Opinion
No. 2D21-1050
04-26-2023
ECKERD YOUTH ALTERNATIVES, INC., d/b/a Eckerd Kids, Appellant, v. The DEVEREUX FOUNDATION, INC., Appellee.
Philip E. Glatzer of Marlow Adler Abrams Newman & Lewis, Coral Gables, for Appellant. Mark D. Tinker of Cole, Scott & Kissane, P.A., Tampa, for Appellee.
Philip E. Glatzer of Marlow Adler Abrams Newman & Lewis, Coral Gables, for Appellant.
Mark D. Tinker of Cole, Scott & Kissane, P.A., Tampa, for Appellee.
NORTHCUTT, Judge.
The circuit court awarded a final summary judgment to The Devereux Foundation, Inc., on cross-claims filed against it by Eckerd Youth Alternatives, Inc. We reverse and remand for further proceedings.
Prior to the litigation below, the Florida Department of Children and Families delegated to Eckerd the responsibility to provide for the welfare of some children in the State's foster care system. Eckerd, in turn, contracted with Devereux to provide these services. Eckerd's subcontract with Devereux contained an indemnification provision that required Devereux to defend and indemnify Eckerd as follows:
20. Indemnification:
To the extent permitted by Florida Law, the Provider [Devereux] shall indemnify, save, defend, and hold Eckerd and the Department harmless from any and all claims, demands, actions, causes of action of whatever nature or character, arising out of or by reason of the execution of this agreement or performance
of the services provided herein. It is understood and agreed that [Devereux] is not required to indemnify Eckerd or Department for claims, demands, actions, or causes of action arising solely out of Eckerd's or the Department's negligence.
In 2016, two siblings who were in foster care made claims against Eckerd, alleging that they had been negligently reunited with their abusive biological father and that they suffered injuries as a result. Ultimately, the siblings sued Eckerd, Devereux, and some Devereux employees for their involvement.
When it first learned of the siblings’ claims, Eckerd promptly sent a letter to tender its defense to Devereux, but it was unsatisfied with the response:
• August 5, 2016: Upon receiving the notice of claim from one of the siblings and before the siblings filed suit, counsel for Eckerd wrote to Devereux, quoted the indemnification and defense provision of the contract agreement, and said "we hereby tender the above-styled and described claim to The Devereux Foundation, Inc. and its carrier." The letter also demanded that Devereux indemnify Eckerd.
• January 6 and 12, 2017: Devereux's counsel responded in two letters after the siblings had filed suit against both Devereux and Eckerd. Both letters said that Devereux "agrees to conditionally comply with its contracted obligation to indemnify Eckerd pursuant to [the indemnity provision of the contract]." Devereux also noted that the indemnification was limited and would not include claims that alleged that Eckerd was solely negligent. Devereux said it "will only agree to afford the level of protection previously agreed upon and does not agree to provide a heightened level of indemnity protection." (Emphasis added.) Neither letter made any specific reference to the duty to defend.
Following these fruitless communications, Eckerd moved for leave to amend its pleadings in the siblings’ suit to assert a three-count cross-claim against Devereux. Count I alleged that Devereux breached its contract with Eckerd in part by failing to assume Eckerd's defense of the claims against it by the minor plaintiffs. Count II sought contractual indemnity from Devereux, alleging that Devereux's failure to defend and indemnify under the contract agreement damaged Eckerd. And Count III asserted a right to common law indemnity from Devereux.
While its motion to amend was pending, Eckerd again attempted to convince Devereux to undertake its defense in the siblings’ suit:
• July 25, 2017: Eckerd's attorney wrote to Devereux's insurance carrier, Homeland Insurance Company of Delaware/One Beacon, again seeking a defense and indemnity. Eckerd highlighted the fact that "an insurer's duty to defend is broad" and that "[t]he defense duty extends to both covered and uncovered claims." The letter also advised that "should [Devereux] fail to accept its defense and indemnity obligations to Eckerd in this matter," Eckerd would defend itself, pursue settlement, and then sue Devereux and its insurer for the cost of settlement and fees and costs.
The record does not contain any timely response from Devereux or its carrier.
The circuit court heard the motion to file a cross-claim in late 2017, then granted the motion in June 2018. Devereux filed an answer and affirmative defenses to the cross-claim in which it "[a]dmitted that the contract between DEVEREUX and ECKERD contains an indemnification agreement; however, denied that Devereux agreed to defend and indemnify ECKERD for ECKERD'S own, direct negligence."
Eckerd and Devereux separately entered settlement negotiations with the siblings. Before completing its settlement, Eckerd made a final effort to get Devereux to assume its defense:
• February 21, 2019: Eckerd wrote Devereux and said it had "previously requested, on numerous occasions, that Devereux defend and indemnify Eckerd," while Devereux "ignored, or denied, Eckerd's requests." The letter again asked Devereux to "defend and indemnify Eckerd in this suit" or alternatively "approve a settlement that Eckerd is negotiating with the Plaintiffs."
• February 22, 2019: Devereux responded "[w]ith respect to defense and indemnity, we previously advised that Devereux agrees to conditionally comply with its contracted obligation to indemnify Eckerd pursuant to [the contract]." Once more, Devereux stated its duty to indemnify was limited. Devereux claimed that since Eckerd had not discussed with Devereux a "conditional acceptance," Eckerd "ha[d] yet to provide any ability for Devereux to defend indemnified claims."
