The Travelers Indemnity Company of Connecticut v. Richard McKenzie & Sons, Inc. ( 2021 )


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  •         USCA11 Case: 18-13172   Date Filed: 08/26/2021    Page: 1 of 24
    [PUBLISH]
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE ELEVENTH CIRCUIT
    ________________________
    No. 18-13172
    ________________________
    D.C. Docket No. 8:17-cv-02106-SDM-CPT
    THE TRAVELERS INDEMNITY COMPANY
    OF CONNECTICUT,
    Plaintiff-Appellee,
    versus
    RICHARD MCKENZIE & SONS, INC.,
    HERMANNS REAL ESTATE VENTURES, LLC,
    Defendants-Appellants.
    ________________________
    Appeal from the United States District Court
    for the Middle District of Florida
    ________________________
    (August 26, 2021)
    Before BRANCH, TJOFLAT, and ED CARNES, Circuit Judges.
    ED CARNES, Circuit Judge:
    USCA11 Case: 18-13172           Date Filed: 08/26/2021       Page: 2 of 24
    It is sometimes said that the only way to find out if you can trust someone is
    to trust them. As this case proves, there is much truth in that adage. And in a
    related one, which is that trusting someone can lead to litigation.
    I. FACTS AND PROCEDURAL HISTORY
    When Richard Hermanns bought his first citrus grove in 2009, he hired
    Richard McKenzie — who had experience with starting and managing citrus
    groves — to take care of things for him. 1 He relied on McKenzie for everything:
    clearing the land, buying the supplies, planting the trees, keeping the trees healthy,
    maintaining the groves, and picking the fruit. McKenzie, in turn, billed Hermanns
    for materials purchased and labor expended. Hermanns left everything in
    McKenzie’s hands and did not visit the groves often.
    Trusting McKenzie was a mistake. Hermanns would later allege that
    McKenzie billed him for hundreds of thousands of dollars’ worth of trees that were
    never planted, fertilizer that was never applied, and diesel fuel that was never
    delivered. He also stole some of Hermanns’ diesel fuel for his own use. And
    through his negligence, McKenzie damaged Hermanns’ groves: He planted only
    115 trees per acre instead of the industry-standard 150, planted many of the trees
    1
    Hermanns and McKenzie both acted through their companies, but for simplicity we
    refer to the parties individually in place of the companies. Also for simplicity, when describing
    any action of their attorneys we will refer to the parties themselves.
    2
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 3 of 24
    too deep, failed to apply enough fertilizer and pesticides, failed to dig enough
    drainage ditches, and generally did a bad job of caring for the trees. Hermanns
    discovered McKenzie’s fraud, theft, and negligence and fired him.
    Hermanns eventually convinced the State Attorney’s Office in Polk County
    to charge McKenzie for his alleged fraud and theft, but what happened with that
    criminal case does not matter given how we are deciding this case. On the civil
    side of things, Hermanns sued McKenzie in Florida state court. His original
    complaint alleged facts about McKenzie falsely billing Hermanns and stealing
    from him, and based on that it asserted claims for breach of contract, breach of
    fiduciary duty, and an equitable accounting. The complaint had no claim for
    negligence. Almost a year later, and two days after finding out that McKenzie had
    an insurance policy issued by Travelers, Hermanns moved to amend the complaint
    to add a claim for negligence; that motion was granted. Hermanns notified
    Travelers of the amended complaint against McKenzie. Travelers disclaimed
    coverage.
    In the state court litigation, Hermanns and McKenzie entered into a
    settlement agreement. They settled the three non-negligence claims for $200,000,
    which was to be paid by McKenzie personally. But as to the negligence claim,
    they attempted to bring that part of the settlement within the “Coblentz doctrine,”
    meaning McKenzie would not be on the hook for paying it. Their attempt
    3
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    consisted of agreeing that McKenzie owed to Hermanns $2,965,750 in damages for
    the negligence claim, but that Hermanns would not try to collect any of the
    judgment from McKenzie. Instead, Hermanns could only go after Travelers for
    those damages. As contemplated by their settlement agreement, the state trial
    court entered a consent judgment awarding Hermanns $2,965,750 on his
    negligence claim against McKenzie.
    Travelers filed this declaratory judgment action against McKenzie and
    Hermanns in March 2017. It sought a judgment declaring that, based on the
    insurance policy’s provisions, it had no duty to defend against or indemnify
    McKenzie for Hermanns’ original state court complaint, or his amended state court
    complaint, or the state court consent judgment that had been entered for Hermanns
    against McKenzie. Travelers also asked the court to rule that the consent judgment
    was unenforceable because it was the result of collusion between McKenzie and
    Hermanns and was for an unreasonable amount of money.
    Hermanns filed in federal court two counterclaims against Travelers, one
    alleging breach of contract and one seeking a declaratory judgment. The breach of
    contract claim was based on Travelers’ refusal to defend and indemnify McKenzie
    against Hermanns’ state court lawsuit, which Hermanns claimed Travelers was
    required to do by McKenzie’s insurance policy. The declaratory judgment that
    Hermanns sought was one stating that the state court consent judgment was
    4
    USCA11 Case: 18-13172        Date Filed: 08/26/2021   Page: 5 of 24
    enforceable against Travelers. McKenzie later joined Hermanns’ counterclaims
    against Travelers.
    Travelers moved for summary judgment on all the claims and counterclaims.
    Hermanns moved for partial summary judgment, contending that because
    Travelers breached its duty to defend, it was liable for the costs that McKenzie
    incurred in defending the state-court action and for the attorney’s fees that
    Hermanns incurred in bringing his counterclaim. Hermanns sought the attorney’s
    fees McKenzie had incurred in defending against Hermanns’ lawsuit because in the
    settlement Hermanns had been assigned all of McKenzie’s rights under the
    insurance policy. McKenzie joined Hermanns’ motion for partial summary
    judgment.
    The district court granted summary judgment in favor of Travelers on all of
    the claims and counterclaims. On the consent judgment issue, the court ruled that
    it was unenforceable for three independent reasons. First, it was for an
    unreasonable dollar amount. Second, it was collusive and entered into in bad faith.
    Third, McKenzie’s insurance policy did not cover the allegations in Hermanns’
    complaint. Explaining the third reason, the court relied on two exclusions in
    McKenzie’s insurance policy, one for damage that the insured “expected or
    intended” to cause and one for damage caused to real property by the insured’s
    “operations.” On the duty to defend counterclaim, the court concluded that those
    5
    USCA11 Case: 18-13172        Date Filed: 08/26/2021    Page: 6 of 24
    same two policy exclusions meant that Travelers had no duty to defend McKenzie
    against Hermanns’ complaint.
    This is McKenzie’s and Hermanns’ appeal. They contend that there are
    genuine issues of material fact concerning the enforceability of the settlement
    agreement and that they are entitled to summary judgment on Travelers’ duty to
    defend McKenzie against Hermanns’ complaint.
    II. ANALYSIS
    We start with the duty to defend, and we end there because it also
    determines the enforceability of the settlement agreement. If Hermanns and
    McKenzie lose on the duty to defend, they lose on everything. And the district
    court ruled that they lost on the duty to defend. One of the bases for its ruling was
    that the damages alleged in Hermanns’ amended complaint were not covered by
    the insurance policy because of applicable policy exclusions. We agree. And
    because there was no duty to defend, there was no wrongful refusal by Travelers to
    defend McKenzie, which means the settlement agreement is unenforceable.
    When an insurance company wrongfully refuses to defend its insured,
    Florida law lets the insured settle the case himself in exchange for the plaintiff’s
    promise to collect the settlement only from the insurance company. That type of
    settlement is called a “Coblentz agreement,” named for the Fifth Circuit case that
    6
    USCA11 Case: 18-13172          Date Filed: 08/26/2021      Page: 7 of 24
    first approved one. See Coblentz v. Am. Sur. Co. of N.Y., 
    416 F.2d 1059
     (5th Cir.
    1969). 2
    A Coblentz agreement can be enforced only if the plaintiff can make several
    showings. The agreements “traditionally ha[ve] occurred where an insurer
    breaches its duty to defend,” Perera v. U.S. Fid. & Guar. Co., 
    35 So. 3d 893
    , 900
    (Fla. 2010), and the plaintiff must show “coverage, wrongful refusal to defend, and
    that the settlement was reasonable and made in good faith.” Quintana v. Barad,
    
