IN THE SUPREME COURT OF FLORIDA CASE NO: DCA CASE NO.: 2D

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1 Electronically Filed 04/18/ :20:31 PM ET RECEIVED, 4/25/ :07:31, Thomas D. Hall, Clerk, Supreme Court IN THE SUPREME COURT OF FLORIDA HARCO NATIONAL INSURANCE COMPANY, vs. Petitioner, LARRY PATTERSON as Father and Next Fried of KATIE PATTERSON, a Minor, CASE NO: DCA CASE NO.: 2D Respondent. PETITIONER S BRIEF ON JURISDICTION On Review from the District Court of Appeal of Florida, Third District Case No.: 2D LOCAL COUNSEL: PRO HAC VICE COUNSEL: Timon V. Sullivan Diane B. Carvell Ogden & Sullivan, P.A Rawle & Henderson LLP 113 S. Armenia Avenue The Payne Shoemaker Building Tampa, FL North Third Street, 9 th Floor Tel: (813) Harrisburg, PA Fax: (813) Tel: (717) Fax: (717) Pro Hac Vice No:

2 TABLE OF CONTENTS PAGE Table of Contents..i Table of Authorities.ii Statement of the Case and of the Facts.1 Summary of Argument.3 Argument..4 I. The District Court s Opinion Directly and Expressly Conflicts With American Bankers Insurance Co. v. Leatherby Insurance, 350 So.2d 353 (Fla 2 nd DCA 1977) adopted by 371 So.2d 488 (Fla. 1979(mem) II. The District Court Upheld the Validity of Florida Statute , an Exception to the Dangerous Instrumentality Doctrine, in Direct and Express Conflict with Vargas v. Enterprise Leasing Co., 60 So.3d 1037 (Fla. 2011)...7 Conclusion 9 Certificate of Service..10 Certificate of Compliance...10 i

3 TABLE OF AUTHORITIES Am. Bankers Ins. Co. v. Leatherby Ins., 350 So.2d 353 (Fla 2 nd DCA 1977). 3, 4,5,6,7, 9 Bechina v. Enterprise, 972 So.2d 925 (Fla. 3 rd DCA 2007). 8 Calder Race Course v. Hialeah Race, 389 So.2d 215 (Fla. 3 rd DCA 1980)..5 Commerce Insurance v. Atlas Rent A Car, 585 So.2d 1054 (Fla. 3d DCA 1991). 7 Continental Casualty Company v. Old Repub. Ins. Co., , 2007 WL (S.D. Fla. 2007)(V.5, R ). 6 Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 821, 827 (M.D. Fla. 2007)..7 Insurance Company of North America v. Avis Rent-A-Car System, Inc., 348 So.2d 1149 (Fla. 1977)....6 Karling v. Budget Rent, 2 So.3d 354 (Fla. 5 th DCA 2008)....8 Onge v. White, 988 So.2d 59 (Fla. 1 st DCA 2008)..8 Susco Car Rental System v. Leonard, 112 So. 2d 832 (Fla. 1959)....7 Vargas v. Enterprise Leasing, Inc., 993 So.2d 614 (Fla. 4 th DCA 2008)...8 Vargas v. Enterprise Leasing Co., 60 So.3d 1037 (Fla. 2011).. 3, 7, 8, 9 West v. Enterprise Leasing, 997 So.2d 1196 (Fla. 2 nd DCA 2008)...8 ii

4 (9)(b)(2), Fla. Stat. (2007)... 7, , Fla. Stat....3, 7 49 U.S.C iii

5 STATEMENT OF THE CASE AND OF THE FACTS On April 29, 2005, Katie Patterson, a minor, was injured in a motor vehicle accident that involved a truck driven by Sergio Gutierrez in the course and scope of his employment with Drop Ship Direct. Drop Ship Direct leased the truck from FirstLease and, pursuant to the lease agreement, obtained insurance coverage through Progressive. FirstLease is insured through Harco National Insurance Company [hereinafter Harco ]. The Harco Business Automobile Insurance Policy for FirstLease contains a Leasing or Rental Concern-Contingent Coverage endorsement which provides as follows: A. LIABILITY INSURANCE and any required no-fault, uninsured motorist and underinsured motorist insurance provided by the policy for a covered auto which is a leased auto or rented auto applies subject to the following provisions: 1. At the time of an accident the insurance or indemnity as required in the lease or rental agreement is not collectible. * * * 3. For the lessee or rentee, any employee or agent of the lessee or rentee or any person, except you or your employees or agents, operating the leased or rented auto with the permission of any of these, the limit or insurance provided by this endorsement is the minimum limit required by any applicable compulsory or financial responsibility law. This endorsement does not apply to 1

