Courtney FARRER, as assignee of Gulf Coast Transportation, and Cooperative Leasing, Inc., Appellants,
v.
UNITED STATES FIDELITY & GUARANTY COMPANY, a corporation, Brown & Brown, Inc., and Barry Brannen, Appellees.
District Court of Appeal of Florida, Fourth District.
*87 Justin C. Johnson and David A. Paul of Justin C. Johnson & Associates, P.A., and Michael J. Keane and Brandon S. Vesely of Keane, Reese, & Vesely, P.A., St. Petersburg, for appellants.
Judith W. Simmons and Amy M. Tamargo of Simmons & Dunlap, Tampa, for appellee United States Fidelity and Guaranty Company.
Neil Rose and Steven J. Chackman of Bernstein & Chackman, P.A., Hollywood, for appellees Brown & Brown, Inc. and Barry Brannen.
ON MOTION FOR REHEARING
WARNER, J.
We deny the motion for rehearing, withdraw our previously issued opinion, and substitute the following in its place.
Appellant, Courtney Farrer, appeals and United States Fidelity & Guaranty Company ("USF & G") cross-appeals from a final summary judgment entered partly in favor of USF & G and partly in favor of Farrer in this insurance dispute.[1] The trial court found that USF & G had a duty to defend but not to indemnify as to two of Farrer's counts. It also found no duty to either defend or indemnify as to a third count. We disagree and conclude that, at a minimum, material issues of fact remain that should have precluded the entry of summary judgment in this matter.
In 1993, Farrer was a passenger in a taxi cab owned by Gulf Coast Transportation, Inc. and Cooperative Leasing, Inc. ("the insureds"). At some point during the ride, the driver of the cab drove Farrer to a remote location and sexually assaulted her. Farrer sued the insureds for negligent hiring, negligent retention, and breach of contract for safe transportation. She did not sue the driver. During the underlying tort action, it was revealed that, prior to the attack on Farrer, the cab driver had been arrested for indecent exposure (to which he entered a nolo contendere plea) and loitering for prostitution, both of which occurred in June of 1987. Also, the Hillsborough County Public Transportation Commission issued two warnings to the driver, one for a dress code violation and the second for being discourteous to a passenger by asking sexual questions. That passenger filed an incident report in May of 1992 in which she stated that the driver had made advances towards her and touched her leg.
The underlying tort action against the insureds settled, and a stipulated final judgment in the amount of $700,000 was entered against them. Pursuant to the settlement agreement, the insureds agreed to assign to Farrer any and all rights under their commercial general liability policy issued by USF & G. That included the right to be substituted in the insureds' declaratory action concerning USF & G's duty to defend and cover any losses under the policy. Subsequently, Farrer exercised that right by joining the declaratory *88 action and amending the complaint, as to USF & G, to allege a claim for breach of contract and for other declaratory relief. USF & G disputed coverage and any duty to defend. The trial court entered summary judgment on cross motions, finding no coverage under the policy on any of the counts against USF & G and no duty to defend on two of the three counts. The court did not set forth a specific reason supporting its ruling.
Under Section I of the policy, "Coverage A." provides for bodily injury and property damage liability. Within "Coverage A.," section 1.b states:
This insurance applies to "bodily injury" and "property damage" only if:
(1) The bodily injury or property damage is caused by an "occurrence" that takes place in the "coverage territory."
"Occurrence" is defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." "Coverage A." also contained certain exclusions, which included the following:
This insurance does not apply to
a. "Bodily injury" or "property damage" expected or intended from the standpoint of the insured.
. . . .
g. "Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any ... "auto" ... owned or operated by or rented or loaned to any insured.
Of the six issues raised on appeal, we address those relating to "Coverage A.," which include: (1) whether Farrer's claim was an "occurrence" under the commercial general liability policy; (2) whether coverage was excluded by the "expected or intended" exclusion of the policy; and (3) whether coverage was excluded by the "arising out of exclusion of the policy. Farrer contends that these issues should be resolved in favor of a finding that USF & G had a duty to defend and indemnify. USF & G cross-appeals that the court erred in finding a duty to defend on two of the three counts. We conclude that USF & G had a duty to defend, but issues of fact remain concerning whether it had a duty to indemnify. We affirm as to the issues regarding "Coverage B.," insurance for personal injuries.
