18 Fla. L. Weekly Supp. 65a

Online Reference: FLWSUPP 1712ZEPC Insurance — General liability — Contractor performing bridge deck replacement project has coverage as additional insured for own direct negligence, not just for its vicarious liability, under general liability policy of subcontractor providing traffic control on project where policy provides for coverage if contractor’s liability is caused “in whole or in part” by subcontractor’s acts or omissions and lawsuits filed by or on behalf of persons injured or killed when truck failed to stop at rolling roadblock performed by subcontractor allege fault or have ended in finding of partial fault on behalf of subcontractor — Further, contractor is covered for own negligence under provision of subcontractor’s policy providing coverage for any liability “arising out of” operations of subcontractor — Contractor is also entitled to indemnity for own direct negligence under excess carrier policy — No merit to argument that terms of subcontract control scope of coverage under excess policy — Occurrences — Acts or omissions of subcontractor relating to rolling roadblock and its acts or omissions relating to roadside warning signs are separate occurrences, making $2 million aggregate limit available under policy to indemnify contractor for incident — Primary carrier’s exhaustion of policy limits does not eliminate contractor’s action against carrier for failure to handle claim in good faith by attempting to secure release for contractor’s own negligence — Where primary policy provides that duty to defend ends when policy limit is used in payment of judgments or settlement, primary carrier’s duty to defend did not end when carrier tendered policy limit to excess carrier for purpose of later paying settlement — Excess carrier is entitled to recover damages for primary carrier’s premature termination of defense

ZEP CONSTRUCTION, INC., Plaintiff, v. INTERSTATE FIRE & CASUALTY COMPANY, CRUM & FORSTER SPECIALTY INSURANCE COMPANY, LEXINGTON INSURANCE COMPANY, TRAFFIC CONTROL PRODUCTS OF FLORIDA, INC., LAUREN ALTERMAN, as Personal Representative of the Estate of JAMES P. BRASHEAR, KIM GUARINO, as Parent and Legal Guardian of TYLER BRASHEAR, a Minor, ZULMA A. RAMIREZ, as Personal Representative of the Estate of MANUEL R. RAMIREZ, ASHLEY BONEY, GLORIVETTE MOLINA-ALAMO, VANESSA ORNEAS, SARA JEAN ORNEAS, CHW CHAU JOHNSTON, LEONEL D. HERNANDEZ, KRISTEN COLEMAN, and AUREA HERNANDEZ NEGRIN, Defendants. Circuit Court, 12th Judicial Circuit in and for Sarasota County. Case No. 2009 CA 014397 NC. July 14, 2010. Honorable Charles E. Williams, Judge. Counsel: Mark A. Boyle, Sr., and Geoffrey H. Gentile, Fort Myers, for Plaintiff, Zep Construction. Robin Taylor Symons, Miami, for Interstate Fire & Casualty Company. Philip E. Glatzer, Coral Gables, for Lexington Insurance Company. Damien M. Hoffman, Michael E. Reed, Tampa, for Traffic Control Products of Florida, Inc. Mitchel Chusid, Coral Springs, for Lauren Alterman, as Personal Representative of the Estate of James P. Brashear, and Kim Guarina, as Parent and Legal Guardian of Tyler Brashear. Arthur Spiegel, Miami, for Zulma Ramirez, as Personal Representative of the Estate of Manuel R. Ramirez.

ORDER ON MOTIONS HEARD JUNE 17, 2010

The following Motions came to be heard on June 17, 2010:

A. ZEP Construction, Inc.’s Amended Motion For Partial Summary Judgment Regarding Lexington And Interstate’s Duty To Indemnify ZEP For Its Own Negligence;

B. ZEP Construction, Inc.’s Motion for Summary Judgment Regarding Multiple Occurrences;

C. Lexington Insurance Company’s Amended Motion for Summary Final Judgment;

D. Interstate Fire & Casualty Company’s Motion for Summary Judgment against ZEP Construction.

The Court has reviewed all summary judgment evidence; the parties (including Crum & Forster Specialty Insurance Company) Memoranda of Law and heard extensive oral argument on June 17, 2010.

SUMMARY JUDGMENT EVIDENCE IN THIS CASE CONSISTS OF:

1) The Amended Complaint and Exhibits in this action;

2) The Answers and Affirmative Defenses filed by PRIMARY CARRIER and EXCESS CARRIER;

3) The four operative complaints filed by all plaintiffs in the underlying lawsuits;

4) Verdicts and judgment in ALTERMAN, filed with ZEP’s Request to Take Judicial Notice filed March 10, 2010;

5) TCP’s PRIMARY POLICY;

6) TCP’s EXCESS POLICY;

7) Affidavit of Mark Stevens;

8) Affidavit of Lidia Maisonet;

9) Affidavit of Paul Neidich;

10) The Appendix filed by ZEP dated 1/28/10; and

11) Request for Judicial Notice dated 3/10/10 (Verdict Forms from Alterman Case).

A. FINDINGS OF FACT

ZEP’s Amended Motion for Partial Summary Judgment and primarily LEXINGTON and INTERSTATES Motions (A, B and D identified above) are directed to Count I of the Amended Complaint which seeks declaratory relief against all Defendants including, as is relevant to the Motions, TRAFFIC CONTROL PRODUCTS OF FLORIDA, INC.’s (“TCP”) insurance carriers, LEXINGTON INSURANCE COMPANY (“PRIMARY CARRIER” or LEXINGTON) and INTERSTATE FIRE & CASUALTY COMPANY (“EXCESS CARRIER” or LEXINGTON). Primarily, Motions A, B and D address whether ZEP has insurance coverage under the LEXINGTON and INTERSTATE policies for its own negligence or only for ZEP’s vicarious liability based on the acts of omissions TCP.

Motion C addresses whether the incident which forms the basis for the underlying lawsuits and claims constitute more than one “occurrence” under the LEXINGTON policy. The Court makes the following findings of fact and has specifically determined that there are no genuine issues as to any material facts as follows. See Rule 1.510 Florida Rules of Civil Procedure.

