The “your product” Exclusion Applies if the Product is not Fundamentally Changed

Recently, in Liberty Mut. Fire Ins. Co. v. MI Windows & Doors, Inc. (Fla. 2d DCA 2013), the Court relied on a “your product” exclusion of a CGL policy to partially reverse summary judgment that was entered in favor of insured window and door manufacturer and against insurer.  The court ruled that the exclusion applied since the fact that a third party added transoms to the insured’s sliding glass doors did not fundamentally change the nature and function of the doors, thus the doors remained the insured’s product.

What is a Reasonable Hourly Rate for Awarding Attorney’s Fees in Miami? Answer: It’s Significantly Less Than New York

In a recent federal case in which rapper and producer Timbaland (aka Timothy Mosley) won summary judgment on a copyright infringement case, Magistrate Judge Torres made the interesting comment that the fees that would be awarded to Timbaland would not be “‘New York’ billing rates.”  Kernal Records Oy v. Mosley, Case No. 09-21597, 23 (S.D. Fla. July 16, 2013).  When calculating fees, parties are awarded reasonable hourly rates in the prevailing market and, as was the holding in a previous opinion, the reasonable rates in Miami are not equivalent to those in New York.

So what is a reasonable hourly fee in Miami?  Although it varies from case to case, it is clearly less than the rate in New York.  In Hermosilla v. Coca-Cola Co., 10-21418-CIV, 2011 WL 9364952 (S.D. Fla. July 15, 2011), the court reduced the hourly rate of partners at Holland & Knight, LLP to a “blended” $425 an hour, and associates to $225 an hour, for what it called a basic intellectual property and contract case.  The court held:

We find as an initial matter that many of the hourly rates requested by the H & K attorneys are excessive for the South Florida legal community for the types of legal services that were required in this case. See ACLU of Ga., 168 F.3d at 437–38; Norman, 835 F.2d at 1299. “Even if a party chooses to employ counsel of unusual skill and experience, the court awards only the fee necessary to secure reasonably competent counsel.”

Id. at *9.  The partner fees were reduced from as high as $680 an hour for a partner and $385 an hour for an associate.  The other partners’ and associates’ billing rates weren’t too far behind the leaders.  The Court in Hermosilla noted the prestigious credentials of the H&K attorneys, but pointed out that even in the most expensive legal jurisdiction, New York, the courts could not approve such rates.

Which brings us back to our most recent case.  Judge Torres merely warned the attorneys for  “Timbo the King” (as he’s been referred to by Jay-Z), that Miami is not New York when it comes to billing.  No fees have been awarded yet, but for those of you that are curious, we’ll keep you up to date when Timbaland’s attorneys submit their version of what is reasonable.  For those that stumbled upon this post for insight regarding the reasonable hourly rate in South Florida and Miami, here are some cases to get you started:

Tiara Condominium Ass’n, Inc. v. Marsh USA, Inc., 697 F.Supp.2d 1349 (S.D.Fla.2010) (reducing hourly rates charged by premium New York law firm by 19 to 25 percent); Global Horizons Inc. v. Del Monte Fresh Produce N.A., Inc., 2009 WL 855970 (S.D.Fla. Mar.31, 2009) (awarding discounted hourly rates for premium South Florida law firm of $300–475 per hour (partners); $185–310 (associates); and $160 (paralegals)); Red Bull GMBH v. Spacefuel Corp., No. 06–20948–Civ–Jordan/Torres (S.D. Fla. June 20, 2007) (awarding reduced blended hourly rates for premium Washington D.C. and South Florida law firm of $400 for partners and $250 for associates).

(H/T to SouthFloridaLawyers.blogspot.com)

Additional Insured May Be Entitled to Separate, Independent Counsel When There is a Conflict With a Co-Insured

Recently, I wrote a synopsis of Univ. of Miami v. Great Am. Ins. Co., Case No. 3D09-2010 (Fla. 3d DCA Feb. 20, 2013), which was published on Hinshaw & Culbertson’s website.  In essence, the holding of the case is beneficial for policyholders and may create a duty for an insurer to provide separate counsel (i.e., another attorney), to an additional insured in situations where the named insured and additional insured have a conflict.  For more details, check out the article in its entirety, which can be found here, and is reproduced below as well.

On July 18, 2000, a young child drowned and nearly died while at a summer swim camp held on a university’s campus. The child’s parents sued both the camp and the university for negligent supervision. The lawsuit also included allegations that the university was vicariously liable for the camp’s negligence.

The university was an additional insured under a commercial general liability policy issued to the camp. The policy contained a separation of insureds provision.

In response to the lawsuit, the insurer retained the same defense counsel to represent both the university and the camp. Shortly after suit was filed, the university advised the insurer that there was a conflict of interest in the single representation of itself and the camp, and demanded independent counsel of its own choice. The insurer refused, and the university retained counsel at its own expense.

After the negligence case settled, the university filed a declaratory judgment action against the insurer, arguing that the insurer breached the policy by failing to provide it with separate counsel from the camp. The university sought reimbursement of its defense costs and attorneys’ fees.

The insurer moved for summary judgment, arguing that there could be no conflict of interest in its representation by a single counsel because the camp was contractually bound to indemnify and hold harmless the university for any liability arising out of the camp’s use of its facilities. The trial court agreed and held that the insurer had no obligation to reimburse the university for its fees and costs.

In a case of first impression, Univ. of Miami v. Great Am. Ins. Co., Case No. 3D09-2010 (Fla. 3d DCA Feb. 20, 2013), Florida’s Third District Court of Appeal reversed the trial court’s holding. On appeal, the university argued that there was an obvious conflict of interest with the camp, as evidenced by the pleadings which contained direct allegations of negligence on the part of both defendants as well as vicarious liability. The defendants also each alleged that they were relieved of liability based on the negligence of the other in their answers to the complaint.

The court agreed with the university, concluding that it was entitled to its own independent counsel based on the allegations and record evidence which established “inherently adverse” legal defenses between the university and camp. To defend both co-defendants, the court observed that “counsel would have had to argue conflicting legal positions, that each of its clients was not at fault, and the other was, even to the extent of claiming indemnification and contribution for the other’s fault. In so doing, legal counsel would have had to necessarily imply blame to one co-defendant to the detriment of the other.” According to the court, “[o]n these facts, we believe this legal dilemma clearly created a conflict of interest between the legal defenses of the common insureds sufficient to qualify for indemnification for attorney’s fees and costs for independent counsel.”

While the holding of this case is noteworthy, the dissent is also significant. In a lengthy and well-reasoned dissent, Judge Frank A. Shepherd noted that there was no actual conflict of interest or even a “‘substantial risk’ of conflict” between the insureds. Judge Shepherd observed that the majority’s decision to afford the university and camp separate counsel on the basis of mere finger pointing created by their own pleadings was nothing more than a “paper conflict.” According to the dissent, the majority would afford insureds “separate counsel any time an insured articulates a conflict in a pleading, whether or not real.”

Judge Shepherd further noted that the “flaw in the majority opinion is that it confuses and conflates insurer obligations in three unrelated circumstances: (1) the duty to defend; (2) conflicts between an insured and insurer; and (3) conflicts between insureds.” In a statement based on the majority’s citation of cases from all three circumstances, Judge Shepherd observed that this case involved only the third circumstance and that “the majority makes no effort to distinguish among them in its resolution of this case.”

Practice Note

This case expands an insured’s right to independent defense counsel where there is a perceived conflict of interest with a co-insured. Although the dissent argued that this case expands the requirement to provide separate defense counsel to insureds anytime an insured “articulates a conflict in a pleading,” the majority also relied upon “record evidence” submitted on summary judgment. From a practical standpoint for insurers, where an insured seeks separate, independent counsel from a co-insured and there are allegations of a conflict of interest between them, separate counsel may need to be provided.

The actual case opinion is also available on the link above.

Bad Faith Discovery of Claims and Underwriting Files is Generally Irrelevant in a Coverage Action

Florida courts have consistently ruled that bad-faith discovery of an insurer’s business policies and claims handling procedures is premature until the insurer’s obligation to provide coverage has been established.  Florida’s Third DCA reiterated this rule in XL Specialty Ins. Co. v. Skystream, Inc., 988 So.2d 96, 98 (Fla. 3d DCA 2008).

