Appellate win provides needed clarity on sublimited insurance coverage
The underlying incident involved a murder and attempted murder at a Days Inn, resulting in wrongful death and negligent security claims.
The Eleventh Circuit recently issued an opinion affirming summary judgment in favor of insurer StarStone National Insurance Co. and against insured, Polynesian Inn LLC d/b/a Days Inn of Kissimmee, and Andrew James Bickford, holding there is no coverage under StarStone’s policy for the underlying incident involving a murder and attempted murder on the property of an insured hotel.
In the opinion, the Eleventh Circuit adopted StarStone’s proposed definition and interpretation of the term “sublimit,” thereby providing clarity to insurers, insureds, and the public at large, on a term frequently found in insurance policies, but that Florida courts had never before defined.
The underlying incident involved a murder and attempted murder of two men at a Days Inn hotel, operated by Polynesian, resulting in wrongful death and negligent security claims. In April 2017, “a woman wielding a knife attacked Bickford and Zackery Ganoe while they were guests at a hotel operated by Polynesian in Kissimmee, Florida.” Polynesian was insured under a primary policy with $1,000,000 in limits applicable to each occurrence. However, for assault and battery offenses, the limits were $25,000 per offense, per an endorsement. StarStone insured Polynesian under an excess policy, and the policy did not provide coverage for any claims that were subject to a “sublimit of liability” in the primary policy.
StarStone argued $25,000 limit applicable to assault and battery offenses under the A&B endorsement was a “sublimit” in the primary policy and, therefore, its excess policy provided no coverage. Polynesian and Bickford argued the limit in the A&B endorsement was not a sublimit but rather was a separate standalone limit. The Middle District of Florida granted summary judgment in favor of StarStone, which was appealed to the Eleventh Circuit.
The Eleventh Circuit held that the definition of “sublimit” advanced by StarStone and adopted by the district court, i.e. that a sublimit caps a carrier’s exposure, or existing coverage, at an amount less than the otherwise applicable policy limit, is consistent with the ordinary meaning of that term, as reflected in legal and non-legal dictionaries. The Eleventh Circuit acknowledged that “Florida courts commonly adopt the plain meaning of words contained in legal and non-legal dictionaries,” despite Polynesian and Bickford’s arguments to the contrary.
The Eleventh Circuit rationalized that the $25,000 limit resulting from assault or battery would typically have been covered under the primary policy’s general $1 million per occurrence limit for “bodily injury.” The operation of the A&B endorsement is to cap the primary carrier’s liability for that subcategory of loss to $25,000. As aptly noted by the Eleventh Circuit, “[i]n other words, the effect of the A&B Endorsement was to cap existing coverage for a particular subcategory of loss, not to create a new category of coverage that did not exist before the A&B Endorsement.”
The impact going forward for insureds is that sublimited coverage is sublimited coverage. Excess and umbrella carries will now be on firm ground in denying any coverage beyond the sublimit. Both brokers and insureds must be cognizant of this change, and draft towers of coverage appropriately if something else or if broader coverage is desired. The old adage that the attachment point is sacrosanct — will now live on for ages.
The case was styled StarStone National Insurance Co. v. Polynesian Inn, LLC, et al., appellate case no. 19-13769.
Viviana Loshak is a partner with the U.S. law firm of Hinshaw & Culbertson. She primarily represents clients in commercial litigation, focusing on insurance-related matters and may be reached at vloshak@hinshawlaw.com. Rory Eric Jurman is a partner with Hinshaw & Culbertson. He provides strategic and cost-effective counsel to Fortune 500 companies, insurers, and self-insureds and may be reached at rjurman@hinshawlaw.com. James Wyman is Of Counsel with Hinshaw & Culbertson. He is an experienced appellate practitioner who is Board Certified by The Florida Bar in Appellate Practice and may be reached at jwyman@hinshawlaw.com.
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