The PROJECT

The construction project consisted of bridge deck replacement and related traffic control on 1-75 over Palmer Boulevard near SR-758, bridge numbers 170081 and 170082, in Sarasota County, Florida (“PROJECT”). ZEP was the general contractor. Defendant TCP was the subcontractor

The SUBCONTRACT

ZEP and TCP entered into a subcontract for the PROJECT on or about July 26, 2007, wherein ZEP was to be named as an additional insured (“AI”) under TCP’s policies (“SUBCONTRACT”). The General Conditions of the SUBCONTRACT states:

3. The subcontractor shall obtain prior to commencing work hereunder and shall maintain at all times, policies. . .comprehensive general liability. . .insurance in such amounts. . .and shall deliver acceptable certificate or policies of such insurance to Contractor naming Zep Construction, Inc. as additionally insured.

The INCIDENT

During the construction of the Project, on or about October 1, 2007, ZEP and TCP performed a “rolling roadblock” on northbound I-75 to shift the flow of traffic on I-75, resulting in slowed and stopped traffic. During the “rolling roadblock”, a semi truck pulling a tractor-trailer failed to stop. This resulted in the semi truck crashing into vehicles that were stopped on I-75.

The UNDERLYING LAWSUITS

Several people have claimed resulting injuries or have died as a result of the accident. As of the date of the Motion, there have been four (4) civil actions commenced naming ZEP and TCP as defendants as more fully described below:

1) On or about August 18, 2008, LAUREN ALTERMAN, as Personal Representative of the Estate of JAMES P. BRASHEAR and KIM GUARINO, as Parent and Legal Guardian of TYLER BRASHEAR (“ALTERMAN”) filed suit against ZEP and others in the Twelfth Judicial Circuit Court, Sarasota County, under case number 2008 CA 013208 NC. The operative complaint is attached as Exhibit “C” in the Appendix.

2) On or about September 2, 2008, ZULMA A. RAMIREZ, as Personal Representative of the Estate of MANUEL R. RAMIREZ (“RAMIREZ”) filed suit against ZEP and others in the Twelfth Judicial Circuit Court, Sarasota County, under case number 2008 CA 014145 NC. The operative complaint is attached as Exhibit “D” in the Appendix.

3) On or about August 12, 2008, GLORIVETTE MOLINA-ALAMO (“MOLINA-ALAMO”) filed suit against ZEP and others in the Twelfth Judicial Circuit Court, Sarasota County, under case number 2008 CA 012972 NC. The operative complaint is attached as Exhibit “F” in the Appendix.

4) On or about July 22, 2009, ASHLEY BONEY (“BONEY”) filed suit against ZEP and others in the Twelfth Judicial Circuit Court, Sarasota County, under case number 2009 CA 012410 NC. The operative complaint is attached as Exhibit “E” in the Appendix.

The ALTERMAN, RAMIREZ, BONEY and MOLINA-ALAMO complaints all allege that ZEP and TCP each owed a duty to the respective plaintiffs. See Exhibit “C” in the Appendix, paragraphs 18, 19, 28, 38, 43, 44, 46 and 47, Exhibit “D” in the Appendix, paragraphs 16, 17, 44 and 59, Exhibit “E” in the Appendix, paragraphs 13, 14, 28, 33 and 53, and Exhibit “F” in the Appendix, paragraphs 15, 27, 31, 32, 34 and 35.

Similarly, all four underlying complaints allege breaches of duty by ZEP and TCP as well as recount the contractual relationship between ZEP and TCP, TCP being ZEP’s subcontractor. See Exhibit “C” in the Appendix, paragraphs 29, 39 and 48, Exhibit “D” in the Appendix, paragraphs 45 and 60, Exhibit “E” in the Appendix, paragraphs 29, 34 and 53, and Exhibit “F” in the Appendix, paragraphs 28 and 36.

As is relevant here, the ALTERMAN case was tried to verdict, resulting in a finding of 30% negligence on TCP and 65% negligence on ZEP. See Plaintiff’s Request to Take Judicial Notice filed March 10, 2010.

There is no dispute that the plaintiffs in all the pending litigation against ZEP claim that there were multiple negligent acts committed by multiple parties including ZEP, TCP, E.C. Driver, and various entities associated with the truck and the truck driver, who all committed multiple acts of negligence which gave rise to claims against ZEP.

TCP was accused of multiple independent acts of negligence, including failure to post signs or warnings during the work which occurred on the night in question, failure to properly conduct a rolling roadblock, and violation of industry standards relating to the construction signs and rolling roadblock

The truck driven by Pablo Merlos, which was involved in the incidents on the night in question, was a 1996 Kenworth tractor which was owned, operated and maintained by South East Connection, Inc. The trailer Merlos was towing was owned, operated and maintained by Florida Carrier & Brokerage Service, Inc. The Alterman plaintiffs further alleged that Carlos Mata utilized Florida Carrier and South East as alter egos for fraudulent and misleading purposes, and that Mata was liable for the wrongful act of Florida Carrier and South East in failing to maintain the tractor and trailer and multiple violations as alleged in the Fourth Amended Complaint.

LEXINGTON’S PRIMARY POLICY

The PRIMARY POLICY provides that it will pay $1 million per occurrence. The policy defines occurrence as:

“Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

In the event of continuing or progressively deteriorating damage over any length of time, such damage shall be deemed to be one “occurrence”, and shall be deemed to occur only when such damage first commences.

The policy provides for a general aggregate limit of $2 million. The aggregate limit reflects the most that PRIMARY CARRIER will pay regardless of the number of insureds, claims or suit brought for persons or organizations making claims or bringing suits. See Declarations sheet and page 14 of the PRIMARY POLICY. In this case, there is no dispute that PRIMARY CARRIER has only paid the $1 million occurrence limit for the incidents which occurred on October 1, 2007. There remains $1 million available under the general aggregate limit to pay claims against ZEP if the Court determines there was more than one occurrence.

PRIMARY POLICY Endorsement 13 trumps all other terms and provides:ENDORSEMENT #013PRIMARY/NON CONTRIBUTORY ENDORSEMENT

This endorsement modifies insurance provided by the policy:

Notwithstanding any other provision of the policy to the contrary, the insurance afforded by this policy for the benefit of the Additional Insured shall be primary insurance, but only with respect to any claim, loss or liability arising out of the Named Insured’s operations;and any insurance maintained by the Additional Insured shall be non-contributing. (emphasis added).

All other terms and conditions of the policy remain the same. PRIMARY POLICY Endorsement 18 provides (emphasis added):

ENDORSEMENT #018

A. Section II — Who Is An Insured is amended to include as an additional insured the person(s) or organization(s) shown in the Schedule, but only with respect to liability for “bodily injury”, “property damage” or “personal and advertising injury” caused, in whole or in part, by:	1. All work, including materials, parts or equipment furnished in connection with such work, on the project (other than service, maintenance or repairs) to be performed by or on behalf of the additional insured(s) at the location of the covered operations has been completed; or
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf;	2. That portion of “your work” out of which the injury or damage arises has been put to its intended use by any person or organization other than another contractor or sub-contractor engaged in performing operations for a principal as a part of the same project.
in the performance of your ongoing operations for the additional insured(s) at the location(s) designated above.
B. With respect to the insurance afforded to these additional insureds, the following additional exclusions apply:
This insurance does not apply to “bodily injury” or “property damage” occurring after:

INTERSTATE EXCESS POLICY

The relevant part of the policy provides:

Subject to the other provisions of this policy, we will pay on behalf of any “insured”, the “insured’s” “ultimate net loss” if such loss arises from:

a. Injury or damage that occurs; or

b. An offense committed

during our Policy Period and is insured by “underlying insurance” designated in the Schedule of Underlying Insurance in ITEM SIX of the Declarations.

* * * *

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy, or relate to premium, subrogation, other insurance, an obligation to investigate or defend, the amount of limits of insurance, payment of expenses, cancellation or any renewal agreement.

If any “underlying insurance” does not pay a loss, for reasons other than exhaustion of an aggregate limit of insurance, then we will not pay such a loss. (emphasis added)¹

IV. DEFINITIONS

F. “Insured means. . .

3. Subject to the terms of the policy, persons or organizations included as Additional Insured in “underlying insurance”, but only for their liability arising out of operations of the “Named Insured” under this policy. The Limit of Insurance available to that Additional Insured shall be the lesser of:

a. The amount of coverage that the “Named Insured” has contractually agreed to provide to that Additional Insured; or

b. The Limits of Insurance available under this policy. (emphasis added)

Relevant portions of the EXCESS POLICY provide:

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance” policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy. . .

“Insured” means . . .

Subject to the terms of the policy, persons or organizations included as Additional Insured in “underlying Insurance”, but only for their liability arising out of operations of the “Named Insured” under this policy. The Limit of Insurance available to that Additional Insured shall be the lesser of. . . (emphasis added)

OCCURRENCE FACTS

In the present case there were multiple acts of negligence committed by multiple persons or entities, any one of which can be seen to be an independent and proximate cause of damages sustained by the persons injured or killed in the incidents which occurred on October 1, 2007. The independent and immediate acts of TCP in failing to properly conduct a rolling roadblock were one immediate proximate cause of damage. The independent and immediate act of TCP in failing to properly place signs was another immediate proximate cause of the damages. The negligent driving of Pablo Merlos is yet a third independent proximate cause of the injuries sustained. Finally, other actions and omissions taken by the entities associated with the ownership, maintenance and inspection of the tractor and trailer driven by Pablo Merlos were independent proximate causes of the injuries sustained.

B. CONCLUSIONS OF LAW

1. Summary Judgment Standard

Summary Judgment is appropriate where there is no genuine issue of material fact. Volusia County v. Aberdeen at Ormond Beach, 760 So. 2d 126, 130 (Fla. 2000) [25 Fla. L. Weekly S390a]; Fla. R. Civ. P. 1.510. Partial summary judgment is appropriate under the Rules when there are no material disputed facts. Southern American Fire Ins. Co. v. I.B.H. Liquor Corp., 242 So. 2d 731 (Fla. 3d DCA 1971). Pursuant to Florida Rule of Civil Procedure 1.510(d), the Court should make a finding of what material facts exist without controversy.

2. Interpretation of Insurance Policies

An insurance policy is a contract of adhesion, and accordingly, Florida follows the in contra perforatum rules of construction against the drafter. In the interpretation of insurance policies, it is axiomatic that an interpretation of an insurance policy is construed against its drafter. Westmoreland v. Lumbermens Mut. Cas. Co., 704 So. 2d 176, 179 (Fla. 4th DCA 1997) [23 Fla. L. Weekly D150a]. Specifically, provisions of an insurance policy which define insuring or coverage clauses are construed in the broadest possible manner to affect the greatest extent of coverage. Id. at 179. In contrast to insuring clauses, however, exclusionary clauses in liability insurance policies are always narrowly construed against the insurer. Demshar v. AAACon Auto Transport, Inc., 337 So. 2d 963, 965 (Fla. 1976). If insurance coverage is to be excluded based upon the definition of coverage, or a policy exclusion, the policy should so state in clear, unmistakable language. Progressive Ins. Co. v. Estate of Wesley, 702 So. 2d 513 (Fla. 2d DCA 1997) [22 Fla. L. Weekly D2277c]. Terms must be liberally construed in favor of coverage so that if two interpretations are available, one allowing greater indemnity will always prevail. Weldon v. All Am. Life Ins. Co., 605 So. 2d 911, 915 (Fla. 2d DCA 1992) and Braley v. American Home Assur. Co., 354 So. 2d 904 (Fla. 2d DCA 1978), cert. denied, 359 So. 2d 1210 (Fla. 1978). While courts should be cognizant of the purposes of the policies of insurance, this interpretive tool should only be used to further the intent of the parties, not usurp or contradict the language of the policy as written. U.S. Fire Ins. Co. v. J.S.U.B. Inc., 979 So. 2d 871, 892 (Fla. 2007) [32 Fla. L. Weekly S811a]

