IN THE SUPREME COURT OF FLORIDA Case No. 1D07-6027 FLORIDA DEPARTMENT OF FINANCIAL SERVICES, AS RECEIVER FOR AMERICAN SUPERIOR INSURANCE COMPANY, INSOLVENT, vs. Petitioner, IMAGINE INSURANCE COMPANY LIMITED Respondent. JURISDICTIONAL BRIEF OF RESPONDENT IMAGINE INSURANCE COMPANY LIMITED CHRISTOPHER M. KISE FLA. BAR NO. 855545 JAMES A. MCKEE FLA. BAR NO. 638218 FOLEY & LARDNER LLP 106 EAST COLLEGE AVENUE SUITE 900 TALLAHASSEE, FLORIDA 32301 (850) 222-6100 (TEL.) (850) 561-6475 (FAX) COUNSEL FOR IMAGINE INSURANCE COMPANY, LIMITED Foley & Lardner LLP
TABLE OF CONTENTS TABLE OF CONTENTS... I TABLE OF AUTHORITIES... II STATEMENT OF THE CASE AND FACTS... 1 ARGUMENT... 4 I. THE FIRST DISTRICT S DECISION IS NOT IN EXPRESS AND DIRECT CONFLICT WITH CASES FROM THIS COURT OR OTHER DISTRICT COURTS.... 4 II. THE FIRST DISTRICT S DECISION DOES NOT AFFECT A CLASS OF CONSTITUTIONAL OR STATE OFFICERS... 8 CONCLUSION... 10 CERTIFICATE OF SERVICE... 11 CERTIFICATE OF COMPLIANCE... 11 i Foley & Lardner LLP
TABLE OF AUTHORITIES CASES Consumers Super Market #2, Inc. v. The Underwriters at Lloyds, 189 So. 2d 648 (Fla. 3d DCA 1966)... 5 Crown Central Petroleum Corp. v. Standard Oil Co. et al., 142 So. 2d 731 (Fla. 1962)... 9 Florida State Board of Health v. Lewis, 149 So. 2d 41 (Fla. 1963)... 8-9 Foundation Health v. Westside EKG Associates, 944 So. 2d 188 (Fla. 2006)... 4-5 Hardee v. State, 534 So. 2d 706 (Fla. 1988)... 1-4 Imagine Insurance Company v. State of Florida, Department of Financial Services, 1D07-6027, Slip Op. (Fla. 1st DCA Dec. 16, 2008)... 1-3 Larson v. Harrison, 142 So. 2d 727 (Fla. 1962)... 8-9 Lutz v. Protective Life Insurance Co., 951 So. 2d 884 (Fla. 4th DCA 2007)... 4-5 Reaves v. State, 485 So. 2d 829 (Fla. 1986)... 1, 7 Spradley v. State, 293 So. 2d 697 (Fla. 1974)... 9 Springer v. Colburn, 162 So. 2d 513 (Fla. 1964)... 4-5, 7 Wainwright v. Taylor, 476 So. 2d 669 (Fla. 1985)... 6 STATUTES 631.201, Fla. Stat.... 7 ii Foley & Lardner LLP
STATEMENT OF THE CASE AND FACTS The Department of Financial Services, as Receiver for American Superior Insurance Company (the Receiver ), seeks review of a decision of the First District Court of appeals reversing a trial court order which granted summary judgment in favor of the Receiver and denied the motion for summary judgment filed by Imagine Insurance Company ( Imagine ). The First District s decision involves the interpretation of language in a structured reinsurance contract entered into by Imagine and American Superior Insurance Company, a Florida property and casualty insurer. Imagine Insurance Company v. State of Florida, Department of Financial Services, 1D07-6027, Slip Op. at 2 (Fla. 1st DCA Dec. 16, 2008). The four corners of the First District s decision establish the additional facts set forth below. 1 The Contract at issue required American Superior to pay a premium of $900,000 per year in exchange for Imagine s agreement to reimburse American Superior for up to $2,000,000 in losses. Id. The premium due was payable in a first installment of $270,000, and three remaining installments of $210,000 each. 1 The Receiver s Jurisdictional Brief cites numerous facts which cannot be found within the four corners of the First District s decision. See Reaves v. State, 485 So. 2d 829, 830 (Fla. 1986) ( Neither a dissenting opinion nor the record itself can be used to establish jurisdiction. ) (citing Jenkins v. State, 385 So. 2d 1356 (Fla. 1980); Hardee v. State, 534 So. 2d 706, 708 (Fla. 1988). 1 Foley & Lardner LLP
Additionally, a $1,000,000 Trust Agreement was created as part of the Contract and was funded for the sole benefit of Imagine. Id. Shortly after the contract was executed, American Superior suffered a major hurricane loss in August 2004, and Imagine paid the full coverage limits of the Contract, less the three quarterly premiums that were scheduled to be paid in future months. Id. at 3. Notwithstanding the payment of these reinsurance proceeds, American Superior became insolvent. Id. On September 29, 2004, the trial court issued a consent order of rehabilitation and appointed the Department as Receiver of American