MARY S. SCRIVEN, District Judge.
The following facts are undisputed in this case:
The instant action is a coverage dispute that arises out of insurer Defendant CCC's refusal to defend or indemnify insured Plaintiffs against an underlying state court malpractice claim brought for alleged professional negligence in Plaintiffs' handling of the tax returns of the Partin family. (Dkt. 36 at 9; Dkt. 37 at 5-9; Dkt. 38-1 at 7) The Partins
On April 21, 2006, Kim Cullen, Esq., counsel for the Partins, sent a letter to Mr. Eddy. (Dkt. 47 at ¶ 13; Dkt. 47-1 at 62-92) The letter stated, inter alia:
(Dkt. 47-1 at 63)
Plaintiffs claim that they reported this letter to Sandy Garrick, Plaintiff C & E's insurance broker at Huckleberry Sibley & Harvey Insurance. Specifically, Plaintiffs claim that Mr. Eddy contacted Sandy Garrick upon receipt of the April 21, 2006 letter and asked whether it was necessary to notify C & E's errors and omissions carrier about the letter. (Dkt. 37 at 3) Garrick testified at her deposition that Carson Eddy never called her about the Cullen letter and that she first saw the letter in March 2007 after Defendant CCC declined coverage for the underlying action.
On May 2, 2006, C & E partner Todd Hitchins sent an e-mail to other C & E partners with "Partin Settlement Issues" in the subject line. (Dkt. 36-18 at 2; Dkt. 47-1 at 83) Mr. Hitchins's e-mail expressed four concerns over the ongoing Partin issues and stated, "My biggest concern — what is our obligation to the insurance company .... who pays for the defense and any damages?" (Id.)
Plaintiff C & E renewed its insurance policy with Defendant CCC under Accountants Professional Liability Policy No. 128535142 (the "Second Policy"), a claims-made policy that is substantively similar to the First Policy and provided coverage for a period incepting on August 1, 2006 and terminating on August 1, 2007. (Dkt. 47 at 1) Under the Second Policy, Defendant CCC agreed to provide coverage for claims made against Plaintiff C & E, provided that, "prior to the effective date of this Policy, none of [Plaintiff C & E's employees] had a basis to believe that any ... act or omission, or interrelated act or omission, might be reasonably be expected to be the basis of a claim." (Dkt. 47-1 at 6, 7) Plaintiff C & E did not report the April 21, 2006 letter to Defendant CCC in connection with the renewal of the Second Policy. (Dkt. 47 at 4)
On January 11, 2007, C & E partners Carson Eddy and Todd Hitchins met with Ms. Partin and discussed her allegations of malpractice. (Dkt. 47 at ¶ 24) On January 11, 2007, Plaintiff C & E notified Sandy Garrick in writing of the issues raised by Ms. Partin at the January 11, 2007 meeting and specifically stated that Plaintiff C
On October 18, 2007, the Partins sued Plaintiffs in state court for professional negligence in the handing of the several Partin family accounting matters. (Dkt. 47 at 2; Dkt. 47-1 at 29-37) Plaintiffs and the Partins settled the state court action on confidential terms in August 2009. (Dkt. 8 at 3; Dkt. 36 at 9; Dkt. 37 at 8; Dkt. 47 at 4)
Plaintiffs filed the instant action for breach of contract on October 20, 2009.
Defendant CCC filed a Motion for Summary Judgment contending that Plaintiffs' claims for relief fail as a matter of law because Plaintiffs cannot meet two independent conditions precedent to coverage under the Second Policy. (Dkt. 36 at 13-24) Specifically, Defendant contends no coverage is available under the terms of the Second Policy since (1) several partners at Plaintiff C & E had a basis to believe, prior to the policy's inception date, that Plaintiff's Harp's acts or omissions in connection with the Partins' representation might reasonably be expected to be the basis of a claim, and (2) the claim was first made prior to the effective date of the policy. (Id.)
Plaintiffs also filed a Motion for Summary Judgment contending that they are entitled to summary judgment because (1) prior to the inception date of the Second Policy, Plaintiffs had no basis to believe that services provided by them to the Partins might reasonably be expected to be the basis of a claim and (2) that no claim was made prior to the effective date of the Second Policy. (Dkt. 37 at 13-22) Plaintiffs also raise an alternative argument in their Opposition to Defendant's Motion for Summary Judgment. Plaintiffs claim that, even if the Court finds that a claim was made prior to the effective date of the Second Policy, the claim is covered under the First Policy and Plaintiffs timely reported the claim to CCC during the First Policy period through an insurance broker, Huckleberry, Sibley, Harvey Insurance Agency, which Plaintiffs contend was CCC's agent. (Dkt. 44 at 3.)
In its Memorandum in Opposition to Plaintiffs' Motion for Summary Judgment, Defendant reiterates arguments set forth in its Motion for Summary Judgment.
Summary judgment is appropriate when the movant can show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fennell v. Gilstrap, 559 F.3d 1212, 1216 (11th Cir.2009) (citing Welding Servs., Inc. v. Forman, 509 F.3d 1351, 1356 (11th Cir.2007)). Which facts are material depends on the substantive law applicable to the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the burden of showing that no genuine issue of material fact exists. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). Evidence is reviewed in the light most favorable to the nonmoving party. Fennell, 559 F.3d at 1216 (citing Forman, 509 F.3d at 1356). A moving party discharges its burden by showing that there is an absence of evidence to support the non-moving party's case. Denney v. City of Albany, 247 F.3d 1172, 1181 (11th Cir.2001) (citation omitted). When a moving party has discharged its burden, the non-moving party must then go beyond the pleadings, and by its own affidavits, or by depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue for trial. Porter v. Ray, 461 F.3d 1315, 1321 (11th Cir.2006) (citation omitted). The party opposing a motion for summary judgment must rely on more than conclusory statements or allegations unsupported by facts. Evers v. Gen. Motors Corp., 770 F.2d 984, 986 (11th Cir.1985) ("conclusory allegations without specific supporting facts have no probative value.").
In the context of cross motions for summary judgment, the denial of one does not require the grant of another. Ernie Haire Ford, Inc. v. Universal Underwriters Ins. Co., 541 F.Supp.2d 1295, 1297 (M.D.Fla. 2008) Summary judgment is always inappropriate if disputes remain as to any material facts. Id. at 1298.
As noted by the parties, "[t]he interpretation of an insurance contract is a question of law." Kattourn v. N.H. Indem. Co., 968 So.2d 602, 604 (Fla. 2d DCA 2007). It is undisputed that Florida law governs the interpretation of Defendant's insurance policy in this case. (Dkt. 36 at 12-13; Dkt. 37 at 11-12) "Florida law provides that insurance contracts are construed in accordance with the plain language of the policies as bargained for by the parties." Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla.2000). Accordingly, the scope and extent of coverage are determined by the language and terms of the policy, and the policy terms are given their plain and ordinary meaning. "It is a cardinal principle of insurance law that where the provisions of an insurance policy are clear and unambiguous, the terms of the policy will be accorded their plain meaning and enforced as written." Ernie Haire Ford, 541 F.Supp.2d at 1298; see also Northland Cas. Co. v. HBE Corp., 160 F.Supp.2d 1348, 1358 (M.D.Fla.2001)
The Court finds that Plaintiffs failed to notify Defendant CCC of a claim or potential claim prior to the expiration of the First Policy and therefore cannot avail themselves of coverage under that policy. The Court additionally finds that, prior to the effective date of the Second Policy, partners of Plaintiff C & E had knowledge that Plaintiff Harp's acts or omissions in connection with the Partins' representation might reasonably be expected to be the basis of a claim. As such, the Court finds that coverage is excluded under the terms of the Second Policy. Because coverage is unavailable as a matter of law under both policies and because no material disputes of fact remain to be adjudicated, Defendant CCC is entitled to summary judgment.
As a preliminary matter, the Court must resolve Plaintiffs' argument (raised for the first time in their Opposition to Defendant CCC's Motion for Summary Judgment) that Plaintiff C & E reported the April 21, 2006 letter to Defendant CCC during the First Policy period by virtue of its claimed communication with the insurance broker, Huckleberry Sibley & Harvey. (Dkt. 44 at 3) Plaintiffs argue that Huckleberry Sibley & Harvey is authorized by the insurer to act as the insurer's agent for the purposes of receiving communications from the insured concerning claims. (Dkt. 44 at 3) Thus, Plaintiffs contend that, even if the Court finds that the April 21, 2006 letter is a claim, coverage exists under the First Policy because Plaintiffs reported the letter to Defendant CCC. (Dkt. 44 at 3) The Court finds no merit in this argument.
Section VI, subsection C, of the First Policy, entitled "Duties in the event of a claim," provides that "You must give us written notice as soon as reasonably possible during the policy period of any claim made against you."
(Dkt. 47-1 at 74-75)
The following subsection, "E. Notice," states that "Notice of any claim or potential claim should be reported to Director of Claims, Accountants Professional Liability, CNA, CNA Plaza, 333 South Wabash Street, Chicago, Illinois 60604." (Dkt. 47-1 at 75) The next subsection, "F. Changes/Transfer of Interest," further provides:
(Dkt. 47-1 at 75)
The Court finds that these policy provisions manifest an unambiguous intention on the part of Defendant CCC to limit any latent liability that could arise from an agent's delay in reporting a claim or potential claim or failure to report a claim or potential claim at all. The First Policy includes an express provision informing the insured of the procedure for reporting a claim: "You must give us written notice as soon as reasonably possible during the policy period of any claim made against you." (Dkt. 47-1 at 4) Likewise, in the event of a potential claim, an insured is required to provide "written notice to us prior to the expiration of the policy period." The First Policy also explicitly informs the insured where to send that notice: "Notice of any claim or potential claim should be reported to Director of Claims, Accountants Professional Liability, CNA, CNA Plaza, 333 South Wabash Street, Chicago, Illinois 60604." Finally, the policy states: "Notice to any of our
Plaintiffs nevertheless contend that the Court should ignore the procedures set forth in the First Policy for reporting a claim or potential claim. Instead, Plaintiffs request that the Court give exclusive force to a policy endorsement that governs "PREMIUM OR CLAIM DISPUTES." (44-1 at 7) The endorsement provides that "Should you have a dispute concerning your premium or about a claim, you should contact your agent or the company." (Dkt. 44-1 at 7) According to Plaintiffs, this endorsement form "expressly directs the insured to contact either the agent ... or the insurance company directly, in the event of a `dispute about a claim.'" (Dkt. 44 at 13) Plaintiffs maintain that they simply exercised the option of reporting this "dispute about a claim" to Sandy Garrick instead of reporting it to Defendant CCC. (Dkt. 44 at 13)
The Court finds that the cited language of the endorsement has no bearing on this issue and reliance on it by the Plaintiffs is wholly misplaced. The First Policy clearly describes the steps required of Plaintiffs in the event that they needed to notify Defendant CCC of a claim. Nothing in the endorsement suggests that its terms alter or supersede the notice requirement contained in the First Policy. The Court finds that the endorsement only gives the insured instruction regarding the manner in which to resolve disputes about claims. As for notification of the existence of a claim or potential claim in the first instance, the policy plainly required Plaintiffs to notify Defendant CCC directly. The argument that they notified Defendant CCC though Sandy Garrick, even if the asserted facts concerning the content and timing of that notification are accepted as true, fail as a matter of law to constitute notice being provided as required by the Policy.
Plaintiffs' reliance on the doctrine of apparent authority is also unavailing. Under Florida law, the doctrine of apparent authority provides that an insurer should be bound by the acts of a producing agent whom the insurer has clothed with apparent authority to bind it. Am. Cas. Co. of Reading, Pa. v. Castellanos, 203 So.2d 26, 27 (Fla. 3d DCA 1967). Plaintiffs rely exclusively on the Castellanos decision in support of their argument that Huckleberry Sibley & Harvey had apparent authority to receive a communication regarding claims.
The Castellanos decision is inapplicable to this matter. The policy at issue in Castellanos allowed for an insured to notify "the company or any of its authorized agents" of a claim. Id. (emphasis in original). The policy at issue here did not permit Plaintiffs to notify an agent in the event of a claim. To the contrary, Plaintiffs were, as noted, required to notify Defendant CCC if they faced a claim or potential claim. Moreover, by contractually agreeing that "knowledge possessed by any such agent" could not "act as a waiver or change in any part of this policy" (Dkt. 47-1 at 75), Defendant CCC and Plaintiffs agreed that an insurance agent or broker would not be cloaked with the authority to alter any terms of the policy, including the
Thus, even if Sandy Garrick were acting as Defendant CCC's agent for certain purposes, and even if she had apparent authority for certain purposes, and even if Plaintiffs immediately turned over the April 21, 2006 letter to her, Plaintiffs' claim for coverage under the First Policy fails because the policy put Plaintiffs on notice that Ms. Garrick did not have authority to receive notification regarding a claim or a potential claim on behalf of Defendant CCC. Accordingly, any factual dispute related to what was or was not communicated to Sandy Garrick is immaterial because, in the absence of proper notification to Defendant CCC in the manner required under the First Policy,
The Court additionally finds that Plaintiffs cannot recover under the Second Policy because, prior to its inception, employees of Plaintiff C & E had knowledge of acts and/or omissions related to the Partins' representation that might reasonably have been expected to form the basis of a claim. Defendant issued the Second Policy to Plaintiff C & E, effective August 1, 2006 through August 1, 2007. (Dkt. 47-1 at 2)
As a claims-made policy, the Policy provided coverage for liability provided that:
(Dkt. 47-1 at 7) (bold in original; underlined emphasis added) A claim is defined as:
(Id. at 4) (bold in original) Additionally, the policy makes clear that
(Dkt. 47-1 at 6) (bold in original)
In its motion, Defendant CCC asserts that "prior to the Policy's effective date of August 1, 2006, no fewer than three Insureds (Harp, Eddy, and Hitchins) had a basis to believe that Harp's acts or omission in connection with the Partins' representation might reasonably be expected to be the basis of [a] claim against Harp and/or the Firm." (Dkt. 36 at 18) Conversely, Plaintiffs contend "the facts known to plaintiffs on August 1, 2006 did not provide plaintiffs with a basis to believe that Mr. Harp's work for the Partins' might be expected to be the basis of a claim." (Dkt. 37 at 19) Based upon the undisputed evidence in the record, the Court finds that before August 1, 2006, the effective date of the Policy, Plaintiff Harp and C & E partners Carson Eddy and Todd Hitchins,
On February 23, 2003, Plaintiff Harp sent a letter to the IRS regarding the Partins' taxes for the 12/31/2000 and 12/31/2001 tax years. (Dkt. 47-1 at 39) In the letter, Plaintiff Harp stated the "inadvertent under-reporting of the total payments received during tax years 2000 and 2001 were the consequences of two factors, namely: (1) a misunderstanding on the part of the return preparer ... and (2) a misunderstanding with respect to the complexities surrounding the reporting of a two-part installment sale[.]" (Id. at 40) On March 16, 2006, Ms. Partin sent letters to Plaintiff Harp and Carson Eddy stating that the Partins decided to change accounting firms. (Dkt. 36-10 at 2; Dkt. 36-11 at 2; Dkt. 37-1 at 2; Dkt. 47-1 at 44, 46)
Mr. Eddy thereafter received a letter on April 21, 2006, from an attorney representing the Partins, in which Plaintiffs were informed that "several acts or omissions" seemed "obvious" to the attorney "to rise to the level of professional malpractice." (Dkt. 47-1 at 63) The April 21, 2006, letter directed Plaintiffs to "provide a copy of this correspondence to your malpractice or errors & omission carrier, and ask the carrier to contact us as soon as possible." (Dkt. 47-1 at 63)
On May 2, 2006, C & E partner Todd Hitchins sent an e-mail regarding "Partin Settlement Issues," which clearly disclosed that he was aware of circumstances that could reasonably be expected to form the basis of a malpractice claim. (Dkt. 36-18 at 2) The e-mail, sent to Carson Eddy and copied to C & E partners, Jennifer Christensen, Plaintiff Harp, and Vic Incinelli, stated:
(Dkt. 36-18 at 2; Dkt. 47-1 at 83) In a response e-mail, Carson Eddy stated:
(Id.)
The Court finds that, prior to the inception date of the Second Policy, the foregoing events conclusively demonstrate that Plaintiffs had reason to believe that the Partin family might file a claim against Plaintiff C & E. More importantly, the Hitchins e-mail irrefutably shows that a malpractice claim was actually foreseen by at least one partner at C & E and that this concern was shared with other C & E partners.
In this regard, the Court finds this matter indistinguishable from Coregis Insurance Co. v. McCollum, 961 F.Supp. 1572, 1579 (M.D.Fla.1997). In Coregis, the court addressed the language of an exclusionary provision which stated "coverage will not be afforded if at the effective date any insured under the policy knew or could have reasonably foreseen any claim arising out of any act, error, omission or personal injury that might be expected to be the basis of a claim or suit." Id. at 1579 (emphasis added).
Prior to the policy's effective date, an associate at the insured law firm wrote a memorandum to one of the firm's partners documenting her belief that a former client might file a malpractice claim based on the firm's representation of that client in a federal court action. Id. at 1576. The plaintiff, a professional liability insurer, sought summary judgment on the basis
Here, as in Coregis, the policy contained a "prior knowledge" provision that conditioned coverage on the insureds' having no knowledge of an act or omission in the provision of professional services that might reasonably be expected to be the basis of a claim. As in Coregis, internal communication here reveals concerns on the part of an employee of the insured that a claim might be filed. Finally, as in Coregis, insured C & E declined to notify its insurer prior to the effective date of the policy of any concerns regarding a potential claim. The court in Coregis recognized that the exclusionary clause at issue did not require that "that such a claim have merit or that the insured reasonably believed it to have merit." Coregis, 961 F.Supp. at 1579. All that was required was that the insured be "aware of circumstances that might lead to a malpractice claim." Id.
As in Coregis, the Court here finds that, regardless of the subjective beliefs Plaintiffs claim now to have held, the language of the Second Policy precludes coverage for the Partin claim because several insureds objectively "had a basis to believe" that the "act[s] or omission[s]" of Plaintiff Harp "might reasonably be expected to be the basis of a claim" prior to the inception date of the policy. (Dkt. 47-1 at 7)
Having concluded that no coverage exists for the Partin claim based on the plain exclusionary language of the Second Policy, the Court need not address the parties' cross motions for summary judgment as to whether the April 21, 2006 letter to Carson Eddy at Plaintiff C & E constitutes a "claim." (See Dkt. 36 at 13-17; Dkt. 37 at 13-18)
For the foregoing reasons, the Court finds no basis for coverage for the Partin Claim under the First Policy or the Second Policy. Accordingly, it is hereby