Ambiguity requiring interpretation exists whenever terms of the contract are subject to different reasonable interpretations, one of which provides coverage, and one of which provides exclusions. Weldon, 605 So. 2d at 915 and Blue Shield of Fla. v. Woodlief, 359 So. 2d 883 (Fla. 1st DCA 1978). It has also been said that ambiguity arises in a policy of insurance where more than one interpretation may be fairly given to a policy provision. Ellsworth v. Ins. Co. of N. A., 508 So. 2d 395, 399 (Fla. 1st DCA 1987). Where critical terms in a policy are not defined, these terms must be liberally construed in favor of the insured. See Westmoreland, 704 So. 2d at 180 and State Farm Mut. Auto. Ins. Co. v. Pridgen, 498 So. 2d 1245, 1247 n. 3 (Fla. 1986). When an insurer fails to define a term found in an exclusion or limitation on policy language, the insurer cannot insist upon a narrow, restrictive interpretation of the coverage provided under the subject insurance policy. See Westmoreland, 704 So. 2d 176 and Nat’l Merch., 400 So. 2d at 530.

When defining coverages and exclusions, an insurer must take care to ensure that provisions of its own policy do not give rise to conflicts which create ambiguity in the policy. More specifically, with respect to a policy of insurance, it is improper for an insurance policy to grant rights in one paragraph and then retract those very same rights in another paragraph. See Tire Kingdom, Inc. v. First Southern Ins. Co., 573 So. 2d 885, 887 (Fla. 3d DCA 1990) and Moore v. Connecticut Gen. Life Ins. Co., 277 So. 2d 839 (Fla. 3d DCA 1973), cert. denied, 291 So. 2d 204 (Fla. 1974).

Where policy language is subject to differing interpretations, the terms should be construed liberally in favor of the insured and strictly against the insurer. CTC, 720 So. 2d at 1076; Container Corp. of America v. Maryland Cas. Co., 707 So. 2d 733, 736 (Fla. 1998) [23 Fla. L. Weekly S163a]; Deni Assocs. of Fla. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla. 1998) [23 Fla. L. Weekly S59a]; and Berkshire Life Ins. Co. v. Adelberg, 698 So. 2d 828, 830 (Fla. 1997) [22 Fla. L. Weekly S513a]. In addition, when an insurer fails to define a term in a policy, the insurer cannot take the position that there should be a narrow restrictive interpretation of the coverage provided. CTC, 720 So. 2d at 1076 and State Comprehensive Health Ass’n v. Carmichael, 706 So. 2d 319, 320 (Fla. 4th DCA 1997) [23 Fla. L. Weekly D49a]. “Proof of the pudding” of ambiguity is found when a reasoned judgment of numerous courts come to opposite or different conclusions from a study of essentially the same policy language. Security Ins. Co. v. Investors Diversified, 407 So. 2d 314, 316 (Fla. 4th DCA 1981).

3. Is ZEP insured for its own negligence or only for vicarious liability for the negligence of TCP under the LEXINGTON (PRIMARY POLICY) and INTERSTATE (EXCESS POLICY)?

a. ZEP Has Coverage as an Additional Insured for its Own Negligence under the LEXINGTON (PRMIARY POLICY).

PRIMARY CARRIER contends that ZEP is only covered for ZEP’s vicarious liability for the actions of TCP because of the language of Endorsement 18 of the PRIMARY POLICY. This contention is clearly incorrect because ZEP has full coverage from PRIMARY CARRIER as an AI if ZEP’s liability was caused “in whole or in part” by TCP’s acts or omissions. In sum, any act or omission on the part of TCP is sufficient to trigger ZEP’s entitlement to indemnity from PRIMARY CARRIER. The inclusion by PRIMARY CARRIER of the phrase “in whole or in part” grants ZEP coverage so long as there is any fault on the part of TCP. Because all four plaintiffs’ operative complaints in the underlying lawsuits allege fault on behalf of TCP and the ALTERMAN jury found TCP 30% at fault, LEXINGTON owed ZEP indemnity for ZEPS own negligence in the ALTERMAN Case.

The case law interpreting the “in whole or in part” language has found coverage for additional insureds under the facts of this case. In Am. Empire Surplus Lines Ins. Co. v. Crum & Forster Specialty Ins. Co., 2006 U.S. Dist. LEXIS 33556 (S.D. Tex. May 23, 2006), the court in interpreting an endorsement, in relevant part identical to Endorsement 18 of the PRIMARY POLICY, held that the AI had coverage so long as there was any fault on the part of the named insured. Id. See also Penn Nat’l Mut. Cas. Ins. Co. v. Ipsco Steel (Alabama), Inc., 2008 U.S. Dist. LEXIS 20246 (S.D. Ala. Mar. 10, 2008). The court observed that to interpret the phrase “in whole or in part” to mean that there was coverage only for vicarious liability was “inconsistent” with the policy language. Id. LEXINGTON cited no authority contrary to Am. Empire or Penn Nat’l.

ZEP has coverage under PRIMARY POLICY’s Endorsement 18 where the acts or omissions of TCP (even though not negligent) caused, in whole or in part, the liability of ZEP. The insurance commentators at International Risk Management Institute, Inc. (“IRMI”) indicate that any contractor in ZEP’s position should most certainly have coverage:

IRMI believes, though, that in practically every conservable case, some act or omission of the named insured . . . (whether negligent or not) can be pointed to as one cause of . . . injury to [the plaintiff]. Thus, a sustainable coverage denial for these types of claims based solely on the current endorsements requirement that the named insured contribute to the cause of loss should be an exceedingly rare event.

Jack P. Gibson and W. Jeffrey Woodward, Questions and Answers on Additional Insured Issues — Part 1, IRMI.com, July 2009.

