Jones, Foster, Johnston & Stubbs, P.A. v. Prosight-Syndicate 1110 at Lloyd's
680 F. App'x 793
| 11th Cir. | 2017Background
- ProSight issued a professional liability policy to law firm Jones Foster (May 1, 2013–May 1, 2014) that covered "damages for claims" arising from professional services and obligated ProSight to "defend any suit against the Insured seeking Damages." The policy defined "Damages" as compensatory judgments, settlements, or awards, and excluded sanctions and non-pecuniary relief.
- In related litigation, Third Point moved in federal court for an order to show cause why plaintiff Carroll and his lawyers at Jones Foster should be held in contempt and sanctioned for violating a state-court protective order; the motion sought sanctions under Rule 11, 28 U.S.C. § 1927, and inherent powers, including attorneys’ fees and dismissal of claims.
- Jones Foster sought defense coverage from ProSight for the contempt/sanctions motion; ProSight denied coverage, reasoning the relief sought was sanctions/non-pecuniary and excluded by the Policy.
- Jones Foster sued ProSight (breach of contract, declaratory relief); ProSight removed and moved to dismiss under Rule 12(b)(6). The district court granted dismissal with prejudice, holding the policy unambiguously excluded contempt/sanctions.
- On appeal, the Eleventh Circuit reviewed de novo, applying Florida contract/insurance law principles (duty to defend determined by allegations; coverage terms given ordinary meaning; ambiguities construed for insured only if actual ambiguity exists).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ProSight had a duty to defend the contempt/sanctions motion | Contempt motion sought attorneys’ fees and costs (monetary relief) which are compensatory; thus the motion at least partially sought "Damages" covered by the Policy, triggering a duty to defend | Policy unambiguously limits defense to suits seeking compensatory judgments/awards and explicitly excludes sanctions and non-pecuniary relief; contempt sanctions—even monetary—are sanctions and excluded | Held for ProSight: no duty to defend because the motion sought sanctions (including monetary sanctions) excluded by the Policy |
| Whether the policy’s dishonest/fraud exclusion created an independent duty to defend allegations of fraudulent/dishonest conduct | The exclusion’s defense-until-ruled language requires ProSight to defend any proceeding alleging dishonest/fraudulent conduct regardless of whether the proceeding seeks sanctions | Exclusion must be read in context with coverage provisions; it only removes coverage that would otherwise exist and does not create new coverage obligations | Held for ProSight: exclusion does not compel a defense where coverage does not otherwise exist |
| Whether the Policy excluded only sanctions assessed directly against the firm (so indirect sanctions against firm could be covered) | Because the Policy bars only sanctions "assessed directly against any insured," indirect sanctions against the firm based on attorneys’ misconduct should be covered | The contempt motion targeted individual attorneys, not the firm as an entity; no indirect sanctions against the firm were sought | Held for ProSight: irrelevant—motion sought sanctions against individuals, not the firm |
| Whether the innocent-insured clause required ProSight to defend the firm even if the individual attorneys were alleged to have committed wrongdoing | The firm is an innocent insured because alleged misconduct was limited to two attorneys; innocent-insured provision should preserve defense for the firm | The innocent-insured provision applies only when coverage would exist but be lost by the exclusion; here coverage never existed for sanctions, so the provision cannot create coverage | Held for ProSight: innocent-insured clause inapplicable because no initial coverage for sanctions existed |
Key Cases Cited
- James River Ins. Co. v. Ground Down Eng’g, Inc., 540 F.3d 1270 (11th Cir. 2008) (standard of review on Rule 12(b)(6) and contract interpretation)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for complaints)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standards)
- Jones v. Fla. Ins. Guar. Ass’n, 908 So. 2d 435 (Fla. 2005) (insurer's duty to defend broader than duty to indemnify; resolve doubts for insured)
- Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29 (Fla. 2000) (policy terms given ordinary meaning; construe whole policy)
- Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528 (Fla. 2005) (policy must actually be ambiguous to construe for insured)
- Category 5 Mgmt. Grp. v. Companion Prop. & Cas. Ins. Co., 76 So. 3d 20 (Fla. Dist. Ct. App. 2011) (insurer must defend entire suit if allegations are partially within coverage)
- Sizzler Family Steak Houses v. W. Sizzling Steak House, Inc., 793 F.2d 1529 (11th Cir. 1986) (civil contempt can serve compensatory purposes but remains a sanction)