(2) A claim for spoliation of evidence.

Selective Insurance Company of the Southeast insured White Racing under both a worker's compensation policy and an employer's liability policy. Selective provided Rivera benefits under the worker's compensation policy for his injuries. Selective maintained, however, that it had no duty to defend White Racing against Rivera's lawsuit because it did not fall within the terms of the liability policy's coverage for damages arising from “bodily injury by accident.”

To that end, Selective filed a declaratory judgment action seeking a declaration that it owed no duty to defend. Selective argued that Rivera's claims against White Racing were solely for economic losses – not bodily injury – flowing from its alleged breach of its duties to preserve evidence after the accident.

In response, White Racing conceded that the two specific counts stated against it were not covered by the liability policy. Nevertheless, White Racing maintained that Selective owed a duty to defend because the factual allegations in Rivera's complaint could support a negligence claim against White Racing for Rivera's injuries.

The district court agreed with White Racing and entered a partial declaratory judgment requiring Selective to defend White Racing against Rivera's lawsuit.

Selective appealed to the Eleventh Circuit.

The Eleventh Circuit's decision

The circuit court reversed.

In its decision, the circuit court first ruled that looking solely to the specific claims that Rivera asserted against White Racing — spoliation and failure to cooperate under Fla. Stat. § 440.39 — Selective had no duty to defend because a liability policy applying to “bodily injury by accident” did not provide coverage for claims against an insured for breaching a duty to preserve evidence.

The Eleventh Circuit then rejected White Racing's contention that Selective owed a duty to defend because “the totality of the factual allegations in the complaint, irrespective of the specific counts pled,” could support a finding of negligence against White Racing for Rivera's injuries.

The circuit court said that the “state of facts” alleged arguably could support a claim that White Racing's negligence had contributed to Rivera's bodily injuries. However, the circuit court added, perhaps due to complications arising from Rivera's receipt of worker's compensation benefits, the complaint “quite clearly” did “not seek recovery against White Racing for those injuries.” In these circumstances, the Eleventh Circuit decided, it could not conclude that the Florida Supreme Court would find a duty to defend based on “the mere theoretical possibility” that Rivera could seek recovery against White Racing for his injuries at some later time.

In the circuit court's opinion, Rivera's complaint made clear that the injury for which he sought to recover damages “was the inability to prove a cause of action, caused by White Racing's alleged breach of its duties to preserve evidence after the accident.” Those damages, the Eleventh Circuit concluded, were not covered by the Selective liability policy, which applied to “bodily injury by accident,” and Selective had no duty to defend White Racing against Rivera's claims.

The case is Selective Ins. Co. of the Southeast v. William P. White Racing Stables, Inc., No. 16-16248 (11th Cir. Dec. 13, 2017).

Steven A. Meyerowitz, Esq., ([email protected]) is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals.