Circuit Court Reverses Judgment for Insurer and Holds that Florida Law Requires Insurers to Defend Against Class Action Lawsuits Before Certification Even if the Only Potentially Covered Claims Involve Members of the Putative Class
Two individuals filed a putative class action against defendants, operators of nursing home facilities, alleging breach of fiduciary duties owed nursing home residents “to provide necessary care, services, and supplies required for their health and well-being.” Hartford Acc. & Indemn. Co. v. Beaver, 446 F.3d 1289, 2006 WL 2933939, *1 (11th Cir. 2006). Plaintiff Estate of Ayres lived in a nursing home from 1986 until his death in 1995; plaintiff Garrison resided in the same nursing home from 1993 until 1997. Hartford defended the class action under a reservation of rights based on a general liability policy that covered the time period from 1987-1992. Id. Hartford then filed suit against defendants seeking a declaration that it owed no duty to defend, and sought summary judgment on its complaint. While the motion was pending, Ayres’ estate settled with defendants and withdrew as a party-plaintiff, leaving Garrison as the sole class representative in the class action. Id. The federal district court granted Hartford’s motion because Garrison’s claim was outside the policy period. While the claims of putative class members fell within the Hartford 1987-1992 insurance policy period, the court concluded that Hartford did not owe a duty to defend against those class action claims “until such time as that class is certified pursuant to Florida Rule of Civil Procedure 1.220.” Id., at *2. The district court explained, “a class must be certified before a claim may be maintained on its behalf” and that prior to certification “there is no class action claim to defend against.” Id. Defense attorneys appealed and the Eleventh Circuit reversed.
Preliminarily, the Circuit Court held that Florida state law controlled, and concluded that while “an open question” under Florida law “a duty to defend exists.” Beaver, at *2. After analyzing Florida law governing an insurer’s duty to defend, the Eleventh Circuit held at *3:
Thus, the central inquiry in a duty to defend case is whether the complaint “alleges facts that fairly and potentially bring the suit within policy coverage.” [Citation.] Since the parties agree that Hartford faces potential liability only if a class is certified, we are obliged to ask whether the Underlying [Class Action] Complaint alleges facts that fairly and potentially support class certification.
In this regard, the Circuit Court found that the eight pages of detailed and extensive factual allegations in the class action complaint supporting class certification “‘alleges facts that fairly and potentially bring the suit within policy coverage.’” Beaver, at *4 (citation omitted). The Court reasoned, “Florida’s courts have uniformly said that a suit alleging facts that fairly and potentially bring the suit within policy coverage triggers an insurer’s duty to defend. That standard is readily met in this case.” Id.
Hartford argued that any defense obligation under the policy remained inchoate until a class is certified because (1) absent class members are not part of the action prior to certification and (2) claims by absent t class members are speculative prior to certification. Beaver, at *5. The Eleventh Circuit disagreed. As to the first issue, the Court noted that Florida permits claims of putative class members to be aggregated for purposes of establishing jurisdiction (suggesting that putative class members are part of the action), and that in any event procedural and jurisdictional issues are “completely unrelated to Florida’s duty-to-defend law,” id. Moreover, the Court found that the claims of putative class members were not “speculative” but rather “potential” and thus within policy coverage. Id.
Finally, the Circuit Court observed “this basic truth about class action litigation: the fight over class certification is often the whole ball game.” Beaver, at *6. The Court found this factor to be of great importance, explaining “The overwhelming importance of class certification to the ultimate resolution of the case militates strongly against leaving the insured without a defense until after a decision on class certification.” Id. The Court also noted that such a holding would serve to preclude an insurer from controlling the litigation at this critical stage because “if there were no duty to defend, there also would be no right to defend.” Id.
NOTE: The Circuit Court also rejected Hartford’s claim that the intentional act exclusion applied. Beaver, at *8-*9.
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