IN THE SUPREME COURT OF FLORIDA

CASE NO: SC00-1655

Lower Tribunal No. 3D98-2658

_____________________________________________

HAGGERTY & SONS INSURANCE

AGENCY, INC., a Florida Corporation,

Defendant/Petitioner

vs.

DARRELL GWYNN,

Plaintiff/Respondent

and

DALY AGENCY, INC., a Foreign Corp.,

Defendant/Respondent,

_______________________________________________

PETITIONER'S INITIAL BRIEF

DEMAHY LABRADOR & DRAKE, P.A.

Attorneys for Petitioner

2333 Ponce De Leon Boulevard

The Colonnade, Suite 650

Coral Gables, FL 33134

Telephone:305-443-4850

Facsimile:305-443-5960

TABLE OF CONTENTS

TABLE OF CONTENTS i

TABLE OF AUTHORITIES ii

CERTIFICATE OF SIZE AND STYLE OF TYPE iii

I. INTRODUCTION 1

II. STATEMENT OF THE CASE 1

III. STATEMENT OF THE FACTS 3

IV. SUMMARY OF THE ARGUMENT 9

V. ARGUMENT 13

VI. CONCLUSION 41

CERTIFICATE OF SERVICE 41

TABLE OF AUTHORITIES

Akins v. Hudson Pulp & Paper Co.

330 So.2d 757, 759 (Fla. 1st DCA 1976) 19, 20

All Terrain Properties, Inc. vs. Hoy

265 A.D. 2d 87, 93, 705, N.Y.S. 2d 350, 355 (2000) 23

Allen vs. Zurich Ins. Co.

667 F.2d 1162, 1166-67 (4th Cir. 1982) 27

Atlantic Cylinder Corp. vs. Hetner

438 So.2d 922, 923 (Fla. 1st DCA 1983) 20

Bass vs. General Motors Corp.

637 So.2d 304, 306 (Fla. 1st DCA 1994) 35

Bernard Berman, P.A. vs. Gary Stern M.D., P.A.

731 So.2d (Fla. 4th DCA 1999) 26

Bill Eyerly Insurance vs. Gregory

727 So.2d 293 (Fla. 5th DCA 1999) 35

Bitz vs. Ed Knox CLU and Associates

721 So.2d 823 (Fla. 3rd DCA 1998) 12,

13, 32,

39, 40

Boshnack vs. World Wide Rent-a-Car, Inc.

195 So.2d 216 (Fla. 1967) 16

Brown vs. City of Dayton

730 N.E. 2d 958, 962 (Ohio 2000) 23

Bruszewzki vs. United States

181 F.2d 419, 422, n.6 (3rd Cir. 1950)

24

Citizens for Open Access to Sand & Tide, Inc. vs. Seadrift

60 Cal. App. 4th 1053, 1070, 71 Cal. Rptr. 2d 77, 88 (1998) 24

Coble vs. Aronson

647 So.2d 968 (Fla. 4th DCA 1994) 33

D.R. Mead & Co. vs. Cheshire of Florida, Inc.,

489 So.2d 830 (Fla. 3rd DCA 1986) 10,

15, 17

Department of Health and Rehabilitative Services vs. B.J.M.

656 So.2d 906, 910 (Fla. 1995)

18

E.C. vs. Katz

731 So.2d 906 910 (Fla. 1995) 18

Fidelity & Casualty Company of New York vs. Scott

386 So.2d 315, 316 (Fla. 1st DCA 1980) 25

Hunzinger Construction Corp. vs. Quarles & Brady

735 So.2d 589, 595 (Fla. 4th DCA 1999) 34,

35, 37

Insurance Company of North America vs. Whatley

558 So.2d 120, 122 (Fla. 5th DCA 1990) 22

Khan vs. Simkins Industries, Inc.

687 So.2d 16, 17 (Fla. 1996) 19

Lambert vs. Nationwide Mutual Fire Insurance Company

486 So.2d 517 (Fla. 1st DCA 1984) 27, 30

Major vs. Inner City Property Management, Inc.

653 A.2d 379, 381 (D.C. 1995) 21

Nelson & Company v. Holtzclaw

566 So.2d 307, 308-9 (Fla. 1st DCA 1990) 25

Oaks Farm vs. Berry

500 So.2d 175, 177 (Fla. 1st DCA 1986) 35

Pearson vs. Harris

449 So.2d 339 (Fla. 1sr DCA 1984) 30

Peat, Marwick, Mitchell & Co. vs. Lane

565 So.2d 1323 (Fla. 1990) 33, 36

Pennsylvania Guaranty Association v. Sikes

597 So.2d 1051 (Fla. 3rd DCA 1991) 33

Progressive American Insurance Company vs. McKinnie

513 So.2d 240, 242 (Fla. 4th DCA 1987) 19

Ray Roofing Company vs. Young

491 So.2d 672 (Fla. 1st DCA 1982) 25

Roberts vs. People

87 P. 2d 251(Colo. 1938) 38

Rosen vs. Raum

191 A.D. 2d 254, 595 N.Y.S. 2d 14 (1993) 22

Safecare Medical Center vs. Howard

670 So.2d 1020 (Fla. 4th DCA 1996) 28,

29, 30

Sheridan vs. Greenberg

391 So.2d 234 (Fla. 3rd DCA 1980) 10,

15, 17

Smith vs. Avatar Properties

714 So.2d 1103, 1107 (Fla. 5th DCA 1998) 26

Southeastern Fidelity Insurance Company vs. Rice

515 So.2d 240, 242 (Fla. 4th DCA 1987) 19

State vs. Summers

528 S.E. 2d 17, 20 (N.C. 2000) 24

State vs. Wilson

483 So.2d 23 (Fla. 2nd DCA 1985, affirmed

520 So2d 566 (Fla. 1988)

16, 38

State Farm Mutual Automobile Insurance Company

vs. Smalley Transport Company

696 So.2d 522, 523-24 n.2 (Fla. 3rd DCA 1997) 30

Stogniew vs. McQueen

656 So.2d 917, (Fla. 1995) 19, 23

Tamari vs. Bache & Company

637 F.Supp. 1333, 1341 (N.D.ILL. 1986) 22

Thompson vs. Petherbridge

472 So.2d 773, 774-775 (Fla. 1st DCA 1985)

25

Vanguard Insurance Company vs. Townsend

544 So.2d 1153, 1157 (Fla. 5th DCA 1989) 22

Werth vs. Martin

79 A.D. 2d 861, 434 N.Y.S. 2d 483 (1980) 21

Wiles vs. Mullinax

168 S.E. 2d 366 (N.C. 1969) 16, 17

CERTIFICATE OF SIZE AND STYLE OF TYPE

WE HEREBY CERTIFY that the size and style of type used in the Initial

Brief, filed May 7, 2001, in the captioned matter, is:

Times New Roman 14 pt.

DEMAHY. LABRADOR & DRAKE, P.A.Attorneys for Defendant, Haggerty2333 Ponce De Leon BoulevardThe Colonnade, Suite 650Coral Gables, FL 33134Ph: 305-443-4850Fx: 305-443-5960

By: __________________________

KENNETH R. DRAKE

FBN: 375111

I. INTRODUCTION

Plaintiff, Darrell Gwynn, appeals a summary judgment entered in favor of the

Defendants, insurance agents. Plaintiff claimed that the Defendants negligently failed

to secure worker’s compensation coverage for him. The Plaintiff was an officer and

an employee of Gwynn Enterprises. The Plaintiff, however, was found to be covered

under Gwynn Enterprises’ policy by the worker’s compensation court, but then settled

his claim with the compensation carrier while on appeal. In this litigation, Plaintiff did

an about-face, and claimed there was no coverage to him under the policy.

