Evanston denied coverage and Palm Beach sued, seeking a declaration of coverage under the policy's employee benefits liability coverage endorsement.

Evanston moved for summary judgment, arguing that there was no coverage under its policy for Mr. Van Liew's breach of contract claim because the claim did not constitute a negligent act, error, or omission.

For its part, Palm Beach asserted that the endorsement was intended to cover negligent breach of contract claims and because Mr. Van Liew failed to address whether Palm Beach's acts were negligent or willful, there was an ambiguity that had to be construed in favor of coverage.

The Evanston Insurance Policy

The Evanston policy's employee benefits liability coverage endorsement provided:

We will pay those sums that the insured becomes legally obligated to pay as damages because of any act, error or omission of the insured, or of any other person for whose acts the insured is legally liable, to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured any “suit” seeking damages to which this insurance does not apply. . . .

This insurance applies to damages only if:

(1) The act, error or omission is negligently committed in the “administration” of your “employee benefit program” . . .

The endorsement's intentional acts exclusion excluded coverage for:

[d]amages arising out of any intentional, dishonest, fraudulent, criminal or malicious act, error or omission, committed by any insured . . .

The District Court's Decision

The court granted Evanston's motion.

In its decision, the court agreed with Evanston that Mr. Van Liew's breach of contract claim did “not constitute a negligent act, error, or omission” and, therefore, that it was not covered by the endorsement.

The court pointed out that there was no dispute that Mr. Van Liew's action was a breach of contract claim and that he explicitly alleged in his complaint that Palm Beach owed him accrued leave under the terms of his employment agreement.

According to the court, that Palm Beach may have withheld Mr. Van Liew's leave by some negligent act or error was “irrelevant.” The duty to defend depended “solely on the facts and legal theories alleged in the pleadings and claims against the insured,” the court said, noting that Mr. Van Liew's only allegation was breach of contract.

Because his complaint never mentioned negligence, the court concluded, Mr. Van Liew's claim fell outside the scope of coverage and Evanston had no duty to defend Palm Beach in the Van Liew action.

The case is Palm Beach Leisureville Community Association, Inc. v. Evanston Ins. Co., No. 19-60399-CIV-DIMITROULEAS (S.D. Fla. July 10, 2019).