• February 25, 2019: Eckerd replied and directly stated that "Devereux offered no conditional acceptance of its duty to defend Eckerd in this litigation." Eckerd explained that, regardless, the contract "provides for a full defense of Eckerd" and that "[t]he contractual duty to defend includes both covered and uncovered claims," and for that reason "our repeated tenders should have been accepted without condition."
• February 27, 2019: Devereux responded that it "has neither changed its position with respect to the defense and indemnity issues." Once more, it repeated that it "agree[d] to comply with its contracted obligations as stated in [the contract]." Devereux stated that Eckerd had "only tendered ... a ‘full defense of Eckerd’ for ‘both covered and uncovered claims’ " and "[t]hat tender does not comport with either the contract or Devereux's obligations." Devereux flatly refused to pay for Eckerd's past defense costs because they "involve non-indemnified claims for which Devereux owes no duties, and Eckerd has never tendered the ability to defend indemnified claims to Devereux without imposing the improper condition that it also assume obligations for non-indemnified claims."
Eckerd and Devereux ultimately settled independently with the siblings, with the lower court's approval, and then filed competing motions for summary judgment on Eckerd's cross-claims. The circuit court granted Devereux's motion for summary judgment and denied Eckerd's, making several key findings. In doing so, it rejected Devereux's position that its duty to defend was commensurate with its duty to indemnify. Under the indemnification provision of the contract, the court observed, Devereux had a "duty to provide a complete defense to Eckerd." Nevertheless, the court took the view that Eckerd had failed to properly tender the defense before voluntarily settling the siblings’ claims against it. It found that Eckerd's letters required "Devereux to provide undifferentiated ‘defense and indemnity’ to the entire action." The court ruled that in each correspondence, "Eckerd conditioned the tender on Devereux accepting both a defense and indemnity for the entirety of the [siblings’] litigation" and "[e]ach time, Devereux responded that it would not agree to provide indemnity greater than what the contract required and invited Eckerd to discuss a proper tender of the defense."
Devereux does not dispute this determination except to claim that the indemnity provision is ambiguous and thus unenforceable. This argument is made for the first time on appeal. Therefore, it is not properly before us and will not be addressed further in this opinion.
The lower court further ruled that because Eckerd had not properly tendered a defense and Devereux had not declined to undertake a defense, Eckerd could not enter into a settlement and then seek indemnity from Devereux under the contract.
This appeal turns on a limited issue—whether Eckerd's letters sufficiently invoked Devereux's duty to provide a defense pursuant to the indemnity provision of the contract. Our review is de novo. See Volusia County v. Aberdeen at Ormond Beach, L.P. , 760 So. 2d 126, 130 (Fla. 2000). Florida law recognizes that "when a complaint contains a covered claim and a claim which is not covered by the indemnity agreement, then the duty to defend extends to the entire lawsuit." Metropolitan Dade County v. Fla. Aviation Fueling Co., Inc. , 578 So. 2d 296, 298 (Fla. 3d DCA 1991) ; see also Metropolitan Dade County v. CBM Indus. of Minn., Inc. , 776 So. 2d 937, 938–39 (Fla. 3d DCA 2000) (holding that the indemnitor breached its duty to defend the indemnitee despite some of the claims against the indemnitee being for its own negligence).
The duty to defend is entirely separate from the duty to indemnify. See State, Dep't of Transp. v. S. Bell Tel. & Tel. Co., 635 So. 2d 74, 78 (Fla. 1st DCA 1994). Because the duty to defend is so broad, indemnitors who believe they are not liable to indemnify all or any of the claims against their indemnitee may undertake the defense of an indemnitee under a reservation of rights. See, e.g. , First Am. Title Ins. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA. , 695 So. 2d 475, 476–77 (Fla. 3d DCA 1997) (holding that an indemnitor "does not breach its duty to defend an [indemnitee] when it provides a defense under a reservation of rights"). In this manner, an indemnitor can avoid breaching its duty to defend while maintaining its right to later challenge its liability to indemnify for some or all of the claims. See Giffen Roofing Co. v. DHS Devs., Inc. , 442 So. 2d 396, 396–97 (Fla. 5th DCA 1983) ("It is well settled that an insurer may provide a defense to its insured while reserving the right to later challenge coverage, if timely notice of such reservation is given to the insured.").
While this situation most often arises in the insurance context, there is no reason the same principles would not apply to the similar contractual indemnity relationship between Eckerd and Devereux.
Here, Eckerd undisputedly and repeatedly tendered the defense of the entire lawsuit against it to Devereux. Devereux's responses largely ignored the demands to defend, while ambiguously asserting it would "comply with its contractual obligations" to indemnify. Then it wrongly claimed it had no obligation to assume Eckerd's defense so long as Eckerd unqualifiedly demanded indemnity. As we have mentioned, the duties to indemnify and to defend are discrete obligations. Devereux was not absolved of the latter by its dispute with Eckerd over the scope of the former. For these reasons, we reverse the summary judgment in favor of Devereux. We remand with instructions to grant Eckerd's motion for summary judgment on its right to a defense under the parties’ contract and for further proceedings consistent therewith.
Reversed and remanded.
LaROSE and SMITH, JJ., Concur.