Having rejected LEXINGTONS argument under Endorsement 18, the Court finds that it is appropriate to address the parties arguments surrounding Endorsement 13 under the LEXINGTON policy, as that dispute may become relevant later in these proceedings. The Court specifically finds that by its own terms, Endorsement 13 trumps or controls over any other provisions including Endorsement 18. Therefore in this case, ZEP is entitled to indemnity from LEXINGTON for its own negligence so long as ZEP’s liability has any connection to TCP’S work.

Endorsement 13 of the PRIMARY POLICY states, by its own terms, that it controls “notwithstanding any other provision of the policy to the contrary”. Thus Endorsement 13 insures ZEP with primary coverage for any liability “arising out of” the operations of TCP and by its own terms, trumps all other provisions of the PRIMARY POLICY and clearly insures ZEP for ZEP’s own negligence under Florida law. Endorsement 13 provides broader coverage than Endorsement 18 because fault does not matter so long as ZEP’s liability “arises out of” (has any connection to) TCP’s work. Identical policy language has been interpreted to provide coverage to the AI for its own negligence. Again, the case law in Florida prior to the date the PRIMARY POLICY was issued is clear — an AI under the “arising out of” language is entitled to coverage for its own direct negligence, not just its vicarious liability. Koala Miami Realty v. Valiant Insurance Company, 913 So. 2d 25 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D2162a].

ZEP raised the argument that the LEXINGTON policy, due to the inclusion of Endorsements 11, 13, 17, 18, were so internally inconsistent as to create uncertainty and ambiguity. In light of the Court’s ruling that Endorsements 13 and 18 control and having rejected LEXINGTONS arguments the Court need not address the internally inconsistent argument raised by ZEP.

b. ZEP is entitled to indemnity and defense for its own negligence not only its vicarious liability under the INTERSTATE EXCESS POLICY

INTERSTATE as the EXCESS CARRIER argued that its duty to indemnity ZEP for its own negligence was limited to the terms of the LEXINGTON policy. In light of the Court’s rulings on the LEXINGTON policy, INTERSTATES arguments for limiting coverage to vicarious liability are rejected.

In its Motion for Summary Judgment, EXCESS CARRIER claimed that ZEP’s AI status under the EXCESS POLICY was tied to the Endorsements found in the PRIMARY POLICY. Such claims are patently incorrect because the specific language of the EXCESS POLICY controls the scope of ZEP’s AI coverage. Relevant portions of the EXCESS POLICY provide:

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance” policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy. . .

“Insured” means . . .

Subject to the terms of the policy, persons or organizations included as Additional Insured in “underlying Insurance”, but only for their liability arising out of operations of the “Named Insured” under this policy. The Limit of Insurance available to that Additional Insured shall be the lesser of. . . (emphasis added)

Crucially, the term “inconsistent” is not defined anywhere in the EXCESS POLICY. Having failed to define that term, EXCESS CARRIER cannot rely upon a narrow restrictive interpretation of “inconsistent” in evaluating its meaning. CTC, 720 So. 2d at 1076. Thus any distinction between the EXCESS POLICY language and that of the PRIMARY POLICY must be interpreted in favor of the insured in light of the “inconsistent” language found within. Even if it is assumed, arguendo, that the PRIMARY POLICY limits the availability of coverage to pure vicarious liability of ZEP for TCP’s negligence, the EXCESS POLICY may provide differently by its own terms. Importantly, the policy does just that. The definition of “insured” in the EXCESS POLICY recognizes anyone who is an AI under the PRIMARY POLICY is deemed an AI under the EXCESS POLICY. Thus, it is clear, and has been admitted by EXCESS CARRIER, that ZEP is an AI under the EXCESS POLICY.

The named insured provision then defines the “scope” of ZEP’s coverage by noting the availability of coverage “for their liability arising out of operations of the ‘named insured’ ”. The Florida Supreme Court has specifically noted that:

The term “arising out of” is broader in meaning than the term “caused by” and means “originating from”, having its origin in”, “growing out of”, flowing from”, “incident to” or “having a connection with.” Hagen, 675 So. 2d at 965.[21 Fla. L. Weekly D1207a] As we implied in Race, 542 So. 2d at 351, this requires more than a mere coincidence between the conduct (or, in this case, the product) and the injury. It requires “some causal connection, or relationship.” Heritage Mut. Ins. Co., 657 So. 2d at 922 . But it does not require proximate cause.

Taurus, 913 So. 2d at 539-40 [30 Fla. L. Weekly S633a]. EXCESS CARRIER has “explicitly chosen”, by its own policy language, to provide amongst the broadest available coverage for its AIs. In the instant case, relative to the judgment entered in the ALTERMAN case, TCP’s operations were not only found to be “related” to the subject accident, TCP was actually found to be at fault. Thus, the de minimus causal connection or relationship necessary to establish coverage is already determined as a matter of law.

EXCESS CARRIER also argued that ZEP’s AI status is limited to the scope of TCP’s liability under the provision of TCP’s SUBCONTRACT with ZEP governing contractual indemnity. This argument is not supported by any case law in Florida and is in fact refuted by the limited case law which touches on this subject matter under Florida law. Florida law is consistent with the majority rule and recognized understanding of this issue in treatises. (“Because the endorsement and policy wording, not the underlying business contract, dictate the scope of coverage, the courts generally hold that it is permissible for AI status to cover the sole fault of an AI (indemnitee) even where the indemnity agreement does not transfer liability arising from the sole fault of the indemnitee.”) Additional Insured Book, Ch. 4, p. 69.

Under Florida law, each contractual provision rests on its own footing, unless the contractual agreement necessarily requires reference to another provision to evaluate its construction. See American Medical Int’l v. Scheller, 462 So. 2d 1 (Fla. 4th DCA 1984). The subject SUBCONTRACT in the instant case contains two separate requirements: 1) paragraph 3 provides that ZEP will be made an “additional insured” under TCP’s policies² and 2) in a completely separate paragraph, the subject SUBCONTRACT contains contractual indemnity provisions ³.