The parties will be referred to by name or as they appeared below. Darrell

Gwynn will be referred to by name or as Plaintiff. Daly Agency Inc. will be referred

to as Daly. Haggerty & Sons Insurance Agency Inc., the Petitioner, will be referred

to as Haggerty. The Record will be cited as (R. Vol. ___, p. ___.) All emphasis will

be the writer’s unless otherwise indicated.

II. STATEMENT OF THE CASE

Plaintiff sued two insurance agencies, Daly and Haggerty, alleging that they

negligently failed to obtain worker’s compensation coverage for him. In his initial

complaint, Plaintiff alleged that the negligence of the Defendants placed him in a

weakened position in the worker’s compensation litigation and ultimately caused him

to settle the case while on appeal for an amount less than the full value of his claim.

(R. Vol. I, p.1-34) However, Plaintiff changed his theory of recovery as the case

progressed. In the Second Amended Complaint, Plaintiff alleged that he had filed his

worker’s compensation claim “notwithstanding the absence of such coverage” and

8

that there really was no coverage for him under Traveler’s worker’s compensation

policy issued to his employer, Gwynn Enterprises. Despite the fact that he had

litigated and won worker’s compensation coverage, Plaintiff asserted that he was not

covered by the Traveler’s worker’s compensation policy for the injuries he received

in his April 15, 1990 accident, and sought as damages the benefits he would have

received under the worker’s compensation policy if he was covered. (R. Vol. XII,

p.1823-29).

The Defendants separately moved for summary judgment on the basis that the

worker’s compensation court in the underlying litigation had already ruled that there

was coverage under the worker’s compensation policy. While those motions were

pending, Plaintiff continued to maintain his position that he was not provided coverage

under the policy, filing a Motion in Limine to exclude any evidence of the worker’s

compensation order finding such coverage, or the receipt by Mr. Gwynn of worker’s

compensation benefits. (R. Vol. XII, p.1798).

The trial court ultimately entered summary judgment in favor of the Defendants,

without ruling on the Motion in Limine. The Third District Court of Appeal reversed

the summary judgment. It found:

1. That the Defendants could not invoke the doctrine of collateral estoppel

based on the first litigation because the Defendants were not privies or

parties to that action. (R. 2370.)

2. That the Plaintiff was not barred by judicial estoppel from arguing in this

litigation that there was no coverage under the Traveler’s policy, because

there was “no impermissible change of position.” (R. 2371-72.)

9

3. That the Plaintiff did not abandon his claim against the Defendant

insurance agencies by his settlement with Traveler’s on appeal. (R.

2372.)

This Court accepted jurisdiction based upon express and direct conflict.

III.STATEMENT OF THE FACTS

The material facts are briefly discussed below.

A. The Policy Is Procured

Plaintiff was a race car driver and worked for Gwynn Enterprises, a family

business located in Florida. Gwynn Enterprises, through Ed Gwynn, Plaintiff’s father,

contacted Daly in January 1989 to procure worker’s compensation coverage. Gwynn

Enterprises had not had worker’s compensation coverage since approximately April

1988. (R. Vol. VII, p. 905.) Daly, a Minnesota insurance agency, associated with

Haggerty, a Florida insurance agency, to place the compensation coverage here in

Florida. (R. Vol. XIII, p. 2242.)

Haggerty received Gwynn Enterprises’ application from Daly. The application

stated that the officers of the corporation were not exempt from the coverage, but

simultaneously stated that it had excluded officer’s salaries in determining the

premium. Moreover, attached to the application were corporate officer exemption

forms showing that the officers of Gwynn Enterprises exempted themselves from

coverage. (R. Vol. VII, p.881, Exh. C and D). To add to the confusion, the employee

1 There is some confusion in the Record as to whether or not Darrell Gwynnsigned the Certificate of Exemption in 1987 as well. His testimony at least at one pointin this case was that he did. (R. Vol. V, p. 661-62.)

10

class codes on the application were for mechanics and clerks. (R.Vol. II, p.326-327;

Vol. VII, p.942). To clarify, Haggerty spoke with Tom Kelsey, a Daly agent, to

determine whether officers were to be exempt. Haggerty changed the application as

a result of this conversation to reflect that the officers were exempt (R. Vol. VII, p.

881, Exh. C and D; XIII, p. 2243-44.) Mr. Kelsey, however, denied having any

conversation with Haggerty discussing the officers being exempt before Plaintiff’s

April 15, 1990 accident. (R. Vol. VII, p. 912.)

The Plaintiff testified that he believed he was covered under the worker’s

compensation policy as of 1989. (R. Vol. V, p. 649-50.) The Gwynns, however,

signed forms in 1987 and 1989 titled “Certificate of Exemption From Coverage Under

Worker’s Compensation Law.” (R. Vol. XIII, p. 2243.) Ed Gwynn acknowledged

receipt and execution of the Certificate of Exemption on approximately January 24,

1989. He did not recall where the form came from, and stated he had no dealings with

Haggerty. (R. Vol. VIII, p. 1127-28.) Plaintiff also admitted signing the Certificate of

Exemption in 1989. 1 However, he denied knowing what it was for. He said that his

father told him he had to sign the Certificate of Exemption to get worker’s

compensation coverage. (R. Vol. V, p. 664-66.)

2 Earlier that year, Haggerty had written to Travelers asking for an endorsementeffective February 22, 1990, excluding officers from coverage.

11

It was the testimony of the Daly employees that they did not know anything

about the 1989 Exemption form, and did not know how the Gwynns got the form. (R.

Vol. VII, p. 919.) Haggerty had no contact with the Gwynns’ at all, prior to Plaintiff’s

accident. (R. Vol. XIII, p. 2243-44.)

B. The Accident Occurs April 15, 1990, And The Policy Is Endorsed 10

Days Later

The Plaintiff was injured in a car racing accident April 15, 1990 during the

course and scope of his employment with Gwynn Enterprises. Travelers, the worker’s

compensation carrier, 10 days later, issued an endorsement, based on the 1989

Certificate of Exemption, excluding coverage to officers, and therefore excluding

coverage to the Plaintiff.2 Up to that time, the policy did not exclude coverage to

the officers and Travelers had assessed and received premium including salary

for the officers. (R. Vol. XIII, p. 2244.)

C. Plaintiff Files His Worker’s Compensation Action, Wins,

And Then Settles On Appeal

In response to Travelers’ denial of coverage, Plaintiff filed a worker’s

compensation action claiming entitlement to coverage under Gwynn Enterprises’

policy. The parties stipulated to try the coverage issue first. (R. Vol. VII, p. 976.)

3 Haggerty and Daly’s personnel were deposed, among others. (R. Vol. II, p. 90-245; Vol. III, p. 247-424.) Haggerty, in fact, had been threatened by Plaintiff with suit“for negligence.” (R. Vol. II, p. 164.)

12

After extensive discovery 3 and hearing, the worker’s compensation court agreed

with Darrell Gwynn, issuing a 20-page order, setting out extensive factual findings

and conclusions of law. In fact, the court found that each of the theories propounded

by Plaintiff was a sufficient basis to find coverage. The court’s findings and

conclusions include:

1. In December 1988, Gwynn Enterprises received a contract with Coorsrequiring everyone with Gwynn Enterprises to be covered by worker’s compensationinsurance, including Plaintiff. (R. Vol. IV, p. 480.)

2. Daly knew Gwynn Enterprises wanted coverage for its officers. (R. Vol.

IV, p. 481.)

3. The worker’s compensation policy was issued without any exclusion, and

premium was assessed based on all officers salaries. (The court found that any

inconsistencies in the application were caused by the employer’s misunderstanding of

the application.)(R. Vol. IV, p. 481-82.)

4. The Certificate of Exemption signed in 1989 was signed with the belief

that its purpose was to revoke a previous 1987 Certificate of Exemption. At all times,

Gwynn Enterprises intended for its officers to be covered. (R. Vol. IV, p. 481.)

4 There was record evidence which contradicts this finding, as there was for anumber of other findings. However, the worker’s compensation judge made thesefindings based on disputed facts, as a trier of fact.

13

5. Haggerty changed the application without consulting Daly or Gwynn.4 (R.

Vol. IV, p. 481-82.)

6. When the policy was renewed for 1990, the premium again was assessed

based upon all officers’ salaries, including Darrell Gwynn’s salary, and again there was

no endorsement excluding coverage to Darrell Gwynn. (R. Vol. IV, p. 482-83.)

7. Travelers issued an endorsement excluding coverage to officers 10 days

after the April 15, 1990 accident, and thus refused coverage to Darrell Gwynn. (R.

Vol. IV, p. 483.)

8. Based on these facts, the worker’s compensation court adopted the

following arguments propounded by Gwynn.

a. The carrier waived the exclusion for coverage of officers by issuing

the policy with such coverage which was accepted by Gwynn Enterprises. (R. Vol.

IV, p. 484-86.)

b. The carrier was estopped to deny coverage by issuing the policy

providing coverage to officers, including Darrell Gwynn, which was relied on by

Gwynn Enterprises, and Darrell Gwynn. (R. Vol. IV, p. 487-90; 492-94.)

5 The briefs on appeal appear at Vol. VII, p. 972 (Travelers) and Vol. VII, p.1018 (Gwynn). Gwynn’s summary of its argument appears on pages 1031-35.

14

c. Even if the insurance agents, Daly and Haggerty, were

negligent, they were agents of Gwynn Enterprises, the employer, not the agent of

Darrell Gwynn, an employee. Since the carrier stands in the shoes of the

employer, the actions of the agents were attributable to the carrier as well as the

employer. (R. Vol. IV, p. 490-91.)

d. Plaintiff and Gwynn Enterprises relied on the carrier’s actions in

conducting their business. (R. Vol. IV, p. 491-92.)

Based on these findings, the worker’s compensation court ordered that

Travelers provide worker’s compensation benefits to Darrell Gwynn, and ordered that

Travelers pay Jackson Memorial Hospital’s medical bills. (R. Vol. IV, p. 497-98.)

Travelers appealed. Plaintiff maintained his positions on appeal, 5 including that

Daly and Haggerty were acting as agents of the employer and therefore, by operation

of law, the insurance carrier. (R. Vol. VII, p. 1024, 1034, 1056-57.) Before the appeal

was resolved, the parties settled. Traveler’s paid Gwynn $1.75 million. Plaintiff’s

attorney’s fees of $550,000.00 were designated to be paid out of that settlement fund.

The settlement agreement also stated that the full value of the claim was $5 million.

The worker’s compensation court’s order finding coverage was not vacated by the

settlement. (R. Vol. VII, p. 881, Exh. L).

15

IV. SUMMARY OF THE ARGUMENT

The Third District’s Opinion should be quashed, and the summary judgment

affirmed. The worker’s compensation court found that Plaintiff was entitled to

coverage under the policy. That finding precludes this suit. The trial court correctly

entered summary judgment here.

The Third District ruled that neither a prior finding of coverage in the worker’s

compensation action, nor Plaintiff’s change in position in this litigation bars this action.

Indeed, the Third District’s Opinion can be read to allow an insured to sue the

insurance company, obtain a favorable determination of coverage, settle the case, and

then sue the insurance agent, treating the underlying litigation as if it never happened.

Under the Opinion, the resolution of whether or not there actually is coverage under

the policy apparently is no longer dispositive in a suit against an insurance agent for

failure to procure coverage. This is contrary to long-established Florida law.

The foundational cause of action here against the insurance agents, Daly and

Haggerty, as stated in the Second Amended Complaint, is that the agents negligently

failed to procure worker’s compensation insurance coverage for Darrell Gwynn.

Under the longstanding general rule of law, the Plaintiff’s burden of proof required the

establishment of a lack of coverage under the policy. For instance, cases such as

D.R. Mead & Co. v. Cheshire of Florida, Inc., 489 So.2d 830 (Fla. 3rd DCA 1986)

and Sheridan v. Greenberg, 391 So.2d 234 (Fla. 3rd DCA 1980), relied upon a finding

16

of no coverage under a policy in prior litigation, as an element to the claim against the

agent. The critical element of Gwynn’s case was that there was no coverage under the

policy. However, Gwynn already resolved that issue in the worker’s compensation

court, obtaining a ruling that there was coverage. The Third District’s Opinion

thus conflicts with this established rule of law, by finding that there need not be a

determination of “no coverage” to pursue the agent. In fact, the Opinion permits a

positive finding of coverage in favor of the insured, which does not result in absolution

of the agent.

The finding of coverage should be a binding determination on that critical

element of Plaintiff’s cause of action against the insurance agents. Both the insured

and the insurance agent should be bound under these circumstances by that finding.

Is there any doubt that, if Plaintiff lost the coverage issue in the worker’s

compensation court and was thus precluded from recovering under that policy,

Plaintiff would be contending in this action that the workers’ compensation court’s

determination established that there was no coverage? If the agent were permitted to

re-litigate that issue, then the insured could conceivably lose to the carrier on a finding

of no coverage, and then lose to the agent on a finding that there was coverage; i.e.,

suffer inconsistent results depriving him of a recovery from both carrier and agent.

Here, Plaintiff should be bound by the worker’s compensation court’s finding of

coverage, just as the agents.

17

The doctrine of collateral estoppel should be applicable to support the summary

judgment. There was mutuality of parties, because the agents were in privity with the

parties to the first suit. Both the Defendants and the Plaintiff were, are, bound by the

finding of coverage. Also, the finding of coverage was a final decision for purposes

of collateral estoppel. All judicial labor on that issue was at an end. It was subject to

appeal. It was not subject to modification. Piece-meal appeals in worker’s

compensation cases are not prohibited.

Similarly, the summary judgment was properly granted under the doctrine of

judicial estoppel. Florida law prohibits a party from taking totally inconsistent

positions in successive related litigation. In the first case, Plaintiff argued there was

coverage, and won. In the second case, Plaintiff argues there is no coverage, despite

the fact that he successfully persuaded the court in the first case that there was. It is

this type of judicial gamesmanship that this doctrine prohibits.

Also, the rule of abandonment supports the summary judgment. Plaintiff’s

settlement precluded final resolution of the coverage issue. Only if the First District

had reversed the worker’s compensation judge’s ruling, would Plaintiff be able to

establish lack of coverage. But, the settlement foreclosed that possibility. Plaintiff

should not ask the trial court to stand in the shoes of the First District Court of

Appeals to determine whether the finding of the worker’s compensation judge would

have been upheld.

18

Finally, the rule espoused in Bitz vs. Ed Knox CLU and Associates, 721 So.2d

823 (Fla. 3d DCA 1998), does not support this suit. Plaintiff has not sought as

damages his litigation costs from the first case, as did Bitz. Plaintiff rather seeks

coverage damages. Plaintiff does not contend he was entitled to coverage, as did Bitz;

rather, Plaintiff contends the Defendants failed to obtain coverage. The rule in Bitz

does not apply.