    528 So. 2d 1300
    , 1301 n.1 (Fla. 3d DCA 1988). Hermanns’ and McKenzie’s
    claims fail at the start: they can show neither coverage nor a wrongful refusal to
    defend. And for purposes of this case, the analysis for those two requirements is
    the same. Cf. Fun Spree Vacations, Inc. v. Orion Ins. Co., 
    659 So. 2d 419
    , 422
    (Fla. 3d DCA 1995) (“Since [the insurer] had no duty to defend the insureds,
    correspondingly, there is no duty to indemnify them nor to pay the consent
    judgment.”).
    Under Florida law, “an insurer’s duty to defend its insured against a legal
    action arises when the complaint alleges facts that fairly and potentially bring the
    suit within policy coverage.” Jones v. Fla. Ins. Guar. Ass’n, 
    908 So. 2d 435
    , 442–
    43 (Fla. 2005). The duty to defend is a broad one, broader than the duty to
    2
    In Bonner v. City of Prichard, 
    661 F.2d 1206
    , 1209 (11th Cir. 1981) (en banc), this
    court adopted as binding precedent all decisions of the former Fifth Circuit handed down before
    October 1, 1981.
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    USCA11 Case: 18-13172        Date Filed: 08/26/2021   Page: 8 of 24
    indemnify, and “[t]he merits of the underlying suit are irrelevant.” Mid-Continent
    Cas. Co. v. Royal Crane, LLC, 
    169 So. 3d 174
    , 181 (Fla. 4th DCA 2015). We
    determine whether an insurer has a duty to defend its insured based only on “the
    eight corners of the complaint and the policy,” 
    id. at 182
    , and only as the
    complaint’s alleged facts are “fairly read,” Fun Spree Vacations, Inc., 
    659 So. 2d at 421
    . The “facts” we consider in evaluating the duty to defend come solely from
    the complaint, regardless of the actual facts of the case and regardless of any later
    developed and contradictory factual record. Jones, 
    908 So. 2d at
    442–43. “Any
    doubts regarding the duty to defend must be resolved in favor of the insured,” 
    id. at 443
    , and “where a complaint alleges facts that are partially within and partially
    outside the coverage of an insured’s policy, the insurer is not only obligated to
    defend, but must defend that entire suit,” Sunshine Birds & Supplies, Inc. v. U.S.
    Fid. & Guar. Co., 
    696 So. 2d 907
    , 910 (Fla. 3d DCA 1997). But of course,
    because the lawsuit must be for something covered by the insurance policy, “the
    insurer has no duty to defend” when “the pleadings show the applicability of a
    policy exclusion.” State Farm Fire & Cas. Co. v. Tippett, 
    864 So. 2d 31
    , 35 (Fla.
    4th DCA 2003).
    8
    USCA11 Case: 18-13172          Date Filed: 08/26/2021       Page: 9 of 24
    We focus on the specifics of the insurance policy Travelers issued to
    McKenzie: the coverage provided and the exclusions from that coverage.3 The
    policy requires Travelers to “pay those sums that [McKenzie] becomes legally
    obligated to pay as damages because of bodily injury or property damage to which
    this insurance applies,” and to “defend [McKenzie] against any suit seeking those
    damages.” Doc. 106-1 at 3 (quotation marks omitted).
    “However,” states the policy, “[Travelers] will have no duty to defend
    [McKenzie] against any suit seeking damages for bodily injury or property damage
    to which this insurance does not apply.” 
    Id.
     (quotation marks omitted). The
    insurance policy specifies a number of situations in which it does not apply. Many
    of them are listed in part of the policy titled and dedicated to various “exclusions,”
    and we’ll refer to those generically as the policy’s “standard exclusions.” Two are
    most relevant, the ones labeled 2.j.(5) and 2.j.(6). 4 Both exclude from coverage
    3
    Travelers actually issued five policies to McKenzie spanning the period from January
    11, 2009 through February 11, 2013. Because the five policies were materially identical, both
    parties refer to them as the “policy,” singular. So will we.
    4
    Another relevant exclusion is one that excludes coverage for damage “expected or
    intended from the standpoint of the insured.” Because expected or intended damage is plainly
    excluded from coverage, Travelers had no duty to defend Hermanns’ three theft and improper
    billing claims, which were based on McKenzie’s alleged intentional conduct of stealing (through
    improper billing and other means) gas, trees, and money from Hermanns. If the complaint had
    alleged that McKenzie’s intentional conduct had caused unintentional damage, it might have
    triggered the duty to defend. See, e.g., Hartford Accident & Indem. Co. v. Beaver, 
    466 F.3d 1289
    , 1296–98 (11th Cir. 2006); Grissom v. Com. Union Ins. Co., 
    610 So. 2d 1299
    , 1307–08
    (Fla. 1st DCA 1992).
    9
    USCA11 Case: 18-13172           Date Filed: 08/26/2021        Page: 10 of 24
    property damage that was caused by the insured’s work. The exclusions state in
    full that there is no coverage for property damage to:
    (5) That particular part of real property on which you or any contractors
    or subcontractors working directly or indirectly on your behalf are
    performing operations, if the “property damage” arises out of those
    operations; or
    (6) That particular part of any property that must be restored, repaired
    or replaced because “your work” was incorrectly performed on it.
    Doc. 9-5 at 35.
    The insurance policy also includes several endorsements that expand
    coverage in specified ways. One of the endorsements is called the “Farm Care-
    Taker Liability Coverage” endorsement. It extends coverage and the duty to
    defend “to apply to ‘Farm care-taking’ operations performed by [McKenzie].”
    “Farm care-taking” is defined as work done by “one who performs farming
    operations including: planting, cultivating, harvesting or similar ‘farming’
    operations by an insured.”
    But the complaint doesn’t allege facts that can be fairly read as asserting that McKenzie’s
    intentional conduct of theft and improper billing caused any unintended damage. The only
    unintended damage the complaint alleges is the damage to Hermanns’ groves, and the complaint
    alleges that McKenzie caused that damage by negligent conduct: underplanting and improperly
    maintaining the trees. The alleged damage to the groves is not based on McKenzie’s intentional
    conduct of theft. Because the intentional conduct claims caused only expected or intended
    damage, the coverage exclusion for damage “expected or intended from the standpoint of the
    insured” applied, and those claims did not trigger the duty to defend. Which is probably why
    Hermanns added the negligence claim to the complaint in the first place, something he did
    immediately after learning McKenzie was insured by Travelers.
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    USCA11 Case: 18-13172        Date Filed: 08/26/2021   Page: 11 of 24
    The farm care-taker endorsement expressly states that three of the insurance
    policy’s standard exclusions “do not apply to coverage provided by this
    endorsement.” The three excluded exclusions are 2.l, 2.m., and 2.j.(6). The last
    one of those is the exclusion from coverage of property damage to “[t]hat
    particular part of any property that must be restored, repaired or replaced because
    ‘your work’ was incorrectly performed on it.” Of critical importance, however, the
    farm care-taker endorsement does not include the 2.j.(5) exclusion in the
    specification of the exclusions that it is excluding.
    If the 2.j.(5) exclusion applies to the damages alleged in Hermanns’
    complaint, as the district court found, then Travelers had no duty to defend or
    indemnify McKenzie because the insurer has no duty to defend or indemnify when
    “the pleadings show the applicability of a policy exclusion.” Tippett, 
    864 So. 2d at 35
    ; see also Fun Spree Vacations, Inc., 
    659 So. 2d at 422
    . Hermanns and
    McKenzie put forward two arguments for why the 2.j.(5) exclusion does not apply.
    Their first argument is that the 2.j.(5) exclusion does not apply because the
    damages alleged in the complaint do not fall within its terms. The second is that,
    even if the alleged damages do fall within 2.j.(5), the exclusion is invalid because
    the farm care-taker endorsement either “supersedes” it, “conflicts” with it, or
    results in illusory coverage that requires us to ignore it.
    11
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 12 of 24
    We start with whether the damages alleged by the complaint fall within the
    2.j.(5) exclusion. As mentioned, that exclusion applies to property damage to
    “[t]hat particular part of real property on which you . . . are performing operations,
    if the ‘property damage’ arises out of those operations.” The damage alleged in
    Hermanns’ complaint meets each requirement set out in 2.j.(5)’s text.
    To begin with, the only property damage –– and that is the relevant damage
    for present purposes –– the complaint alleges was caused by McKenzie’s
    negligence is damage to real property, a point that Hermanns and McKenzie
    concede. The complaint alleges that Hermanns “incurred damages” that included
    “having to push [or, clear] between 70 to 100 acres of land” on the citrus grove “to
    compensate for [McKenzie’s] past improper care.” Of course, the actual clearing
    of the acreage was not the damage that McKenzie caused, but the consequence of
    and the fix for the damage. That consequence and fix indicates that McKenzie’s
    negligence, as distinguished from his intentional acts, damaged only the citrus
    groves, meaning the citrus trees and possibly the land on which they grew; trees, as
    well as land, are real property under Florida law. See Richbourg v. Rose, 
    44 So. 69
    , 73–74 (Fla. 1907); Bornstein v. Somerson, 
    341 So. 2d 1043
    , 1046 (Fla. 2d
    DCA 1977).
    Narrowing the focus, the “particular part of real property” that is excluded
    from coverage under 2.j.(5) is the property “on which [McKenzie] . . . [was]