The interaction of a contractual indemnity provision with an AI provision in a subcontract was most directly addressed by the case of Cone Bros. Contracting Co. v. Ashland-Warren, Inc., 458 So. 2d 851 (Fla. 2d DCA 1984). Appellee brought suit against Appellant subcontractor. Id. at 852. Appellant contested the suit, arguing that the injuries resulted from the contractor’s own negligence. Id. Contractor entered into a contract for the construction, improvements, and modifications to portions of I-4. Id. Contractor entered into a subcontract with subcontractor for the subcontractor’s performance of certain work within the project, including modifications to a bridge. Id. On two occasions, vehicles collided with a temporary wall that had been placed on the bridge by the subcontractor in performance of its subcontract. Id. As a consequence of the two accidents, contractor and subcontractor were both named as defendants in the personal injury actions in Orange County. Id. One of the numbered paragraphs of the subcontract provided:

Minimum insurance requirements, the requirement that the subcontractor hold contractor harmless from any and all claims or suits arising of out the performance of subcontractor’s work;

Contractor would be named as an AI under subcontractor’s policies. Id.

A separate provision of the subcontract provided that subcontractor would save, indemnify and protect contractor and owner “from any and all loss, damage, costs, expense and attorney fees suffered or incurred on account of any breach by the aforesaid obligations and covenants, and any other provision of this contract.” Id. at 853. As in the instant case, after being named as a defendant, contractor demanded its subcontractor or the subcontractor’s insurers undertake contractor’s defense in accordance with their subcontract. Id. Subcontractor and its insurers rejected this request claiming that the indemnification was unenforceable. Id. The suit against contractor and subcontractor was taken to trial; the jury found both liable, as well as the driver of the vehicle. Id. Thereafter, contractor sued subcontractor under claims of 1) contractual indemnity, 2) common law indemnity, and 3) breach of contract based upon subcontractor’s failure to obtain liability insurance which listed contractor as a named insured. Id. After hearing on motions for summary judgment, the trial court recognized and held, based on stipulated facts by the parties, that subcontractor’s claims for contractual indemnity for its own negligence were invalid because of its failure to comply with Florida Statute 725.06. Id. at 854. The subject statute, as then written, disallowed construction contracts which purported to indemnify a party against liability for its own conduct unless the contract contained specific monetary limitations regarding the extent of indemnification. Id. After a finding for subcontractor on the indemnification issue, the trial court entered an order granting contractor summary judgment as to the AI requirement. Id. In affirming the trial court’s ruling, the Second District Court of Appeals specifically noted:

In the case before us, the contract calls for appellee to be named “as an additional assured thereunder.” Thus, the contract calls for insurance policies that not only insured appellant for any liabilities it might have to appellee, but provided that appellee would also be insured to protect it “from all claims, suits or liabilities.”

In regard to appellant’s second point, we conclude that section 725.06, Florida Statutes (1977), which was the statute which would be applicable to a contract entered into in 1977, is clearly a limitation upon indemnification and has no applicability to a contract provision relating to insurance for liabilities arising out of the performance of construction contracts. Since appellee’s cause of action grew out of a breach of such a contract providing for insurance, section 725.06 is not applicable.

Id. at 855-856. The court’s holding in Cone Bros. completely refutes the argument of EXCESS CARRIER that the AI status is somehow tied to the availability of contractual indemnity. The court specifically held that the contractual indemnity provision in the subcontract did not validly require indemnification for contractor’s own negligence. Id.

Neither the PRIMARY POLICY nor EXCESS POLICY state that the coverage is limited to the coverage TCP agreed to provide to ZEP. Even where an insurance policy provided that this coverage was available “but only to the extent required by subcontract” the court still found coverage for the general contractor’s sole negligence. Shell Oil Co. v. Nat’l Union Fire Ins. Co., 44 Cal. App. 4th 1633 (Cal. App. 2d Dist. 1996). In sum, there is nothing in the contract between TCP and ZEP, the PRIMARY POLICY or the EXCESS POLICY, which limits ZEP’s coverage as argued for by the carriers.

The EXCESS POLICY provides additional insurance coverage for ZEP “originating from”, “having its origin in”, “growing out of”, “flowing from”, “incident to”, or “having a connection with” the work of TCP. Taurus, 913 So. 2d at 532. The EXCESS POLICY specifically provides, by its terms, that ZEP is covered for any damages “arising out of” TCP’s operations; thus, any relationship between TCP’s work and ZEP’s work which leads to the subject incident, other than mere coincidence, allows coverage for ZEP’s own negligence under the unambiguous language of the subject policy. Under the law of Florida, this unambiguous contract language must be enforced in favor of ZEP.

The fact that the EXCESS POLICY contains some language of a following form nature does not end the discussion or evaluation of the policy as a whole under Florida law. The relevant part of the policy provides:

Subject to the other provisions of this policy, we will pay on behalf of any “insured”, the “insured’s” “ultimate net loss” if such loss arises from:

a. Injury or damage that occurs; or

b. An offense committed

during our Policy Period and is insured by “underlying insurance” designated in the Schedule of Underlying Insurance in ITEM SIX of the Declarations.

* * * *

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy, or relate to premium, subrogation, other insurance, an obligation to investigate or defend, the amount of limits of insurance, payment of expenses, cancellation or any renewal agreement.

If any “underlying insurance” does not pay a loss, for reasons other than exhaustion of an aggregate limit of insurance, then we will not pay such a loss. (emphasis added)⁴

IV. DEFINITIONS

. . .

