Opinion
Case No. 1:22-cv-23629-KMM
2023-06-06
OCCIDENTAL FIRE & CASUALTY COMPANY OF NORTH CAROLINA, Plaintiff, v. DIXIE WAY MOTORS, INC. d/b/a Dixie Way Auto Plaza and Juan L. Fernandez, Defendants.
Francesco J. Palanda, Ronald Lee Kammer, Hinshaw & Culbertson, LLP, Coral Gables, FL, for Plaintiff. Daniel Lustig, Michael James Pike, Pike & Lustig, LLP, West Palm Beach, FL, for Defendant Juan L. Fernandez.
Francesco J. Palanda, Ronald Lee Kammer, Hinshaw & Culbertson, LLP, Coral Gables, FL, for Plaintiff. Daniel Lustig, Michael James Pike, Pike & Lustig, LLP, West Palm Beach, FL, for Defendant Juan L. Fernandez. ORDER K. MICHAEL MOORE, UNITED STATES DISTRICT JUDGE
THIS CAUSE came before the Court upon the following motions: Defendant Juan L. Fernandez's ("Defendant Fernandez") Motion for Summary Judgment ("D's Mot." or "Defendant Fernandez's Motion") (ECF No. 18) and Plaintiff Occidental Fire & Casualty Company of North Carolina's ("Plaintiff") Cross Motion for Summary Judgment ("P's Mot" or "Plaintiff's Motion") (ECF No. 25). The Motions are now ripe for review. I. BACKGROUND
The following facts are taken from the Complaint ("Compl.") (ECF No. 1), Defendant Fernandez's Statement of Undisputed Material Facts ("D's 56.1") (ECF No. 17), Plaintiff's Statement of Undisputed Facts ("P's Resp. 56.1") (ECF No. 26), and a review of the corresponding record citations and exhibits.
On May 13, 2018, Defendant Fernandez was involved in a motor vehicle collision (the "Accident"). See D's 56.1 ¶ 9. On the date of the accident, Plaintiff insured Defendant Dixie Way Motors Inc. ("Defendant Dixie Way") under a Commercial Policy, bearing policy number CG00170115 (the "Policy"). Id. ¶ 1.
After the accident, Defendant Fernandez initiated a lawsuit against Defendant Dixie Way in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida (the "Underlying Action"). Id. ¶ 5. Plaintiff did not defend Defendant Dixie Way in the Underlying Action. Id. ¶ 13.
In the Underlying Suit, Defendant Fernandez alleged that he was injured while driving the Covered Auto which was "giv[en to] Fernandez to drive." P's 56.1 ¶ 22. Under the terms of the Policy, if Defendant Dixie Way owned the Covered Auto at the time of the Accident, then the Covered Auto was insured by the Policy. Yet, if Defendant Fernandez owned the Covered Auto at the time of the Accident, the Covered Auto was not insured.
On March 3, 2021, a Final Arbitration Award was issued by Arbitrator Richard Wennet in the Underlying Action. Id. ¶ 14. The Final Arbitration Award stated, in pertinent part, "[t]he arbitrator finds that the vehicle at issue was owned by [Defendant Dixie Way] on the date of the accident and at the time of the accident, and thereafter, was sold to a third party by [Defendant Dixie Way], after the accident and after repairing same." Id. ¶ 15.
Then, on April 30, 2021, the Honorable Judge John S. Kastrenakes entered judgment in favor of Defendant Fernandez against Defendant Dixie way in the amount of $521,800.00. Id. ¶ 17. The Final Judgment stated, "The vehicle at issue involved in [Defendant Fernandez]'s accident was owned by [Defendant Dixie Way] on the date of the accident and at the time of the accident, and thereafter, the vehicle was sold to a third party." Id. ¶ 18.
On November 4, 2022, Plaintiff initiated the Instant Action seeking a declaration that (1) the allegations of the Complaint did not trigger a duty to defend, and (2) it is not obligated to indemnify Defendant Dixie Way for the judgment in the Underlying Action. See generally Compl.
