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Hillsborough County v. Star Insurance Co.

United States Court of Appeals, Eleventh Circuit

February 3, 2017

HILLSBOROUGH COUNTY, a political subdivision of the State of Florida, JORGE L. DOMINGUEZ, as Personal Representative of the Estate of Darcia Dominguez, Plaintiffs - Appellees,
STAR INSURANCE COMPANY, a Michigan Corporation, Defendant-Appellant.

         Appeals from the United States District Court for the Middle District of Florida D.C. Docket No. 8:14-cv-02067-EAJ

          Before MARTIN and JORDAN, Circuit Judges, and COOGLER, [*] District Judge.

          JORDAN, Circuit Judge.

         Darcia Dominguez died from injuries sustained in an automobile accident with a Hillsborough County employee in February of 2010. Jorge Dominguez, the personal representative of Ms. Dominguez's estate, filed a wrongful death suit against Hillsborough County in state court, and that action, as far as we know, is still pending. This federal diversity case involves an insurance dispute between the County, Mr. Dominguez, and Star Insurance, the County's excess carrier.

         We confront an issue of first impression under Florida law-the interplay between the limited waiver of sovereign immunity set forth in Fla. Stat. § 768.28(5) and the language of the self-insured retention limit (SIRL) contained in an endorsement to the excess liability policy issued to the County by Star. One Florida appellate court has acknowledged a virtually identical issue but declined to resolve it given the case's procedural posture. See State Nat'l. Ins. Co. v. Robert, 71 So.3d 238, 241 (Fla. 4th DCA 2011).

         The question, as best as we can briefly explain it, is whether the County and Mr. Dominguez can settle the estate's claim for the sum of $2.35 million-with the County paying its SIRL of $350, 000 and Star purportedly paying the remaining $2 million (the policy limits)-without Star's consent but subject to the Florida Legislature approving a special claims bill for the $150, 000 "gap" between the $200, 000 sovereign immunity cap established by § 768.28(5) and the $350, 000 SIRL.

         The district court, exercising diversity jurisdiction and ruling on cross-motions for summary judgment that the parties submitted without the benefit of discovery, held that any requirement that the Florida Legislature pass a claims bill for the "gap" amount before coverage is triggered under the policy frustrates the purpose of the County's contract with Star. But it also ruled that the County cannot unilaterally settle the estate's claim for an amount within the policy limits without Star's consent. See D.E. 55 at 7-13. See also Hillsborough Cnty. v. Star Ins. Co., No. 8:14-CV-2067-T-EAJ, 2015 WL12765535 (M.D. Fla. June 24, 2015) (denying motion for reconsideration). In granting Mr. Dominguez's motion for entry of judgment, the district court clarified that, in concluding that the County could not settle without Star's consent, it necessarily ruled that, should Star consent, the County could satisfy its SIRL without a claims bill by the Legislature. See D.E. 82 at 3.

         Two of the three parties before us are unhappy with the district court's ruling. Star argues that the district court committed reversible error by ruling, pursuant to a frustration of purpose theory, that the requirement of a special claims bill is unenforceable. It also maintains that the County breached the terms of the policy by entering into a settlement without its consent. The County says that the district court did not go far enough, and asks us to hold that it does not need Star's consent to settle the claim with the estate. Mr. Dominguez-who would be the other party to a settlement with the County-oddly calls for affirmance of the district court's judgment, which would mean that-absent a jury verdict in his favor-he and the County need Star's consent to consummate their settlement.

         If this sounds like a mess, that is because it is.


         We begin with the text of § 768.28(5) as it existed at the time of the deadly accident, because it provides the backdrop for the parties' dispute. See Hattaway v. McMillan, 903 F.2d 1440, 1444 n.3 (11th Cir. 1990) (explaining that courts apply the Florida sovereign immunity provisions in effect at the time a cause of action accrues). We then turn to the language of the excess policy issued by Star, the case's procedural history, the parties' contentions, and the district court's rulings.


         In February of 2010, § 768.28(5) read in relevant part as follows:

The state and its agencies and subdivisions shall be liable for tort claims in the same manner and to the same extent as a private individual under like circumstances, but liability shall not include punitive damages or interest for the period before judgment. Neither the state nor its agencies or subdivisions shall be liable to pay a claim or judgment by any one person which exceeds the sum of $100, 000 or any claim or judgment, or portions thereof, which, when totaled with all other claims or judgments paid by the state or its agencies and subdivisions arising out of the same incident or occurrence, exceeds the sum of $200, 000. However, a judgment or judgments may be claimed and rendered in excess of these amounts and may be settled and paid pursuant to this act up to $100, 000 or $200, 000, as the case may be; and that portion of the judgment that exceeds these amounts may be reported to the Legislature, but may be paid in part or in whole only by further act of the Legislature. Notwithstanding the limited waiver of sovereign immunity provided herein, the state or an agency or subdivision thereof may agree, within the limits of insurance coverage provided, to settle a claim made or a judgment rendered against it without further action by the Legislature, but the state or agency or subdivision thereof shall not be deemed to have waived any defense of sovereign immunity or to have increased the limits of its liability as a result of obtaining insurance coverage for tortious acts in excess of the $100, 000 or $200, 000 waiver provided above[.]

