United Rentals, Inc. v. Mid-Continent Casualty Co.

Citations: 843 F. Supp. 2d 1309; 2012 WL 539362; 2012 U.S. Dist. LEXIS 25065Docket: Case No. 11-61586-CIV

Court: District Court, S.D. Florida; February 15, 2012; Federal District Court

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Cecilia M. Altonaga, District Judge, considered Mid-Continent Casualty Company’s Motion for Summary Judgment regarding United Rentals, filed on December 6, 2011. The underlying case involves a lawsuit in Florida state court initiated by Larry K. Ferguson, representing the Estate of Larry C. Ferguson, which claims that L.C. Ferguson suffered serious injuries leading to his death while operating a scissor lift on May 19, 2008, during his employment. The Estate is suing multiple parties, including United Rentals and General Interior Systems Southern, Inc., specifically alleging strict liability and negligence against United Rentals without attributing any claims to General Southern’s actions.

The scissor lift was leased to General Southern by United Rentals under a Rental Agreement that includes an indemnification clause requiring General Southern to indemnify United Rentals for claims related to the scissor lift's operation and to maintain insurance for any arising liabilities. Mid-Continent issued two insurance policies to General Southern covering the period including the accident date.

In response to the lawsuit, United Rentals filed cross-claims against General Southern on May 10, 2010, seeking contractual indemnification and asserting breach of contract. Subsequently, United Rentals initiated this action on July 18, 2011, seeking a declaration of coverage under both the Primary and Excess Policies, arguing it qualifies as an “additional insured” under these policies due to the Rental Agreement. United Rentals contends that Mid-Continent has breached the insurance policies by refusing to defend, indemnify, or provide coverage.

United Rentals claims entitlement to coverage under the Primary Policy’s supplementary payments provision as an indemnitee, despite this not being specifically alleged in the Complaint. Mid-Continent filed a Third-Party Complaint against General Southern on October 3, 2011, seeking a declaration that the insurance policies do not obligate Mid-Continent to defend or indemnify General Southern regarding United Rentals’s State Cross-Claims. Mid-Continent's motion for summary judgment requests a ruling that neither insurance policy covers (1) United Rentals concerning the Estate’s claims, nor (2) General Southern for United Rentals’s State Cross-Claims. 

Summary judgment is appropriate when there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law, with all evidence interpreted in favor of the opposing party. The court can interpret the insurance contract as a matter of law when essential facts are undisputed. Under Florida law, insurance contracts are construed by their plain meaning, with ambiguities resolved in favor of coverage. The three legal questions for the court to address are: (1) if United Rentals is an additional insured under the Primary or Excess Policy; (2) if United Rentals qualifies as a covered indemnitee under the Primary Policy’s supplementary payments provision; and (3) if Mid-Continent has a duty to defend or indemnify General Southern against United Rentals’s State Cross-Claims.

United Rentals can only be considered an additional insured under the Primary Policy if the Rental Agreement with General Southern qualifies as a legally valid "insured contract" as defined in the policy. For coverage under the Excess Policy, United Rentals must either be covered under the Primary Policy or have a written agreement that meets the Excess Policy's requirements. Key provisions of the Rental Agreement necessitate General Southern to indemnify United Rentals and maintain specific insurance coverage. The Primary Policy defines "insured contract" as any agreement under which one party assumes the tort liability of another for bodily injury or property damage caused by their actions or those acting on their behalf. The Excess Policy similarly covers any person or organization agreed to in writing for insurance related to operations performed by or on behalf of the insured.

Coverage under both policies is limited to vicarious liability arising from General Southern’s actions. The allegations against United Rentals primarily involve strict liability and negligence due to its own actions, not vicarious liability. Consequently, even if the Rental Agreement were valid, it would not provide the coverage sought because the insurance policies explicitly limit coverage to agreements concerning vicarious liability. United Rentals thus does not qualify as an additional insured under the Primary Policy or the Excess Policy in relation to the claims made against it.

The Court notes that even if the Rental Agreement qualifies as an “insured contract” under the insurance policies, Florida law renders void any indemnity provisions in contracts concerning construction-related activities unless they include a monetary limitation on indemnification that is reasonably related to the contract's value and included in project specifications or bid documents, per Fla. Stat. 725.06(1). The Rental Agreement's indemnity clause obligates General Southern to indemnify United Rentals for claims related to the use and operation of equipment, including liabilities arising from United Rentals' alleged negligence or defective products. However, the Rental Agreement lacks the required monetary limitation, making this indemnity provision void concerning United Rentals' own acts or omissions. Consequently, there is no valid insured contract under which United Rentals can be deemed an additional insured under the insurance policies concerning the claims against it. The Court emphasizes that the indemnity clause’s invalidity precludes United Rentals from being considered an “additional insured” under the Excess Policy as it does not qualify as an insured under the Primary Policy for its own acts or omissions. United Rentals acknowledges the compelling nature of case law on this issue but remains unclear in its argument regarding its status as an additional insured under the Excess Policy.