II. LEGAL STANDARD
Summary judgment is appropriate where there is "no genuine issue as to any material fact [such] that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed. R. Civ. P. 56). A genuine issue of material fact exists when "a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "For factual issues to be considered genuine, they must have a real basis in the record." Mann v. Taser Int'l, Inc., 588 F.3d 1291, 1303 (11th Cir. 2009) (citation omitted). Speculation cannot create a genuine issue of material fact sufficient to defeat a well-supported motion for summary judgment. Cordoba v. Dillard's, Inc., 419 F.3d 1169, 1181 (11th Cir. 2005).
The moving party has the initial burden of showing the absence of a genuine issue as to any material fact. Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). In assessing whether the moving party has met this burden, a court must view the movant's evidence and all factual inferences arising from it in the light most favorable to the non-moving party. Denney v. City of Albany, 247 F.3d 1172, 1181 (11th Cir. 2001).
Once the moving party satisfies its initial burden, the burden shifts to the non-moving party to present evidence showing a genuine issue of material fact that precludes summary judgment. Bailey v. Allgas, Inc., 284 F.3d 1237, 1243 (11th Cir. 2002); see also Fed. R. Civ. P. 56(e). "If reasonable minds could differ on the inferences arising from undisputed facts, then a court should deny summary judgment." Miranda v. B & B Cash Grocery Store, Inc., 975 F.2d 1518, 1534 (11th Cir. 1992). But if the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial, and summary judgment is proper. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
The standard of review for cross-motions for summary judgment does not differ from the standard applied when only one party files a motion. See Am. Bankers Ins. Grp. v. United States, 408 F.3d 1328, 1331 (11th Cir. 2005). "Cross-motions for summary judgment will not, in themselves, warrant the court in granting summary judgment unless one of the parties is entitled to judgment as a matter of law on facts that are not genuinely disputed." United States v. Oakley, 744 F.2d 1553, 1555 (11th Cir. 1984) (internal quotation marks and citation omitted). Thus, a court must consider each motion on its own merits, resolving all reasonable inferences against the party whose motion is under consideration. See Am. Bankers Ins. Grp., 408 F.3d at 1331.
III. DISCUSSION
This is a declaratory coverage action to determine whether Plaintiff has a duty to defend or indemnify Defendant Dixie Way in the Underlying Action concerning the Accident. Defendant Fernandez contends that Plaintiff is required to defend and indemnify Defendant Dixie Way based on the terms of the Policy. See, e.g., D's Mot. at 4. Plaintiff argues that under an exception to the Policy it has neither a duty to defend nor a duty to indemnify. See generally P's Mot.
A. Duty to Defend
Under Florida law, "[i]t is well settled that an insurer's duty to defend its insured against a legal action arises when the complaint alleges facts that fairly and potentially bring the suit within policy coverage." Jones v. Fla. Ins. Guar. Ass'n, 908 So.2d 435, 442-43 (Fla. 2005). An insurer's duty to defend claims against an insured is thus determined by the terms of the policy and allegations of the complaint. Nat'l Union Fire Ins. Co. v. Lenox Liquors, Inc., 358 So. 2d 533, 536 (Fla. 1977). Any doubt concerning the insurer's duty to defend after an examination of the complaint's allegations is resolved in favor of the insured. Lawyers Title Ins. Corp. v. JDC (Am.) Corp., 52 F.3d 1575, 1580-81 (11th Cir. 1995).
The interpretation of insurance policies is generally a question of law. Id. at 1580. When interpreting an insurance policy, Florida courts "start with the plain language of the policy, as bargained for by the parties." State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d 1226, 1230 (11th Cir. 2004) (quoting Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000)). "If the language used in an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning of the language used so as to give effect to the policy as written." Travelers Indem. Co. v. PCR Inc., 889 So.2d 779, 785 (Fla. 2004); see also Steinberg, 393 F.3d at 1230.