F. “Insured means. . .

3. Subject to the terms of the policy, persons or organizations included as Additional Insured in “underlying insurance”, but only for their liability arising out of operations of the “Named Insured” under this policy. The Limit of Insurance available to that Additional Insured shall be the lesser of:

a. The amount of coverage that the “Named Insured” has contractually agreed to provide to that Additional Insured; or

b. The Limits of Insurance available under this policy. (emphasis added)

“It is well settled that the obligations of a following form excess insurer are defined by the language of the underlying policies, except to the extent that there is a conflict between the two policies, in which case the wording of the excess policy will control”. See Handbook on Insurance Coverage Disputes § 13.01 (7th ed. 1994); Home Ins. Co. v. American Home Products Corp., 902 F. 2d 1111, 1113 (2d Cir. 1990); Alcolac, Inc. v. California Union Ins. Co., 716 F. Supp. 1546, 1548 (D. Md. 1989); and Paramount Communications, Inc. v. Gibraltar Casualty Co., No. 25473/90 (N.Y. Sup. Ct. Dec. 31, 1992) (“following form” excess policies are triggered by the same event that triggers the primary policy.) Under this case law, even where a policy does not so specify, deviations between the so-called “following form” excess policy and the primary policy are determined by review of the explicit provisions of the excess policy. Carriers can and do specify this rule of construction in their policies on occasion. As noted previously, the EXCESS POLICY of insurance specifies that any “inconsistent” provisions in the EXCESS POLICY control.⁵ Thus, even if this policy were a “following form” policy, the EXCESS POLICY by its own terms could alter the availability of coverage when contrasted with that of the primary policy.

In the instant case, the EXCESS POLICY explicitly recognized the broadest form of AI coverage pursuant to its “arising out of” language purposefully placed in the policy of insurer in the definition of “insured”.

EXCESS CARRIER argues that the scope of its coverage is controlled by the subcontract between ZEP and TCP (“SUBCONTRACT”). This is incorrect, as only the dollar amount of coverage is controlled by the SUBCONTRACT. EXCESS CARRIER’s policy provides that the amount of coverage (in dollars) available to ZEP in this case shall be the lesser of the amount that TCP contractually agreed to provide to ZEP or the limits of insurance available under the policy ($5,000,000.00). Notably, the EXCESS POLICY does not engraft or incorporate any other language from the SUBCONTRACT in order to determine the scope of coverage available under the EXCESS POLICY to ZEP. The terms of the EXCESS POLICY control the scope of coverage. EXCESS POLICY provides that ZEP is insured for ZEP’s liability arising out of TCP’s operations. The EXCESS POLICY does not limit the scope of insurance coverage to the scope of TCP’s duty to indemnify ZEP. Therefore, EXCESS CARRIER’s argument that the terms of the SUBCONTRACT control the scope of available insurance coverage (as opposed to the dollar amount available) must be rejected by this Court.

4. Whether the incident is more than one occurrence under PRIMARY POLICY.

When determining whether an incident constitutes one or more “occurrences” under an occurrence insurance policy, the Florida Supreme Court has applied the “cause theory”. Koikos v. Travelers Ins. Co., 849 So. 2d 263 (Fla. 2003) [28 Fla. L. Weekly S194a]. Under the “cause theory” of analyzing what is an occurrence under an insurance policy in Florida, the Florida Supreme Court has held that the courts should analyze the immediate acts that give rise to the injuries. Id. at 273. In Koikos, the Florida Supreme Court held that each of two gun shots fired close in time were each an “occurrence” which meant that there were two “occurrence limits” available to pay the claims against the insured. Id. See also, N.H. Ins. Co. v. RLI Ins. Co., 807 So. 2d 171 (Fla. 3d DCA 2002) [27 Fla. L. Weekly D377b] (each of three shots constituted three occurrences under an occurrence based policy); and Am. Indem. Co. v. McQuaig, 435 So. 2d 414 (Fla. 5th DCA 1983) (each of three shot gun blasts was a separate occurrence under the Florida “cause theory” as there was not one proximate, uninterrupted and continuous cause which resulted in the injuries and damages). Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc., 420 F.3d 1317, 1332 (11th Cir. 2005) [18 Fla. L. Weekly Fed. C861a] (each crime an occurrence).

The immediate acts or omissions of TCP relating to the rolling road block constitute an occurrence under Florida law. The Court also concludes that the immediate acts or omissions of TCP relating to the road side warning signs are a separate occurrence under Florida law. Finally, the acts or omissions by the truck driver constitute a third occurrence under Florida law. In light of the coverage limits of $2 million dollars, under PRIMARY POLICY, the Court will not address whether acts or omissions of other persons constitute occurrence under Florida law. The Court holds that the $2 million aggregate limits are available to indemnify ZEP relating to the incident which is the subject of this Declaratory Judgment action and the underlying cases.

5. PRIMARY CARRIER exhaustion argument.

PRIMARY CARRIER’S claimed exhaustion of policy limits does not eliminate ZEP’s cause of action against PRIMARY CARRIER for PRIMARY CARRIER’s failure to act in good faith. “Under Florida law, if an insurer exposes its insured to personal liability in excess of policy limits as a result of the insurer’s failure to exercise good faith in the defense or settlement of the claim, the insurer may be liable for the entire judgment against the insured.” Berges v. Infinity Ins. Co., 896 So. 2d 665, 682 (Fla. 2004). Because the insured surrenders control over the settlement, insurance carriers must act in good faith in the investigation and in settlement of all claims brought against the insured. Id. at 682-683. In this case, there is no dispute that PRIMARY CARRIER failed to get a release for ZEP for its own negligence. In light of ZEP’s arguments made in its Amended Motion for Partial Summary Judgment relating to indemnity and the arguments stated herein regarding multiple occurrences, the Court denies PRIMARY CARRIER’s Motion as a matter of law.

PRIMARY CARRIER owed a duty to ZEP to attempt to secure a release for ZEP’s own negligence and, having failed to do so, has an exposure for failure to handle the claim in good faith. Conteras v. U.S. Sec. Ins. Co., 927 So. 2d 16 (Fla. 4th DCA 2006. [31 Fla. L. Weekly D836a])

PRIMARY CARRIER owed a duty to ZEP and TCP to begin its handling of the claim by seeking to protect both TCP and ZEP. See Adega v. State Farm Fire & Cas. Ins. Co., 2009 U.S. Dist. LEXIS 97230 (Oct. 16, 2009).

