Certain Underwriters at Lloyds, London Subscribing to Policy No. Sa 10092-11581 v. Waveblast Watersports, Inc.
Docket: Case No. 13-61979-CIV
Court: District Court, S.D. Florida; January 13, 2015; Federal District Court
Defendant Sands Harbor, Inc. has filed a Motion for Summary Judgment, supported by Scottsdale Insurance Company, while Plaintiff has filed a Partial Motion for Summary Judgment. Additionally, Defendants Scottsdale Insurance Company and Sands Harbor, Inc. have submitted Motions to Strike. The Court has reviewed the record, briefs, and applicable law.
Plaintiff initiated this action on September 11, 2013, under the Declaratory Judgment Act, seeking a ruling that it has no obligation to defend or indemnify Defendants Wav-eblast Watersports Inc., Waveblast Watersports II, Inc., Sands Harbor, Inc., and Scottsdale Insurance Company against claims from Steven Miskell, administrator of Kathleen Miskell's estate, related to her death in a parasailing accident.
Defendants Waveblast and Waveblast II counterclaimed, asserting that Plaintiff must defend and indemnify them in the underlying lawsuit. Sands Harbor also counterclaimed for a declaration of duty to defend and indemnify, along with a breach of contract claim for failure to defend and a request for attorney's fees.
Plaintiff is the insurer under policy number SA10092-11581, naming Waveblast as the insured and Sands Harbor as an additional insured. Scottsdale Insurance Company insures Sands Harbor under policy number BCS0025806.
The underlying complaint details that on August 15, 2012, Stephen and Kathleen Miskell were at Sands Harbor Hotel, which advertised parasailing excursions. After waiting for a storm to pass, they were offered a tandem parasailing trip. During the excursion, a malfunction in Kathleen's harness caused her to fall from a height of over 150 feet, resulting in her death.
The Court granted the Plaintiff's Motion for Entry of Final Default Judgment against Defendants Fuller and Zabadal, determining that there is no coverage for these Defendants, and the Plaintiff is not obligated to defend or indemnify them in the underlying lawsuit. Defendants Scottsdale Insurance Company and Sands Harbor filed a motion to strike the Plaintiff's Response to Scottsdale’s Motion for Summary Judgment, arguing that it constitutes a successive motion for summary judgment regarding coverage priority. Although motions to strike are generally disfavored, the Court noted that Rule 12(f) applies only to specific pleadings and found that the Plaintiff's Response, which addresses policy construction, complies with the Federal Rules. Consequently, the motions to strike were denied.
Regarding summary judgment motions, the Plaintiff sought Partial Summary Judgment on coverage priority with Defendant Scottsdale related to Defendant Sands Harbor's defense and indemnity. Defendant Sands Harbor requested Final Summary Judgment, asserting that the Plaintiff must defend and indemnify it against claims in the underlying lawsuit, with Defendant Scottsdale supporting Sands Harbor’s motion. The legal standard for cross-motions for summary judgment is the same as for single motions, allowing for a determination of no factual dispute if both parties agree on the controlling legal theories and material facts. Summary judgment is granted when there is no genuine dispute over material facts, with the Court viewing facts in favor of the non-moving party.
A plaintiff must present more than a minimal amount of evidence to survive summary judgment; there must be sufficient evidence for a jury to reasonably rule in their favor. The Court does not weigh conflicting evidence but requires the moving party to first demonstrate the absence of any genuine issue of material fact. Once this burden is met, the non-moving party must provide substantial evidence beyond mere speculation to prove each essential element of their case. They must support their claims with specific facts from affidavits, depositions, or interrogatory responses. Even if parties agree on basic facts, differing inferences may warrant denial of summary judgment.
In insurance coverage disputes under Florida law, courts analyze the insurance policy as a whole, emphasizing the plain language agreed upon by the parties. When interpreting policy provisions, ambiguities favor the insured, and the insurer must demonstrate that an exclusion applies to deny coverage. The insurer's duty to defend is broader than the duty to indemnify, arising whenever allegations in a complaint could reasonably fall within policy coverage. This duty must be assessed based on the complaint's allegations, regardless of their factual accuracy, and any uncertainties must favor the insured. If there is no duty to defend, there is also no duty to indemnify.
Defendants assert that the allegations in the underlying complaint are covered by the parasail endorsement in Plaintiff's insurance policy and are not subject to exclusion under the watercraft exclusion, a point not contested by Plaintiff. Instead, Plaintiff argues that both it and Defendant Scottsdale are responsible on a co-primary, pro-rata basis due to the 'other insurance' clauses in their respective policies.
Under Florida law, insurance contracts are interpreted based on their plain meaning, and policy terms should be understood in their ordinary sense, reflecting the parties' intent. Defendants maintain that Plaintiff has a duty to defend based on the applicability of the parasailing endorsement and the irrelevance of the watercraft exclusion.
The parasailing endorsement specifies that it covers claims related to parasailing activities, including entering and boarding the vessel, but excludes coverage for injuries to swimmers, snorkelers, or divers during preparation or boarding. The watercraft exclusion denies coverage for bodily injury or property damage arising from the ownership, maintenance, use, or entrustment of any aircraft, auto, or watercraft owned or operated by the insured, even if negligence is alleged. However, this exclusion has specific exceptions, including for certain watercraft under specific conditions and liability assumed under insured contracts.
The complaint alleges that the decedent's death occurred while parasailing, towed by defendants Waveblast II and/or Waveblast parasailing vessel. Defendant Sands Harbor contends that this incident falls under the parasailing endorsement of the insurance policy, arguing that the watercraft exclusion should not negate coverage. Under Florida law, if a policy interpretation leads to an absurd conclusion, it must be rejected in favor of a more reasonable interpretation. The Court determines that applying the watercraft exclusion to parasailing is absurd since parasailing inherently involves watercraft. The coverage extension explicitly includes activities related to entering and boarding the vessel, indicating that the exclusion does not limit coverage for parasailing. Thus, the Court rules that the watercraft exclusion does not prevent coverage for parasailing activities and grants the defendants' motion for summary judgment regarding the plaintiff's duty to defend Sands Harbor in the lawsuit.
Regarding the plaintiff's duty to indemnify, although the plaintiff claims the underlying suit has partially settled, there is no evidence of a resolution on liability, rendering the indemnification issue premature. Therefore, the defendants' motion for summary judgment on indemnification is denied.
In conclusion, the defendants’ motion for summary judgment is partially granted and partially denied. The Court will further examine the duties of both the plaintiff and defendant Scottsdale to defend and indemnify Sands Harbor. Additionally, the plaintiff seeks a ruling that the 'other insurance' clauses in its and Scottsdale’s policies are mutually repugnant, proposing that both insurers owe Sands Harbor a defense on a co-primary basis. Scottsdale counters that, even if the clauses are mutually repugnant, the plaintiff should act as the primary insurer while Scottsdale would be the excess insurer, based on the indemnification clause in the lease agreement between Waveblast II and Sands Harbor.
Mutual repugnance occurs between 'other insurance' clauses when both policies state their coverage is excess over any other collectible insurance. In such cases, the clauses negate each other, leading to a pro-rata distribution based on policy limits relative to the loss. This situation arises in the context of a death during parasailing, deemed a watercraft-related incident. The term "arising out of" encompasses a broader scope than "caused by," indicating a connection to the loss. Initially, the 'other insurance' clauses in both policies were nearly identical; however, Scottsdale’s clause was amended to include a unique excess provision, asserting its policy is excess when valid and collectible insurance exists under any other policy. Scottsdale claims this provision remains effective despite the mutual cancellation of other clauses, while the Plaintiff contests that allowing this would create a 'super excess' clause unsupported by Florida law. Reference cases illustrate the complexities of interpreting these clauses, particularly in distinguishing between the specific terms and their implications on coverage.