    12
    USCA11 Case: 18-13172      Date Filed: 08/26/2021    Page: 13 of 24
    performing operations.” See Am. Equity Ins. Co. v. Van Ginhoven, 
    788 So. 2d 388
    , 391 (Fla. 5th DCA 2001) (“[T]he term ‘real property’ is modified by the
    terms ‘on which you . . . are performing operations.’”). To begin defining “[t]hat
    particular part of real property,” then, we must first define McKenzie’s operations.
    Florida law gives us a general definition: “operations” for 2.j.(5) purposes means
    “work done in the performance of the insured contractor’s contract.” Nova Cas.
    Co. v. Willis, 
    39 So. 3d 434
    , 436 (Fla. 3d DCA 2010) (citing Container Corp. of
    Am. v. Md. Cas. Co., 
    707 So. 2d 733
    , 736–37 (Fla. 1998)). According to
    Hermanns’ complaint, McKenzie contracted to “manage, maintain and harvest
    citrus trees located [on Hermanns’] Grove.” Those contractual duties made
    McKenzie “responsible to ensure that the groves were properly planted, watered,
    fertilized, treated and harvested,” as well as “for the proper repair and maintenance
    of the Grove drainage canals and irrigation system.” The complaint makes plain
    that McKenzie’s “operations” were broad.
    The complaint also alleges that the damage happened to the real property
    “on which” McKenzie was performing operations. See Am. Equity Ins. Co., 
    788 So. 2d at 391
    . The only land the complaint refers to is the parcels making up the
    citrus groves, and the complaint expressly groups all of those parcels together and
    refers to them collectively as “the ‘Groves.’” And, as mentioned, the complaint
    then identifies McKenzie’s “operations” as covering “the Groves.” The only fair
    13
    USCA11 Case: 18-13172       Date Filed: 08/26/2021   Page: 14 of 24
    reading of the complaint is that McKenzie’s operations were on all of the property
    that the complaint alleges was damaged: the groves. There is no other property to
    which the complaint refers or could be referring when it alleges that McKenzie’s
    negligence “has caused damages to [Hermanns]” that required clearing “70 to 100
    acres of land to compensate for the past improper care.”
    The alleged property damage happened when McKenzie “[was] performing
    operations.” See 
    id.
     The damage to the citrus groves was done when he
    underplanted and failed to properly maintain and treat the trees that he did plant.
    Cf. Carithers v. Mid-Continent Cas. Co., 
    782 F.3d 1240
    , 1247 (11th Cir. 2015)
    (“Property damage occurs when the damage happens, not when the damage is
    discovered or discoverable.”).
    Finally, any damage certainly “ar[ose] out of [McKenzie’s] operations.”
    “The Supreme Court of Florida has concluded that the phrase ‘arising out of’ is not
    ambiguous and has a broad meaning, even when used in a policy exclusion.”
    Zucker for BankUnited Fin. Corp. v. U.S. Specialty Ins. Co., 
    856 F.3d 1343
    , 1349
    (11th Cir. 2017) (citing Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 
    913 So. 2d 528
    , 539 (Fla. 2005)). The phrase requires merely that “there [is] ‘some causal
    connection, or relationship’ that is ‘more than a mere coincidence’ but proximate
    cause is not required.” James River Ins. Co. v. Ground Down Eng’g, Inc., 
    540 F.3d 1270
    , 1275 (11th Cir. 2008) (quoting Taurus Holdings, 
    913 So. 2d at 539
    ).
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    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 15 of 24
    The complaint alleges that kind of causal connection between the property damage
    and McKenzie’s operations.
    Hermanns and McKenzie alternatively argue that even if the property
    damage alleged in the complaint falls within the terms of the 2.j.(5) exclusion
    standing alone, the farm care-taker endorsement makes the exclusion either
    inapplicable or invalid. We disagree. Regardless of how the farm care-taker
    endorsement may change other aspects of the policy, it does not change the
    outcome of this appeal.
    When interpreting an insurance policy under Florida law, we bear in mind
    several interpretive principles. We must interpret the policy’s terms “in
    accordance with the plain language of the policies as bargained for by the parties.”
    Prudential Prop. & Cas. Ins. Co. v. Swindal, 
    622 So. 2d 467
    , 470 (Fla. 1993).
    When “a policy provision is clear and unambiguous, it should be enforced
    according to its terms whether it is a basic policy provision or an exclusionary
    provision.” Taurus Holdings, 
    913 So. 2d at 532
     (quotation marks omitted). We
    “may not rewrite contracts, add meaning that is not present, or otherwise reach
    results contrary to the intentions of the parties.” 
    Id.
     (quotation marks omitted).
    That means “[w]hen contractual language is clear and unambiguous, [we] cannot
    indulge in construction or interpretation of its plain meaning.” Detroit Diesel
    Corp. v. Atl. Mut. Ins. Co., 
    18 So. 3d 618
