Mid-Continent Casualty Co. v. Royal Crane, LLC

Citations: 169 So. 3d 174; 2015 Fla. App. LEXIS 8799; 2015 WL 3609062Docket: No. 4D13-3496

Court: District Court of Appeal of Florida; June 10, 2015; Florida; State Appellate Court

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A crane rental agreement included an indemnification clause mandating the lessee, Cloutier Brothers, Inc., to indemnify the lessor, Royal Crane, LLC, for all damages linked to the crane's use. Following an accident where Robert Damiano was injured by a falling truss from the crane, he sued Hunter Crane for negligence and other claims, briefly mentioning Cloutier. Hunter Crane sought indemnification from Cloutier based on the rental agreement's terms, but Cloutier, advised by its insurer Mid-Continent Casualty Company, refused the tender of defense. Consequently, Hunter Crane initiated a third-party action against Cloutier for breach of contract and indemnification.

The court ruled that the insurer had no duty to defend Cloutier or to provide coverage for the lawsuit, reversing the final judgment. The policy defined coverage as applicable only to damages for bodily injury or property damage, with the insurer obligated to defend only against suits that fell within this scope. The indemnity clause's broad language, which included claims arising from any potential negligence by the lessor, underscored the legal complexities surrounding the obligations of the parties involved.

The Policy excludes coverage for "bodily injury" or "property damage" that Cloutier is obligated to pay due to contractual liability, with two exceptions: (1) liability that would exist independently of the contract, and (2) liability assumed in an "insured contract" where the injury or damage occurs after the contract execution. An "insured contract" is defined as part of any agreement related to Cloutier’s business, including indemnification for municipalities, where Cloutier assumes tort liability for injuries caused by itself or its agents. Cloutier claimed the Rental Agreement was an "insured contract" and sought defense from the Insurer, which denied any duty to defend or indemnify, prompting Cloutier to manage its own defense. Following a settlement with Damiano for $100,000, Cloutier entered into a Coblentz settlement with Hunter Crane, agreeing to a total judgment of $263,746.53, which included attorney's fees, while assigning its claims against the Insurer to Hunter Crane. Hunter Crane subsequently filed a complaint against the Insurer for breach of contract and a declaratory judgment, asserting the Insurer had a duty to defend and indemnify Cloutier. It sought partial summary judgment, arguing that Cloutier's use of Hunter Crane's equipment triggered the Insurer’s duty to defend. The Insurer countered, claiming Hunter Crane's allegations were barred by the Policy’s exclusion for contractual liability, as Cloutier's liability arose solely from the Rental Agreement and was not an "insured contract."

Hunter Crane’s motion for partial summary judgment was granted by the trial court, while the Insurer's motion was denied. The court determined that the Insurer had a duty to defend and was barred from contesting coverage issues, except as they might relate to the settlement's reasonableness regarding Hunter Crane’s claim against Cloutier. Following a pre-trial ruling, the court instructed the parties to create a Verdict Form for the jury to assess a reasonable settlement amount if the underlying consent judgment was deemed unreasonable. Subsequently, the parties reached a stipulation that established a reasonable judgment amount of $230,000, leading the court to enter judgment for that amount.

A "Coblentz agreement" is defined as a negotiated consent judgment between an insured and a claimant to resolve a lawsuit when an insurer has denied coverage and declined to defend. This agreement establishes liability and damages, permitting the insured to assign any claims against the insurer to the injured party in exchange for a release from personal liability. To enforce the agreement, the assignee must demonstrate: 1) the damages are covered by the policy, 2) the insurer wrongfully refused to defend, and 3) the settlement was reasonable and made in good faith.

The duty to defend and the issue of coverage are distinct; the duty to defend is broader and is determined solely by the facts and legal theories in the pleadings against the insured, regardless of the merits of the underlying suit. If there is any doubt regarding the duty to defend, it must be resolved in favor of the insured. An insurer must defend claims even if coverage is uncertain, and this duty persists even if it is later found that the cause of action is groundless. Conversely, coverage and the duty to indemnify are assessed based on the actual facts and circumstances of the injury rather than the claimant's complaint.

