Insured’s Failure to Fulfill Policy Condition Fatal to Coverage
It seems that the insurance contract is the only contract that the parties don’t read. Failure to read and understand an insurance contract can be, and often is, expensive to the insured who fails to read and comply with the policy contract.
In Steadfast Insurance Company v. The Celebration Source, Inc., a Florida corporation, Michael J. Campi, Paul M. Campi, David L. Campi, E.F., a minor, by and through her parents and natural guardians, Robert Frank and Terri Frank, Robert Frank, individually, Terri Frank, individually, Jeremy J. Soto, et al., No. 17-11115, United States Court Of Appeals For The Eleventh Circuit (May 7, 2018) the Defendants appealed the district court’s grant of summary judgment in favor of Steadfast Insurance Company (“Steadfast”). The district court concluded that Steadfast owed no duty to defend or to indemnify its insured, The Celebration Source, Inc. (“Celebration”), in an underlying state court tort lawsuit.
Celebration is an event planning company that provides games and rides for special events. On 17 December 2011, E.F. was injured while riding on a piece of recreational equipment — called the “Psycho Swing” — operated by Celebration. At their client’s request, Celebration had borrowed the “Psycho Swing” from another vendor for use at the 17 December event.
Robert and Terri Frank, individually and on behalf of E.F., filed the underlying tort lawsuit against the Celebration Defendants in Florida state court. The lawsuit alleges injuries stemming only from the “Psycho Swing.”
At the time of the 17 December incident, Celebration was covered under a Commercial General Liability insurance policy issued by Steadfast (“Policy”). Steadfast undertook to defend the Celebration Defendants in the underlying lawsuit under a complete reservation of rights. Then, Steadfast filed this declaratory judgment action, seeking a declaration that it, in reality, owes no duty to defend or to indemnify the Celebration Defendants in the underlying suit. The district court granted summary judgment in favor of Steadfast.
Under Florida law, an insurer owes a duty to defend its insured when the complaint alleges facts that fairly and potentially bring the suit within policy coverage. Any doubts regarding the duty to defend must be resolved in favor of the insured. Where there exists no duty to defend, an insurer has no duty to indemnify.
When an insurance policy’s language is “clear and unambiguous,” it is construed according to its plain language. In other words, if the language of an insurance policy is clear, it must be construed to mean what it says and nothing more.
Courts have no power to create insurance coverage, if it does not otherwise exist by the terms of the policy. If the policy language is ambiguous, however, the policy is interpreted liberally in favor of the insured and strictly against the drafter who prepared the policy. When construing insurance policies courts should read each policy as a whole, endeavoring to give every provision its full meaning and operative effect.
The Policy includes an “Equipment Schedule” which identifies each piece of equipment covered under the Policy. The “Equipment Schedule” says expressly, “Please note that there is no coverage for any equipment not indicated.”
The Policy also includes a Newly Acquired Recreational Apparatus (“NARA”) Endorsement. The NARA Endorsement establishes a “limitation of coverage” for newly acquired equipment. In pertinent part, the NARA Endorsement includes this language: “Coverage for ‘bodily injury’ and ‘property damage’ arising out of the ownership, ‘maintenance,’ or use of recreational apparatus you ‘acquire’ after the effective date of this policy, shall apply only if the following conditions are met: . . . 3. You tell us within 30 days after you ‘acquire’ the amusement device and/or recreational apparatus that you want us to cover it for Commercial General Liability.”
The plain language of the Policy provides unambiguously that no coverage exists for equipment not listed in the Equipment Schedule. Consistent with the express terms of the Policy, the NARA Endorsement then sets forth the means by which newly acquired equipment may be added to the Policy. Under the clear and unambiguous terms of the NARA Endorsement, coverage for newly acquired equipment applies “only if” (among other things) the insured notifies Steadfast within 30 days that it seeks coverage for a new piece of equipment.
Because the insured failed to comply with the “clear and unambiguous” 30-day notice requirement, the newly acquired equipment was never covered under the policy.
The 30-day notice provision at issue here contains no ambiguity. That the “Psycho Swing” was not listed in the Policy’s Equipment Schedule is undisputed. Celebration also concedes that it provided no notice to Steadfast within the 30-day period that it wanted Steadfast to provide coverage under the Policy for the “Psycho Swing.” Because Celebration failed to satisfy the conditions set forth in the NARA Endorsement for adding newly acquired equipment, no coverage existed under the Policy for bodily injuries arising out of ownership, maintenance, or use of the “Psycho Swing.” The allegations in the underlying state court lawsuit thus fall outside the Policy’s coverage.
The district court concluded correctly — as a matter of Florida law — that Steadfast owes no duty to defend or to indemnify the Celebration Defendants in the underlying state
All the insured needed to do to get coverage for injuries caused by the Psycho Swing was to advise the insurer it was acquired and it wanted it insured. It did not. Failure to read the policy and comply with the condition was fatal to the claim.
© 2018 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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