    , 620 (Fla. 4th DCA 2009).
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    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 16 of 24
    While ambiguities are construed in favor of coverage, “a true ambiguity
    exists only when the language at issue is reasonably susceptible to more than one
    interpretation.” City of Pompano Beach v. Beatty, 
    222 So. 3d 598
    , 600 n.1 (Fla.
    4th DCA 2017) (quotation marks omitted). But “a true ambiguity does not exist
    merely because a document can possibly be interpreted in more than one manner.”
    Lambert v. Berkley S. Condo. Ass’n, Inc., 
    680 So. 2d 588
    , 590 (Fla. 4th DCA
    1996) (emphasis added). And a “provision is not ambiguous simply because it is
    complex or requires analysis.” Garcia v. Fed. Ins. Co., 
    969 So. 2d 288
    , 291 (Fla.
    2007). “While ‘insurance policies may be confusing to persons not trained or
    experienced in the form and language of insurance policies[,] . . . . that fact does
    not make such policies or language legally ambiguous.’” Zucker, 856 F.3d at 1348
    (quoting Fla. Ins. Guar. Ass’n v. Sechler, 
    478 So. 2d 365
    , 367 (Fla. 5th DCA
    1985)) (brackets and ellipsis in original).
    With those interpretive principles in mind, we turn again to McKenzie’s
    insurance policy. To start, far from “superseding” or rendering 2.j.(5) inapplicable,
    the plain meaning of the farm care-taker endorsement is that the 2.j.(5) exclusion
    applies to the endorsement’s coverage. The endorsement expressly lists three
    exclusions that “do not apply to coverage provided by this endorsement.” None of
    those three is 2.j.(5). By expressly stating that three of the standard exclusions do
    not apply, and specifying which ones they are, the implication is that all the
    16
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 17 of 24
    remaining, unincluded or unspecified exclusions do apply. See, e.g., Shumrak v.
    Broken Sound Club, Inc., 
    898 So. 2d 1018
    , 1020 (Fla. 4th DCA 2005) (“It is a
    fundamental principle of contract construction, . . . that the expression of one thing
    is the exclusion of the other.”) (quotation marks omitted).
    The most common-sense and natural reading of the endorsement is that it
    does not silently exempt itself from the policy’s full and long list of standard
    exclusions, except as specified. One set of the standard exclusions in the policy,
    for example, has to do with pollution. It would be passing strange if the farm care-
    taker endorsement, without saying so, gave an insured free rein to pollute on
    Travelers’ dime. Hermanns and McKenzie don’t expressly argue that the pollution
    exclusions are inapplicable, but the logic of their argument about 2.j.(5)’s
    inapplicability would require that to be true. The endorsement lists some
    exclusions as not applying and does not mention any of the other exclusions. The
    2.j.(5) exclusion is not mentioned, just as the pollution exclusions are not. If the
    endorsement somehow makes 2.j.(5) inapplicable, then it must do the same for all
    the other unmentioned standard exclusions. That odd interpretation and outcome
    have no basis in the endorsement’s text. The much better interpretation is that all
    of the standard exclusions continue to apply to the coverage given by the
    endorsement, except for those exclusions expressly listed as not applying.
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    USCA11 Case: 18-13172       Date Filed: 08/26/2021     Page: 18 of 24
    To escape the impact of 2.j.(5), Hermanns and McKenzie advance another
    argument: “conflict.” They argue that an endorsement extending coverage to the
    insured’s farm care-taker operations conflicts with 2.j.(5)’s exclusion of real
    property damage caused by the insured’s operations. But an insurance policy can
    both provide coverage and also exclude some things that might otherwise fall
    within that coverage. That’s not a conflict. It’s just an exclusion, and those are par
    for the insurance course. See Cynergy, LLC v. First Am. Title Ins. Co., 
    706 F.3d 1321
    , 1327 (11th Cir. 2013) (“But that is the nature of an exclusion — to exclude
    things that otherwise would be covered, when certain conditions are met.”). And it
    is not surprising that the provision giving coverage and the provision excluding
    things from that coverage might use the same word, “operations.” That is, after all,
    a good way to be clear about what coverage is having an exclusion carved out of it.
    In light of that, the plain meaning of the provisions is clear. The farm care-
    taker endorsement and the 2.j.(5) exclusion taken together mean that coverage
    extends to property damage caused by the insured’s farm care-taker operations, but
    not if the damage is to real property, such as citrus groves.
    Hermanns’ and McKenzie’s rejoinder to this reading of the policy is that it
    makes the coverage provided by the farm care-taker endorsement illusory. The