Given the rule propounded by the Third District’s Opinion, following on the

heals of the Bitz opinion, it appears that no insured need ever litigate a coverage issue

fully with the insurance company, particularly where the actual damages suffered by

the insured are variable or subjective (like they are in this case). An insured can settle

with the insurance carrier for less than “full” damages, and then institute suit against

the insurance agent claiming that the existence of a coverage dispute caused by the

actions or omissions of the insurance agent caused the partial-value settlement.

The issue of coverage then becomes almost irrelevant, with the primary issue

focused on being whether the insurance company denied coverage colorably related

to the actions of the insurance agent. In other words, under the rule of law espoused

in the Third District’s Opinion, it no longer matters whether there is coverage or

whether the carrier wrongfully denied coverage. There is now a cause of action

against the agent just if the insured’s carrier denies coverage.

The final judgment should be affirmed in all respects.

19

V.ARGUMENT

For the reasons set out below, the opinion of the Third District Court Appeal

should be quashed, and the judgment under appeal should be affirmed.

A. The Determination of Coverage Has Already Been Made And Both

Plaintiff And Defendants Should Be Bound By That Determination.

In a case like this, alleged negligent failure to procure requested insurance

coverage, the first question is: Is there coverage for the Plaintiff under the policy

which was procured? The second question is: If not, was the agent at fault? This

first question was already answered in the worker’s compensation case. The policy

provided Darrell Gwynn coverage. Under Florida law, the Plaintiff should be bound

by that finding, as should the agents, Haggerty and Daly.

1. The Determination of the Existence or Non-Existence of Coverage Acts

as a “Final” Determination of Whether or Not The Insurance Agent

Procured

The Required Coverage.

The rule of law espoused in the Third District’s Opinion should be found

contrary to Florida public policy. It creates the opportunity for inconsistent results

and could work to totally deprive an insured of any recovery if the insured has to

litigate the issue of coverage twice: first against the insurance carrier, and then against

20

the agent. Is there any doubt that Plaintiff would argue that the decision of the

worker’s compensation court was binding on the Defendants, if that decision had been

that the worker’s compensation policy did not cover the Plaintiff? Otherwise, if the

court’s ruling did not foreclose the issue of coverage in a later suit against the agent,

the plaintiff/insured could lose his suit against the carrier in one court on the finding of

no coverage under the policy, and then lose his follow up suit against the insurance

agent in another court on the opposite finding: that there was coverage under the

policy. That is particularly true where the question of coverage is driven by factual

issues of intent of the parties and agency relationships, like it was here.

If Plaintiff had lost in the worker’s compensation action, should constitute the

“fact” that Plaintiff had no coverage under the policy. See, Sheridan vs. Greenberg,

391 So.2d, 234, 235 (Fla. 3rd DCA 1980) (where a worker’s compensation carrier

“successfully denied coverage”, after which the insured/employee sued the insurance

agent for negligent failure to procure coverage); D.R. Mead & Company vs. Cheshire

of Florida Inc., 489 So.2d 830, 831 (Fla. 3rd DCA 1986) (where the insured first lost

its suit for recovery of damages on its insurance claim, and thereafter brought suit

against the insurance agent claiming it had made misrepresentations in the application

process causing the loss of coverage). That “fact” of no coverage under the policy

should not be re-litigated in the follow up suit against the agent for failure to procure

coverage.

21

We are not advocating that this Court rescind the mutuality of parties

requirement to invoke collateral estoppel. Rather, we are pointing out the practical

effect on an insured of such a rule; the insured would be deprived of the ability to

recover under the policy, yet forced to re-litigate the issue against the agent. If the

worker’s compensation court found there was no coverage, then the plaintiff would

NEVER be able to obtain coverage under the policy. Certainly, an insurance agent

should not ask to re-litigate the coverage question under these circumstances. Neither

should the Plaintiff be able to bury a successful result, and to re-litigate the same issue

against the Defendants by taking the position that there was no coverage, a position

completely inconsistent with the position the Plaintiff took before the worker’s

compensation court.

Plaintiff cited several cases below for the proposition that, not only is the

worker’s compensation court’s order not binding, it isn’t even admissible. Boshnack

vs. World Wide Rent-a-Car, Inc., 195 So.2d 216 (Fla. 1967) holds that a criminal

conviction of the defendant is not admissible in a civil action against that defendant

arising out of the same facts. That rule continues to be the law, but has no bearing

here. State vs. Wilson, 483 So.2d 23 (Fla. 2nd DCA 1985), affirmed, 520 So.2d 566

(Fla. 1988), involved a criminal defendant’s attempt to prove his innocence through

evidence of an alleged accomplice’s acquittal from the same crime. The court held

that evidence of the acquittal was inadmissible. That case too is still good law, but

22

similarly has no bearing here.

However, Wiles vs. Mullinax, 168 S.E. 2nd 366 (N.C. 1969) does appear to be

on point. But, in short, we believe it to be wrongly decided and in conflict with

Florida law. In Wiles, an employer was found to be without worker’s compensation

coverage and was ordered to pay worker’s compensation benefits. The employer

sued her insurance agent for failing to procure such coverage. North Carolina’s

Supreme Court held that judgment was not binding on the insurance agent because the

insurance agent was not a party to that first action. Wiles vs. Mullinax, 155 S.E. 2nd

246, 250 (N.C. 1967), appeal after remand, 168 S.E. 2nd at 373-74.

First, the case is based on a simple determination that the agent was not a party,

and therefore res judicata was not applicable, without review of the question of

whether the agent was in privity. See Wiles v. Mullinax, 155 S.E. 2d at 250. We

believe this conclusion to be contrary to Florida law and wrongly reasoned. Second,

the case appears to be in conflict with Florida cases like D.R. Mead and Sheridan.

Third, the case fails to address the obvious potential of the plaintiff-insured being

handed down inconsistent result by two separate courts, one finding in favor of the

insurer that there was no coverage and the next finding in favor of the agent that there

was coverage.

That potential for inconsistent result is simply wrong. Under circumstances like

those here, either there is coverage or there is none. It should not be the possibility of

23

both.

B. The Doctrine Of Collateral Estoppel Precludes Plaintiff’s Suit

The essential elements of the doctrine of collateral estoppel are “that the parties

and issues be identical, and that the particular matter be fully litigated and determined

in a contest which results in a final decision of a court of competent jurisdiction.”

Department of Health and Rehabilitative Services vs. B.J.M., 656 So.2d 906, 910 (Fla.

1995). The primary element at issue here is identity of the parties. Since Plaintiff also

raised the finality of the order as an issue in the appeal before the District Court, we

will briefly address that element too.

1. There Was Mutuality Of The Parties.

Florida law requires mutuality of parties in order to invoke collateral estoppel

defensively:

Thus, unless both parties are bound by the prior judgment, neithermay use it in a subsequent action.

E.C. vs. Katz, 731 So.2d 1268, 1269 (Fla. 1999). Defensive use of collateral

estoppel without mutuality of parties appears to be either limited or non-existent

at this time. Id. at 1270. So, although the Defendants were not parties in the

first case, the requirement of mutuality is fulfilled if they were in privity with the

6 “[A] careful statement of the identity of parties element. . . includes,alternatively, ones in privity with actual parties, participants in the action having aninterest but not technically parties, and persons virtually, though not actually,represented by the parties of record. “ Progressive American Ins. Co. vs. McKinnie,513 So2d 748, 749 (Fla. 4th DCA 1987.)

24

parties involved in the first case.

For one to be in privity with one who is a party to a lawsuit or for one tohave been virtually represented by one who is a party to a lawsuit, onemust have an interest in the action such that she will be bound by the finaljudgment as if she were a party.

Stogniew vs. McQueen, 656 So.2d 917, 920 (Fla. 1995). 6 See, also, Khan vs. Simkins

Industries Inc., 687 So.2d 16, 17 (Fla. 1996); Southeastern Fidelity Insurance

Company vs. Rice, 515 So.2d 240, 242 (Fla. 4th DCA 1987) (finding an insurer to be

in privity with its insured, even where the insurer contests coverage).

Here, Daly and Haggerty had an interest in the worker’s compensation suit and

should bound by the result. Compare, Progressive American Insurance Company v.

McKinnie, 513 So.2d 748, 749 (Fla. 4th DCA 1987). Under Florida law, these agents

should be found to be in privity with the employer and the carrier, as argued by

Plaintiff in the worker’s compensation court and as found by the worker’s

compensation court in its ruling. Compare, Akins vs. Hudson Pulp & Paper Co., 330

So.2d 757, 759 (Fla. 1st DCA 1976).

However, the Third District’s Opinion holds that the doctrine of collateral

estoppel does not bar this action “based on the worker’s compensation proceeding

25

because [the Defendants] were not … privies of the parties to that proceeding.” (R.

2370.) This holding thus finds that an insurance agent is not in privity with either the

insurance carrier or the insured in an action to determine the existence of coverage

under the policy procured by that insurance agent. We believe this finding is contrary

to Florida law.

Here, based on Plaintiff’s arguments and proofs, the worker’s compensation

court made specific findings on the issue of agency and imputation of the agents’

alleged negligence to their principal, the employer (and by operation of law, the

insurance carrier). The court concluded that even if the agents were negligent in the

manner in which they placed the worker’s compensation coverage, that negligence

would be imputed to their principal, the employer.

Under these circumstances, an insurance agent should be considered to be “in

privity” with its principal, just as employees are considered to be in privity with their

employers. For instance, in Akins vs. Hudson Pulp and Paper Company, 330 So.2d

757 (Fla. 1st DCA 1976), the plaintiff initially filed a worker’s compensation claim,

arising out of the negligence of an employee-nurse. Akins’ claim was unsuccessful.

Id. at 757-58. Subsequently, Akins brought this second suit against the employee-

nurse alleging that the nurse’s negligence caused her damages. The First District

affirmed summary judgment in favor of the employee-nurse on the basis of collateral

estoppel. Although she was not a party to the initial action, based upon the existence

26

of the employer-employee relationship the court found she was bound by the

judgment. Id. at 759. See also, Atlantic Cylinder Corp vs. Hetner, 438 So.2d 922,

923 (Fla. 1st DCA, 1983) (a prior adjudication in favor of a corporation barred a

subsequent action by the same plaintiff against the corporation’s officers.)

Here, the worker’s compensation court made factual findings that could have

been employed by Gwynn Enterprises/Traveler’s against the agents in a claim for

indemnification for the monies Traveler’s paid in settlement of Plaintiff’s worker’s

compensation claim. Although the Defendants-insurance agents are not indemnitors

of the Plaintiff here, as agents of their principal, Gwynn Enterprises, they could be

found to be indemnitors of Gwynn Enterprises/Travelers. Thus, under the

circumstances, the agents should be considered to be bound by the ruling of the

worker’s compensation court. See, generally, 12 Fla. Jur. 2d, Contribution, §§ 39 and

40, p.56-57. If the Defendants could be held to be indemnitors of Gwynn

Enterprises/Travelers, then Florida law should also find that the Defendants are in

privity with Gwynn Enterprises and Travelers, and thus permit application of the

doctrine of collateral estoppel and res judicata.

This conclusion is in line with the rule in other jurisdictions which holds that a

decision on the merits in an action against a principal is res judicata in a later action

against the agent if the prior action concerned a matter within the agency relationship.

See, e.g., Major v. Inner City Property Management, Inc., 653 A.2d 379, 381 (D.C.

27

1995); Werth v. Martin, 79 A.D. 2d 861, 434 N.Y.S. 2d 483 (1980) (finding that

although the agent was not a party to the initial action, the agent testified at length in

the initial action and was the principal’s disclosed agent; thus, the finding in favor on

the principal collaterally estopped the later action against the agent); Rosen v. Raum,

191 A.D. 2d 254, 595 N.Y.S. 2d 14 (1993); Tamari v. Bache & Company, 637

F.Supp. 1333, 1341 (N.D.ILL. 1986) (“a decision on the merits of an action against

a principal is res judicata to a subsequent action against the agent … if the prior action

concerned a matter within the agency.”)

Plaintiff, in the District Court, argued that the Defendants could not be in privity

with Gwynn Enterprises or Travelers because their position was antagonistic to

Traveler’s position in the worker’s compensation action. Plaintiff cited cases such as

Insurance Company of North America v. Whatley, 558 So.2d 120, 122 (Fla. 5th DCA

1990), and Vanguard Insurance Company v. Townsend, 544 So.22d 1153, 1157 (Fla.

5th DCA 1989), in support of that proposition.

Plaintiff’s argument, however, overlooks the worker’s compensation court’s

finding that the Defendants were agents of the employer, Gwynn Enterprises, and thus

agents of Traveler’s by operation of law. There is no basis to suggest that the

Defendants’ interests were antagonistic to those of Gwynn Enterprises. It was Gwynn

Enterprises’ position, through Plaintiff’s father, Ed Gwynn, that Gwynn Enterprises

intended all along to have coverage for its officers. It would be a highly unusual

28

circumstance or case in which the insurance agent would want the court to find that

there was no coverage for its insured. Contrary to Plaintiff’s argument, the

Defendant’s interests were consistent with those of Gwynn Enterprises, which was that

there should be coverage. While the worker’s compensation court found that the

Defendants became agents of Traveler’s by operation of law, and of course Traveler’s

opposed coverage, that should not create a re-alignment of the interests of the

Defendants and their principal, Gwynn Enterprises.

The purpose of the mutuality requirement is this Court’s “concerns over

fairness for the litigants.” Stogniew, 656 So.2d at 920. Florida law, however,

recognizes that within the concept of mutuality of the parties is a gray area, called

privity or virtual representation, which allows binding application of a judgment against

another party who is not present in the initial litigation. The problem is, Florida’s

courts in their definition of privity have left a great deal of indefiniteness. This,

however, is not unusual.

Other jurisdictions have noted that the definition of privity is “somewhat

amorphous”. Brown v. City of Dayton, 730 N.E. 2d 958, 962 (Ohio 2000).

In certain situations, a broader definition of “privity” is warranted. As

a general matter, privity “is merely a word used to say that the

relationship between the one who is a party on the record and another is

close enough to include that other within the res judicata”.

29

Id. See, also All Terrain Properties, Inc. v. Hoy, 265 A.D. 2d 87, 93, 705 N.Y.S. 2d

350, 355 (2000) (“Privity has been described as ‘an amorphous term not susceptible

to ease of application.’ The doctrine extends to ‘persons who are not parties to the

previous action but who were connected with it to such an extent that they are treated

as if they were parties.’ ‘What is controlling is the identity of the issue which has

necessarily been decided in the prior action or proceeding.’ (citations omitted);) State

v. Summers, 528 S.E. 2d 17, 20 (N.C. 2000) (“Unlike issue identity, the rules for

determining whether the parties in question are or were in privity with parties in the

prior action are not as well defined. Except in cases where the parties in each claim

are identical, the meaning of ‘privity’ for the purpose of collateral estoppel is

‘somewhat elusive … and there is no definition of the word ‘privity’ which can be

applied in all cases.’ ”).

Fairness to the litigants should also be the policy behind the analysis of privity:

Privity is not susceptible of a neat definition, and determination of

whether it exists is not a cut-and-dried exercise. In the final analysis, the

determination of privity depends upon the fairness of binding appellant

with the result obtained in earlier proceedings in which it did not

participate. Whether someone is in privity with the actual parties requires

close examination of the circumstances of each case.

30

Citizens for Open Access to Sand & Tide, Inc. v. Seadrift 60 Cal. App. 4th 1053,

1070, 71 Cal. Rptr. 2d 77, 88 (1998) (citations omitted). See also, Bruszewzki v.

United States, 181 F.2d 419, 422, n.6 (3rd Cir. 1950) (“the true reason for holding the

issues res judicata does not necessarily depend upon privity, but on the policy of the

law to end litigation by preventing a party who has had one fair trial of a question of

fact from again drawing it into controversy.”)

The general rule in Florida has been, and should be, that an insurance agent is

bound by prior litigation between the insured and the insurance carrier on the issue of

whether or not there was coverage under the policy procured by the agent.

2. The Order Qualifies as a “Final Decision”

In the District Court, the Plaintiff argued that the worker’s compensation court

order was non-final, citing Ray Roofing Company v. Young, 491 So.2d 672 (Fla. 1st

DCA 1982). However, that argument failed to consider the specific procedural

circumstances which occurred in this case, and the fact that the order was appealed.

The order itself was subject to appeal because it determined the issue of

insurance coverage in favor of the employee (the party seeking affirmative relief). See,

Fidelity & Casualty Company of New York v. Scott, 386 So.2d 315, 316 (Fla. 1st

DCA 1980). And, Traveler’s did appeal the order. Of course, once appealed, the trial

court lost jurisdiction to modify its order finding coverage. Indeed, the coverage

31

ruling itself was not subject to modification by the trial judge. See, Nelson &

Company v. Holtzclaw, 566 So.2d 307, 308-9 (Fla. 1st DCA 1990). The settlement

did not vacate the court’s coverage finding. It therefore stands. See, e.g., Thompson

v. Petherbridge, 472 So.2d 773, 774-775 (Fla. 1st DCA 1985) (for res judicata

purposes, a ruling on a claim for reformation of a note was final even though other

claims were left for adjudication where the court could not revisit the specific issue

created by the claim for reformation.)

So, for the purposes of collateral estoppel the order of the worker’s

compensation court was final, and is therefore binding in this case.

C.This Action Is Barred By the Doctrine Of Judicial Estoppel.

The doctrine of judicial estoppel prohibits a party from taking a specific position

in initial litigation, and then in later, related litigation taking the opposite position.

Judicial estoppel is an equitable doctrine that is used to prevent

litigants from taking totally inconsistent positions in separate

judicial, including quasi-judicial, proceedings. The doctrine is

“designed to prevent parties from making a mockery of justice by

inconsistent pleadings.”

Smith vs. Avatar Properties Inc., 714 So.2d 1103, 1107 (Fla. 5th DCA 1998).

32

That doctrine was further discussed by the Fourth District Court of Appeals in

Bernard Berman, P.A. vs. P. Gary Stern M.D., P.A., 731 So.2d 148 (Fla. 4th DCA

1999):

In certain circumstances a party may properly be precluded as a matterof law from adopting a legal position in conflict with one earlier taken inthe same or related litigation. “Judicial estoppel” is invoked in thesecircumstances to prevent the party from playing “fast and loose” with thecourts, and to protect the essential integrity of the judicial process.

***

The circumstances under which judicial estoppel may appropriately beinvoked are probably not reducible to any general formulation ofprinciple, but they may be found where neither collateral estoppel norequitable estoppel. . . would apply. Its essential function and justificationis to prevent the use of “intentional self-contradiction. . . as a means ofobtaining unfair advantage in a forum provided for suitors seekingjustice.”

731 So.2d at 149 (quoting Allen v. Zurich Ins. Co., 667 F.2d 1162, 1166-67

(4th Cir. 1982).)

Clearly, Plaintiff has taken two completely inconsistent positions in the two

actions, which we believe this Court should find disturbing. Plaintiff originally took

the position in the worker’s compensation litigation that the Travelers’ policy

provided him coverage, obtained a ruling that there was indeed coverage under the

policy for him, and received nearly two million dollars in payment from Travelers

based upon that ruling.

33

Now, in this litigation, Plaintiff takes the totally opposite position that the

Travelers’ policy does not provide him coverage. The Third District has held that

this is not an “impermissible change of position”. The Opinion implies that the

doctrine does not apply here because there was a justifiable reason for the settlement

and Plaintiff’s subsequent change in position.

1. Florida law does not recognize this as an exception to the rule.

This is not an exception recognized by the other district courts of appeal, and

in fact directly conflicts with the specific holding in at least one other Florida case. In

Lambert vs. Nationwide Mutual Fire Insurance Company, 456 So.2d 517 (Fla. 1st

DCA 1984), Lambert’s parents were killed in an automobile accident involving three

other vehicles. Lambert filed suit claiming the accident was caused by the negligence

of the drivers of those three vehicles. Lambert settled that action with all three

defendants. Id. at 517. Then, Lambert filed another action against his parents’ UM

insurer alleging inconsistently with the first suit that only one of the three vehicles was

at fault. Id. The First District affirmed the summary judgment for the insurer based

on the doctrine of judicial estoppel.

It is quite generally held that where a litigant . . . obtains a

judgment, advantage or consideration from one party, he will not

thereafter, by repudiating such allegations and by means of

34

inconsistent and contrary allegations or testimony, be permitted to

obtain a recovery or right against another party, arising out of the

same transaction or subject matter. . . . .

Id. at 519.

Thus, the Lambert decision found that the plaintiff impermissibly took an

inconsistent position in the second litigation, despite the fact that the initial litigation

was settled and that Lambert was merely seeking the additional value of his claim not

fully recovered in the initial litigation. Id. at 517-518. Just as in Lambert, here Plaintiff

settled the first litigation against one party, but is taking an inconsistent position in the

second litigation against another party, and is seeking the difference between what he

received in the first suit and the alleged full value of his claim. The Opinion under

review and Lambert directly conflict.

Safecare Medical Center vs. Howard, 670 So.2d 1020 (Fla. 4th DCA 1996) is

also on point. There, in the first suit, a patient filed a medical malpractice suit against

Dr. Howard and his employer, Safecare. Safecare was sued both for its own

negligence and vicariously for Howard’s negligence. Howard settled with the patient,

and received a release in his favor. Ultimately, Safecare moved for summary judgment

claiming that Howard’s release exonerated it from liability and that it was entitled to a

set-off for the settlement. The trial court denied summary judgment based on the

35

release, but granted summary judgment on the set-off issue. On appeal, the patient

conceded that Howard’s release precluded Safecare from being held vicariously liable

for Howard’s actions. Instead, the patient took the position that it was only

proceeding on the claim against Safecare for its own actions. As a result, the appellate

court reversed the summary judgment on the set off issue. 670 So.2d at 1021-22.

The first case was then remanded to the trial court, and was set for trial.