6 the limits specified by any law governing Motor Carriers of passengers or property. 4. This insurance provided by this endorsement does not apply if any other insurance is collectible. 5. The insurance provided by this endorsement does not apply as excess insurance to any other policy. Harco denied coverage for Drop Ship Direct and Gutierrez under the terms of the contingent liability endorsement as Drop Ship Direct and Gutierrez had valid and collectable insurance through Progressive, which was paid out in full. On or about October 25, 2005, Patterson filed a Complaint against Drop Ship Direct, Gutierrez and FirstLease. On or about June 6, 2008, Patterson filed an Amended Complaint as against Harco seeking a declaration that Harco owed a duty of defense and indemnification for the claims brought against them [sic] by LARRY PATTERSON, as Father and Next Friend of KATIE PATTERSON, a minor, in the underlying action of this case; that Harco violated its fiduciary duty to its insured DROP SHIP DIRECT, INC. and SERGIO GUTIERREZ, II, by failing to defend and/or indemnify for that action; and that the policy of insurance taken out by DROP SHIP DIRECT, INC. and SERGIO GUTIERREZ, II provided coverage for the claims alleged by LARRY PATTERSON, as Father and Next Friend of KATIE PATTERSON, as assignee of DROP SHIP DIRECT and SERGIO GUTIERREZ, II. 2

7 On or about May 26, 2011, after oral argument, the Honorable Bernard C. Silver granted Harco s Motion for Summary Judgment, finding that there was no coverage for Drop Ship Direct and Gutierrez under the contingent liability endorsement. Patterson appealed to the Second District Court of Appeal, which reversed the Circuit Court opinion. SUMMARY OF ARGUMENT The District Court s opinion is in direct and express conflict with the holding in Am. Bankers Ins. Co. v. Leatherby Ins., 350 So.2d 353, 354 (Fla 2 nd DCA 1977) adopted by 371 So.2d 488 (Fla. 1979)(mem.) which analyzed the language of a very similar contingent coverage endorsement and held that that a lessee was not an insured under the lesssor s policy because of the contingent coverage clause and the fact that the lessee had a policy of his own. The District Court upheld the validity and application of Florida statute , an exception to the dangerous instrumentality doctrine, despite the fact that the Graves Amendment preempts Florida s dangerous instrumentality doctrine. The District Court s opinion is in conflict with the Supreme Court of Florida, which has held that the Graves Amendment preempts all state and common laws which impose strict vicarious liability on rental car companies. Vargas v. Enterprise Leasing Co., 60 So.3d 1037, 1038 (Fla. 2011). 3

8 ARGUMENT I. THE DISTRICT COURT S OPINION DIRECTLY AND EXPRESSLY CONFLICTS WITH AMERICAN BANKERS INSURANCE CO. V. LEATHERBY INSURANCE, 350 SO.2D 353, 354 (FLA 2 ND DCA 1977) ADOPTED BY 371 SO.2D 488 (FLA. 1979)(MEM.) The Courts of Florida have upheld contingent coverage endorsements, which are often referred to as escape clauses. In Am. Bankers Ins. Co. v. Leatherby Ins., 350 So.2d 353, 354 (Fla 2 nd DCA 1977), Julio Gonzalez leased a rental car from Olin s Miami Rent A Car, Inc. While driving, Gonzalez was involved in a motor vehicle accident. Id. at 354. Gonzalez was insured by Leatherby s Insurance. Id. Olin s was insured by American Banker s Insurance. Id. The American Banker s policy provided contingent limited coverage for persons other than Olin s. Id. In particular, the definition of a contingent insured was (a) any person or organization using a RENTAL VEHICLE WITH THE PERMISSION OF THE OWNER, BUT ONLY IF SUCH PERSON OR ORGANIZATION HAS NO OTHER AUTOMOBILE LIABILITY INSURANCE AVAILABLE TO HIM WITH LIMITS OF LIABILITY AT LEAST EQUAL TO THE FINANCIAL RESPONSIBILITY LIMITS, whether on a primary, contributory, excess, or any other basis with respect to his use of the rental vehicle. Id. With respect to contingent limited coverage, the policy stated that the insurance... SHALL NOT APPLY TO ANY LOSS WITH RESPECT TO WHICH THE CONTINGENT INSURED IS COVERED BY ANY OTHER AUTOMOBILE LIABILITY INSURANCE, WHETHER ON A PRIMARY, CONTRIBUTORY, EXCESS OR ANY OTHER 4