    law of Florida about illusory insurance coverage works like this. As we have
    mentioned, “when insurance policies are ambiguous, Florida courts construe them
    18
    USCA11 Case: 18-13172       Date Filed: 08/26/2021   Page: 19 of 24
    in favor of coverage.” Zucker, 856 F.3d at 1352. And a policy is “ambiguous”
    when a coverage provision and an exclusion are directly at odds, “leaving the
    insured to wonder which provision correctly explained the scope of his coverage.”
    Id. The ambiguity is resolved “by ignoring the exclusion.” Id. (citing Tire
    Kingdom, Inc. v. First S. Ins. Co., 
    573 So. 2d 885
    , 887 (Fla. 3d DCA 1990)). But
    if the policy’s coverage and exclusion provisions do not negate one another, the
    coverage is not illusory, and there is no ambiguity, so the plain language of the
    exclusion controls. See Warwick Corp. v. Turetsky, 
    227 So. 3d 621
    , 625–26 (Fla.
    4th DCA 2017).
    Coverage is illusory under Florida law only if the insurance policy grants
    coverage with one hand and then with the other completely takes away the entirety
    of that same coverage. Completeness is key. “‘When limitations or exclusions
    completely contradict the insuring provisions, insurance coverage becomes
    illusory.’” 
    Id. at 625
     (quoting Purrelli v. State Farm Fire & Cas. Co., 
    698 So. 2d 618
    , 620 (Fla. 2d DCA 1997) (emphasis added). “A policy is illusory only if there
    is an internal contradiction that completely negates the coverage it expresses to
    provide,” 
    id.
     (emphasis added), or if the exclusion “‘completely swallow[s] the
    insuring provision,’” 
    id.
     (quoting Auto-Owners Ins. Co. v. Christopher, 
    749 So. 2d 581
    , 582 (Fla. 5th DCA 2000)) (emphasis added). The Fourth District Court of
    Appeal summed it up this way: “We also conclude that the excess policy is not
    19
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 20 of 24
    illusory because the terms of [it] do not ‘completely contradict’ each other, and [it]
    does not completely negate the entirety of coverage it purportedly provides.” 
    Id. at 623
     (emphasis added); see also Purrelli, 
    698 So. 2d at 620, 621
     (holding coverage
    illusory when “the exclusion completely swallowed up the insuring provision”)
    (emphasis added).
    But there is a dispositive difference between complete contradiction or
    complete negation and merely excepting some or many or even most things from
    coverage. Coverage is not illusory if the policy “simply excludes coverage for
    a subset of claims that would ordinarily fall within the policy’s insuring
    provisions.” Zucker, 856 F.3d at 1352. And an exclusion that “completely
    swallows” coverage is not the same as one that takes a nibble, or even a big bite,
    out of it. Exclusions can be “significant” without “completely contradict[ing] the
    insuring provisions.” Warwick, 
    227 So. 3d at 626
     (quoting Interline Brands, Inc.
    v. Chartis Specialty Ins. Co., 
    749 F.3d 962
    , 967 (11th Cir. 2014)); see also Zucker,
    856 F.3d at 1353 (“The Prior Acts Exclusion excludes a lot of coverage, but not all
    coverage.”). Exclusions do not render coverage illusory even if they make the
    coverage depend on “extraordinary circumstances” that are “unlikely” to occur.
    Warwick, 
    227 So. 3d at 626
    .
    The difference can be illustrated with examples. An insurance policy that
    “purport[s] to cover certain intentional torts, but exclude[s] intended acts” is
    20
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 21 of 24
    illusory. 
    Id.
     at 625 (citing Purrelli, 
    698 So. 2d at
    619–20). So is a policy that
    states it “cover[s] parasailing but exclude[s] watercrafts.” 
    Id.
     (citing Certain
    Underwriters at Lloyds v. Waveblast Watersports, Inc., 
    80 F. Supp. 3d 1311
    ,
    1318–19 (S.D. Fla. 2015)). In those situations, the category of coverage is smaller
    than the category of exclusion; it’s impossible to do the covered activity without
    also doing the excluded activity.
    On the other hand, a policy is not illusory if it covers “advertising injury”
    but excludes advertising injury arising out of a violation of “any statute, ordinance
    or regulation”; that’s just a coverage provision with an exception, even if the
    exception is a “significant” one. 
    Id.
     (quoting Interline Brands, Inc., 749 F.3d at
    967). A policy also is not illusory when it excludes all claims for incidents arising
    out of conduct occurring before a certain date, such as barring coverage for losses
    arising out of bank officers’ pre-November 2008 conduct, even when those are the
    very claims most likely to be made. See Zucker, 856 F.3d at 1346, 1352. In those
    situations, the category of coverage is bigger than the category of exclusion; it is
    possible to do the covered activity without also doing the excluded activity.
    Those examples demonstrate why, under Florida law, exclusion 2.j.(5) does
