Public Risk Management of Florida v. Munich Reinsurance America, Inc. ( 2022 )

USCA11 Case: 21-11774 Date Filed: 06/29/2022 Page: 1 of 30
[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 21-11774
____________________
PUBLIC RISK MANAGEMENT OF FLORIDA,
Plaintiff-Counter Defendant-Appellant,
versus
MUNICH REINSURANCE AMERICA, INC.,
a foreign corporation authorized to do business in Florida,
Defendant-Counter Claimant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 8:18-cv-01449-MSS-AEP
____________________
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2 Opinion of the Court 21-11774
Before JILL PRYOR, GRANT, and ANDERSON, Circuit Judges.
ANDERSON, Circuit Judge:
Public Risk Management of Florida (“PRM”) is appealing the
district court’s grant of summary judgment to Munich Reinsurance
America, Inc. (“Munich”). PRM sued Munich for breach of con-
tract and sought declaratory relief that Munich is obligated by the
parties’ reinsurance agreement (“the Reinsurance Agreement”) to
reimburse PRM for the defense and coverage it provided to an in-
sured in an underlying lawsuit. Munich counter-claimed for a de-
claratory judgment stating that it has no duty to reimburse PRM,
and the district court granted that relief. On appeal, PRM argues,
inter alia, that the Reinsurance Agreement contained a “follow the
fortunes” clause, which forbids a reinsurer “from second guessing”
an insurer’s “good faith decision” to pay a claim to the insured.
Am. Bankers Ins. Co. of Fla. v. Nw. Nat’l Ins. Co., 198 F.3d 1332,
1335 (11th Cir. 1999). Alternatively, PRM argues that even if the
Reinsurance Agreement did not have a follow-the-fortunes clause,
the district court should have inferred one.
We disagree with both arguments. The Reinsurance Agree-
ment contains language that is plainly inconsistent with the follow-
the-fortunes doctrine. Accordingly, the district court properly re-
jected the doctrine’s application in this case. We also hold that this
Court will not infer application of the follow-the-fortunes doctrine
in a reinsurance agreement where the agreement’s plain and
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21-11774 Opinion of the Court 3
unambiguous language is inconsistent with the doctrine. Applying
this rule, we conclude that it would be inconsistent with the plain,
unambiguous terms of the Reinsurance Agreement to infer that
Munich should be bound by PRM’s coverage decision, and, accord-
ingly, we cannot conclude that the district court erred by granting
summary judgment and declaratory relief to Munich.
I.
PRM is a self-insured intergovernmental risk-management
program that exclusively insures various local governmental enti-
ties in Florida. One of its members, the City of St. Pete Beach (“the
City”), was insured by PRM from April 1, 2008 to April 1, 2009 un-
der the relevant coverage document (“the 2008/2009 Coverage
Document”). The Reinsurance Agreement between Munich and
PRM reinsured that 2008/2009 Coverage Document. Both PRM’s
2008/2009 Coverage Document and Munich’s Reinsurance Agree-
ment lasted from April 1, 2008 to April 1, 2009. 1 Munich reinsured,
inter alia, the Public Officials Errors and Omissions (“E&O”) Cov-
erage that the 2008/2009 Coverage Document provided to the
City. Prior to April 1, 2008, a different reinsurer, Certain
1 In other words, PRM insured the City pursuant to the 2008/2009 Coverage
Document, and Munich’s Reinsurance Agreement with PRM agreed to reim-
burse PRM for amounts PRM paid out to the City which were covered by the
2008/2009 Coverage Document. Stated more simply, Munich reinsured the
2008/2009 Coverage Document, agreeing to pay PRM amounts PRM paid out
to the City if such amounts were covered under PRM’s 2008/2009 Coverage
Document with the City.
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4 Opinion of the Court 21-11774
Underwriters at Lloyd’s, London (“Underwriters”), issued reinsur-
ance policies to PRM, one of which was effective October 1, 2005
to October 1, 2006.
The 2008/2009 Coverage Document became relevant in this
case when two residents sued the City. Chester and Katherine
Chmielewski (“the Chmielewskis”) owned a house (pursuant to a
1972 deed) and adjoining beach parcel (pursuant to a 1975 deed).
On April 26, 2006, they brought a quiet title action against the City
in state court and sought a declaratory judgment that their beach
parcel deed was valid. The state court entered a Stipulated Final
Judgment in favor of the Chmielewskis on November 26, 2008 and
quieted title to the beach parcel. The City, however, continued
allowing public access to that land and publicly took the position
that the Chmielewskis had no right to exclude the public from their
beach parcel.
On November 9, 2009, the Chmielewskis sued the City
again in state court, alleging two counts of inverse condemnation.
PRM denied coverage for this suit because the 2008/2009 Coverage
Document excluded liability for inverse condemnation claims.
In this state court litigation, the Chmielewskis filed a second
amended complaint on November 18, 2013, asserting two new
counts: (1) a § 1983 claim that the City violated their Fourth
Amendment rights and (2) an inverse condemnation claim under
the Florida Constitution. The City removed the suit to federal
court and gave PRM notice of the second amended complaint.
PRM said it would cover the § 1983 claim under its Public Officials
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21-11774 Opinion of the Court 5
E&O Coverage, but the inverse condemnation exclusion barred
coverage for the second claim. PRM notified Munich of the § 1983
claim against the City on December 13, 2013.