Safecare’s position in its pretrial stipulation set forth that it had not been independently

negligent and, because of the release, it could not be vicariously liable for Howard’s

negligence. However, on the first day of trial, Safecare settled with the patient, with

the stipulation that the money represented damages for Howard’s negligence. 670

So.2d at 1021.

Safecare then brought a second suit against Howard for indemnification and

equitable subrogation. The trial court dismissed the complaint with prejudice.

Although Howard was not a party to the first suit when Safecare settled with the

patient, the appellate court affirmed. It noted that at the time of the settlement, a

finding of vicarious liability against Safecare was a legal impossibility, and Safecare

could only have been found negligent at trial for its own conduct, a result which would

have barred an indemnity action against Howard.

Having elected to settle when the case was in such a posture,Safecare is estopped from manipulating the basis of its settlement

36

and from asserting a liability position in this case contrary to the oneit had successfully maintained on the first appeal.

670 So.2d at 1022-23.

See also, Pearson v. Harris , 449 So.2d 339 (Fla.1st DCA 1984); State Farm

Mutual Automobile Insurance Company vs. Smalley Transport Company, 696 So.2d

522, 523-24, n.2 (Fla. 3rd DCA 1997) (“Essentially the manifest injustice intended to

be avoided is allowing a party who has gained something from the assertion of its first

position to, by the assertion of the second, inconsistent position, gain something more

to which it would not have been entitled under the first position.”); Crowder vs.

Jacksonville Transit Authority, 669 So.2d 1101, 1105 (Fla. 1st DCA 1996).

Here, the position taken by Darrell Gwynn in this lawsuit is a 180 degree reversal

from the position he took in the worker’s compensation action. Here he says there is

no coverage; there he said there was coverage. The facts here are like those in

Lambert and Safecare, in that the claimants in those cases asserted positions in the

initial litigation based on a certain set of facts, and after receiving favorable rulings

settled the cases, but then took inconsistent positions in a second lawsuit. Those cases

correctly apply the rule of judicial estoppel; the Opinion under review did not. The

Plaintiff’s second claim should be barred.

2.The Opinion under review implies a theory of recovery not assertedby Plaintiff.

37

Although the Opinion does not explicitly say so, it implies that Plaintiff was

seeking recovery based upon a theory that the negligence of the agents forced him into

a position to settle his valid coverage case against Travelers for less than full value of

the claim, in mitigation of his damages resulting from Defendants’ alleged negligence.

Although the original complaint actually asserted this theory of recovery, by the time

the Second Amended Complaint had been filed, that theory of recovery had been

dropped. It was replaced by the bare-bones assertion that there was no coverage

under the policy (and that Plaintiff had filed his worker’s compensation claim despite

his knowledge that there was no coverage under the policy).

Thus, this case is unlike Keramati vs. Schackow, 553 So.2d 741 (Fla. 5th DCA

1989) cited by Plaintiff and the District Court as supporting authority. There, plaintiff

was not found to have taken inconsistent positions between her initial medical

malpractice action and her subsequent legal malpractice action against the attorneys

that represented her in the first litigation. Unlike here, plaintiff took the position that

she had to settle the first litigation for less than its full value because her “attorneys had

seriously compromised the ultimate success of the suit” by certain negligent

omissions. Id. at 743. Here, Plaintiff does not allege that Defendants weakened his

coverage position. Rather, Plaintiff now alleges to the contrary that there never was

38

coverage. Compare Bitz vs. Ed Knox CLU and Associates, 721 So.2d 823 (Fla. 3rd

DCA 1998.)

More to the point, Plaintiff in the worker’s compensation action took the

position that there was coverage under the Travelers policy, including the position that

any negligence of the agents, Daly and Haggerty, should be attributable to the

employer (and thus by operation of law to the carrier) because they were the agents

of the employer. Between then and now, no factual changes have occurred. Yet,

Plaintiff now takes the position that there was no coverage, based on the same facts

and law. In essence, the Plaintiff wants to tell the jury in this case that he really never

got coverage, and pretend that the worker’s compensation action never went forward

and that the worker’s compensation court never ruled in his favor.

Should Florida law permit Plaintiff to do this?

D. Plaintiff Abandoned His Claim Against The Insurance Agents When He

Settled The Worker’s Compensation Action After Obtaining a

Favorable Ruling on Coverage.

The abandonment principle, contrary to the Third District’s Opinion, should

transcend litigation malpractice cases. It owes its origin to an accounting malpractice

case. In Peat, Marwick, Mitchell & Co. v. Lane, 565 So.2d 1323 (Fla. 1990), this

Court held that a cause of action against an accountant did not begin to run until after

entry of judgment by the tax court against the client. Pennsylvania Guaranty

39

Association v. Sikes, 597 So.2d 1051 (Fla. 3rd DCA 1991), relied on Peat, Marwick

in holding that the plaintiff in a legal malpractice action abandoned its claim against its

lawyer by settling the claim while an adverse judgment was on appeal. Peat, Marwick

was cited for the proposition that if the tax court did not uphold the assessed tax

deficiency, there would be no action against the accountants for malpractice. Sikes -

spawned a series of cases involving the issue of abandonment in legal malpractice

actions. We review those below.

1. Review of Legal Malpractice Abandonment Cases.

Admittedly, recent legal malpractice abandonment cases have found that

settlement on appeal did not abandon the later legal malpractice action. However,

these cases are applicable, and important to this Court’s analysis, for the reasoning

upon which those courts concluded that the settlement did not require a finding of

abandonment. Those principles applied here would militate toward a finding of

abandonment.

In Coble vs. Aronson, 647 So.2d 968 (Fla. 4th DCA 1994), the client sued his

lawyers arguing that their preparation of documents related to a closing caused him

substantial damages. Simultaneously, the client sued a third party seeking to reform

those documents. Ultimately, the client settled the case with the third party and the trial

judge in the legal malpractice case dismissed the action because of the settlement. In

reversing the dismissal, the appellate court noted:

40

[T]he settlement of underlying or related litigation and the consequentfailure to complete appellate review thereof does not bar a claim forattorney malpractice where the existence of redressable harm does notdepend on the outcome of the litigation.

647 So.2d at 970-71. Here, the settlement of the initial lawsuit, after receiving a

favorable ruling from the trial court, precluded a finding of injury to Plaintiff. Had the

appeal gone forward without the settlement, and the appellate court ruled in Gwynn’s

favor, then there would have been no cause of action at all against the insurance agent.

In Parker vs. Graham & James, 715 So.2d 1047 (Fla. 3rd DCA 1998), the clients

settled their underlying case, after retaining new counsel, and then filed a legal

malpractice suit. The court held that the settlement did not constitute an abandonment

because it “did not thwart any review process which could have cured the

malpractice.” Id at 1048. But here, the settlement did “thwart [the] review process”

by foreclosing the conclusion by the appellate court that there was coverage under the

policy for Darrell Gwynn.

Finally, in Hunzinger Construction Corp. vs. Quarles & Brady, 735 So.2d 589,

595 (Fla. 4th DCA 1999) the court held that there was no abandonment by virtue of the

settlement:

Thus, we cannot say that the trial court’s ruling most likely would havebeen reversed had the appeal gone its course. To the contrary,reversal on factual issues is most uncommon.

41

Here, to avoid abandonment Plaintiff must argue that the decision of the

worker’s compensation trial court would have been reversed on appeal. As noted

in Hunzinger, “reversal on factual issues is most uncommon.” This is particularly true

in worker’s compensation cases where factual conclusions are not subject to reversal

“absent a clear abuse of discretion.” Oaks Farm vs. Berry, 500 So.2d 175, 177 (Fla.

1st DCA 1986). Findings of a judge of compensation claims are to be sustained if

permitted by any view of the evidence and its possible inferences. Bass vs. General

Motors Corp., 637 So.2d 304, 306 (Fla. 1st DCA 1994). The standard of review in a

worker’s compensation case is whether competent substantial evidence supports the

decision below, not whether it is possible to recite contradictory record evidence

which supported arguments rejected below. Cumberland Farms Inc. vs. Manning, 685

So.2d 64 (Fla. 1st DCA 1996).

2. The Principle Should Be Applied to an Insurance Agent.

Although not stated in terms of abandonment, this theory has been recently

applied in an action against an insurance agent. In Bill Eyerly Insurance Inc. vs.

Gregory, 727 So.2d 293 (Fla. 5th DCA 1999), suit was brought against an insurance

agent by accident victims through assignment from the insureds. As a result of the

agent’s negligence a default judgment was entered against the insured in the amount of

$318,000.

42

Simultaneously, the plaintiffs sued the insurer. The insurer was found liable

under its policy and judgment was entered in favor of the plaintiffs in the amount of

$423,000, which represented the policy limits of $300,000 plus accrued interest in the

amount of $123,000. However, the plaintiffs settled with the insurer for only $310,000.

So, the plaintiffs in the suit against the insurance agent sought as damages the

$113,000 difference, which the trial court ultimately awarded. However, the Fifth

District reversed the $113,000 award because it was not determined that this amount

was not recoverable against the insurer. Rather, the parties had merely settled for

less than the full amount of the judgment. Id. at 295-96. Similarly, here, there was no

determination that the full value of Plaintiff’s claim could not be recovered from

Travelers.

Up to the time of the settlement in the Plaintiff’s worker’s compensation action,

there was no injury suffered by the Plaintiff because there had been a finding of

coverage under the worker’s compensation policy. According to Peat, Marwick,

Plaintiff’s cause action against the Defendants’ insurance agents had not even accrued.

According to Sikes, and its progeny, since the only manner in which plaintiff could

suffer injury was a finding of no coverage, Plaintiff’s settlement after the favorable

ruling was received constituted an abandonment of his claim against the insurance

agents.

43

Abandonment is a stronger issue in an insurance agent negligence case than in

a legal or accounting malpractice case, because the latter usually are more fact

intensive than the former. The initial question in an insurance agent negligence case for

failure to procure requested coverage is a legal one: is there coverage under the policy?

The existence of coverage under the policy should be dispositive of the claim.

Florida’s statutes and common law rules of construction of insurance contracts favor

an insured, and are aimed at finding coverage. Plaintiff’s resolution of his claim

against Traveler’s falls squarely within the rule of law establishing an abandonment of

that claim.

If the appellate court in Hunzinger would be reluctant to second guess the result

of an appeal in the underlying litigation, how much more reluctant should this Court

be in establishing a rule of law which would allow the circuit court to second guess the

trial judge in the worker’s compensation case? Should the circuit court stand in the

shoes of the First District Court of Appeals and decide whether or not the worker’s

compensation court’s ruling “most likely would have been reversed had the appeal

gone its course?” Should the circuit court be asked to stand in the shoes of the First

District Court of Appeals and determine whether or not the trial judge in the worker’s

compensation action committed reversible error either in the factual findings which

were made or in the legal conclusions? Should these issues be presented to the jury?

7 It no longer matters whether there is coverage or whether the carrier wrongfullydenied coverage. There is now a cause of action against the agent if the insurance

44

We think all the answers to these questions should be “no”. See, State vs.

Wilson, 483 So.2d 23, 26-27 (Fla. 2nd DCA 1985), quoting from Roberts vs. People,

87 P. 2d 251 (Colo. 1938). The Plaintiff received the best outcome possible from the

trial judge in his worker’s compensation action. This Court should be reluctant to

fashion a rule of law which would permit either the Plaintiff to bury that ruling, such

that the trial jury should not be apprised of it; or require the trial court to act as the

appellate court having jurisdiction over that ruling and determine whether it was right

or wrong.

Under these circumstances, Plaintiff abandoned any right to pursue the

Defendants for failure to procure insurance coverage. The trial court in the worker’s

compensation action found the existence of coverage, and that finding stands to this

day.

E. Bitz vs. Ed Knox CLU and Associates P.A., 721 So.2d 823 (Fla. 3rd DCA

1998) Does Not Prohibit Dismissal.

Plaintiff argued Bitz to the District Court for the proposition that Florida has

approved a rule of law which allows a suit against an insurance agent for that agent’s

negligence which causes the insured to become embroiled in litigation. Whether or not

the reasoning of Bitz should stand,7 the problem is that Plaintiff does not seek litigation

carrier denies coverage.

45

costs incurred in the underlying case as an element of damages. Rather, the only

damages sought by Plaintiff are those damages which he could have recovered had he

been covered under the worker’s compensation policy.

Moreover, the allegations of Gwynn’s Second Amended Complaint do not

allege that he was entitled to insurance coverage, but that the insurance carrier used

misrepresentations of fact negligently submitted by the agent as part of the application

to the detriment of the insured. Rather, Plaintiff asserted in his Second Amended

Complaint that there was no coverage as a result of the negligence of the Defendants.

In fact, Plaintiff via its amended complaint and motion in limine, essentially took the

position that the litigation of the worker’s compensation action should be treated as

a non-event, and that the Defendants would only be entitled to a set off, nothing more.

The factual foundation for Bitz does not apply here. Therefore, the rule stated

in Bitz should not apply here. Moreover, given the rule espoused by the Third

District’s Opinion, following on the heals of the Bitz opinion, no plaintiff need ever

litigate a coverage issue fully with the insurance company, particularly where the actual

damages suffered by the insured are variable or subjective like they are in this case.

An insured can settle with the carrier for less than his “full” (allegedly) damages and

then institute suit against the insurance agent claiming that the existence of a coverage

46

dispute caused by the actions or omissions of the insurance agent caused the “partial-

value” settlement.

The issue of coverage then becomes almost irrelevant, with the primary issue

focused on being whether the insurance company denied coverage colorably related

to the actions of the insurance agent. Thus, if the policy and rule of law stated in the

Third District’s Opinion is allowed to stand, it no longer matters whether there is

coverage or whether the carrier wrongfully denied coverage. There is now a cause of

action against the agent if the insurance carrier denies coverage.

V. CONCLUSION

The Opinion expressly and directly conflicts with the decisions of other district

courts of appeal and the Florida Supreme Court on the same questions. The Opinion

should be quashed, and judgment in favor of Petitioner should be affirmed.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing was

mailed this ____ day of May 2001, to: DAVID APPELBY, ESQ, Womack,

Appleby & Brennan, P.A., 7700 North Kendall Drive, Suite 705, Miami, FL 33156;

STEWART G. GREENBERG, ESQ., 11440 N. Kendall Drive, PH 400, Miami, FL

33176; PATRICE A. TALISMAN, ESQ., Hersch & Talisman, P.A. 110 Brickell

Avenue, Penthouse One, Miami, FL 33131.

47

DEMAHY. LABRADOR & DRAKE, P.A.

Attorneys for Defendant Haggerty

2333 Ponce De Leon Boulevard

The Colonnade, Suite 650

Coral Gables, FL 33134

Ph: 305-443-4850

Fx: 305-443-5960

By: __________________________

KENNETH R. DRAKE

FBN: 375111