An insurer's duty to defend is broader than the insurer's duty to indemnify. See McCreary v. Fla. Residential Prop. & Cas. Joint Underwriting Ass'n,
I. An "occurrence" under the policy.
The policy provides coverage for bodily injury that "is caused by an `occurrence' that takes place in the `coverage territory.'" The policy defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Emphasis added). On this issue, we are guided by the principle that "coverage clauses are construed in the broadest possible manner to affect the greatest extent of coverage." McCreary,
USF & G contends that the coverage incident in this case was not an accident, but was an intentional act not covered by the policy. It relies on State Farm Fire & Casualty Co. v. Compupay, Inc., 654 *89 So.2d 944 (Fla. 3d DCA 1995)("Compupay"), to support this argument. In Compupay, a former employee sued Compupay and Compupay's manager for damages stemming from the manager's sexual harassment and sexual discrimination of the employee. The employee also alleged a failure to investigate and negligent retention of the manager. Compupay's insurer denied coverage and refused to provide Compupay with a defense. After the claim was settled, Compupay sued its insurer for its failure to defend. The trial court granted summary judgment in Compupay's favor. On appeal, the third district determined that the manager's acts were intentional and, based on the allegations in the employee's complaint, there was no duty to defend. See id. at 947. Importantly, the complaint alleged that Compupay was aware of the manager's past practices. The court concluded that the manager's "continuing pattern of sexual harassment and discrimination ... [was] predictable and should have been within Compupay's expectation." Id. Thus, "the events were not an accident, and not an `occurrence.'" Id.
A closer case to the present one is Sunshine Birds & Supplies. In Sunshine, two employees residing on the business premises sexually molested minors during non-business hours on the business premises. Like the complaint in Compupay, the complaint in Sunshine alleged negligent hiring and retention of the employees. However, unlike the complaint in Compupay, the Sunshine complaint pled alternatively that the employer had constructive, as opposed to actual, knowledge of the employees' past behavior. Because of the alternatively pled allegations, the third district held that the insurer had a duty to defend. See Sunshine Birds & Supplies, Inc.,
As to USF & G's duty to indemnify, a question of fact remains to be resolved as to whether the insureds' knowledge of the cab driver's past behavior demonstrated actual knowledge of the driver's "proclivity in general" to commit sexual assault. Id. at 911. Specifically, the driver's prior arrests for loitering for prostitution and indecent exposure and his history of making an advance towards a previous passenger do not lead to the certain conclusion that the driver would commit sexual assault. There is no record evidence that the employer knew of any violent acts committed by the driver towards another person. Indeed, the lack of similarity between the employee's former behavior and his behavior in this case distinguishes this case from all others cited. Therefore, as to USF & G's duty to indemnify, a dispute remains to be resolved by the trier of fact as to whether the insureds had actual knowledge of the cab driver's "proclivity" to commit sexual assault.
II. The "expected or intended" exclusion.
The policy excludes coverage for bodily injury "expected or intended from the standpoint of the insured." Exclusionary clauses in insurance contracts are strictly construed. See Westmoreland v. Lumbermens Mut. Cas. Co.,
USF & G looks to the settlement agreement between Farrer and Gulf Coast to support its claim that it is undisputed that Farrer's injury was expected from the standpoint of the insured. In that agreement, Gulf Coast acknowledges that prior to the attack on Farrer it was provided with notice of "the abhorrent and/or criminal behavior and the general unfitness of the driver at the time ... to work as a taxi cab driver." USF & G extrapolates from that statement that Gulf Coast had actual knowledge of the potential of sexual assault. However, the "abhorrent/criminal behavior" which Gulf Coast might have had notice of did not involve conduct suggesting that the driver had violent tendencies. USF & G submits that the "expected" exclusion would deny coverage where an employer knows of wrongful conduct by an employee and later an injury occurs caused by the employee engaging in the same general type of conduct. We do not characterize sexual battery as the same general type of conduct as the non-violent conduct Gulf Coast apparently knew about the driver.
In Grange Mutual Casualty Co. v. Thomas,
III. The "arises out of" exclusion.
The policy excludes coverage for bodily injury "arising out of the ownership, maintenance, use or entrustment to others of *91 any aircraft, `auto' or watercraft owned or operated by or rented or loaned to any insured." USF & G argues that because the sexual assault took place in the taxi cab, Farrer's claims are not covered under the policy. We disagree.