         (emphasis added).[1]

         The sentence in bold provides that any judgment or settlement above the sovereign immunity waiver is payable, in whole or in part, only through a special claims bill approved by the Florida Legislature. See Wallace v. Dean, 3 So.3d 1035, 1041 n.9 (Fla. 2009). The sentence in italics allows a municipality like the County to purchase liability insurance and to settle a claim within the limits of coverage (and above the stated sovereign immunity caps) without further action by the Legislature. See Mich. Millers Mut. Ins. Co. v. Bourke, 607 So.2d 418, 421-22 (Fla. 1992); Tramel v. Bass, 707 So.2d 847, 848 (Fla. 1st DCA 1998). But it also states that the purchase of insurance does not waive the defense of sovereign immunity.


         The County purchased an excess liability insurance policy (including excess automobile coverage) from Star for the period spanning from October 1, 2009, to October 1, 2010. The policy, which cost the County $527, 360, has a $2 million limit for each accident or occurrence, as well as a $350, 000 SIRL. See Public Entity Excess Liability Policy, D.E. 18-1, at Declarations Page.

         The policy states that Star will "pay all sums" that the County "legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'" Id. at § II.A. It also provides that the County cannot assume any obligation, make any payment, or incur any expense "without [Star's] consent, except at [the County's] own cost, " and requires the County to cooperate with Star "in the investigation, settlement or defense of the claim or 'suit.'" Id. at § IV.A.2.b(1) & (3).

         The SIRL endorsement, which applies to automobile excess coverage, states that the County, "[i]n consideration of the premium charged and as a condition to the issuance and continuation of the [p]olicy, " agrees to be responsible, "per occurrence, " for the first $350, 000 in "allocated costs and expenses of investigation, defense, negotiation and settlement." Id. at SIRL Endorsement, ¶ 1. Star's "limit of liability [of $2 million per occurrence] shall apply solely in excess" of the County's SIRL. Id.

         Paragraph 4 of the SIRL endorsement provides that the County shall not incur any costs or expenses, "other than for immediate first aid to others, . . . except at [its] own cost, . . . without the written consent" of Star. Id. at ¶ 4. That same paragraph requires the County to provide an "adequate defense and investigation" of any action, and "accept any reasonable offer or settlement" within the $350, 000 SIRL. Id. at ¶ 4.A-B. If the County fails to comply with any of the provisions of paragraph 4, Star "shall not be liable for any damages or costs or expenses[.]" Id. at ¶ 4.


         Mr. Dominguez, in an attempt to have a Florida court determine the nature and extent of coverage under Star's excess policy, asserted a declaratory judgment claim against the County and Star in his state-court wrongful death action. The state trial court denied Star's motion to dismiss, but in June of 2014 the Second District granted Star's petition for certiorari and reversed, holding that Mr. Dominguez-who was not an insured under Star's excess policy-had not satisfied Florida's non-joinder statute, Fla. Stat. § 627.4136(1), because he had not yet obtained a judgment against, or settled with, the County. See Star Ins. Co. v. Dominguez, 141 So.3d 690, 691-92 (Fla. 2d DCA 2014). So no Florida Court has addressed Star's obligations under the policy.

         In its amended complaint for declaratory relief in federal court, the County alleged (and Star admitted) that Ms. Dominguez had died as a result of injuries sustained in an automobile accident with a County employee (though the complaint was silent about who was at fault and Star said it was without knowledge as to the details of the accident); that Mr. Dominguez, as administrator of Ms. Dominguez's estate, had filed a wrongful death action in state court; that the case was then set for trial in February of 2015; and that Star had issued a reservation of rights letter in July of 2014. See Am. Compl., D.E. 18, at ¶¶ 5, 15; Answer and Defenses, D.E. 28, at ¶¶ 5, 15. In its reservation of rights letter, which was attached to the amended complaint, Star took the position that it was only obligated to pay those sums that the County "legally must pay, " and that under § 768.28(5) the County had sovereign immunity for any sums over $200, 000 absent an act of the Florida Legislature. Because the Florida Legislature had not taken any action (like passing a special claims bill) that would ...

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