Insurer Has No Duty to Indemnify Under Florida Law Because Sub-Contractor is a Statutory Employee

Stephens v. Mid-Continent Casualty Co., No. 13-10170, from SDFla

Senior District Judge Friedman (D.D.C.) joined by Circuit Judge Pryor and Circuit Judge Jordan.

Summary:  The insured’s assignee sued the insurer for refusing to defend and indemnify the insured in a state court proceeding brought by the estate of a construction worker who died after a fall at a job-state. The district court granted summary judgment to the insurer.

 The insurance policy contained a standard employee exemption clause, which exempted coverage for bodily injury to an employee of the insured.  The issue was whether the construction worker, who was employed by a subcontractor of the insured, was one of the insured’s employees. The panel agreed with the district court that this clause referred to both actual employee and statutory employees, and held that, under Florida law, the construction worker was an employee of the insured.

The issue of whether the insurer had a duty to defend and indemnify was more complicated, because under Florida law an insurer must defend even if it is uncertain whether coverage exists under a policy.  The state court complaint filed against the insured did not contain any facts suggesting that there was an employment relationship between the insured and the construction worker.  The panel thus avoided the question of whether there was a duty to defend, concluding that there was no duty to indemnify, because the construction worker, as a sub-contractor, was a statutory employee of the insured.  The employee exemption thus barred coverage. 

Concurring opinion by Circuit Judge Jordan: Judge Jordan fully joined the majority opinion, but wrote separately to note that this was a close case, given its summary judgment posture.

Note: This opinion makes reference to a Coblentz agreement between the insured and the assignee.  In the Eleventh Circuit, where a liability insurer is informed of an action against its insured, but declines to defend the insured, the insurer may be held to a consent judgment entered in that action, absent fraud or collusion.  See Coblentz v. Am. Sur. Co. of New York, 416 F.2d 1059 (5th Cir. 1969).  To recover on a Coblentz agreement, a plaintiff must show: (1) that an insurer wrongfully refused to defend; (2) that the insurer had a duty to indemnify under the policy; and (3) the settlement between the insured and the assignee was reasonable and made in good faith.  This is why the lack of a duty to indemnify, standing alone, was enough to defeat the assignee’s claim, and why there was no need for the panel to address the difficult issue of whether there was a duty to defend.