On January 13, 2014, Munich sent PRM a letter denying cov-
erage for the § 1983 claim because it arose from wrongful acts that
predated the Reinsurance Agreement’s coverage period (i.e., April
1, 2008 to April 1, 2009). Munich encouraged PRM to seek cover-
age from Underwriters because it believed the wrongful acts un-
derlying the § 1983 claim arose during the period when Underwrit-
ers reinsured PRM’s policy with the City. PRM notified Underwrit-
ers of the Chmielewskis’ claim and told Underwriters that it be-
lieved the wrongful acts underlying the claim occurred during the
coverage period of its reinsurance agreement with Underwriters.
In a June 15, 2015 letter to the City, PRM used a December 31, 2005
date of loss and informed the City that it was seeking reinsurance
coverage from Underwriters. After some back and forth with
PRM, Underwriters eventually denied coverage as to the § 1983
claim on October 7, 2015, shortly before the jury trial in the under-
lying litigation.
The jury awarded the Chmielewskis $725,000 for the § 1983
claim and almost $1.5 million for the inverse condemnation claim.
The City filed a motion to set aside $600,000 of the jury’s award for
the § 1983 claim as duplicative of the damages awarded for the in-
verse condemnation claim. The judge granted that motion, and
judgment on the § 1983 claim was entered as follows: $50,000 for
interference with Chester Chmielewski’s possessory interest in his
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6 Opinion of the Court 21-11774
property and $75,000 for interference with Katherine Chmielew-
ski’s possessory interest in her property. PRM agreed to indemnify
the City for the § 1983 claim.
On October 28, 2015, PRM contacted Munich to request
that it reconsider its denial of coverage. PRM argued that, in light
of evidence and testimony brought out at trial, the date of loss was
November 28, 2008, 2 which was within the coverage period of Mu-
nich’s Reinsurance Agreement with PRM. This was the first time
since Munich denied coverage on January 13, 2014 that PRM noti-
fied Munich of developments in the underlying litigation. On
March 3, 2016, Munich again denied coverage, maintaining that
“the testimony relevant to the [§ 1983] claim revealed that [the
Chmielewskis’] damages for interference with property rights had
been ongoing since 2005, and possibly earlier.” While the City’s
appeal of the jury verdict was pending, PRM settled the § 1983
claim for $750,000.
After PRM settled the § 1983 claim, Munich refused to reim-
burse PRM. PRM then sued Munich for reimbursement pursuant
to the Reinsurance Agreement. In its amended complaint, PRM
asserted two counts for breach of contract and sought
2 It is unclear why PRM argued that the date of loss was November 28, 2008
given that the state court’s Stipulated Final Judgment quieting title to the
Chmielewskis’ beach parcel was entered on November 26, 2008. That said,
this two-day discrepancy is not material to our resolution of this appeal.
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21-11774 Opinion of the Court 7
reimbursement of its legal defense costs in excess of $200,000, 3 in-
cluding the cost of the $750,000 settlement. That is, PRM sought
declaratory relief that Munich had a duty under the 2008/2009
Coverage Document and the Reinsurance Agreement to reim-
burse PRM for the cost of its legal defense of the City and its
$750,000 settlement with the Chmielewskis. Munich answered
and counter-claimed for an opposing declaratory judgment that it
did not owe PRM any reimbursement for PRM’s payments to the
City. The parties then submitted motions for summary judgment.
The district court referred these summary judgment motions to a
magistrate judge for the entry of a report and recommendation
(“R&R”).
The magistrate judge recommended granting summary
judgment and declaratory relief to Munich. He concluded that
“[t]he record in the Underlying Litigation [was] replete with refer-
ences to actions taken by the City prior to April 1, 2008, the effec-
tive date of the [2008/2009] Coverage Document and the Reinsur-
ance Agreement, that interfered with the Chmielewskis possessory
interest in their property.” The magistrate judge relied on three
parts of the record revealing these facts: (a) the Chmielewskis’ sec-
ond amended complaint, (b) portions of the trial transcript, and
3 PRM had a self-insured retention of $200,000. As stated in the Reinsurance
Agreement, “PRM shall retain and be liable for the first $200,000 Ultimate Net
Loss . . . . [Munich] shall then be liable for the amount by which such Ultimate
Net Loss exceeds the retention of PRM . . . .”
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8 Opinion of the Court 21-11774
(c) the trial court’s denial of the City’s post-verdict motion for judg-
ment as a matter of law. These portions of the record “contain[ed]
allegations spanning years before the [November 26, 2008] Stipu-
lated Final Judgment,” which PRM argued was the date of the oc-
currence underlying the Chmielewskis’ § 1983 claim. Based on the
plain text of the 2008/2009 Coverage Document and the Reinsur-
ance Agreement between Munich and PRM, the magistrate judge
reasoned,
[T]he [2008/2009] Coverage Document states that,
when there are a series of related wrongful acts by a
member, they will be deemed one wrongful act that
occurred at the time of the first of such acts. . . .
Given that the City’s wrongful acts against the
Chmielewskis constitute a series of related wrongful
acts, under the plain language of the Public Officials
E&O coverage, those wrongful acts must “be deemed
to have been committed at the time of the first of such
acts or alleged acts.” . . . [T]he City first committed
the wrongful acts during a timeframe predating the
[2008/2009] Coverage Document and the Reinsur-
ance Agreement . . . .
PRM objected to the magistrate judge’s R&R. The district
court disagreed and adopted the R&R. PRM now appeals the dis-
trict court’s grant of summary judgment and declaratory relief to
Munich.