In Skystream, the insurer initiated a declaratory judgment action to determine that it owed no duty to defend and indemnify against claims brought by the estates of passengers killed in an airplane crash. After the insurer’s duty to defend was determined on cross-motions for summary judgment, the insureds moved to amend to assert bad faith and also propounded bad faith discovery. In response, the insurer moved to dismiss and opposed the discovery with a motion for protective order, which the lower court denied. On certiorari review, the court held that the bad faith discovery was premature, even though there was a determination of coverage, because there still was not a ruling regarding damages. Id. at 98 (citing Imhof v. Nationwide Mut. Ins. Co., 643 So.2d 617, 619 (Fla. 1994)).

Insurance Agents Are Not Liable for Attorney’s Fees Under Florida Statute Sec. 627.428

Underwood Anderson & Assoc., Inc. v. Lillo’s Italian Rest., Inc., (Fla. 1st DCA 2010)

An insurance agent appealed the trial court’s award of $100,000 in attorney’s fees to the insured under Fla. Stat. § 627.428(1) after a judgment for negligence procurement of a flood insurance policy in the insured’s favor, because, the agent claimed, he did not qualify as an insurer under the terms of the statute. The court agreed and held that the agent did not constitute an insurer under § 627.428(1) because he merely facilitated the insurance contract to which he was not a party.

Appraisal is Only Covered Under Ordinance and Law Coverage if Loss Actually Occurs During Policy Period

Jossfolk v. United Prop. & Cas. Ins. Co. (Fla. 4th DCA 2013)

The roof of an insured structure was damaged and submitted for appraisal. A neutral appraisal entered an award on damages, but stated that Ordinance and Law coverage (which represents the cost of bringing any structure into compliance with applicable ordinances or laws) had not been appraised. The insurer made payment to the insured based upon the award and the insured then applied for a roofing repair permit from the City of Weston, claiming that 34% of the roof area needed repair. The City of Weston rejected the permit since the repair exceeded the area allowed by the building code to be repaired without requiring replacement of the entire roof system. The insured then asked the insurer to pay for the entire roof repair under Ordinance and Law Coverage, but the insurer declined to increase payment.

As a result, the insured filed a declaratory judgment action, seeking a ruling that the insurer must participate in an appraisal for Ordinance and Law coverage. A trial court entered final summary judgment in favor of the insured, noting the insurer’s argument that the appraiser had denied Ordinance and Law coverage. On appeal, the fourth district disagreed, concluding that Ordinance and Law coverage is not recoverable until it is incurred. Stated differently, the fourth district ruled that because no Ordinance and Law Coverage was incurred at the time of the original appraisal, the appraisal never appraised Ordinance and Law Coverage.

Action for Bad Faith Was Ordered to Arbitration Based on Insurance Policy’s Arbitration Provision

Truck Ins. Exchange v. Pediatrix Med. Grp., Inc. (4th DCA 2013)

In this very brief opinion concerning an insurance bad faith action, the court entered a stay of the proceedings and reversed a trial court’s order denying a motion to compel arbitration. The court explained that because the insurance policy in question contained an arbitration provision and because the issues raised in the bad faith action were “inextricably intertwined with arbitrable issues,” the “trial court should have granted the motion to compel arbitration of the underlying issues and stayed the present case until those issues are decided” in arbitration.

An Insurance Carrier’s Duty to Defend Under Florida Law

The duty to defend based on an insurance policy under Florida law is very straightforward.  Florida applies a test that the duty to defend is determined strictly by the allegations in the complaint as compared to the insurance policy. See Higgins v. State Farm Fire & Cas. Co., 894 So.2d 5, 9-10 (Fla. 2004). An insurer must defend only when the complaint includes allegations that “fairly and potentially” bring the transaction within the coverage provisions of the policy. Trizec Properties, Inc. v. Biltmore Constr. Co., 767 F.2d 810, 811 (11th Cir. 1985). When an exclusion in the policy applies, there is no duty to defend.  Acceptance Ins. Co. v. Bates, Dunning & Assocs., Inc., 858 So.2d 1068, 1069 (Fla. 3d DCA 2003). 