Here, the Policy provides:
We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from "garage operations" involving the ownership, maintenance or use of a covered "auto" . . .P's 56.1 ¶ 27. Here, the Underlying Complaint sought damages from Defendant Dixie Way, an insured under the terms of the policy, for an accident which caused bodily injury and involved the use of a covered auto. See generally D's Mot.
We have the right and duty to defend an "insured" against a "suit" asking for such damages . . . . However, we have no duty to defend and "insured" against a "suit" seeking damages for "bodily injury" or "property damage" . . . to which this insurance does not apply.
Plaintiff makes two arguments as to why the Accident is not covered by the terms of the Policy. First, Plaintiff argues that the facts as alleged in the Underlying Complaint trigger the application of an exclusion to the Policy, meaning that the Accident was not within the Policy and Plaintiff had no duty to defend in the Underlying Action. P's Mot. at 4. Next, Plaintiff avers that the Court can rely on extrinsic facts, including an investigation conducted by Plaintiff suggesting that Defendant Fernandez owned the Covered Auto at the time of the Accident, which would place Defendant Fernandez's claim outside the scope of coverage. Id. at 5. The Court addresses each argument in turn.
The Combined Garage Exclusion/Limitation provides that "[n]o coverage is afforded under this policy for . . . 'Bodily injury' or 'property damage' occurring after possession of an 'auto' has been surrendered to another person pursuant to a sale, conditional sale, gift, abandonment or lease." P's 56.1 ¶ 27. Plaintiff argues that the Underlying Complaint triggers this exception by alleging that the vehicle had been "giv[en to] Fernandez to drive," and describes the Covered Auto as "Fernandez's vehicle." P's Mot. at 4. Accordingly, Plaintiff avers that "[t]he allegations of the [Underlying Complaint] have meaning and the words 'given to' and [ ] 'Fernandez's vehicle' lead to only one inescapable conclusion that possession of the car had been surrendered (i.e., given to) Fernandez via a sale, conditional sale, gift, abandonment or lease." Id.
The Court disagrees. First, the Underlying Complaint states that "Fernandez was given [the Covered Auto] . . . to drive by [Defendant Dixie Way]." ECF No. 1-3 ¶ 5. The Underlying Complaint notably does not say—or indicate—that the car was given to Defendant Fernandez "pursuant to a sale, conditional sale, gift, abandonment, or lease," which is required to trigger the Combined Garage Exclusion/Limitation. And, given that Defendant Dixie Way is an auto dealer, see D's 56.1 ¶ 3, it could well be that the car was given to Defendant Fernandez to test drive, and not "pursuant to a sale, conditional sale, gift, abandonment, or lease."
As previously discussed, the duty to defend arises where a complaint "alleges facts that fairly and potentially bring the suit within policy coverage." Fla. Ins. Guar. Ass'n, 908 So.2d at 442-43. Here, the facts alleged in the Underlying Complaint do not make clear that the Combined Garage Exclusion/Limitation is triggered. Rather, the facts alleged fairly and potentially demonstrate that Defendant Dixie Way owned the Covered Auto at the time of the Accident, bringing the suit within policy coverage and giving rise to the duty to defend. Plaintiff's argument—that summary judgment is warranted because the Combined Garage Exclusion/Limitation is triggered—fails as a matter of law.