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21-11774 Opinion of the Court 9
II.
We review a district court’s grant of summary judgment de
novo, applying the same legal standards used by the district court.
Felts v. Wells Fargo Bank, N.A., 893 F.3d 1305, 1311 (11th Cir.
2018). “Summary judgment is appropriate where there is no gen-
uine issue as to any material fact and the moving party is entitled
to judgment as a matter of law.” Jurich v. Compass Marine, Inc.,
764 F.3d 1302, 1304 (11th Cir. 2014). We view “all facts and rea-
sonable inferences in the light most favorable to the nonmoving
party.” Id.The parties agree that Florida insurance law applies to this
diversity action. “It is well settled that the construction of an insur-
ance policy is a question of law for the court.” Jones v. Utica Mut.
Ins. Co., 463 So. 2d 1153, 1157 (Fla. 1985). “Under Florida law, in-
surance contracts are construed according to their plain meaning.
Ambiguities are construed against the insurer and in favor of cov-
erage.” Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d
528, 532 (Fla. 2005). However, before resolving an ambiguity in
favor of the insured, we must find “a genuine inconsistency, uncer-
tainty, or ambiguity in meaning . . . after resort to the ordinary
rules of construction.” Excelsior Ins. Co. v. Pomona Park Bar &
Package Store, 369 So. 2d 938, 942 (Fla. 1979). “[This rule] does not
allow courts to rewrite contracts, add meaning that is not present,
or otherwise reach results contrary to the intentions of the parties.”
Id. “Florida law places on the insured the burden of proving that a
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10 Opinion of the Court 21-11774
claim against it is covered by the insurance policy.” LaFarge Corp.
v. Travelers Indem. Co., 118 F.3d 1511, 1516 (11th Cir. 1997).
III.
We agree with the district court that Munich had no duty to
reimburse PRM for its defense and indemnification of the City
based on the plain, unambiguous text of the Reinsurance Agree-
ment and the 2008/2009 Coverage Document. The following pro-
visions of the Reinsurance Agreement are crucial to an understand-
ing of this case.
Article I of the Reinsurance Agreement requires Munich to
indemnify PRM for “Ultimate Net Loss” that PRM has paid pursu-
ant the 2008/2009 Coverage Document:
The Reinsurer agrees to indemnify PRM, on an excess
of loss basis, for Ultimate Net Loss paid by PRM as a
result of Occurrences . . . during the term of this
Agreement under PRM’s Coverage Document un-
derwritten by PRM and covered under this Agree-
ment.
Art. I. Article VII then defines “Ultimate Net Loss” as “the
sum or sums paid by PRM for which it is liable, under the
Coverage Document reinsured hereunder.” Under Article
XI(C), Munich must pay PRM after it receives from PRM
proof of payment and coverage:
Payment by the Reinsurer of its portion of loss and
expense, paid by or on behalf of PRM, will be made
by the Reinsurer to PRM promptly after proof of
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21-11774 Opinion of the Court 11
payment by PRM and coverage hereunder is received
by the Reinsurer.
Art. XI(C).
To summarize, the Reinsurance Agreement requires Mu-
nich to reimburse PRM after PRM submits: (1) proof that it has
paid amounts to its insured (i.e., the City), and (2) proof that Mu-
nich’s Reinsurance Agreement provides coverage for such pay-
ment. Because the Reinsurance Agreement covers only “sums paid
by PRM for which it is liable, under the Coverage Document rein-
sured hereunder,” i.e., the 2008/2009 Coverage Document, Mu-
nich is not obligated to reimburse PRM for amounts it paid on be-
half of the City—either as indemnification or for its legal defense—
that PRM was not required to pay under the 2008/2009 Coverage
Document. For example, Munich is not obligated to reimburse
PRM for amounts it paid on behalf of the City for which it might
have been liable pursuant to coverage documents preceding the
2008/2009 Coverage Document that might have been reinsured by
reinsurance companies other than Munich.
Accordingly, this case turns on whether the 2008/2009 Cov-
erage Document (which Munich reinsured) required PRM (a) to
defend the City against the § 1983 claim in the Chmielewskis’ sec-
ond amended complaint and (b) to indemnify the City for the
$750,000 settlement of that claim. The answer to both questions is
clearly no.
As the parties here agree, the 2008/2009 Coverage Docu-
ment’s Public Officials E&O Coverage provides occurrence-based
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12 Opinion of the Court 21-11774
(as opposed to claims-made) coverage. “An occurrence policy is a
policy in which the coverage is effective if the [wrongful] act or
omission occurs within the policy period, regardless of . . . the date
the claim is made or asserted.” Gulf Ins. Co. v. Dolan, Fertig &
Curtis, 433 So. 2d 512, 514 (Fla. 1983). In other words, “[c]overage
depends on when the [wrongful] act or omission occurred and not
when the claim was asserted.” Id. at 515. Therefore, whether the
2008/2009 Coverage Document obligated PRM to defend and in-
demnify the City depends on when the wrongful acts (i.e., the oc-
currence) underlying the Chmielewskis’ § 1983 claim occurred.
The following provisions of the 2008/2009 Coverage Docu-
ment are crucial to an understanding of whether PRM was re-
quired to defend and indemnify the City pursuant to the 2008/2009
Coverage Document. The 2008/2009 Coverage Document’s Pub-
lic Officials E&O Coverage defines “occurrence” as follows:
1. OCCURRENCE means a WRONGFUL ACT
committed during the COVERAGE PERIOD.
All claims for damages based on or arising out
of the same WRONGFUL ACT or a series of
related WRONGFUL ACTS by one or more
MEMBERS shall be deemed one
OCCURRENCE. . . .
2. For the purposes of this [Public Officials E&O
policy] only, WRONGFUL ACT means any
actual or alleged . . . discrimination and viola-
tions of civil rights by the MEMBER during the
COVERAGE PERIOD. All claims for damages
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21-11774 Opinion of the Court 13
based on or arising out of the same
WRONGFUL ACT or a series of related
WRONGFUL ACTS by one or more
MEMBERS shall be deemed one
WRONGFUL ACT. . . .
Put simply, these definitions treat a series of related wrongful acts
as one “occurrence.” The Public Officials E&O Coverage then
fixes the date of that one occurrence as the date of the first wrong-
ful act in the series of related wrongful acts:
This coverage applies only if a claim for damages
arises out of a WRONGFUL ACT committed during
the COVERAGE PERIOD. As respects a series of re-
lated WRONGFUL ACTS by one or more
MEMBERS, the WRONGFUL ACT shall be deemed
to have been committed at the time of the first of such
acts or alleged acts.
The Public Officials E&O Coverage only covers that occurrence if
it fell within the 2008/2009 Coverage Document’s coverage pe-
riod—i.e., April 1, 2008 to April 1, 2009:
This coverage does not apply to WRONGFUL ACTS
committed prior to or after the COVERAGE
PERIOD, however as respects a series of related
WRONGFUL ACTS by one or more MEMBERS tak-
ing place over more than one COVERAGE PERIOD,
the WRONGFUL ACT shall be deemed to have been
committed during the first COVERAGE PERIOD in
which the first of such acts or alleged acts took place
and only that Coverage Document’s EXCESS LIMIT
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14 Opinion of the Court 21-11774
OF COVERAGE and SELF INSURED RETENTION
shall apply.
Based on the plain, unambiguous language of the 2008/2009
Coverage Document, PRM had neither (a) a duty to defend the
City against the § 1983 claim in the Chmielewskis’ second amended
complaint nor (b) a duty to indemnify the City for the $750,000 set-
tlement of that claim. These issues are related, but the two duties
are “distinct.” Irvine v. Prudential Prop. & Cas. Ins. Co., 630 So.
2d 579, 580 (Fla. Dist. Ct. App. 1993). “While the duty to defend is
broad and based on the allegations in the complaint, the duty to
indemnify is determined by the facts adduced at trial or during dis-
covery.” Pa. Lumbermens Mut. Ins. Co. v. Ind. Lumbermens Mut.
Ins. Co., 43 So. 3d 182, 188 (Fla. Dist. Ct. App. 2010). “The duty to
defend is of greater breadth than the insurer’s duty to indemnify,
and the insurer must defend even if the allegations in the complaint
are factually incorrect or meritless.” Jones v. Fla. Ins. Guar. Ass’n,
Inc., 908 So. 2d 435, 443 (Fla. 2005) (per curiam).
A. Duty to Defend
We will start with the duty to defend. Whether PRM had a
duty to defend the City “must be determined from the allegations
in the” Chmielewskis’ second amended complaint. Id. If those al-
legations “fairly and potentially” brought the § 1983 claim within
the 2008/2009 Coverage Document’s coverage period, then PRM
had a duty to defend. Id. The § 1983 claim was based on the City’s
seizure of the Chmielewskis’ property in violation of the Fourth
Amendment. See United States v. Jacobsen, 466 U.S. 109, 113, 104
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S. Ct. 1652, 1656 (1984) (“A ‘seizure’ of property occurs when there
is some meaningful interference with an individual’s possessory in-
terests in that property.”). Accordingly, we must look to the sec-
ond amended complaint to determine when that seizure allegedly
occurred.
The Chmielewskis’ second amended complaint alleged that
the City interfered with their possessory interests in their property
beginning in 2003. They alleged that the City adopted an ordinance
in 2003 that designated their beach parcel as “public” property, and,
“[a]s a result, public use of [their property] increased and [their]
property was constantly traveled by members of the public with
various degrees of noise, litter, injury to the dunes and plants, pet
waste, and invasive prying and peering directly into the Chmielew-
skis’ home through their great room window.” The Chmielewskis
also alleged that they tried to sell their property in 2005, but the
City denied them density credits for the beach parcel because the
City asserted that they “did not own” that parcel. They then al-
leged that the City continued to infringe upon their possessory in-
terests in their property throughout the following four years.
PRM does not dispute that (a) the Chmielewskis’ second
amended complaint alleged that Fourth Amendment violations oc-
curred as early as 2003 (i.e., prior to the relevant coverage period)
or (b) every infringement by the City of the Chmielewskis’ posses-
sory interest in their property was part of a series of related wrong-
ful acts. Our own review of the allegations in the second amended
complaint confirms the opinions of the magistrate judge and the
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16 Opinion of the Court 21-11774
district court—i.e., there are ample allegations of related wrongful
acts of the City interfering with the Chmielewskis’ possessory in-
terest in their property beginning well before 2008.
The 2008/2009 Coverage Document treats this series of re-
lated Fourth Amendment violations as a single “occurrence” that
took place “at the time of the first of such acts.” Accordingly, the
occurrence underlying the § 1983 claim occurred, at the earliest, in
2003 or, at the latest, in 2005. Both dates are well before the
2008/2009 Coverage Document’s coverage period. 4 Based on
these allegations in the second amended complaint, PRM had no
duty to defend the City under the 2008/2009 Coverage Docu-
ment. 5
4 PRM notes on appeal that “[t]he Second Amended Complaint is replete with
factual allegations that the City interfered with the Chmielewskis’ possessory
interest in their beach parcel” after “the November 26, 2008 quiet title final
judgment.” But because those alleged wrongful acts were part of a series of
related wrongful acts, the 2008/2009 Coverage Document treats them as “one
occurrence” that was “committed at the time of the first of such acts.” More-
over, even if the series of related wrongful acts “[took] place over more than
one COVERAGE PERIOD, the WRONGFUL ACT shall be deemed to have
been committed during the first COVERAGE PERIOD in which the first of
such acts or alleged acts took place.” The series of related wrongful acts un-
derlying the Chmielewskis’ § 1983 claim occurred prior to the 2008/2009 Cov-
erage Document’s coverage period, so Munich owed no duty to reimburse
PRM because it only reinsured that coverage document.
5 PRM asserts that the district court “ignored” the legal principle that “[t]he
merits of the underlying suit have no bearing on whether the duty to defend
is owed” because the duty to defend is determined based on the allegations in
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21-11774 Opinion of the Court 17
PRM argues that Munich “admitted” that PRM owed a duty
to defend the City. PRM’s basis for this claim is that Munich’s “cor-
porate representative, Christopher Duffy, . . . testified that [PRM]
owed a duty to defend the City in the underlying case, and that its
duty to defend obligation continued throughout the litigation until
the claim was finally resolved.” But this mischaracterizes Duffy’s
testimony. The magistrate judge noted that Duffy “agreed that
PRM owed a duty to defend regardless of which coverage period
the underlying lawsuit fell under, based on the allegations con-
tained within [the § 1983 claim] of the [second amended com-
plaint].” In other words, Duffy acknowledged that PRM may have
had a duty to defend the City pursuant to a prior coverage docu-
ment, but that duty was not owed under the 2008/2009 Coverage
Document.
PRM’s own actions prove this point. At one point, PRM told
the City that (i) its date of loss was December 31, 2005, and (ii) it
was seeking reinsurance coverage from Underwriters—not
the second amended complaint. That is not true. The district court correctly
looked to the second amended complaint: “because the allegations in the op-
erative complaint identified wrongful acts that took place before the policy
period, PRM did not owe the City a duty to defend the underlying lawsuit.”
The magistrate judge also quoted the second amended complaint at length to
show that the series of related Fourth Amendment violations allegedly began
as early as 2003. Both judges properly concluded that PRM owed no duty to
defend the City based on the second amended complaint’s allegations, which
did not “fairly and potentially bring the [§ 1983 claim] within policy coverage.”
Jones, 908 So. 2d at 443.
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18 Opinion of the Court 21-11774
Munich. After Munich denied coverage, PRM’s claims litigation
manager told Underwriters that PRM believed the wrongful acts
underlying the § 1983 claim occurred during the coverage period
of its reinsurance agreement with Underwriters. Accordingly,
when PRM defended the City at trial from October 19–23, 2015, it
likely did so with the understanding that the § 1983 claim was cov-
ered by an earlier coverage document, not the 2008/2009 Cover-
age Document. PRM did not re-seek reinsurance coverage from
Munich until October 28, 2015—i.e., not until after trial in the un-
derlying case. These facts suggest that PRM defended the City pur-
suant to an earlier coverage document—one that Munich had not
reinsured.
PRM also argues that the Reinsurance Agreement’s defini-
tion of “occurrence” means that the § 1983 claim fell within the
2008/2009 Coverage Document’s coverage period. In its definition
of “occurrence,” the Reinsurance Agreement says, “If the date of
any loss occurring under PRM’s Coverage Document cannot be
specifically determined, the date of loss shall be the inception date
of the Coverage Document.” PRM argues that because the date of
loss is unclear (i.e., the first wrongful Fourth Amendment violation
occurred at some unspecified time between 2003 and 2005), then
the Reinsurance Agreement resolves this lack of clarity by fixing
the date as April 1, 2008. But PRM misreads the Reinsurance
Agreement: it says the date of loss will be April 1, 2008 if the loss
“occur[s] under PRM’s Coverage Document” and if the date of that
loss “cannot be specifically determined.” In other words, the
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21-11774 Opinion of the Court 19
Reinsurance Agreement will insert April 1, 2008 as the date of loss
if the occurrence falls within the 2008/2009 Coverage Document’s
coverage period and occurred on an unspecified date. Here, that is
not the case: the loss underlying the § 1983 claim occurred prior to
the coverage period.
PRM’s interpretation is inconsistent with the plain meaning
of this provision of the Reinsurance Agreement: the April 1, 2008
date of loss applies only once it has been established that the loss
fell within the 2008/2009 Coverage Document. Without that pred-
icate finding, the Reinsurance Agreement does not fix the date of
any loss as the first day of its coverage period.