    not render the farm care-taker endorsement illusory. It does not because even with
    the 2.j.(5) exclusion, the endorsement still provides coverage. 2.j.(5) excludes
    coverage only for damage to real property, but the farm care-taker endorsement’s
    21
    USCA11 Case: 18-13172          Date Filed: 08/26/2021        Page: 22 of 24
    coverage is not so limited; it applies to “property damage” not just “real property
    damage.” Unlike an intentional tort, which cannot be done without an intentional
    act, or parasailing, which cannot be done without a watercraft, property damage
    can be done without real property damage. The category of coverage, all property,
    is bigger than the category of exclusion, real property. There’s nothing complete
    about that exclusion; real property damage is “a subset of [what] would ordinarily
    fall within the policy’s insuring provisions.” Id. at 1352.
    The context of “farm care-taking operations” does not change that because
    those operations may damage non-real property. McKenzie’s operations, as
    alleged in Hermanns’ complaint, suggest one way that farm care-taker operations
    could damage non-real property. The complaint alleged that McKenzie stole diesel
    fuel belonging to Hermanns, indicating that McKenzie’s use of diesel was part of
    his farm care-taking operations. In light of that, consider this variation of the facts:
    Assume that instead of stealing the diesel fuel, McKenzie had negligently spilled it
    in the performance of his farm care-taker operations. Had he done so, that would
    be property damage to the diesel fuel that is not included in damage to “[t]hat
    particular part of real property on which” McKenzie was operating. 5 In that
    5
    The policy’s definition of “property damage” includes the “loss of use” of property, like
    the loss of the use of spilled diesel.
    22
    USCA11 Case: 18-13172        Date Filed: 08/26/2021    Page: 23 of 24
    situation, 2.j.(5) would not exclude coverage for the loss of diesel fuel, even if it
    might exclude coverage for damage to the land on which the diesel was spilled.
    There are other possible examples that prove the same point. Farm care-
    takers could negligently damage expensive tractors, machinery, or tools that are
    not real property. Or in negligently “planting” crops they might damage seeds or
    seedlings that are property but not real property. Or in “cultivating” and
    “harvesting” they could damage crops that are property but not real property. The
    point is that the farm care-taker endorsement and the 2.j.(5) exclusion do not
    “completely contradict” each other, which means that coverage is not illusory, and
    there is no ambiguity created by those two provisions, which in turn means we
    must enforce the exclusion according to its unambiguous terms. See Warwick, 
    227 So. 3d at
    625–26.
    We do not know if negligent farm care-taking operations are more likely to
    damage real property than non-real property. But even if they are, that does not
    mean the coverage the endorsement provides is illusory. See 
    id. at 626
    ; Zucker,
    856 F.3d at 1346, 1352.
    It may be that McKenzie does not like the terms of the insurance coverage
    that he purchased; he may wish that he had purchased different coverage. “But
    after the fact wishes are not enough to change before the fact choices,” Zucker, 856
    F.3d at 1353, and we have no authority to rewrite insurance contracts to cure
    23
    USCA11 Case: 18-13172       Date Filed: 08/26/2021    Page: 24 of 24
    buyer’s remorse. See Warwick, 
    227 So. 3d at 626
     (“[The insured] ‘chose to buy
    the policy that it bought. It cannot change that choice now.’”) (quoting Zucker,
    856 F.3d at 1353). Our duty is to enforce the unambiguous terms of the insurance
    policy, see, e.g., Taurus Holdings, 
    913 So. 2d at 532
    , even if they “may be
    confusing to persons not trained or experienced in the form and language of
    insurance policies,” Zucker, 856 F.3d at 1348 (quotation marks omitted).
    In summary, the 2.j.(5) exclusion does not render the farm care-taker
    endorsement illusory. It does not completely swallow the coverage. It does not
    completely contradict the coverage. It does not completely negate the coverage.
    It merely excepts from that coverage damage to real property. Even if that is a
    significant exclusion, it is not a complete one, so the coverage is not illusory.
    Because the negligence claim in Hermanns’ amended complaint alleges only
    damage that falls within the 2.j.(5) exclusion, Travelers had no duty to defend
    McKenzie against Hermanns’ lawsuit, and there was no loss coverage.
    III. CONCLUSION
    Because the insurance policy excluded coverage for the damages alleged in
    Hermanns’ amended state court complaint, Travelers had no duty to defend or
    indemnify, and the Coblentz agreement is unenforceable for that reason. We
    affirm the district court’s grant of summary judgment in favor of Travelers.
    AFFIRMED.
    24
    

