26
Fla. L. Weekly Fed. C1665aTop of Form
Fla. L. Weekly Fed. C1665aTop of Form
Insurance
— Liability — Executive and organization liability policies — Coverage —
Exclusions — Professional services — Bankruptcy trustees who were assigned
the policy rights of insured bank and its executives filed breach of contract
and bad faith action after primary and excess insurance carriers denied
coverage for underlying suit against insureds to recover for losses caused by
Ponzi scheme — District court did not err in dismissing the action, because
coverage was barred by professional services exclusion found in primary and
excess policies at issue — In reasoning that plain language of professional
services exclusion barred coverage because some of the insured executives
provided professional banking services directly to law firm involved in
underlying suit, district court properly observed that the phrase “any insured”
in the exclusion makes the obligations “jointly rather than severally held” and
“unambiguously expresses a contractual intent to create joint obligations”
— Liability — Executive and organization liability policies — Coverage —
Exclusions — Professional services — Bankruptcy trustees who were assigned
the policy rights of insured bank and its executives filed breach of contract
and bad faith action after primary and excess insurance carriers denied
coverage for underlying suit against insureds to recover for losses caused by
Ponzi scheme — District court did not err in dismissing the action, because
coverage was barred by professional services exclusion found in primary and
excess policies at issue — In reasoning that plain language of professional
services exclusion barred coverage because some of the insured executives
provided professional banking services directly to law firm involved in
underlying suit, district court properly observed that the phrase “any insured”
in the exclusion makes the obligations “jointly rather than severally held” and
“unambiguously expresses a contractual intent to create joint obligations”
HERBERT STETTIN, Trustee, Plaintiff,
ROBERT C. FURR, Trustee, MICHAEL I. GOLDBERG, not individually, but as Chapter
11 Trustee of the estate of the debtor, Rothstein Rosenfeldt Alder, P.A., BAYON
INCOME FUND, LP., et al., Plaintiffs-Appellants, v. NATIONAL UNION FIRE
INSURANCE COMPANY OF PITTSBURGH, PA, TWIN CITY FIRE INSURANCE COMPANY,
Defendants-Appellees, AONRISK SERVICES INC. OF MASSACHUSETTS, et al.,
Defendants. 11th Circuit. Case No. 15-14716. July 5, 2017. Appeal from the U.S.
District Court for the Southern District of Florida (No. 1:13-cv-21653-KMW).
ROBERT C. FURR, Trustee, MICHAEL I. GOLDBERG, not individually, but as Chapter
11 Trustee of the estate of the debtor, Rothstein Rosenfeldt Alder, P.A., BAYON
INCOME FUND, LP., et al., Plaintiffs-Appellants, v. NATIONAL UNION FIRE
INSURANCE COMPANY OF PITTSBURGH, PA, TWIN CITY FIRE INSURANCE COMPANY,
Defendants-Appellees, AONRISK SERVICES INC. OF MASSACHUSETTS, et al.,
Defendants. 11th Circuit. Case No. 15-14716. July 5, 2017. Appeal from the U.S.
District Court for the Southern District of Florida (No. 1:13-cv-21653-KMW).
(Before JORDAN and JULIE CARNES,
Circuit Judges, and SCHLESINGER,* District Judge.)
Circuit Judges, and SCHLESINGER,* District Judge.)
(JORDAN, Circuit Judge.) This appeal
is another remnant of the Ponzi scheme orchestrated by Scott Rothstein through
his law firm, Rothstein Rosenfeldt Adler. See, e.g., S.E.C. v. Levin,
849 F.3d 995 (11th Cir. 2017) [26 Fla. L. Weekly Fed. C1407a]; Coquina Invs.
v. TD Bank, N.A., 760 F.3d 1300 (11th Cir. 2014) [25 Fla. L. Weekly Fed.
C230a]; In re Rothstein, Rosenfeldt, Adler, P.A., 717 F.3d 1205 (11th
Cir. 2013) [24 Fla. L. Weekly Fed. C357a]. It arises out of litigation based on
the alleged conduct of certain executives of Gibraltar Private Bank and Trust
Company, at which RRA maintained accounts.
is another remnant of the Ponzi scheme orchestrated by Scott Rothstein through
his law firm, Rothstein Rosenfeldt Adler. See, e.g., S.E.C. v. Levin,
849 F.3d 995 (11th Cir. 2017) [26 Fla. L. Weekly Fed. C1407a]; Coquina Invs.
v. TD Bank, N.A., 760 F.3d 1300 (11th Cir. 2014) [25 Fla. L. Weekly Fed.
C230a]; In re Rothstein, Rosenfeldt, Adler, P.A., 717 F.3d 1205 (11th
Cir. 2013) [24 Fla. L. Weekly Fed. C357a]. It arises out of litigation based on
the alleged conduct of certain executives of Gibraltar Private Bank and Trust
Company, at which RRA maintained accounts.
Gibraltar and some of its executives
were named as defendants in numerous suits seeking to recover for losses caused
by Mr. Rothstein’s scheme. They requested that their insurance carriers,
National Union Fire Insurance Company of Pittsburgh and Twin City Fire Insurance
Company, extend coverage under Gibraltar’s executive and organization liability
insurance policies towards a joint settlement of the claims.
were named as defendants in numerous suits seeking to recover for losses caused
by Mr. Rothstein’s scheme. They requested that their insurance carriers,
National Union Fire Insurance Company of Pittsburgh and Twin City Fire Insurance
Company, extend coverage under Gibraltar’s executive and organization liability
insurance policies towards a joint settlement of the claims.
When National Union and Twin City
denied coverage, Gibraltar and its executives began settlement discussions without
the insurance companies. The parties eventually reached a settlement, which
included Gibraltar and the executives assigning their policy rights to the
bankruptcy trustees of RRA and of other entities that lost money in the Ponzi
scheme.
denied coverage, Gibraltar and its executives began settlement discussions without
the insurance companies. The parties eventually reached a settlement, which
included Gibraltar and the executives assigning their policy rights to the
bankruptcy trustees of RRA and of other entities that lost money in the Ponzi
scheme.
After the assignment, the trustees
again unsuccessfully demanded coverage. The trustees then filed suit, asserting
breach of contract and bad faith claims. National Union and Twin City moved to
dismiss the action, arguing that coverage was barred by a “professional services
exclusion” found in each of the policies. The district court agreed, and
granted the insurers’ motions. The trustees now appeal.
again unsuccessfully demanded coverage. The trustees then filed suit, asserting
breach of contract and bad faith claims. National Union and Twin City moved to
dismiss the action, arguing that coverage was barred by a “professional services
exclusion” found in each of the policies. The district court agreed, and
granted the insurers’ motions. The trustees now appeal.
The National Union policy is the
primary policy, while the Twin City policy is an excess policy that follows the
primary policy’s relevant provisions. The terms of the policies are relatively
straightforward. The policies provide for coverage for “the Loss of any Insured
Person arising from a Claim made against such Insured Person for any Wrongful
Act of such Insured Person, except when and to the extent the Organization has
indemnified such an Insured Person.” D.E. 18-1 at 7. The policies also exempt
“professional services” from coverage. The professional services exclusion
reads as follows:
primary policy, while the Twin City policy is an excess policy that follows the
primary policy’s relevant provisions. The terms of the policies are relatively
straightforward. The policies provide for coverage for “the Loss of any Insured
Person arising from a Claim made against such Insured Person for any Wrongful
Act of such Insured Person, except when and to the extent the Organization has
indemnified such an Insured Person.” D.E. 18-1 at 7. The policies also exempt
“professional services” from coverage. The professional services exclusion
reads as follows:
The
Insurer shall not be liable to make any payment for Loss in connection with any
Claim made against any Insured alleging, arising out of, based upon, or
attributable to the Organization’s or any Insured’s performance of or failure
to perform professional services for others, or any act(s), error(s) or
omission(s) relating thereto.
Insurer shall not be liable to make any payment for Loss in connection with any
Claim made against any Insured alleging, arising out of, based upon, or
attributable to the Organization’s or any Insured’s performance of or failure
to perform professional services for others, or any act(s), error(s) or
omission(s) relating thereto.
Id.
at 37.
at 37.
The district court reasoned that the
plain language of the exclusion barred coverage because some of the insured
executives at Gibraltar provided professional banking services directly to RRA.
See D.E. 80 at 18 (“A plain reading of the Professional Services
Exclusion demonstrates that it bars coverage for any Claim made against any
Insured arising out of any Insured’s performance or failure to perform
professional services for others.”). See generally Kattoum v. New Hampshire
Indem. Co., 968 So. 2d 602, 603 (Fla. 2d DCA 2007) [32 Fla. L. Weekly
D2353a] (“If the policy provides joint coverage, the fraud or misconduct of one
insured can be imputed to an ‘innocent co-insured.’ ”) (citation omitted).
plain language of the exclusion barred coverage because some of the insured
executives at Gibraltar provided professional banking services directly to RRA.
See D.E. 80 at 18 (“A plain reading of the Professional Services
Exclusion demonstrates that it bars coverage for any Claim made against any
Insured arising out of any Insured’s performance or failure to perform
professional services for others.”). See generally Kattoum v. New Hampshire
Indem. Co., 968 So. 2d 602, 603 (Fla. 2d DCA 2007) [32 Fla. L. Weekly
D2353a] (“If the policy provides joint coverage, the fraud or misconduct of one
insured can be imputed to an ‘innocent co-insured.’ ”) (citation omitted).
The trustees ask that we reverse.
They contend that the exclusion should be read severally, and therefore barring
coverage only as to the claims against those insured executives who directly
provided professional services to RRA. Under their reading, the district court
erred because claims against executives who were merely responsible for
internal managerial banking functions, like complying with federal reporting
regulations, are not exempt from coverage.
They contend that the exclusion should be read severally, and therefore barring
coverage only as to the claims against those insured executives who directly
provided professional services to RRA. Under their reading, the district court
erred because claims against executives who were merely responsible for
internal managerial banking functions, like complying with federal reporting
regulations, are not exempt from coverage.
We affirm. Applying Florida law, and
exercising plenary review, see Hegel v. First Liberty Ins. Corp., 778
F.3d 1214, 1219 (11th Cir. 2015) [25 Fla. L. Weekly Fed. C949a], we reach the
same conclusion as the district court.
exercising plenary review, see Hegel v. First Liberty Ins. Corp., 778
F.3d 1214, 1219 (11th Cir. 2015) [25 Fla. L. Weekly Fed. C949a], we reach the
same conclusion as the district court.
The district court properly observed
“that the phrase any insured unambiguously expresses a contractual intent to
create joint obligations.” D.E. 80 at 18 (quoting Sales v. State Farm Fire
& Cas. Co., 849 F.2d 1383, 1385 (11th Cir. 1988)) (internal quotation
marks omitted). The phrase “any insured,” as we explained in Sales,
generally makes the obligations under an insurance provision “jointly rather
than severally held” and “unambiguously expresses a contractual intent to
create joint obligations and to prohibit recovery by an innocent co-insured.”
849 F.2d at 1385 (citing cases). Sales involved Georgia law, but Florida
law is generally in accord. See, e.g., USAA Cas. Ins. Co. v. Gordon,
707 So. 2d 1185, 1186 (Fla. 4th DCA 1998) [23 Fla. L. Weekly D805a] (“We have
no trouble concluding that exclusion (h), which excludes coverage for damage
caused by ‘any insured,’ unambiguously results in joint property coverage in
this case.”) (citation omitted).
“that the phrase any insured unambiguously expresses a contractual intent to
create joint obligations.” D.E. 80 at 18 (quoting Sales v. State Farm Fire
& Cas. Co., 849 F.2d 1383, 1385 (11th Cir. 1988)) (internal quotation
marks omitted). The phrase “any insured,” as we explained in Sales,
generally makes the obligations under an insurance provision “jointly rather
than severally held” and “unambiguously expresses a contractual intent to
create joint obligations and to prohibit recovery by an innocent co-insured.”
849 F.2d at 1385 (citing cases). Sales involved Georgia law, but Florida
law is generally in accord. See, e.g., USAA Cas. Ins. Co. v. Gordon,
707 So. 2d 1185, 1186 (Fla. 4th DCA 1998) [23 Fla. L. Weekly D805a] (“We have
no trouble concluding that exclusion (h), which excludes coverage for damage
caused by ‘any insured,’ unambiguously results in joint property coverage in
this case.”) (citation omitted).
Understanding that the phrase “any
insured” must be read in context, see Kattoum, 968 So. 2d at 604-05, we
believe that the district court correctly interpreted the exclusionary
language. Here the professional services exclusion twice uses the phrase “any
insured,” once in referring to the claim made and once in referring to the
professional services rendered. And that, we think, evinces an intent to create
joint obligations. See Thoele v. Aetna Cas. & Sur., 39 F.3d 724,
725-27 (7th Cir. 1994) (holding, under Illinois law, that exclusion barring
coverage for claims arising out of “business pursuits of any insured” included
“injuries triggered by one insured in connection with the business pursuit of
another”). This is not a case like Michigan Millers Mut. Ins. Corp. v.
Benfield, 140 F.3d 915, 926 (11th Cir. 1998), in which we held, under
Florida law, that the interchangeable use of the phrase “an insured” and “the
insured” in a policy created an ambiguity and did not provide joint coverage or
obligations “so as to exclude [an innocent insured] from recovering under the
policy.”
insured” must be read in context, see Kattoum, 968 So. 2d at 604-05, we
believe that the district court correctly interpreted the exclusionary
language. Here the professional services exclusion twice uses the phrase “any
insured,” once in referring to the claim made and once in referring to the
professional services rendered. And that, we think, evinces an intent to create
joint obligations. See Thoele v. Aetna Cas. & Sur., 39 F.3d 724,
725-27 (7th Cir. 1994) (holding, under Illinois law, that exclusion barring
coverage for claims arising out of “business pursuits of any insured” included
“injuries triggered by one insured in connection with the business pursuit of
another”). This is not a case like Michigan Millers Mut. Ins. Corp. v.
Benfield, 140 F.3d 915, 926 (11th Cir. 1998), in which we held, under
Florida law, that the interchangeable use of the phrase “an insured” and “the
insured” in a policy created an ambiguity and did not provide joint coverage or
obligations “so as to exclude [an innocent insured] from recovering under the
policy.”
The trustees rely on Premier Ins.
Co. v. Adam, 632 So. 2d 1054 (Fla. 5th DCA 1994), but that case does not
call for a different result. In Premier, the Fifth District explained
that an insurance policy’s severability clause resulted in separate insurable
interests for each insured, such that each insured must be treated as holding
separate insurance coverage. Id. at 1055-57. As a result,
notwithstanding an exclusion stating that the policy “did not apply” to “bodily
injury or property damage which is expected or intended by any insured,”
coverage could only be denied against an insured who actually committed the
excluded act. Id. at 1056-57 (emphasis added). Here, however, the
insurance policies issued by National Union and Twin City do not contain a
severability clause. And that difference in policy language is fatal to the
trustees’ argument. See Taylor v. Admiral Ins. Co., 187 So. 3d 258,
260-62 (Fla. 3d DCA 2016) [41 Fla. L. Weekly D387b] (citing Premier and
concluding that exclusion applying to conduct of “any insured” would bar claim
but for policy’s severability clause); Gordon, 707 So. 2d at 1186
(explaining that without a severability clause an exclusion applying to the
conduct of “any insured” creates a joint obligation).
Co. v. Adam, 632 So. 2d 1054 (Fla. 5th DCA 1994), but that case does not
call for a different result. In Premier, the Fifth District explained
that an insurance policy’s severability clause resulted in separate insurable
interests for each insured, such that each insured must be treated as holding
separate insurance coverage. Id. at 1055-57. As a result,
notwithstanding an exclusion stating that the policy “did not apply” to “bodily
injury or property damage which is expected or intended by any insured,”
coverage could only be denied against an insured who actually committed the
excluded act. Id. at 1056-57 (emphasis added). Here, however, the
insurance policies issued by National Union and Twin City do not contain a
severability clause. And that difference in policy language is fatal to the
trustees’ argument. See Taylor v. Admiral Ins. Co., 187 So. 3d 258,
260-62 (Fla. 3d DCA 2016) [41 Fla. L. Weekly D387b] (citing Premier and
concluding that exclusion applying to conduct of “any insured” would bar claim
but for policy’s severability clause); Gordon, 707 So. 2d at 1186
(explaining that without a severability clause an exclusion applying to the
conduct of “any insured” creates a joint obligation).
As to the trustees’ other arguments,
we affirm on the basis of the district court’s well-reasoned order.
we affirm on the basis of the district court’s well-reasoned order.
AFFIRMED.
__________________
*Honorable Harvey E. Schlesinger,
United States District Judge for the Middle District of Florida, sitting by
designation.
United States District Judge for the Middle District of Florida, sitting by
designation.
* * *