B. Duty to Indemnify
PRM also did not have a duty to indemnify the City for the
$750,000 settlement of the § 1983 claim. Unlike the duty to defend,
“the duty to indemnify is determined by the facts adduced at trial
or during discovery.” Pa. Lumbermens Mut. Ins. Co., 43 So. 3d at
188. Those facts, like the allegations in the second amended com-
plaint, show that the earliest of the related series of wrongful acts
by the City began well before the 2008/2009 Coverage Docu-
ment’s coverage period. As noted by the magistrate judge,
Mrs. Chmielewski testified that she had not been able
to enjoy her property since the Don Vista Center ren-
ovation [which occurred from 2003 to 2005], as she
experienced reduced privacy when foot traffic in front
of her home increased and beachgoers would often
look into her windows. Her sons similarly testified
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20 Opinion of the Court 21-11774
that the renovation of the Don Vista Center in the
early 2000s invited public visitors to traverse his par-
ents’ property by clearing the overgrowth from his
family’s sidewalk, that they had to listen to their par-
ents complain about the issue since 2004 or 2005 and
discuss the issue virtually every day for 10 years, that
the Chmielewskis’ property began to resemble a
“zoo” or “circus,” and the neighborhood became
“like a carnival” starting around the early 2000s.
The Chmielewskis’ counsel noted at trial that the City used federal
grant money from 2003 to 2005 to renovate the Don Vista Center,
and he argued, “[T]hat’s when our problems intensify. That’s
when we begin having issues leading to this case.” The trial court
agreed: when it denied the City’s post-verdict motion for judgment
as a matter of law, it said the Chmielewskis had “presented sub-
stantial evidence” that the City infringed on their property rights
beginning as early as the renovation of the Don Vista Center.
Like the allegations in the second amended complaint, the
facts adduced at trial show that the earliest Fourth Amendment vi-
olation underlying the § 1983 claim occurred well before the
2008/2009 Coverage Document’s coverage period. Because the se-
ries of Fourth Amendment violations are related, the magistrate
judge and district court rightly considered them to be a single oc-
currence that occurred as early as 2003.
Munich agreed to indemnify PRM for “Ultimate Net Loss,”
which is “the sum or sums paid by PRM for which it is liable, under
the [2008/2009] Coverage Document.” PRM did not incur any
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21-11774 Opinion of the Court 21
“Ultimate Net Loss” because it was not “liable” for the costs of de-
fending and indemnifying the City pursuant to the 2008/2009 Cov-
erage Document. If PRM was not liable to defend or indemnify the
City under that coverage document, then any costs it incurred are
not “Ultimate Net Loss,” so Munich has no duty to reimburse it
under the Reinsurance Agreement. Accordingly, the district court
did not err by granting summary judgment and declaratory relief
to Munich.
C. PRM’s Argument that the Date of Loss was November 26,
2008.
PRM makes one final argument in its attempt to locate the
date of loss within the 2008/2009 Coverage Document. PRM ar-
gues that the district court erred in concluding that the Fourth
Amendment violations underlying the § 1983 claim occurred prior
to April 1, 2008 because, PRM argues, the City could have violated
the Chmielewskis’ Fourth Amendment rights only after the state
court entered its Stipulated Final Judgment in the Chmielewskis’
quiet title action on November 26, 2008. PRM’s argument is that
the Chmielewskis did not have a possessory interest in the beach
lot until the state court entered its judgment quieting their title to
that parcel. Accordingly, PRM argues, the first act in the series of
related wrongs must have occurred immediately after their posses-
sory interest arose on November 26, 2008—i.e., within the cover-
age period of the 2008/2009 Coverage Document.
We agree with the magistrate judge and district court that
this argument is wholly without merit. PRM’s contention hinges
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22 Opinion of the Court 21-11774
on the premise that one cannot bring a Fourth Amendment claim
for seizure of one’s property until after a court has acknowledged
one’s possessory interest in that property in a quiet title action.
PRM cannot cite a single case for this proposition.
Under the Fourth Amendment, “[a] ‘seizure’ of property oc-
curs when there is some meaningful interference with an individ-
ual’s possessory interests in that property.” Jacobsen, 466 U.S. at
113, 104 S. Ct. at 1656. No caselaw suggests that the Chmielewskis’
possessory interests in their property only come into being once
they succeeded in their quiet title suit. As the magistrate judge con-
cluded, the state court’s Stipulated Final Judgment “provided clear
evidence of the enforceability of [the Chmielewskis’] possessory in-
terests, but [it] did not establish their possessory interests.” There-
fore, the Chmielewskis could have brought their § 1983 claim for
Fourth Amendment violations that occurred prior to November
26, 2008. The series of related wrongful acts underlying their claim
did occur in fact before the 2008/2009 Coverage Document’s cov-
erage period.
D. Summary
For the foregoing reasons, we conclude that the plain, un-
ambiguous language of the relevant insurance provisions clearly
demonstrate that the insured occurrence occurred prior to the ef-
fective date of the 2008/2009 Coverage Document and the Rein-
surance Agreement. The allegations of the second amended com-
plaint clearly demonstrate that PRM had no duty to defend the City
under the 2008/2009 Coverage Document, and the facts developed
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21-11774 Opinion of the Court 23
in the trial of the underlying case clearly demonstrate that PRM
had no duty to indemnify the City under the 2008/2009 Coverage
Document. Thus, the occurrence was not covered under Munich’s
Reinsurance Agreement.
IV.
PRM’s main argument on appeal is that the district court
erred by reviewing de novo its decision to cover the Chmielewskis’
§ 1983 claim because the follow-the-fortunes doctrine requires Mu-
nich to reimburse PRM for its good faith decision to defend and
indemnify the City. This doctrine holds “that reinsurers are gener-
ally bound by the reinsured’s decision to pay the claim and must
refrain from second guessing a good faith decision to do so.” Am.
Bankers, 198 F.3d at 1335. As this Court has explained, the case law
cites several policy reasons supporting the doctrine. First, “[r]ein-
surers do not examine risks, receive notice of loss from the original
insured, or investigate claims,” so “the reinsurance market has re-
lied on . . . the exercise of utmost good faith to decrease monitor-
ing costs and ex ante contracting costs” because reinsurers “cannot
duplicate the costly but necessary efforts of the primary insurer in
evaluating risks and handling claims.” Id. (quoting Unigard Sec.
Ins. Co., Inc. v. N. River Ins. Co., 4 F.3d 1049, 1054 (2d Cir. 1993),
abrogated on other grounds by Glob. Reinsurance Corp. of Am. v.
Century Indem. Co., 22 F.4th 83 (2d Cir. 2021)).
And American Bankers notes a second reason for the doc-
trine:
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24 Opinion of the Court 21-11774
To permit the reinsurer to revisit coverage issues re-
solved between the insurer and its insured would
place insurers in the untenable position of advancing
defenses in coverage contests that would be used
against them by reinsurers seeking to deny cover-
age. . . . Were the Court to conduct a de novo review
of [the insurer’s] decision-making process, the foun-
dation of the [insurer]-reinsurer relationship would
be forever damaged. The goals of maximum cover-
age and settlement . . . would give way to a prolifera-
tion of litigation. [Insurers] faced with de novo re-
view of their claims determinations would ultimately
litigate every coverage issue before making any at-
tempt at settlement.
Id. (first alteration in original) (quoting N. River Ins. Co. v. CIGNA
Reinsurance Co., 52 F.3d 1194, 1206 (3d Cir. 1995)).
As PRM would have us apply it here, the follow-the-fortunes
doctrine would mean that Munich could not second guess PRM’s
coverage decision to defend and indemnify the City if PRM decided
in good faith to do so. Munich would be bound to reimburse on
the basis of PRM’s good faith coverage decision.
PRM argues that the Reinsurance Agreement has an express
follow-the-fortunes clause, and, in the alternative, argues that we
should infer one. We reject both arguments because the plain, un-
ambiguous language of the relevant insurance provisions are in-
consistent with the follow-the-fortunes doctrine.
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21-11774 Opinion of the Court 25
As the foregoing description (supra Part III) of the relevant
insurance provisions reveals, the relevant insurance provisions in
this case not only do not contain an express follow-the-fortunes
clause, they are squarely inconsistent with the doctrine. That is,
the relevant insurance provisions here expressly require PRM to
submit to Munich not only proof that PRM has paid its insured (i.e.,
the City), but also proof that Munich’s Reinsurance Agreement
provides coverage for such payment. As noted above, Article XI(C)
of the Reinsurance Agreement provides
Payment by the Reinsurer of its portion of loss and
expense, paid by or on behalf of PRM, will be made
by the Reinsurer to PRM promptly after proof of pay-
ment by PRM and coverage hereunder is received by
the Reinsurer.
Art. XI(C) (emphasis added). Also as noted above, Article I and Ar-
ticle VII of the Reinsurance Agreement similarly make clear that
Munich agrees to indemnify PRM only for occurrences which oc-
cur during the 2008/2009 Coverage Document that Munich rein-
sured. In other words, Munich reinsured PRM only for occur-
rences for which PRM was liable under the 2008/2009 Coverage
Document. Thus, Article I of the Reinsurance Agreement provides
The Reinsurer agrees to indemnify PRM, on an excess
of loss basis, for Ultimate Net Loss paid by PRM as a
result of Occurrences . . . during the term of this
Agreement under PRM’s Coverage Document un-
derwritten by PRM and covered under this Agree-
ment.
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26 Opinion of the Court 21-11774
Art. I (emphasis added). And Article VII of the Reinsurance Agree-
ment defines the term Ultimate Net Loss as “the sum or sums paid
by PRM for which it is liable, under the Coverage Document rein-
sured hereunder,” i.e., the 2008/2009 Coverage Document. Art.
VII (emphasis added).
Although PRM argues that Articles I and XI(C) of the Rein-
surance Agreement constitute an express follow-the-fortunes
clause, the above quotations demonstrate just the opposite.
Squarely contrary to providing that Munich will be bound by
PRM’s good faith coverage decisions—the core principle of the fol-
low-the-fortunes doctrine—these provisions require that PRM
must submit proof to Munich not only that PRM has paid amounts
to its insured (i.e., the City), but also proof that Munich’s Reinsur-
ance Agreement provides coverage for such payments. See Art.
XI(C) (“Payment by the Reinsurer . . . will be made . . . after proof
of payment by PRM and coverage hereunder is received by the Re-
insurer.”). 6
Having rejected PRM’s argument that the Reinsurance
Agreement contains an express follow-the-fortunes clause, we turn
6 PRM inaccurately characterizes the district court’s opinion as deciding that
Article XI(C) was not a follow-the-fortunes clause “simply because [the rein-
surance agreement] did not specifically use the phrase ‘follow the fortunes.’”
That is incorrect: the district court concluded that Article XI(C) was not a fol-
low-the-fortunes clause because it did not bind Munich to follow PRM’s cov-
erage decisions.
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21-11774 Opinion of the Court 27
to its argument that, even absent an explicit follow-the-fortunes
clause in the Reinsurance Agreement, this Court should infer that
the doctrine applies to any reinsurance contract under Florida law.
In predicting how the Supreme Court of Florida would construe
the Reinsurance Agreement, we decline to infer the application of
the follow-the-fortunes doctrine under the circumstances of this
case. Where a reinsurance agreement contains terms that are
plainly and unambiguously inconsistent with the follow-the-for-
tunes doctrine (as the Reinsurance Agreement does here), we are
confident that the Supreme Court of Florida would not infer appli-
cation of the doctrine. What PRM’s argument asks us to do is to
infer that PRM and Munich intended for Munich to be bound by
PRM’s good faith decision to provide coverage for the City’s
wrongful acts in the underlying case. But the plain, unambiguous
language of the Reinsurance Agreement provides just the opposite:
it requires that PRM submit to Munich not only proof that it paid
the City, but also proof that such payments were covered under
the Reinsurance Agreement. We reject PRM’s argument as wholly
without merit. See Excelsior Ins. Co., 369 So. 2d at 942 (prohibiting
courts from “rewrit[ing] contracts, add[ing] meaning that is not
present, or otherwise reach[ing] results contrary to the intentions
of the parties”).
We need not decide—and we expressly do not address—
whether such an inference would be appropriate under other cir-
cumstances—e.g., where the reinsurance agreement contains nei-
ther an express follow-the-fortunes clause nor language that is
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28 Opinion of the Court 21-11774
plainly inconsistent with the doctrine. Two treatises suggest that
courts are divided over this question. See 2 Allan D. Windt, Insur-
ance Claims & Disputes: Representation of Insurance Companies
& Insureds § 7:10 (6th ed. Mar. 2022 Update) (stating that “courts
in the majority of states” have held that a reinsurer does not have
to follow the fortunes of the insurer if their contract does not con-
tain an express follow-the-fortunes clause); Steven C. Schwartz, Re-
insurance Law: An Analytic Approach § 9.02 (2021) (noting that
“[c]ourts are split as to whether a follow-the-fortunes clause is re-
quired, or whether the doctrine is implicit in every reinsurance
contract”).
PRM also argues that our prior decision in American Bank-
ers required the district court to apply the follow-the-fortunes doc-
trine. We reject that argument. We applied the doctrine in Amer-
ican Bankers because the reinsurance agreement at issue contained
a follow-the-fortunes clause. See 198 F.3d at 1334–35 (identifying a
clause that said “[a]ll claims involving this reinsurance when settled
by the Company, shall be binding on the Reinsurer” as a fol-
low-the-fortunes clause and noting that such clauses “usually
state[] that when an insurer loses to—or settles with—the insured,
the reinsurer must ‘follow the fortunes’ of the [insurer] and pay on
its reinsurance obligations”). Our decision in American Bankers
did not hold, or even suggest, that courts must imply the doctrine
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21-11774 Opinion of the Court 29
in every reinsurance agreement, even when the relevant insurance
provisions are inconsistent with an application of the doctrine. 7
In sum, we reject PRM’s arguments that the Reinsurance
Agreement contains an express follow-the-fortunes clause and its
alternative argument that we should imply one. Both arguments
fail because the plain, unambiguous language of the relevant insur-
ance provisions are squarely inconsistent with the core principle of
7 PRM also cites two decisions of the Eighth Circuit for the proposition that
courts should imply the follow-the-fortunes doctrine in all reinsurance con-
tracts. We can easily distinguish these cases. In the first one, the Eighth Cir-
cuit affirmed the district court’s application of the follow-the-fortunes doctrine
because (a) the parties agreed “as to the nature of the follow-the-fortunes doc-
trine and as to its customary application in the reinsurance business” and
(b) the contracts at issue “did not contain ‘anti-follow-the-fortunes’ provi-
sions.” ReliaStar Life Ins. Co. v. IOA Re, Inc., 303 F.3d 874, 881 (8th Cir. 2002).
The Eighth Circuit, which was applying Minnesota law, did not hold that a
silent reinsurance contract implicitly contains a follow-the-fortunes clause
even when evidence of the parties’ intent is inconsistent with application of
the doctrine. Id. at 880–81. In the second opinion, the Eighth Circuit expressly
did not reach the question of whether such a clause may be implied in a rein-
surance contract. See Emps. Reinsurance Co. v. Mass. Mut. Life Ins. Co., 654
F.3d 782, 791 (8th Cir. 2011) (“[W]e express no opinion as to whether follow
the settlements is an implied term of the Treaty under Connecticut law.”).
Neither case suggests that a follow-the-fortunes clause should be implied
when the reinsurance agreement contains provisions inconsistent with the fol-
low-the-fortunes doctrine.
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30 Opinion of the Court 21-11774
the follow-the-fortunes doctrine—i.e., that Munich would be
bound by PRM’s good faith coverage decisions. 8
V.
Because the district court correctly decided that Munich had
no duty to reimburse PRM for its defense and indemnification of
the City in the underlying § 1983 suit, we AFFIRM the grant of
summary judgment and declaratory relief in favor of Munich. The
judgment of the district court is
AFFIRMED.
8 Because we have determined that the district court correctly refused to apply
the follow-the-fortunes doctrine, we do not reach the parties’ arguments con-
cerning whether a bad faith exception to the doctrine might apply.