Allegations against an insured do not obligate an insurer to indemnify if the claim falls outside the policy’s coverage. This principle remains valid even when liability is established through a settlement, as settlements do not automatically invoke coverage for non-covered claims. The insurer's obligation is evaluated based on the facts at the time of the settlement. A consent judgment does not inherently create coverage, nor does an insurer's failure to defend prevent it from contesting coverage later, although it cannot raise defenses that should have been addressed in the original action. The settlement confirms the insured's liability but not the insurer's coverage responsibilities. 

In this case, the Rental Agreement was deemed not to be an "insured contract" under the policy. Insurance policies are interpreted using standard contract principles, and clear policy language is given its plain meaning. Ambiguous exclusionary clauses, however, are interpreted in favor of the insured. An insurer’s duty to defend is determined by the allegations in the complaint and the policy terms. The Rental Agreement included an indemnification clause, which was argued to be an “insured contract,” thereby potentially exempting it from the policy’s exclusions. The policy defines an “insured contract” as a part of any agreement related to the insured's business that involves assuming tort liability for bodily injury or property damage caused by the insured or their agents.

Debate exists over the scope of an insurance provision regarding coverage for vicarious liability. Three federal district courts in Florida have interpreted the provision narrowly, concluding that coverage as an “insured contract” applies only to vicarious liability on behalf of the insured. In the case of United Rentals, Inc. v. Mid-Continent Cas. Co., a construction worker died while operating a scissor lift leased from United Rentals. The rental agreement required the contractor, General Southern, to indemnify United Rentals for claims related to the lift's operation. The deceased's estate sued both parties without alleging vicarious liability for General Southern's actions. In response, United Rentals sought to invoke the indemnification clause and claimed additional insured status under General Southern's insurance policy with Mid-Continent, arguing the rental agreement constituted an "insured contract." The district court determined that the policy's plain language limited coverage to vicarious liability scenarios, concluding that United Rentals' claims were based on its own acts, not vicarious liability. In contrast, it was argued that the policy's definition of "insured contract" should not be interpreted so restrictively. The language suggests coverage extends beyond vicarious liability to include situations where both the insured and indemnitor share liability for bodily injury.

In Nor-Son, Inc. v. W. Nat’l Mut. Ins. Co., the court found that an indemnity agreement can qualify as an “insured contract” under a policy if the named insured caused some part of the injury or is vicariously liable, referencing broader liability coverage than merely vicarious liability. However, Hunter Crane’s third-party complaint failed to establish that Cloutier caused any injury or was liable, as it did not allege any legal theory demonstrating Cloutier's involvement in the accident. The complaint emphasized Cloutier's relationship with Hunter Crane without linking it to any legal responsibility or control over the crane operator, nor did it invoke the borrowed servant doctrine. The absence of allegations of Cloutier’s direct influence on the work or any employee's involvement in the accident led to the conclusion that the complaint did not meet the criteria for triggering the insurer’s duty to defend. Consequently, the insurer was deemed not obligated to indemnify, leading to a reversal and remand for a final judgment favoring the appellant. The court did not address the implications of a Coblentz agreement due to the lack of coverage obligations established.

The excerpt references several legal cases to establish criteria for determining the status of a special employer. A special employer is defined by three criteria: (1) there must be an express or implied contract for hire between the special employer and the employee; (2) the work being performed at the time of the injury should be primarily for the special employer; and (3) the special employer must retain control over the work's details. Failure to demonstrate these elements, particularly the special employer's control over the employee, results in a presumption favoring the employee's general employment status. Relevant case law includes Shook v. Allstate Ins. Co., Steil v. Fla. Physicians’ Ins. Reciprocal, Griggs v. Bertram, and others, which collectively underscore the importance of these factors in determining employer liability and the applicability of insurance coverage in such contexts.