The "arising out of" clause is used in insurance policies in both coverage clauses and exclusionary provisions. On the one hand, insuring or coverage clauses are construed "in the broadest possible manner to effect the greatest extent of coverage." Westmoreland,
USF & G has cited many cases dealing with the use of the phrase "arising out of in insuring clauses, mostly in Personal Injury Protection ("PIP") Clauses. See, e.g., Stilson v. Allstate Ins. Co.,
First, legislative intentas alwaysis the polestar that guides an inquiry under section 627.736(1). Thus, as noted above, the language of the statute must be liberally construed in order to effect the legislative purpose of providing broad PIP coverage for Florida motorists. Second, a key issue in deciding coverage is whether the type of injury sustained by the insured was reasonably in the minds of the contracting parties. Accordingly, when construing the phrase "arising out of" noted above, courts should ask: Is the injury a reasonably foreseeable consequence of the use (or ownership or the maintenance) of the vehicle?
Because violence against motorists is a common occurrence and one that has foreseeable *92 consequences which can be said "to be very much in the contemplation of Florida consumers when they are contracting to purchase auto insurance," the Blish court held that the injuries to the motorist from the assault arose from the use of the vehicle so that PIP benefits were payable for his injuries. Id.
Concurring with the majority in Blish, Justice Anstead conceded that, by its previous decisions, the court already had gone "way down the road" of expanding the coverage of PIP benefits and stated:
If I were writing on a clean slate, I would agree with the dissent of Justice Ehrlich in Novak (repeated in Hernandez). Dissenting in Novak, Justice Ehrlich wrote:
Ms. Novak had started her automobile and was prepared to back up and drive to the bank when she was accosted and shot upon refusal to accede to the demands of Mr. Endicott to give him a ride or the use of her vehicle. I agree with the majority that Ms. Novak's being shot meets the policy definition of "accident." However, I cannot accept the further conclusion of the majority opinion that this accident arose out of the use of the automobile. Suppose Ms. Novak was accosted when she was within a foot or two of her car, with keys in hand, and shot when she refused to give her assailant her keys. Would it be contended that PIP benefits are applicable? Of course not. Then the only difference between the assumed facts and the ones at hand is the situs of the attack, and the mere fact that the attack took place when Ms. Novak was in the automobile does not result in the attack having arisen out of the ownership, maintenance or use of the automobile. See Reynolds v. Allstate Ins. Co.,400 So.2d 496 (Fla. 5th DCA 1981).
Whether Ms. Novak was standing outside of the car or was seated in the car when shot makes no difference. The use of the car was not involved in the act of violence and that is the dispositive element in order to bring into play one's entitlement to PIP under the policy of insurance.
Novak,453 So.2d at 1120 .
We discuss Blish in detail, including Justice Anstead's concurring opinion, to highlight the lengths that the court has gone to liberally construe the "arising out of" language in a PIP insuring clause. We contrast this with the rule that a narrow and strict interpretation must be given to such language in an exclusionary clause. Justice Anstead's concurring opinion implies that even a slightly narrower interpretation of the "arising out of language would result in no PIP coverage for such claims.
The supreme court itself has refused to apply the liberal nexus interpretation in PIP cases to other contexts. In Race v. Nationwide Mutual Fire Insurance Co.,
In analyzing liability coverage for an act arising out of the ownership, maintenance, and use of a motor vehicle, 6B J. Appleman, Insurance Law and Practice, section 4317 (Buckley ed.1979), states:
*93 It has been stated that the liability of an insurer under the "ownership, maintenance, or use" provision should be measured in accord with the terms of a policy as understood by a person of reasonable intelligence. The word "coverage" as used in automobile liability policy means the sum of risks which the policy covers. Ownership, maintenance, or use of the automobile need not be the direct and efficient cause of the injury sustained.
Rather, the courts have only required that some form of causal relationship exist between the insured vehicle and the accident. However, liability does not extend to results distinctly remote, though within the line of causation.
. . . .
Accordingly, three rather interesting rules have been set up to determine the insurer's liability: 1. The accident must have arisen out of the inherent nature of the automobile, as such; 2. The accident must have arisen within the natural territorial limits of an automobile, and the actual use, loading, or unloading must not have terminated; 3. The automobile must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury.
(Footnotes omitted.)
Id. The court held that the injuries suffered from the assault did not arise out of the use of the motor vehicle to afford uninsured motorist coverage to the insured. See id. at 351.