United Rentals argues that the negligence claims in the State Court Complaint against General Southern could potentially connect the Estate's claims against United Rentals to General Southern's operations, thus invoking an additional insured provision in the excess policy. However, the State Court Complaint does not base any claims against United Rentals on General Southern’s operations, and General Southern has explicitly stated that the Estate did not sue United Rentals for any of its actions or omissions. Consequently, United Rentals fails to provide sufficient justification for its claim regarding the connection between the Estate's allegations and General Southern's operations.

To qualify as an indemnitee under the Primary Policy's supplemental payments provision, United Rentals must establish that a valid insured contract exists in which General Southern assumes liability for the Estate's lawsuit against United Rentals. However, the Primary Policy and Florida law define an "insured contract" strictly to include agreements that provide for indemnity concerning vicarious liability. United Rentals' interpretation of the Rental Agreement, which requires General Southern to maintain insurance that covers it against suits like the Estate’s, does not meet this definition, as it does not constitute an "insured contract" under the Primary Policy.

Additionally, regarding Mid-Continent’s duty to defend or indemnify General Southern against United Rentals’ cross-claims for contractual indemnification and breach of the Rental Agreement, Mid-Continent contends it is not obligated to do so since United Rentals seeks only economic damages. The policies specify that they cover damages related to bodily injury or property damage, thus limiting the scope of coverage and defense obligations.

Indemnification for ultimate net loss is provided by the insurance policy for bodily injury or property damage exceeding a retained limit. The insurer retains the right to collaborate with both the underlying insurer and the insured in defense against claims. The policies do not extend coverage for breach of contract or contractual indemnification claims, as asserted by Mid-Continent. United Rentals does not challenge this interpretation and does not dispute that the policies are limited to bodily injury and property damage. Their argument hinges on whether the Rental Agreement qualifies as an "insured contract." However, the Court finds no policy provisions that cover contract-related claims. Although United Rentals’ claims stem from bodily injury liability, they seek relief based on contract, which is not covered under the policies. Moreover, even if such claims were interpreted to fall under "bodily injury" or "property damage," the policies exclude coverage for damages arising from contractual obligations unless related to an insured contract, which does not exist in this case. Consequently, the Court concludes that General Southern lacks coverage for United Rentals’ breach of contract claims, leading to the granting of the Motion.

Mid-Continent's factual assertion is supported by General Southern's Corrected Answer and Affirmative Defenses, specifically addressing a statement in paragraph 49 of Mid-Continent’s Statement of Material Facts (SMF). General Southern's Answer clarifies that the Estate has not sued General Southern for actions related to United Rentals, but does not concede the absence of a suit against United Rentals for General Southern’s actions. United Rentals does not dispute this assertion and the Court agrees, including it in the undisputed factual background of its Order. 

There was an issue with misnumbering in United Rentals's SMF between paragraphs 47 and 48, but the Court will use the provided paragraph numbers. Mid-Continent criticizes United Rentals for exceeding the ten-page limit set by Local Rule 56.1(a)(1) with a nineteen-page SMF. Despite this, the Court chooses not to disregard United Rentals's SMF, emphasizing its broad discretion in such matters, as established in case law (Reese v. Herbert). 

The Rental Agreement between United Rentals and General Southern includes an indemnity clause requiring the Customer to indemnify United Rentals against various liabilities and claims, including those arising from negligent acts or defective products, applicable to all forms of legal theory such as strict liability and breach of warranty.

Customer must maintain adequate insurance coverage at its own expense, including liability, physical damage, public liability, property damage, and casualty insurance for the full replacement cost of the Equipment. This coverage must include all risks of loss or damage as per standard extended coverage endorsement and must apply throughout the Rental Period, covering any damage or liability related to the Equipment's handling, transportation, maintenance, operation, possession, or use. Upon request, Customer is required to provide United with proof of this insurance through a Certificate of Insurance, detailing coverage specifics and naming United as loss payee and additional insured. The insurance must be satisfactory to United and provide a minimum of 30 days’ notice prior to any cancellation.

The Primary Policy indicates that General Southern is the named insured and covers any person or organization designated as an additional insured under an "insured contract," which is defined as any contract where the insured assumes tort liability for bodily injury or property damage caused by their actions or those acting on their behalf. The Excess Policy similarly includes as insured any underlying policy participants and those for whom the insured has agreed in writing to provide coverage.

Both policies define "bodily injury" as any physical injury, sickness, or disease to a person, including resulting death, and "property damage" as either physical injury to tangible property, including loss of use resulting from that injury, or loss of use of tangible property not physically injured.