In response to certified questions from the Eleventh Circuit, the Florida Supreme Court found that a contractual indemnity payment to the insured satisfied the policy's SIR requirement. Intervest Constr. of Jax v. Gen. Fid. Ins. Co., 2014 Fl. LEXIS 568 (Fla. Feb. 6, 2014).
ICI Homes, Inc. a general contractor, hired Custom Cutting, Inc. to provide trim work, including installation of attic stairs in a residence ICI was building. Under the contract, Custom Cutting agreed to indemnify ICI for any damages resulting from Custom Cutting's negligence. The owner of the residence fell while using the attic stairs installed by Custom Cutting, injurying herself. The owner sued ICI, who sought indemnification from Custom Cutting.
ICI's policy with General Fidelity had a $1 million SIR. The policy also had a transfer of rights clause granting the insurer some subrogation rights.
The case was mediated. The parties agreed to a settlement of $1.6 million. Custom Cutting's insurer proposed paying $1 million to ICI to settle the indemnification claim. ICI, in turn, would pay that $1 million to the residence owner. A dispute arose over wither ICI or General Fidelity was responsible for paying the remaining $600,000.
ICI filed suit in federal court for a declaratory judgment and cross motions for summary judgment were filed. The district court ruled ICI could not use the $1 million indemnification payment to satisfy the SIR. The policy provided that the "Retained Limit' must be paid by the insured and that the "Retained Limit" would only be reduced by payments made by the insured.
ICI appealed. The Eleventh Circuit found no controlling Florida law. A certified question was therefore presented to the Florida Supreme Court asking whether General Fidility's policy allowed ICI to apply the indemnification payment to satisfy the $1 million SIR?
The Florida Supreme Court determined the language of the policy allowed the insured to apply indemnification payments received from a third party toward satisfaction of its $1 million SIR. ICI had bargained for the right to indemnification from Custom Cutting and, without an express policy provision to the contrary, should be able to use the payment to satisfy the SIR.
The second certified question asked whether the common law rule of the "made whole doctrine" applied or whether the transfer of rights clause in the policy abrogated the doctrine. The policy provided that if the insured had rights to recover all or part of any payment made under the policy, the rights were transferred to the insurer. Therefore, the provision gave General Fidelity subrogation rights. However, the provision gave no guidance as to the priority to recover when the indemnity amount was insufficient to "make whole" both parties.
The Florida Supreme Court decided that the transfer of rights provision did not abrogate the made whole doctrine. ICI's right of priority was preserved by the language.