Most recently, the Race test was used to deny coverage under an automobile policy in Lancer Insurance Co. v. Gomez,
Injuries caused by criminal assaults in and about an automobile, but which are not caused by the automobile itself, or do not arise out of the operation, maintenance, or use of an automobile, are not covered under a policy of automobile liability or uninsured motorist coverage. Race,542 So.2d at 351 . The auto must not merely contribute to cause the condition which produces the injury, but must, itself, produce the injury. Taylor v. Phoenix Ins. Co.,622 So.2d 506 , 509 (Fla. 5th DCA 1993).
Id.
In Westmoreland, we examined the use of "arising out of" in the context of an exclusion in a homeowner's policy. The tragic facts revealed that a automobile was left running in a garage. The fumes were able to enter the house, killing all of the occupants. The homeowner's policy contained an exclusion for bodily injury "arising out of the ownership, maintenance, use... of motor vehicles." Judge Farmer reviewed the extensive case law on the construction of the "arising out of" clause in the insuring context and concluded:
The clear import of all of these cases is that, even though the term arising out of in an insuring clause must be liberally construed in favor of coverage, the term nevertheless requires some causal relationship between the injury and use or operation of a motor vehicle, short of proximate cause. Accordingly, the link *94 between an injury and an automobile is not alone, without more, determinative of the construction of the policy provision.
Westmoreland relied on St. Paul Fire & Marine Insurance Co. v. Thomas,
First, we note that Thomas saw a distinct difference in the way arising out of should be construed in an insuring clause from the way it should be construed in an exclusionary clause.273 So.2d at 120 ("[W]e are constrained to follow the well settled and almost universally accepted principle of construing the exclusion in a manner which affords the broadest coverage." [e.s.]). Moreover, although Judge Owen acknowledged that some courts have construed arising out of broadly in the sense of origination or appearance, he nevertheless also concluded that:
"no court has permitted the exclusionary clause of the personal liability policy to become applicable where the causal connection between the injury and the use of the automobile was not at least as strong as the `arising out of standard required under the automobile policy." [e.s.]
Most important to the present case, it is the obvious intent of the insurer that leads to the strict or narrow construction of arising out of in this exclusionary clause. As Judge Owen pointed out, there is specific intention in excluding some claims from the homeowner's coverage where a motor vehicle is used. As he explained, the purpose served the insurer in inserting such an exclusion in the homeowner's provision is for:
"the automobile policy and the homeowner's policy to be complementary to one another, that is, that the coverage under one takes up where the other leaves off, with neither hiatus nor overlapping of such coverage."
273 So.2d at 120 . That same underwriting intent would be even more apparent when both homeowners and motor vehicle coverages appear in the same policy.
Considering the foregoing, and consistent with the principle that an exclusionary clause should be narrowly construed, we adopt the rules of Race as providing the narrower construction of a clause excluding liability for injuries "arising out of" the use of a motor vehicle. Applying those three principles to the facts of this case, it is clear that the sexual assault did not "arise out of" the use of the vehicle. While the assault occurred within the auto, it did not arise out of the inherent nature of the vehicle. More importantly, the automobile did not itself produce the injury, thus failing to satisfy Race's third test. We therefore conclude that under the analysis of Race, as applied in Gomez, the sexual assault which occurred in this case did not arise out of the use of the automobile, and the exclusion does not negate coverage under USF & G's policy.
IV. Conclusion.
As to "Coverage A.," insurance for bodily injury, we conclude that the incident did not arise out of the use of a vehicle so as to exclude coverage. However, issues of fact remain as to whether it constituted an "occurrence" within the policy provisions and whether the cab driver's prior conduct created the expectation that the sexual assault in this case would occur. As such, the trial court erred in entering summary judgment. The allegations of the complaint bring this case within the policy coverage; therefore, there is a duty to defend. Whether there is a duty to indemnify will depend on what facts are proven on remand.
With respect to "Coverage B." for insurance for personal injuries, we conclude that as a matter of law USF & G had no duty to defend or indemnify.
We do not address USF & G's claim that Gulf Coast Transportation, Inc. and Cooperative Leasing, Inc. were not insureds, as that issue was not raised at the summary judgment hearing. For purposes of that hearing, USF & G assumed without conceding that they were insured. We affirm without comment as to the remaining issues raised.
We reverse and remand for further proceedings in this case.
TAYLOR, J., and DELL, JOHN W., Senior Judge, concur.
NOTES
Notes
[1] The trial court's summary judgment order was only on those counts against USF & G. Therefore, the counts against the remaining named appellees will not be addressed in this appeal and have been abated by the trial court.