9 BASIS UNLESS, the total amount of the loss exceeds the sum of the limits of liability of all other policies, bonds, or plans or self-insurance affording such insurance, and then the company shall be liable, subject to (a) above, only for the excess of the loss above such insurance. Id. at The policy went on to state that the limits of liability under the contingent limited coverage were only the amount of applicable financial responsibility limits which exceeded the limits of liability under all other automobile liability insurance available to the contingent insured. Id. at 355. The Court labeled the contingent coverage clause an escape clause. Id. The lessee s policy contained language indicating that it was only an excess policy if the insured had other insurance against the loss. Id. The Court labeled the lessee s policy s excess language the excess clause. The Second District Court of Appeal in Am. Bankers Ins. Co., supra provided a thorough analysis of the case law when an escape clause and an excess clause conflict. The Court determined that when a conflict exists between an escape clause and an excess clause, the escape clause will be enforced. It was held that the lessee was not an insured under the lesssor s policy because of the contingent insurance clause and the fact that the lessee had a policy of his own. Id. at 356 (emphasis added) adopted by 371 So.2d 488 (Fla. 1979)(mem.); see also Calder Race Course v. Hialeah Race, 389 So.2d 215, 216 (Fla. 3 rd DCA 1980)(holding that in Florida, when a conflict exists between an escape clause and 5

10 an excess clause, the escape clause will be enforced); see also Continental Casualty Company v. Old Repub. Ins. Co., , 2007 WL (S.D. Fla. 2007) (holding that the escape clause in the lessor s insurance policy controls over the conflicting other insurance clause in the lessee s policy). The Second District Court of Appeals in Am. Bankers Ins. Co., supra was fortified in its conclusion by a then-recent decision of the Florida Supreme Court. In Insurance Company of North America v. Avis Rent-A-Car System, Inc., 348 So.2d 1149 (Fla. 1977), the Florida Supreme Court upheld the right to freedom of contract so long as the public policy of the state with respect to financial protection from motor vehicle accident was not impugned. The Court found no public policy prohibition of an owner insuring only itself against economic loss in excess of statutory minimums and the amounts available to others. See Insurance Company of North America, supra at The Florida Supreme Court held that the lessor and its insurer may contract to limit the amount of coverage for the lessee as long as coverage provided satisfies the required amount of financial responsibility. Id. The underlying policy of the statute is satisfied once the law s minimum financial protection is provided to injured members of the public. Id. The District Court opinion in this case is in direct conflict with Am. Bankers Ins. Co., supra as the Harco contingent coverage endorsement is an escape clause which specifically provides for minimum financial responsibility if the lessee does 6

11 not have valid and collectable insurance. Since Drop Ship Direct and Gutierrez had valid and collectable insurance for plaintiff s claims through Progressive Insurance Company, as required by the lease agreement, they are not insureds and the precedent of Am. Bankers Ins. Co., supra should apply. II. The District Court Upheld the Validity of Florida Statute , an Exception to the Dangerous Instrumentality Doctrine, in Direct and Express Conflict with Vargas v. Enterprise Leasing Co., 60 So.3d 1037 (Fla. 2011) Under Florida s common law dangerous instrumentality doctrine, an owner of a motor vehicle was held liable for injuries caused by the negligence of anyone entrusted to use the motor vehicle. Garcia v. Vanguard Car Rental USA, Inc., 510 F. Supp. 2d 821, 827 (M.D. Fla. 2007) citing Susco Car Rental System v. Leonard, 112 So. 2d 832 (Fla. 1959). In 1999, the Florida Legislature passed a tort reform package which, inter alia, created Florida Statute (9)(b). Under that statute, short-term lessors of motor vehicles were vicariously liable only up to $100,000 per person and up to $300,000 total for bodily injury and up to $50,000 for property damage. See Garcia, supra at 828. This statutory section created limited liability to the dangerous instrumentality doctrine for short-term lessors of motor vehicles. Id. at 827. Florida Statute was created so that lessors had an exception to the dangerous instrumentality doctrine. Commerce Insurance v. Atlas Rent A Car, 585 7

12 So.2d 1084, 1085 (Fla. 3d DCA 1991). This statute required lease agreements to have specific language on the front of the lease agreement in order to shift vicarious liability back to the lessee/tortfeasor. Under the Graves Amendment, 49 U.S.C , an owner of a motor vehicle that rents or leases to another shall not be vicariously liable if the owner is engaged in the leasing of motor vehicles and is not independently negligent. The effect of the Graves Amendment was to eliminate the vicarious liability that was previously imposed upon owners of vehicles in Florida that are in the business of renting or leasing motor vehicles. For causes of action commenced on or after August 10, 2005, lessors of motor vehicles, such as FirstLease, may no longer be held responsible for the negligent acts of lessees based solely upon the fact that the lessor holds title to the rented or leased vehicle. See 49 U.S.C All five District Courts of Appeal in Florida have held that the Graves Amendment preempts all state and common laws which impose strict vicarious liability on rental car companies. See West v. Enterprise Leasing, 997 So.2d 1196 (Fla. 2 nd DCA 2008); Onge v. White, 988 So.2d 59 (Fla. 1 st DCA 2008); Bechina v. Enterprise, 972 So.2d 925 (Fla. 3 rd DCA 2007); Vargas v. Enterprise Leasing, Inc., 993 So.2d 614 (Fla. 4 th DCA 2008); and Karling v. Budget Rent, 2 So.3d 354 (Fla. 5 th DCA 2008). The Florida Supreme Court recently held that the Graves Amendment preempts (9)(b)(2). Vargas, supra at 1038 (Fla. 2011). The 8

13 Court noted that when Congress enacted the Graves Amendment in 2005, Congress clearly sought to eliminate vicarious liability for a specific category of owner/lessors that under Florida s reforms remained, to an extent, exposed - those engaged in the trade or business of renting or leasing motor vehicles. Vargas, 60 So.3d at Under (9)(b), an owner/lessor is exposed to vicarious liability under Florida law. Id. This clearly conflicts with the preemption clause of the Graves Amendment. Id. The District Court opinion, which imposes vicarious liability on the owner/lessor and its insurer, is in direct conflict with the Florida Supreme Court decision in Vargas, supra and the intent and language of the Graves Amendment. CONCLUSION The District Court opinion is in direct and express conflict with the holding in Am. Bankers Ins. Co., supra which held that a lessee was not an insured under the lesssor s policy because of the contingent coverage clause and the fact that the lessee had a policy of his own. Likewise, the District Court opinion, which upholds the validity of Florida Statute , is in direct conflict with Vargas, supra, which held that a statute which exposes an owner/lessor to vicarious liability clearly conflicts with the preemption clause of the Graves Amendment. Vargas, 60 So. 3d at

14 CERTIFICATE OF SERVICE I HEREBY CERTIFY, that the foregoing Petitioner s Brief on Jurisdiction was electronically filed through the Florida Courts efiling Portal and one copy each was furnished by U.S. Mail, postage prepaid, to Mark D. Tinker, Esq., Banker Lopez Gassler, P.A., ST Avenue North, Suite 900, St. Petersburg, FL 33701, Attorneys for Patterson and Timon V. Sullivan, Esq., Ogden & Sullivan, 113 S. Armenia Avenue, Tampa, Florida on this 18 th day of April LOCAL COUNSEL: PRO HAC VICE COUNSEL: Timon V. Sullivan Diane B. Carvell Ogden & Sullivan, P.A Rawle & Henderson LLP 113 S. Armenia Avenue The Payne Shoemaker Building Tampa, FL North Third Street, 9 th Floor Tel: (813) Harrisburg, PA Fax: (813) Tel: (717) Fax: (717) By: Diane B. Carvell Pro Hac Vice No Pennsylvania Bar No: CERTIFICATE OF COMPLIANCE Pursuant to Florida Rule of Appellate Procedure 9.210, the undersigned counsel certified that this Brief is printed in Times New Roman 14-point font. RAWLE & HENDERSON LLP The Payne Shoemaker Building 10

15 240 North Third Street, 9 th Floor Harrisburg, PA Tel: (717) Fax: (717) dcarvell@rawle.com Attorneys for Harco National Insurance Company By: Diane B. Carvell Pro Hac Vice No Pennsylvania Bar No: