted the doctor in all aspects of his practice. She not only performed clerical tasks, but she took vital signs including the temperature, pulse, height, blood pressure, and weight. Thus, she fell within the policy’s professional services exclusion and there was no duty to indemnify.

However, and again agreeing with the trial court, the Fourth Circuit found that while the insurer did not have the obligation to indemnify, it nonetheless did have the duty to defend. The Court stated that an insurer’s duty to defend is distinct from and broader than its duty to indemnify. The duty to defend is determined solely by the allegations in the complaint, which must set forth facts that bring the case within the coverage of the policy. In the subject case, the Court found that the complaint specifically alleged facts which fell within the insuring language of the policy. It was only after the facts were flushed out in discovery that the duty to indemnify was found not to exist.

The lesson to be gleaned from Estate of Tinervin is that an insurer, when evaluating the coverage and exclusions available under a policy, should not simply base its determination upon an employee’s job title but should take into consideration the actual services rendered by the employee.

Nishall N. Jairam

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PARENTS HELD LIABLE FOR ENTRUSTING CHILD WITH AN ALL TERRAIN VEHICLE RESULING IN DEATH TO ANOTHER

Thirteen-year-old Sara Hennarichs was driving a four wheel all-terrain vehicle (“ATV”) when she lost control, ran into a tree, and died soon thereafter from her injuries. Sara’s estate brought a wrongful death action against Roger and Karen Fina who owned the ATV, and purchased it for the use and enjoyment of their 13-year-old son Nicholas, who was only 11 at the time of the purchase. Nicholas, without his parents’ knowledge or consent, let Sara drive the ATV with a passenger seated behind her.

In Hennarichs v. Fina and Nationwide Insurance Company, 34 Fla.L.Weekly D2031 (Fla. 4th DCA October 7, 2009) the Fourth District upheld a jury verdict in favor of Hennarichs’ estate in the amount of $4.5 million and upheld the trial court’s denial of the Fina’s Motion to Dismiss, Motion for Summary Judgment, and Motion for a Directed Verdict. The Court discussed the law of negligent entrustment in Florida that holds a parent liable where the parent entrusts their child with an instrumentality like a motor vehicle, which because of the child’s lack of age, judgment or experience may become a source of danger to others.

Fina made four primary arguments in support of their Motions. The Court rejected each one. First, Fina argued that Nicholas’s “lack of age” was insignificant because Florida law does not prohibit children from operating ATV’s. The Court disagreed finding that if a child’s lack of age deprives him of the maturity to act responsibly with an ATV, then the child’s parent may be liable for entrusting an ATV to that child.

Second, Fina argued that the rule was inapplicable because Nicholas was not driving at the time of the accident. The Court found that fact to be irrelevant because liability under the negligent entrustment doctrine merely depends upon whether the instrumentality may become a source of danger to others.

Third, Fina argued that the estate presented no evidence during trial that Nicholas was incompetent to have been entrusted with an ATV. The Court disagreed finding that Fina’s complete and total disregard for the bold print WARNING labels on the vehicle and in the instruction manual’s warning that no one under 16 should ride or operate the vehicle, made them responsible for the foreseeable consequences of that choice.

Finally, Fina argued that the estate presented no evidence establishing that they “knew or should have known” that Nicholas might let another child like Sara ride the ATV. The Court disagreed finding that the estate presented sufficient evidence that Fina set an example of disregard for the warnings that came with the ATV and that under those circumstances it was no surprise that Nicholas would disregard their rules too. The Court also found that common sense might have caused the jury to conclude that Fina should have known that a thirteen-year-old boy might let his friends ride his ATV despite instructions otherwise.

On the issue of bailment, Fina argued that Nicholas could not have been liable for negligently entrusting the ATV to Sara because, under the dangerous instrumentality doctrine, a bailee has no cause of action against a bailor for the bailee’s own negligence. The Court found the dangerous instrumentality doctrine inapplicable in this case because the action against Nicolas was not based upon Sara’s negligence as bailee, but upon Nicolas’s negligence as bailor in entrusting the ATV to Sara.

In summary, the Court found that the estate presented sufficient evidence to prove that Fina failed to exercise reasonable care by entrusting the ATV to Nicholas, that Nicholas failed to exercise reasonable care by entrusting the ATV to Sara, and that this tragedy was foreseeable. Reviewing that evidence, the Court found no legal reason to disturb the jury verdict in favor of the estate.

Robyn B. Feibusch