Document Info

Docket Number: 18-13172

Filed Date: 8/26/2021

Precedential Status: Precedential

Modified Date: 8/26/2021

Authorities (26)

PRUDENTIAL PROPERTY AND CAS. v. Swindal , 622 So. 2d 467 ( 1993 )

Tire Kingdom, Inc. v. First Southern Ins. Co. , 573 So. 2d 885 ( 1990 )

Mid-Continent Casualty Co. v. Royal Crane, LLC , 2015 Fla. App. LEXIS 8799 ( 2015 )

Bornstein v. Somerson , 341 So. 2d 1043 ( 1977 )

Quintana v. Barad , 528 So. 2d 1300 ( 1988 )

Warwick Corp. v. Turetsky , 227 So. 3d 621 ( 2017 )

Sunshine Birds v. US Fid. and Guar. , 696 So. 2d 907 ( 1997 )

Lambert v. BERKLEY SO. CONDO. ASS'N, INC. , 680 So. 2d 588 ( 1996 )

Detroit Diesel Corp. v. Atlantic Mutual Insurance Co. , 2009 Fla. App. LEXIS 8770 ( 2009 )

Container Corp. of America v. Md. Cas. Co. , 23 Fla. L. Weekly Supp. 163 ( 1998 )

Shumrak v. Broken Sound Club, Inc. , 898 So. 2d 1018 ( 2005 )

PURRELL v. State Farm Fire and Cas. Co. , 698 So. 2d 618 ( 1997 )

Taurus Holdings v. US Fidelity , 913 So. 2d 528 ( 2005 )

City of Pompano Beach v. Beatty , 2017 Fla. App. LEXIS 10063 ( 2017 )

Perera v. United States Fidelity & Guaranty Co. , 35 Fla. L. Weekly Supp. 235 ( 2010 )

James River Insurance v. Ground Down Engineering, Inc. , 540 F.3d 1270 ( 2008 )

Ralph E. Coblentz, as Administrator, D.B.N. Of the Estate ... , 416 F.2d 1059 ( 1969 )

American Equity Ins. Co. v. Van Ginhoven , 788 So. 2d 388 ( 2001 )

Grissom v. Commercial Union Ins. Co. , 1992 Fla. App. LEXIS 13008 ( 1992 )

Auto-Owners Ins. Co. v. Christopher , 749 So. 2d 581 ( 2000 )

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