Court: District Court of Appeal of Florida; May 24, 2012; Florida; State Appellate Court
Interstate Fire and Casualty Company appeals a judgment awarding Tatiana Abernathy $6,250,430, asserting that a certificate of insurance issued by a broker on April 18, 2007, did not provide coverage for an injury claimed to have occurred on April 14, 2007. The trial court's ruling is reversed, and the case is remanded for summary judgment in favor of Interstate and against Abernathy on claims related to the liability of the Choctaw Touchdown Club (Club). The court emphasizes that losses existing at the time of an insurance agreement or those so imminent they do not transfer risk are not insurable, as insurance is meant to cover fortuitous losses. Public policy dictates that coverage cannot be granted for known or certain losses.
On April 14, 2007, during a fundraiser, Dakota Abernathy was allegedly injured using equipment provided by Emerald Coast Entertainment, LLC (Emerald Coast), which was covered under an Interstate policy that included an endorsement for additional insureds. However, the endorsement required a written contract to name additional insureds, and there was none between the Club and Emerald Coast or Interstate at the time of the accident. Following the incident, the Club requested a certificate of insurance from Emerald Coast, which was processed by the insurance broker, stating the Club was named as an additional insured for operations at the festival, although the certificate explicitly noted it conferred no rights upon the holder.
On August 20, 2009, Ms. Abernathy initiated a lawsuit against Emerald Coast, the Club, and Funtastic, alleging negligence and product liability. Interstate defended Emerald Coast but refused to defend the Club against Ms. Abernathy's claims. On November 30, 2009, Ms. Abernathy and the Club reached a settlement where the Club agreed to a judgment of $6.25 million and assigned its rights under the Interstate policy to Ms. Abernathy, who agreed not to execute the judgment against the Club. The trial court confirmed this judgment, stating Ms. Abernathy would recover $6,250,000 plus costs.
Subsequently, on December 18, 2009, Ms. Abernathy amended her complaint to include Interstate as a defendant, claiming breach of contract and bad faith for denying defense and coverage to the Club. She sought the full judgment amount from Interstate, citing a certificate of insurance as the basis for coverage. Ms. Abernathy and Interstate filed motions for summary judgment, with Ms. Abernathy arguing that coverage existed and the settlement was reasonable. Interstate countered that the certificate was merely informational, issued post-injury, and that there was no contractual relationship at the time of the injury.
On April 29, 2010, the court denied Ms. Abernathy’s motion regarding coverage but upheld the reasonableness of the settlement agreement. A renewed motion for summary judgment on coverage was denied on July 7, 2010. However, on August 24, 2010, the court ruled in favor of Ms. Abernathy, determining the Interstate policy covered the Club, as the insurance broker had the authority to issue the certificate and it constituted part of the policy. The court also stated that post-injury insurance coverage was permissible.
Barbara Robedee's testimony confirms that Dick Wardlow Insurance Brokers had the authority to issue the relevant certificate of insurance, with the only dispute being its effect. Statutorily, certificates are considered part of the insurance policy and clearly outline the coverage for the dates and activities in question. The court acknowledges challenges presented by different jurisdictions regarding certificates of insurance and the "known loss" rule, noting that Florida courts do not adopt this rule. Despite potential public policy arguments against post-injury insurance, no appellate support exists in Florida to negate contractual freedom. The trial court denied Interstate's motion for summary judgment and granted Ms. Abernathy's motion, awarding her $6,250,430, with an amended judgment later including interest and reserving jurisdiction for fees and costs. Summary judgment is only appropriate when there are no genuine material facts at issue, and insurance policy construction is a legal question subject to de novo review. The certificate issued on April 18, 2007, explicitly stated it did not provide new coverage, thus could not cover injuries from an accident four days prior. Coverage for pre-existing losses contravenes public policy principles in Florida, which prohibit coverage for known losses and emphasize the need for insurance to operate under fortuity principles. Florida's insurance laws aim to protect the public from excessive or unfairly discriminatory rates and ensure insurer solvency through oversight by the Florida Financial Services Commission and the Office of Insurance Regulation. The Insurers Rehabilitation and Liquidation Act and the Florida Insurance Guaranty Association Act further safeguard policyholders against insurer insolvency. Ultimately, agreements to cover known losses do not qualify as insurance, reinforcing protections for policyholders.
Insurance operates on the principle of risk management, where parties agree to insure against uncertain future events rather than known losses. A contract must involve a risk of loss accepted by one party through a legally binding agreement with another. Essential elements of insurance include the existence of a hazard and the coverage of fortuitous losses, as recognized by public policy. Disclosure of a known injury prior to the issuance of a Certificate of Insurance (COI) does not negate the principle that one cannot insure against a loss that has already occurred. This principle is rooted in the collective responsibility of policyholders to cover claims and maintain the integrity of the insurance system.
The COI in question did not constitute an insurance contract as it did not provide coverage for an event that had already transpired, specifically an injury that occurred four days prior to its issuance. Under the known loss doctrine, if an insured is aware of a significant likelihood of loss at the time of policy purchase, the risk becomes a known loss and is not insurable. The court reversed the prior judgment and directed that judgment be entered in favor of Interstate, as the Club’s liability claims were not covered by the COI due to the pre-existing condition. The summary also references statutory definitions of insurance, emphasizing its role in indemnifying against future losses.
Bodily injury liability limits under the Interstate policy are set at two million dollars in total and one million dollars per incident. A certificate of insurance dated April 18, 2007, specifies that it serves only as informational and does not grant rights to the certificate holder, nor does it alter the coverage provided by the underlying policies. It certifies that the listed insurance policies are in effect for the designated policy period, subject to all terms, exclusions, and conditions therein. The Choctaw Touchdown Club is named as an additional insured only concerning its operations under a specific contract related to the Jelly Fish Festival on April 13-14, 2007. No written or oral contract between Emerald Coast and the Club has been established, nor is there evidence of a prior request to add the Club as an additional insured. Bad faith claims in the amended complaints were dismissed without prejudice.
When assessing whether a contract violates public policy, a balance must be struck between public interest and the freedom to contract. Contracts not prohibited by law should not be invalidated unless they clearly harm public good or violate societal interests. Courts may refuse to enforce contracts that infringe legal statutes or public policy, based on the principle that no court will support actions founded on immoral or illegal acts. Public policy should be determined through legal statutes and precedents rather than general public interest. Additionally, "contingency" refers to events that may occur or not, indicating uncertainty. The Florida Legislature has established regulations for insurers, requiring compliance with statutory provisions and possession of a certificate of authority to transact insurance. Since the establishment of the property and casualty guaranty association system, approximately 600 insolvencies have occurred, with the system disbursing around $24.2 billion.