What does the “duty to defend” mean?  Essentially, it means that if an insured party is sued, the insurance carrier will “defend” it against the lawsuit.  In other words, they will hire and pay for an attorney to defend the insured.  When an insurance company hires an attorney to defend the insured party, the hired attorney finds himself in sort of a dual role.  On the one hand, the attorney represents the insured party as that is his client.  On the other hand, the insurance company is paying the attorney’s fees.  So, although the attorney must zealously represent the interest of his client (the insured party), he must also report to the insurance carrier and let them know how the case is going.

This dual role is usually not a cause for concern because both the insured party and the insurance company want the same thing: for the insured party to get out of the lawsuit with as little damage as possible.  If there are coverage issues, this may become a little more complicated.   But still, even with coverage issues the insurance carrier and the insured both still have aligned interest when it comes to getting the insured out of the lawsuit unscathed.  For more on the role of the attorney when an insurance company is defending under a reservation of rights, check out The Dance of the Porcupines, by Andy Grigsby.  (It’s linked at the bottom under “Download PDF.”)

Relative of Deceased Insured Was Not Entitled to File Coverage Action Without Proof of Status as Insured

Great Lakes Reinsurance (U.K.) PLC v. Branam (3d DCA 2013)

The complex underlying facts can be summarized thusly: an insurance policy was issued to an individual and to a company for which the individual was the sole officer, director, and shareholder. The individual was then murdered in connection with a coverable loss under the policy and, as a result, one of the individual’s family members filed a claim under the policy, issuing three separate demands. The insurer declined to take a coverage position on these demands, each time requesting documentation to support the relative’s authority to act unilaterally on behalf of the insureds.

The relative filed a breach of contract action against the insurer, contending that the insurer effectively denied coverage by refusing to adjust the relative’s claims within ninety days of their submissions. The insurer moved for a directed verdict, which the trial court denied. The third district reversed, noting the lack of evidence to establish that the claims filed were valid or otherwise triggered the insurer’s contractual obligations. More specifically, the court emphasized that without the policy rights and without a trial court order authorizing the relative to file a claim unilaterally, the relative remained a stranger to the policy and lacked authority to file a claim thereunder.

Insured’s Failure to Comply With EUO Requirements Was a Breach of the Policy’s Cooperation Clause

Citizens Prop. Ins. Corp. v. Ifergane (Fla. 3d DCA 2012)

This case involved a coverage dispute with regard to a wind-only dwelling policy issued by Citizens Property Insurance Corporation. The policy was issued solely to Alexandra Ifergane and provided coverage with respect to a house in which Alexandra resided with her then-husband, Haim.

In October of 2005 the house sustained damages during Hurricane Wilma. The following month Alexandra and Haim divorced and Alexandra thereafter executed a quit claim deed to Haim, assigning him all of her rights and interests in the home. When a tender was made to Citizens for the 2005 damages, Citizens sought to take examinations under oath of Haim and Alexandra. Alexandra declined to comply with the requests, asserting that she was not obligated to sit for an EUO since she had assigned to Haim all of her rights and interests in the property.

In response, Citizens filed an action for declaratory judgment against the Iferganes, seeking a determination regarding its coverage obligations. Citizens sought, inter alia, a determination as to the validity of the quit claim assignment, a declaration that Alexandra is obligated to appear for an EUO (examination under oath) and to comply with other policy conditions, and a determination that Alexandra’s failure or refusal to comply with the EUO request and policy conditions constituted a breach of contract precluding recovery under the policy as a matter of law. Alexandra moved to dismiss the complaint and Haim, in turn, filed a cross-motion insisting that Alexandra’s alleged failures could not be imputed to him because he was an innocent resident spouse co-insured under the policy.

Ultimately, the proceedings led to the entry of three distinct orders which were all at issue on appeal before the Third District. First, was an order granting, with prejudice, Alexandra’s motion to be dismissed as a party. The Third District ruled that this order was properly entered since, by virtue of the valid assignment, Alexandra no longer had an “actual, present, adverse and antagonistic interest in the subject matter of the amended complaint ….” There were two other orders reviewed: an order of final judgment and an order granting Haim’s motion for partial summary judgment as to coverage. The court reversed both, ruling that these orders were erroneously entered. The two reasons provided were, first, because there were genuine issues of material fact as to whether Haim was entitled to coverage as a resident spouse on the date of loss and, second, because the assignment from Alexandra to Haim did not relieve Alexandra of her post-loss obligations (as opposed to rights) as a named insured under the policy.