The court determined that the 'other insurance' provision in the second policy was not relevant to the loss associated with the faulty construction of a boardwalk, thereby establishing the second insurance company as the primary insurer, with the first insurance company’s policy considered excess. In the current case, a specific contingency within the 'other insurance' clauses of both policies is applicable, making the rationale from the Keenan Hopkins Schmidt, Stowell Contractors, Inc. case inapplicable. Defendant Scottsdale failed to provide legal authority supporting the piecemeal cancellation of 'other insurance' clauses under Florida law. The court noted that such an interpretation would suggest a hierarchy among 'other insurance' clauses, which Florida law does not support, as it does not recognize 'super excess' clauses. The court cited AIG Premier Ins. Co. as rejecting the notion that one excess clause could be deemed 'excess to all other excess insurance.'
Both policies are viewed as containing 'classic 'other insurance' clauses,' indicating they would not serve as primary insurance when other applicable coverage exists. Consequently, these clauses are mutually exclusive and nullify each other, leading to a pro-rata sharing of liability based on policy limits. Additionally, the lease agreement between Defendant Sands Harbor (Lessor) and Defendant Waveblast II (Lessee) includes an indemnification clause where the Lessee agrees to indemnify the Lessor against losses and procure liability insurance of at least $1,000,000 for personal injury and $50,000 for property damage. The Lessee must maintain this insurance throughout the lease term and defend the Lessor in any related legal actions. The indemnification extends to any known or ascertainable hazardous conditions on the premises.
Defendant Scottsdale contends that, per Florida law, the lease agreement's indemnity clause assigns the primary liability for losses to the Plaintiff (carrier) for the indemnitor (Waveblast II), despite the presence of 'other insurance' clauses. Plaintiff counters that the indemnity clause does not alter its coverage obligations regarding Defendant Sands Harbor, since the lease is between Sands Harbor and Waveblast II, who is not a named insured on Plaintiff's policy. Only one cited case, Crabtree, addresses indemnification's impact on 'other insurance' clauses but is distinguishable because the competing insurance agreement explicitly stated its primary coverage role. In Crabtree, the court emphasized that indemnification agreements should be enforced per the parties' intentions. The City of South Daytona case, while not directly involving 'other insurance' clauses, is relevant as it highlights contractual indemnification obligations between parties. There, the court rejected an argument about subrogation, noting that specific indemnification exists between the league and the city. In contrast, no such indemnification exists between Plaintiff's insured (Waveblast) and Sands Harbor, as the lease specifically names Waveblast II as the indemnitor, who is not covered by Plaintiff's policy. The current dispute centers on the operation of the policies' 'other insurance' clauses, rather than equitable subrogation rights. Defendants further assert that the duty to defend should be determined solely by the allegations in the underlying complaint, which implicates both Waveblast and Waveblast II in leasing the premises for parasail operations, regardless of which entity was operationally involved.
Treating the allegation that Waveblast leased premises from Defendant Sands Harbor as true does not negate the fact that the indemnification clause relied upon by Defendants is from a lease to which Waveblast is not a party. Consequently, this clause does not influence the 'other insurance' clauses. The Court concludes that Plaintiff has a duty to defend Defendant Sands Harbor in the underlying lawsuit and has breached its contract by failing to do so. No ruling is made regarding the duty to indemnify, as liability has not been established in the underlying case. Both Plaintiff and Defendant Scottsdale Insurance Company are required to defend Sands Harbor, with costs apportioned on a pro-rata basis according to policy limits. The Court does not address issues relating to the duty to defend or indemnify Defendants Waveblast and Waveblast II.
The Court's orders include: denial of Defendants Scottsdale Insurance Company and Sands Harbor's Motions to Strike; partial granting and denial of Sands Harbor’s Motion for Summary Judgment; and granting of Plaintiff's Partial Motion for Summary Judgment. All parties must jointly submit a summary of remaining trial issues by January 19, 2015. The Court declines to consider arguments regarding liability and indemnity involving Waveblast, as these have not been determined in the underlying suit. The record is unclear regarding the insurer for Waveblast II, and while Defendants assert that Sands Harbor may have a common law indemnity claim against Waveblast, the Court refrains from addressing this due to the lack of findings on Waveblast's indemnity obligation in the underlying case.