CRUM & FORSTER SPECIALTY’S OPPOSITION TO LEXINGTON’S AND INTERSTATE’S SUMMARY JUDGMENT MOTIONS

Crum & Forster Specialty argues that Lexington and Interstate are not entitled to summary judgment for another, independent reason. Specifically, Crum & Forster Specialty argues that Lexington breached its defense obligation to ZEP by tendering its policy limits to excess carrier Interstate in September 2009 and terminating ZEP’s defense in the Brashear lawsuit and other claims prior to payment of Lexington’s policy limits in settlement of the Ramirez lawsuit sometime after January 12, 2010.

Lexington does not dispute that its policy obligated it to defend ZEP against the various underlying lawsuits. Lexington also does not dispute that it terminated ZEP’s defense against all claims prior to the payment of its policy limit towards the Ramirez settlement after January 12, 2010. Rather, Lexington argues that by tendering its policy limits to Interstate toward a settlement it exhausted its policy limits thereby terminating any obligation to defend ZEP.

The parties’ dispute comes down to this: Crum & Forster argues that Lexington’s defense obligation did not end until its policy limits were actually paid in settlement, whereas Lexington posits that turning its limits over to Interstate to use toward settlement sufficed. To resolve this issue, the Court looks, as it must, to the language of Lexington’s policy. See Taurus Holdings, Inc. v. United States Fidelity and Guar. Co., 913 So. 2d 528, 532 (Fla. 2005) (stating “insurance contracts are construed according to their plain meaning.”) Lexington’s policy provides that Lexington had “the right and duty” to defend ZEP. The policy further provides that, “Our right and duty to defend end when we have used up the applicable limit of insurance in the payment of judgments or settlements under Coverages A or B.”

The policy clearly states that Lexington’s duty to defend ends when the policy limit is used in “payment of judgments or settlement.” It does not say that the duty ends when the limit is tendered to an excess insurer for the purpose of later paying a settlement. The Court therefore finds that Lexington’s defense obligation to ZEP did not end until its limits were actually paid in the Ramirez settlement after January 12, 2010. Lexington was not free to terminate ZEP’s defense in the ongoing Brashear lawsuit or any other claim prior to that time, and ZEP and Crum & Forster Specialty are entitled to recover damages for Lexington’s premature termination of the defense. See Aetna Ins. Co. v. Borrell-Bigsby Electric Co., 541 So. 2d 139 (Fla. 2d DCA 1989) (holding excess insurer and insured were entitled to recover damages against primary insurer who wrongfully attempted to truncate its defense obligation by impleading its policy limits into the court registry and claiming that its duty to defend was terminated by policy exhaustion). Accordingly, the Court agrees with Crum & Forster Specialty that Lexington and Interstate are not entitled to summary judgment for this reason as well.

IT IS HEREBY ORDERED that

ZEP Construction, Inc.’s Amended Motion For Partial Summary Judgment Regarding Lexington And Interstate’s Duty To Indemnify ZEP For Its Own Negligence is hereby Granted;

ZEP Construction, Inc.’s Motion for Summary Judgment Regarding Multiple Occurrences is hereby Granted;

Lexington Insurance Company’s Amended Motion for Summary Final Judgment is hereby Denied;

Interstate Fire & Casualty Company’s Motion for Summary Judgment against ZEP Construction is hereby Denied.

The Court reserves jurisdiction to enter Judgment and determine entitlement and amount of attorneys’ fees and costs.

__________________

¹This excerpt from the policy which is contained in EXCESS CARRIER’s Memorandum of Law in Support of Its Motion for Summary Judgment Against Plaintiff Zep Construction and Cross-Plaintiff [sic] Crum & Forster Specialty Insurance Company dated April 19, 2010 conveniently the portion of EXCESS POLICY which states:

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance” policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy.

The fact that the language in the policy relied upon by EXCESS CARRIER is found in the insuring agreement. Thus, the language in question relates only to what is covered — meaning bodily injury, property damage, personal injury, and advertising injury — not who is covered, which is determined by the specific language of other portions of the policy defining who is an insured.

²As commonly referenced previously, AI status in Florida generally connotes coverage for your own negligence. See supra §130.01. Thus, if TCP wished to limit AI status to a lesser coverage, it was incumbent on it to do so. Obviously, this unambiguous requirement that ZEP be named as an AI cannot be altered by claimed “parole” evidence purporting to alter this language.

³It is interesting to note that the parties explicitly crossed out portions of the contractual indemnity contract, but made no effort whatever to alter the scope of AI coverage, nor do the cross-outs reference that AI coverage was intended to be narrowed.

⁴This excerpt from the policy which is contained in EXCESS CARRIER’s Memorandum of Law in Support of Its Motion for Summary Judgment Against Plaintiff Zep Construction and Cross-Plaintiff [sic] Crum & Forster Specialty Insurance Company dated April 19, 2010 conveniently the portion of EXCESS POLICY which states:

The definitions, terms, conditions, limitations, exclusions and warranties contained in the “underlying insurance” policy(ies) that are in effect at the inception date of this policy apply to this policy unless they are inconsistent with provisions of this policy.

The fact that the language in the policy relied upon by EXCESS CARRIER is found in the insuring agreement. Thus, the language in question relates only to what is covered — meaning bodily injury, property damage, personal injury, and advertising injury — not who is covered, which is determined by the specific language of other portions of the policy defining who is an insured.

⁵Only where the excess policy specifically provides that the language of the primary policy will control in the case of a conflict, will courts enforce such a policy provision. See, e.g., Hatco Corp. v. W.R. Grace & Co., 801 F. Supp. 1334, 1355-57 (D.N.J. 1992); and Mount Vernon Fire Ins. Co. v. Travelers lndem. Co., 47 N.Y.2d 575, 580, 393 N.E. .2d 974, 975, 419 N.Y.S.2d 899, 900 (1979).