Thomas Mach., Inc. v. Everest Nat'l Ins. Co.

571 F.Supp.3d 1326

THOMAS MACHINERY, INC., Plaintiff,

v.EVEREST NATIONAL INSURANCE COMPANY, et al., Defendants.

CASE NO. 20-60459-CIV-ALTMAN/Hunt

United States District Court, S.D. Florida.

Signed November 23, 2021

Entered November 24, 2021

Edward Herbert Zebersky, Jordan Alexander Shaw, Kimberly A. Slaven, Candace Alexandra Phillips, Zebersky Payne Shaw Lewenz LLC, Fort Lauderdale, FL, for Plaintiff.

Jedidiah David Vander Klok, Joshua Asher Levy, Kennedys CMK LLP, Miami, FL, for Defendant Everest National Insurance Company.

ORDER

ROY K. ALTMAN, UNITED STATES DISTRICT JUDGE

The Defendant, Everest National Insurance Company, issued a general commercial liability policy (the "Policy") to the Plaintiff, Thomas Machinery, a repair shop for concrete pumps and parts. A third party—Ainsworth International—sued Thomas after Ainsworth's concrete pump truck (the "Truck") was stolen from an unspecified spot in front of Thomas's warehouse. Thomas tendered the defense to Everest, which denied coverage. Although Thomas eventually settled Ainsworth's claims, it incurred some $200,000 in litigation costs. Arguing that these costs were the foreseeable consequence of Everest's refusal to defend Thomas against the Ainsworth suit, Thomas sued Everest in state court, alleging a breach of the insurance contract. Everest removed the case, and the parties have now filed cross-motions for summary judgment on one issue: whether Everest had a duty to defend Thomas against Ainsworth's lawsuit.

After careful review, we conclude that Everest did have a duty to defend. The theft of the Truck constituted "property damage" under the Policy, and Everest never expressly excluded theft from coverage, as it would have been required to do under Florida law. Nor was Everest justified in invoking several Policy exclusions. The first exclusion applies if (1) the property didn't suffer "physical injury" and (2) the property damage "arose out of" the insured's "delay or failure ... to perform" the terms of a contract. Everest has failed to show that Ainsworth's allegations foreclosed any inference that the Truck was physically injured. To the contrary, it's easy to imagine a situation in which, for example, the thief broke into the Truck and hotwired the ignition, causing at least some physical damage. In any event, Everest can't show that the theft "arose out of" Thomas's failure to carry out its contractual obligations because Ainsworth's complaint—by which we are, at this stage, constrained—offers no specifics about any verbal agreement with Thomas.

The second exclusion is a bit trickier. It precludes coverage for any damage to property that's within Thomas's "care, custody or control." Courts around the country—including in Florida—have had some difficulty construing (and applying) this odd and overly-technical provision. But, whatever its contours, Everest again fails to show that no reasonable interpretation of the complaint pushes Ainsworth's underlying claims beyond the scope of the exclusion. Everest, to be sure, offers one reasonable reading that would trigger this exclusion—viz. , that the Truck was stolen only after Thomas accepted delivery and exerted control over it. But there are other plausible readings. And Ainsworth's allegations—cryptic as they are—leave several of these open: for instance, that Thomas didn't know the Truck had been delivered; that, even if it knew, it didn't accept the delivery; or that, by the time the Truck was purloined, Thomas had completed the repairs and had tried to return it to Ainsworth.

Notably, each of these possibilities—unlike Everest's interpretation—fits neatly into the legal theories Ainsworth advanced in the state-court complaint. That's because, in Count II of that complaint, Ainsworth asserted a claim of "negligent bailment," which (it goes without saying) would subsume Everest's version of events—the version that characterizes Thomas as a repair-shop bailee as soon as it knowingly accepted delivery of the Truck. In Count I, however, Ainsworth alleged that Thomas had breached some separate "duty to safeguard." Since Ainsworth had already claimed (in Count II) that Thomas became a repair-shop bailee, this first count would have been entirely superfluous if Everest's were the only acceptable version of events. After all, once Thomas knowingly accepted delivery of the Truck, it became a bailee—precisely what Ainsworth had already alleged in Count II. Count I, in other words, must be saying something different than Count II. What exactly? Well, one (or more) of the three scenarios we've outlined above. In any of those three scenarios, Thomas wouldn't have become a bailee because it wouldn't have been in possession or control of the Truck. These three scenarios, in sum, plausibly explain—in a way that Everest's interpretation does not—the presence of Ainsworth's Count I. And, of course, if Thomas didn't have possession or control of the Truck when it was stolen, then the Truck wasn't in Thomas's care, custody, or control. Since each of these three scenarios would push Ainsworth's complaint beyond the ambit of Everest's exclusion, Everest had a duty to defend the whole case.

As this summation makes plain, we GRANT the Plaintiff's Motion for Summary Judgment ("Pl.’s MSJ")¹ [ECF No. 48] and DENY the Defendant's Motion for Summary Judgment ("Def.’s MSJ")² [ECF No. 56].

BACKGROUND

I. The Underlying Complaint: Ainsworth v. Thomas

In the Underlying Complaint [ECF No. 47-2], Ainsworth alleged that it had entered into a verbal agreement with Thomas to fix the Truck. See id. ¶ 4. Ainsworth claimed that "the concrete pump ... was delivered to [Thomas's] Tampa area business facility," but, "[u]nbeknownst to Ainsworth ... the concrete pump was left by [Thomas] on a street outside of Thomas's business facility, and unsecured." Id. ¶¶ 4–5. When Ainsworth called Thomas about the repair, "Ainsworth was informed that its concrete pump had been stolen the prior evening." Id. ¶ 6.

Ainsworth advanced two causes of action in the Underlying Complaint—negligence and negligent bailment.³ In Count I—the negligence claim—Ainsworth's legal theory was that Thomas "breached its duty to [Ainsworth] to safeguard [Ainsworth's] concrete pump." Id. ¶ 10. Ainsworth's Count II—negligent bailment—turned on the allegation that, although Thomas "had sole, actual and exclusive possession and control of Ainsworth's concrete pump prior to the theft," it "failed to return the concrete pump to Ainsworth" and "failed to exercise ordinary care in its storage of the concrete pump by failing to store the pump within its secure facility or otherwise securing the concrete pump to prevent theft[.]" Id. ¶¶ 14, 16.

II. The Policy

The Policy Everest issued to Thomas covers claims for " ‘property damage’ to which this insurance applies" and imposes on Everest a "duty to defend [Thomas] against any ‘suit’ seeking those damages." Policy [ECF No. 47-1] § I.1(a). The Policy defines "property damage" as (a) "[p]hysical injury to tangible property," or (b) the "[l]oss of use to tangible property that is not physically injured." Id. § V.17. The Policy has two relevant exclusions:

1. The "CCC Exclusion": Excluding coverage for "property damage" to "[p]ersonal property in the care, custody or control of the insured." Id. § I.2(j)(4).

2. "Exclusion M": Excluding coverage for " ‘property damage’ to ‘impaired property’ or property that has not been physically injured, arising out of: (1) A defect, deficiency, inadequacy or dangerous condition in ‘your product’ or ‘your work’; or (2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms." Id. § I.2(m). Exclusion M "does not apply to the loss of use of other property arising out of sudden and accidental physical injury to ‘your product’ or ‘your work’ after it has been put to its intended use." Id.

III. Procedural History

We denied without prejudice the first round of cross-motions on the duty to defend, see Order [ECF No. 44], after concluding that the parties had failed to address several potentially dispositive issues, see Mar. 3, 2021 Hr'g [ECF No. 43]. The parties have since filed renewed motions, which are now ripe for review.⁴ In those motions, Thomas contends that Ainsworth's negligence claim (Count I) triggered Everest's duty to defend—even as it concedes that Count II (Ainsworth's negligent-bailment claim) did not.⁵

THE LAW

Under Florida law,⁶ the insurer's duty to defend is triggered when the underlying complaint against its insured "fairly brings the case within the scope of coverage." Princeton Excess & Surplus Lines Ins. Co. v. Hub City Enters., Inc. , 808 F. App'x 705, 708 (11th Cir. 2020) (cleaned up). "If there is any doubt about the insurer's duty to defend, then the ambiguity must be resolved in favor of the insured." Id. ; see also Stephens v. Mid-Continent Cas. Co. , 749 F.3d 1318, 1323 (11th Cir. 2014) ("The duty to defend arises if the relevant pleadings allege facts that fairly and potentially bring the suit within policy coverage." (cleaned up)). "If the [underlying] complaint alleges facts partially within and partially outside the scope of coverage, the insurer is obligated to defend the entire suit." MJCM, Inc. v. Hartford Cas. Ins. Co. , 2010 WL 1949585, at *4 (M.D. Fla. May 14, 2010) (citing Battisti v. Continental Cas. Co. , 406 F.2d 1318, 1321 (5th Cir. 1969) ).

When the allegations in the underlying complaint "show either that a policy exclusion applies or that no coverage exists, no duty to defend arises." Kenneth Cole Prods., Inc. v. Mid-Continent Cas. Co. , 763 F. Supp. 2d 1331, 1334 (S.D. Fla. 2010) (Jordan, J.) (citing Fed. Ins. v. Applestein , 377 So. 2d 229, 232 (Fla. 3d DCA 1979) ). But, when an insurer relies on a policy exclusion to deny coverage, "it has the burden of demonstrating that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable...