Cast Steel Products, Inc. v. Admiral Insurance

Citations: 348 F.3d 1298; 2003 U.S. App. LEXIS 21982; 2003 WL 22434728Docket: 02-16511

Court: Court of Appeals for the Eleventh Circuit; October 28, 2003; Federal Appellate Court

Original Court Document: View Document

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Cast Steel Products, Inc. appeals a summary judgment favoring Admiral Insurance Company regarding coverage under two "claims-made" professional liability policies for a defective product claim. The claim arose after the 1999 policy period ended but was reported during the 2000 policy period. The district court ruled that neither policy covered the claim since it was not both accrued and reported within the same policy period. Cast Steel contends that the 1999 policy is ambiguous concerning the coverage upon renewal, as it allows for an extension of the claims reporting period upon cancellation or non-renewal but does not clarify the same for renewal. The appellate court agrees with Cast Steel, finding the ambiguity must be resolved in favor of the insured under Florida law. Therefore, the court reverses the summary judgment in favor of Admiral and remands the case for the district court to grant summary judgment to Cast Steel regarding the 1999 policy. Cast Steel, a Florida corporation supplying components to the mining industry, purchased the 1999 policy starting January 6, 1999, and renewed it for the 2000 policy period. The claim in question arose from a contract with Hibbing Taconite for pallet cars delivered in June 1999, which were reported defective shortly thereafter.

On October 21, 1999, Hibbing submitted an incident report to Cast Steel, which subsequently informed Ayers/Sierra to prepare claim paperwork. However, Ayers/Sierra failed to submit the claim to Admiral until January 6, 2000, the day the 1999 Policy expired. Admiral responded on February 10, 2000, with a reservation of rights letter regarding the Commercial General Liability (CGL) Policy and initiated an investigation. Cast Steel contended that Admiral did not reserve rights under the 1999 or 2000 Policies, but the argument was dismissed because Cast Steel only filed under the CGL Policy. Ultimately, Admiral denied coverage under all policies.

Cast Steel initiated a lawsuit on July 25, 2001, in Florida state court, seeking a declaration of coverage for the Hibbing claim. The case was removed to the Middle District of Florida on diversity grounds. Cast Steel moved for summary judgment on the 1999 Policy in July 2002, followed by Admiral's own summary judgment motion. The district court granted summary judgment to Admiral in November 2002, ruling that Cast Steel failed to comply with the notice requirement of the 1999 Policy and that the 2000 Policy excluded coverage for claims known at the time of renewal.

The court found Cast Steel's claim that Admiral had given Ayers/Sierra apparent authority to accept claims unsubstantiated, as there was no evidence of any such representation by Admiral and Ayers/Sierra denied being Admiral’s agent. On appeal, Cast Steel argued that genuine issues of material fact remained regarding Ayers/Sierra's authority and an ambiguity in the renewal of the 1999 Policy regarding the reporting period for claims. The appellate review will assess the district court's summary judgment under the same legal standards, considering evidence favorably to the opposing party. The decision raised concerns, as it suggested that a claim accruing between two consecutive policies might not be covered by either, despite the policies appearing to provide seamless coverage.

A claims-made policy only covers claims that accrue and are reported within the specified policy period. The district court ruled that a claim accruing late in the first policy period but reported early in the second was not covered by either policy. Cast Steel contests this ruling, asserting that the 99 Policy provides a thirty-day extension for reporting 1999 claims if the insured cancels or does not renew the policy, suggesting ambiguity regarding whether renewal offers a similar extension. The 99 Policy’s “Extended Discovery Period” provision specifies a claims extension only for claims not covered by subsequent insurance. Cast Steel renewed the 99 Policy but did not cancel or non-renew it, and the policy lacks language indicating a reporting extension for renewals. Admiral argues that this silence indicates no reporting extension exists for renewals, a view supported by the district court, which granted summary judgment to Admiral, referencing the 2001 Pantropic decision where a similar argument was rejected. In Pantropic, the court ruled that the insured could not report a claim after a designated grace period, even with consecutive renewals. The only contrary case cited was Helberg, where an Ohio court found coverage for a claim accruing during Year 1 but reported in Year 2, based on an ambiguous reporting extension clause. In Helberg, the attorney was aware of the claim but reported it after the 1991 policy period ended, leading to a denial of coverage by the insurer.

The court determined that the plaintiff's claim was covered by the 1991 claims-made policy despite the requirement for timely notice to the insurer. It found that the policy’s extended reporting endorsement applied, as there was no cancellation or change of insurance carriers; the insured simply renewed the policy. The ruling emphasized that denying coverage for claims reported during the renewal period would be illogical and inequitable. The court highlighted that Cast Steel reported its claim shortly after the expiration of the previous policy while the new one was in effect, supporting the interpretation that the extended reporting clause automatically extends the reporting period through renewal. Given the ambiguity in the policy and Florida law favoring the insured, the court concluded that coverage should not be denied. Consequently, the court reversed the district court's decision and instructed it to grant summary judgment in favor of Cast Steel. Additionally, Cast Steel's challenge regarding the $2,500 deductible was addressed; although the deductible was improperly billed, Cast Steel was not entitled to a refund since the coverage for the claim was affirmed. The case was reversed and remanded for further proceedings in line with these findings.