Next, Plaintiff argues that the Court can rely on extrinsic facts, including an investigation conducted by Plaintiff suggesting that the vehicle had been sold to Defendant Fernandez prior to the Accident, which would place Defendant Fernandez's claim outside the scope of coverage. Id. at 5. Under Florida law, "the duty to defend depends solely on the facts and legal theories alleged in the pleadings and claims against the insured." Lawyers Title Ins. Corp., 52 F.3d at 1580 (internal citations and quotation marks omitted). Yet, "Florida law does recognize some circumstances where a court may consider evidence extrinsic to the underlying complaint when determining the duty to defend." Diamond State Ins. Co. v. Boys' Home Ass'n, Inc., 172 F. Supp. 3d 1326, 1339-40 (M.D. Fla. 2016); see also Composite Structures, Inc. v. Cont'l Ins. Co., 560 F. App'x 861, 865 (11th Cir. 2014) ("[U]nder certain circumstances, facts outside the underlying complaint can be considered when assessing the duty to defend."). For example, Florida District Courts of Appeal have considered facts outside the underlying complaint to find no duty to defend where the insurer presented uncontroverted evidence of a fact placing a claim outside of coverage. See Composite Structures, 560 Fed. Appx. at 865 (citing Acosta, Inc. v. Nat'l Union Fire Ins. Co., 39 So.3d 565 (Fla. 1st DCA 2010) and Nationwide Mut. Fire Ins. Co. v. Keen, 658 So.2d 1101, 1103 (Fla. 4th DCA 1995)).
Yet, the Eleventh Circuit has cautioned that this departure from the general practice in Florida appears only where neither party "contest[s] the fact that gives rise to a finding of no duty to defend." Id. at 865 n.2; First Specialty Ins. Corp. v. 633 Partners, Ltd., 300 F. App'x 777, 786 (11th Cir. 2008) (explaining that this exception applies "when it is manifestly obvious to all involved that the actual facts placed the claims outside the scope of coverage"). Thus, "a court may consider extrinsic facts if those facts are undisputed, and, had they been pled in the complaint, they clearly would have placed the claims outside the scope of coverage." Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1323 (11th Cir. 2014).
Plaintiff alleges that extrinsic facts demonstrate that the covered auto had been sold to Defendant Fernandez prior to the Accident. See P's Mot. at 5. However, Defendant Fernandez contests this fact. See e.g., D's Resp. to P's 56.1 ("The car belonged to Dixie Way [at the time of the accident] and this fact has already been conclusively adjudicated."). It is not manifestly obvious that the actual facts—namely, who owned the car at the time of the accident—place the claims outside of the scope of the Policy. This Court will not consider extrinsic facts that are disputed by the Parties when considering whether Plaintiff had a duty to defend Defendant Dixie Way in the Underlying Action.
Based on the allegations in the Complaint, the Court finds that Plaintiff had a duty to defend Defendant Dixie Motors in the Underlying Action. Accordingly, Defendant Fernandez's Motion for Summary Judgment is granted with regards to the duty to defend argument.
B. Duty to Indemnify
"Unlike the duty to defend, which generally is triggered by the allegations in the underlying complaint, an insurance company's duty to indemnify an insured party is narrower and is determined by the underlying facts adduced at trial or developed through discovery during the litigation." Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1324 (11th Cir. 2014) (internal quotation omitted); see also Hagen v. Aetna Cas. and Sur. Co., 675 So.2d 963, 965 (Fla. 5th DCA 1996) ("Regardless of the allegations of the complaint, it is the underlying facts that determine the duty to indemnify."); Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1193 n.10 (11th Cir. 2002) ("An insurer's duty to indemnify is ordinarily determined by analyzing the policy coverages based on the actual facts of the underlying case.") (citation omitted). In other words, to determine whether there is a duty to indemnify, one looks at the actual facts, not only those that were alleged in the state court complaint. And for a duty to indemnify to arise, the insurance policy must cover the relevant incident. Stephens, 749 F.3d at 1324.
As a preliminary matter, Florida law clearly states that liability of an insurer depends upon whether the insured's claim is within the coverage of the policy. Spencer v. Assurance Co. of Am., 39 F.3d 1146, 1149 (11th Cir. 1994). "This remains true even when the insurer has unjustifiably failed to defend its insured in the underlying action." Id. (citing Steil v. Florida Physicians' Ins. Reciprocal, 448 So.2d 589, 592 (Fla. 2d DCA 1984)). For the duty to indemnify to arise, the Court must conclude that based on the actual facts of the Underlying Incident, the Accident is within the scope of the Policy.
Defendant Fernandez argues that to determine whether Plaintiff had a duty to indemnify, the Court must "look at the actual facts as found within the Final Judgment rendered in the State Court Case." D's Mot. at 10-11 (emphasis in original). Namely, the Final Judgment found that "[t]he vehicle at issue involved in [Defendant Fernandez's] accident was owned by Defendant [Dixie Way] on the date of the accident and at the time of the accident, and thereafter, the vehicle was sold to a third party." D's 56.1 ¶ 18. Defendant Fernandez asserts that the findings of fact in the Underlying Action clearly show that, at the time of the accident, Defendant Dixie Way owned the covered auto, and therefore the Accident is within the terms of the Policy. Defendant Fernandez further argues that re-evaluating the facts in the Underlying Action would violate the full faith and credit clause of the Constitution. D's Mot. at 12.
Plaintiff asserts that it is not bound by the factual findings in the Underlying Action. P's Mot. at 6. In particular, Plaintiff avers that: (1) the actual ownership of the car at the time of the Accident was not a critical and necessary part of the Underlying Action; and (2) Plaintiff was not a party in the Underlying Action. P's Mot. at 6-8. Plaintiff further argues that the doctrine of full faith and credit is not applicable where, as here, Plaintiff is not seeking to overturn the state court judgment. Rather, here Plaintiff is asking the Court to determine "if there is insurance coverage for that state court judgment, an issue not decided in the state court action." P's Mot. at 9. Plaintiff argues that the actual facts demonstrate that Defendant Fernandez owned the covered auto at the time of the Accident.
The Court agrees with Plaintiff that it is not bound by the State Court Judgment's findings as to the ownership of the car at the time of the Accident. "Under the Full Faith and Credit Act, 28 U.S.C. § 1738, a federal court must 'give preclusive effect to a state court judgment to the same extent as would courts of the state in which the judgment was entered.' " Brown v. R.J. Reynolds Tobacco Co., 611 F.3d 1324, 1331 (11th Cir. 2010) (quoting Kahn v. Smith Barney Shearson Inc., 115 F.3d 930, 933 (11th Cir. 1997)). Defendant Fernandez argues that Plaintiff cannot relitigate the issue of who owned the Covered Auto at the time of the Accident.
The doctrine of collateral estoppel (or issue preclusion) prevents a party from challenging a prior court's finding in a subsequent proceeding before another court. See, e.g., Mitchell v. Humana Hospital-Shoals, 942 F.2d 1581, 1583 (11th Cir. 1991). In Florida, the doctrine of collateral estoppel bars relitigation of the same issues between the same parties in connection with a different cause of action. See Clean Water, Inc. v. State Dep't of Envtl. Reg., 402 So.2d 456, 458 (Fla. 1st DCA 1981) (citing Gordon v. Gordon, 59 So.2d 40, 44 (Fla. 1952)). Under Florida law, collateral estoppel applies where:
(1) the identical issues were presented in a prior proceeding; (2) there was a full and fair opportunity to litigate the issues in the prior proceeding; (3) the issues in the prior litigation were a critical and necessary part of the prior determination; (4) the parties in the two proceedings were identical; and (5) the issues were actually litigated in the prior proceeding.Topps v. State, 865 So. 2d 1253, 1255 (Fla. 2004). Where these elements are satisfied, defensive collateral estoppel "may be applied to bar subsequent causes of action even where the second claim requires proof of different essential facts than those required to be proved in the initial suit." Larimore v. State, 76 So. 3d 1121, 1123 (Fla. 1st DCA 2012); Pearce v. Sandler, 219 So. 3d 961, 965 (Fla. 3d DCA 2017). "Florida has traditionally required that there be a mutuality of parties in order for the doctrine to apply." E.C. v. Katz, 731 So. 2d 1268, 1269 (Fla. 1999) (internal quotation and citation omitted).
The Court agrees with Plaintiff that it is not collaterally estopped from litigating the ownership of the Covered Auto at the time of the Accident. First, Plaintiff was not a party in the Underlying Action. Thus, the Parties in the Underlying Action and the Parties in the Instant Action are not identical. Carson v. Wells Fargo Bank, N.A., No. 8:10-CV-2362-T-17TGW, 2018 WL 4442275, at *3 (M.D. Fla. Jan. 24, 2018) ("The essential elements of issue preclusion under Florida law are that the parties and issues be identical and that the particular matter be fully litigated and determined in a contest which results in a final decision of a court of competent jurisdiction.").
However, a party "who was not a named party to an action will nonetheless be subject to collateral estoppel arising from that action if that person was in privity with a party or virtually represented by a party." Cook v. State, 921 So. 2d 631, 635 (Fla. Dist. Ct. App. 2005). To be in privity with a party to a lawsuit, "one must have an interest in the action such that she will be bound by the final judgment as if she were a party." Id. "The existence of a virtual representation relationship is based on 'closely aligned' interests of a party and a person who is not a formal party." Mariano v. Ethan Allen Interiors, Inc., No. 10-CV-1213-ORL-22KRS, 2010 WL 11626851, at *4 (M.D. Fla. Dec. 30, 2010) (quoting Cook 921 So. 2d at 635).
Here, the interests of Plaintiff and Defendant Dixie Way, who was a party in the Underlying Action, were antagonistic. As Plaintiff notes, "if the vehicle driven by Fernandez was determined to have been owned by Dixie Way at the time of the [A]ccident, then the Combined Exclusion/Limitation of the Policy would not have applied which would have benefitted [Defendant Dixie Way] from a coverage standpoint, possibly creating coverage, to the detriment of [Plaintiff]." P's Resp. at 8. Thus, it cannot be said that Plaintiff was in privity with any party in the Underlying Action.
Further, while the State Court Judgment made a finding on ownership, such a finding was not "critical and necessary" in the Underlying Action. The Underlying Complaint, which alleged one claim for negligence, stated that "Defendant, Dixie Motors, breached the duty of care . . . when it failed to reasonably inspect Fernandez's vehicle before giving [the] same to Fernandez to drive . . . ." ECF No. 1-3 ¶ 13. The issue in the Underlying Action was whether the Covered Auto lost its directional power steering due to faulty parts or maintenance, causing the Accident. The ownership of the car at the time of the Accident did not impact the judgment, nor was it critical and necessary. Because Plaintiff was neither a party, nor in privity with a party, in the Underlying Action, and because the ownership issue was not critical or necessary to the Underlying Action, Plaintiff is not collaterally estopped from litigating the ownership issue.
Accordingly, the Court must consider, based on the actual facts—not those found in the Underlying Judgment—whether Defendant Fernandez owned the Covered Auto at the time of the Accident. However, the Court finds there is a genuine issue of material fact as to who owned the Covered Auto at the time of the Accident. While Plaintiff alleges that Defendant Fernandez owned the Covered Auto, Defendant Fernandez states that Defendant Dixie Way was the owner. Therefore, summary judgment is not appropriate.
IV. CONCLUSION
UPON CONSIDERATION of the Motion, the pertinent portions of the record, and being otherwise fully advised in the premises, it is hereby ORDERED AND ADJUDGED that Defendant Juan L. Fernandez's Motion for Summary Judgment (ECF No. 18) is GRANTED IN PART AND DENIED IN PART. Specifically, the Court grants Defendant Fernandez's Motion to the extent that it argues that Plaintiff had a duty to defend Defendant Dixie Way in the Underlying Action. Further, Plaintiff Occidental Fire & Casualty Company of North Carolina's Cross Motion for Summary Judgment (ECF No. 25) is GRANTED IN PART AND DENIED IN PART. The Court denies Plaintiff's Motion to the extent it argues it did not have a duty to defend. The Court denies both Motions on the issue of whether Plaintiff has a duty to indemnify because the Court finds that there is a genuine issue of material fact as to who owned the Covered Auto at the time of the Accident. The Court will refer the Parties to supplemental mediation by separate order.
DONE AND ORDERED in Chambers at Miami, Florida, this 6th day of June, 2023.