Superior. Id. Upon notification of the consent order, Imagine gave 30 days notice of its intent to terminate the Contract pursuant to the Contract s Special Termination provisions, and advised the Receiver that it was collecting the Non Renewal Charge 2 due and payable to Imagine pursuant to the plain language of the Contract. Id. On December 15, 2004, the circuit court entered an order appointing the Department as Receiver for purposes of liquidation. Id. at 4. The Receiver demanded Imagine pay an additional $630,000 in reinsurance benefits to the Receiver, and rejected Imagine s claim for the Non Renewal Charge. Id. 2 The Non Renewal Charge was calculated pursuant to a contractual formula. Id. at 3. 2 Foley & Lardner LLP
The trial court granted summary judgment in favor of the Receiver and held that Imagine wrongfully retained the $630,000 in premiums due from the $2,000,000 policy limits it paid to American Superior. Id. The court further determined that by cancelling the contract on November 4, 2004, Imagine rendered itself unable to claim a non-renewal charge. Id. at 5. The First District reversed the trial court and held that Imagine appropriately deducted the $630,000 in premiums not yet paid from the loss payment to American Superior. The court reached this conclusion after noting that the contractual interpretation urged by the Receiver would render language in the Contract superfluous, and further noting that [t]he more logical meaning of the Contract, and the understanding actually acted upon before the advent of insolvency by the Reinsurer and American Superior, contemplates the Reinsurer will offset, against any loss payments, the uncollected or unpaid premium installments remaining for the Contract Year. Id. at 7. Importantly, the court observed that Imagine completely performed its obligation under the Contract by paying the maximum benefit in August 2004, so a windfall would result for American Superior if American Superior were not required to pay the full premium. Id. The First District also held that Imagine was entitled to collect the $959,000 Non Renewal Charge from the Trust Account established for its sole benefit, and 3 Foley & Lardner LLP
rejected the Receiver s arguments that a voidable transfer or preference had occurred. Id. at 12. The court recognized that nothing in the record indicates or suggests the Contract was not entered into in good faith. Id. at 16. Thus, the Court held that (1) the trial court erred in its interpretation of the contractual provisions at issue, (2) Imagine properly offset the remaining premium installments from the loss payment made in August 2004; (3) the funds in the trust account are not part of the receivership estate and (4) Imagine is entitled to the Non Renewal Charge, to be paid from the trust account. ARGUMENT The Receiver attempts to invoke this Court s jurisdiction based on express and direct conflict with decisions of this Court and other District Courts of Appeal, and further argues that the First District s decision affects a class of constitutional or state officers. As developed below, no valid jurisdictional basis exists in this case. I. THE FIRST DISTRICT S DECISION IS NOT IN EXPRESS AND DIRECT CONFLICT WITH CASES FROM THIS COURT OR OTHER DISTRICT COURTS. The Receiver asserts conflict with this Court s decisions in Springer v. Colburn, 162 So. 2d 513 (Fla. 1964) and Foundation Health v. Westside EKG Associates, 944 So. 2d 188 (Fla. 2006), as well as the District Court decisions in Lutz v. Protective Life Insurance Co., 951 So. 2d 884 (Fla. 4th DCA 2007) and 4 Foley & Lardner LLP
Consumers Super Market #2, Inc. v. The Underwriters at Lloyds, 189 So. 2d 648 (Fla. 3d DCA 1966). However, none of these cases conflicts with the First District s decision. In Springer, the Court held that Legislature has the power to regulate the liquidation of insolvent insurance companies by limiting prospectively the right of Florida creditors to enforce a Florida judgment against Florida assets. Likewise, in Consumers Super Market, the Third District held that Florida s insurance liquidation statutes are controlling. Consumers Super Market, 189 So. 2d at 650. In Foundation Health, the Court reiterated the well settled proposition that statutory limitations and requirements surrounding traditional insurance contracts may be incorporated into an insurance contract for purposes of determining the parties contractual rights. Foundation Health, 944 So. 2d at 195. Similarly, the Court in Lutz held that statutory requirements for group insurance policies could be incorporated into the insurance contract at issue in that case. Lutz, 951 So. 2d at 887. The four cases cited above thus stand for the well settled propositions that insurance contracts, and the liquidation of insurance companies, are governed by Florida law. Nothing in the First District s decision can be interpreted as contradicting these common sense propositions. The First District s decision reverses the trial court s erroneous interpretation of the plain language of certain provisions of the 5 Foley & Lardner LLP
Contract at issue. Although the Receiver asserts conflict, the Receiver appears to argue only that the First District s interpretation of the Contract is wrong. 3 As noted above, the First District s decision interpreted the plain language of the Contract at issue to determine that Imagine properly offset the outstanding premium from the reinsurance proceedings paid to American Superior, and to determine that Imagine was entitled to collect the nonrenewal charge due pursuant to the Contract. The First District made its determinations, and rejected the Receiver s arguments, after expressly considering Florida s liquidation statutes relating to offsets, as well as case law interpreting such provisions. The Receiver has not cited any cases that conflict with the First District s holding in this respect. The Receiver argues that the First District should have determined that any transfers made pursuant to the Contract constituted voidable transfers. However, the First District expressly recognized that nothing in the record demonstrated a lack of good faith on behalf of Imagine, and rejected the Receiver s argument. The Receiver s argument at this point constitutes nothing more than a disagreement with the First District s review of the record and an attempt to reargue the case below. As no express and direct conflict with the above-cited cases exists, mere 3 As this Court has stated, [o]ur concern in cases based on our conflict jurisdiction is the precedential effect of those decisions which are incorrect and in conflict with decisions reflecting the correct rule of law. Wainwright v. Taylor, 476 So. 2d 669, 670 (Fla. 1985) 6 Foley & Lardner LLP
disagreement with the First District s decision or a desire to reargue the case does not present a valid basis for invoking this Court s discretionary jurisdiction. 4 Finally, the First District s observation that the Receiver would receive a windfall from Imagine if the plain language of the Contract was not given effect, does not conflict with Colburn. The Court in Colburn held that the provisions of section 631.201, Florida Statutes, could not be applied to a contract which existed prior to the passage of the statute, but could be applied prospectively. The contract at issue in Imagine clearly does not predate section 631.201, and there is no assertion in the First District s decision that the liquidation statutes are inapplicable here. Colburn does not stand for the proposition that reinsurance contracts may be rewritten by the Receiver as it desires. Rather, in the receivership context, as in any other context, effect should be given to the terms of the contract at issue, so long as the contract at issue does not violate the provisions of Florida s insurance insolvency statutes. The First District s decision gives effect to the Contract and further determines that no evidence of a voidable transfer exists. Thus, the First 4 The Receiver also cites to facts it alleges are included in the record on appeal, but which are not included within the four corners of the First District s decision. The record on appeal is irrelevant for purposes of this Court s jurisdictional determination. See Receiver s Jurisdictional Brief at 8; Reaves, 485 So. 2d at 830 ( Neither a dissenting opinion nor the record itself can be used to establish jurisdiction. ) 7 Foley & Lardner LLP
District properly reviewed and applied Florida s insolvency statutes and the Receiver s argument that the First District s decision drastically limits the powers of insurance company liquidators is erroneous. In fact, if the Receiver s arguments had been accepted by the First District, the decision would have represented a vast expansion of the powers available to the Receiver under Florida s insolvency statutes. For this reason, even if discretion to review the decision existed, such discretion should not be exercised. II. THE FIRST DISTRICT S DECISION DOES NOT AFFECT A CLASS OF CONSTITUTIONAL OR STATE OFFICERS The First District s decision does not affect a class of constitutional or state officers for two reasons. First, the decision cannot affect a class of officers, because the decision, at best, affects only one officer. Second, the decision does not directly impact the duties of such officers. This Court has held that the term class as used in the applicable constitutional provision requires that more than one officer of the type in question be implicated. In this case the decision is alleged to affect only the Chief Financial Officer and her employees. This Court has previously held that an individual member of the State Cabinet, in the exercise of the functions of his particular office, does not constitute a class. The reason, of course, was that an individual cannot be a class in the sense used in the Constitution. Florida State Board of Health v. Lewis, 149 So. 2d 41, 43 (Fla. 1963) (citing Larson v. Harrison, 142 So. 8 Foley & Lardner LLP
2d 727 (Fla. 1962); Crown Central Petroleum Corp. v. Standard Oil Co. et al., 142 So. 2d 731 (Fla. 1962)). The CFO s employees are not constitutional or state officers, and cannot constitute such a class for jurisdictional purposes. In fact, as the Court held in Lewis, even a board with several members who execute the same constitutional or statutory duties does not satisfy the class requirement. Lewis, 149 So. 2d at 43. Accordingly, the First District s decision cannot affect a class of officers. Moreover, a decision which affects a class of constitutional or state officers must be one which does more than simply modify or construe or add to the case law which comprises much of the substantive and procedural law of this state, as such cases will affect such officers as they would any other citizen. Spradley v. State, 293 So. 2d 697, 701 (Fla. 1974). In order to vest this Court with jurisdiction, a decision must directly and, in some way, exclusively affect the duties, powers, validity, formation, termination or regulation of a particular class of constitutional or state officers. Id. The decision at issue does not meet this standard, as it does nothing more than interpret the plain language of the reinsurance contract at issue, and apply Florida s insolvency statutes to the facts of the case. 9 Foley & Lardner LLP
CONCLUSION For the reasons stated above, no valid basis for this Court s jurisdiction has been asserted by the Receiver. Imagine respectfully suggests that this Court decline to accept jurisdiction. Respectfully submitted, CHRISTOPHER M. KISE FLA. BAR NO. 855545 JAMES A. MCKEE FLA. BAR NO. 638218 FOLEY & LARDNER LLP 106 EAST COLLEGE AVENUE SUITE 900 TALLAHASSEE, FLORIDA 32301 (850) 222-6100 (TEL.) (850) 561-6475 (FAX) COUNSEL FOR IMAGINE INSURANCE COMPANY LIMITED 10 Foley & Lardner LLP
CERTIFICATE OF SERVICE I hereby certify that a true and correct copy of the foregoing was served via U.S. Mail to the following this 23rd day of March 2009: HELEN ANN HAUSER, ESQ. DITTMAR & HAUSER, P.A. 3250 MARY STREET, #400 COCONUT GROVE, FL 33133 JODI COLLINS, ESQ. YAMILE BENITEZ-TORVISO FLORIDA DEPARTMENT OF FINANCIAL SERVICES DIVISION OF REHAB & LIQUIDATION 8420 N.W. 52 ND STREET, SUITE 201 MIAMI, FL 33166 ERIC S. SCOTT, ESQ. FLORIDA DEPARTMENT OF FINANCIAL SERVICES DIVISION OF REHABILITATION AND LIQUIDATION POST OFFICE BOX 110 TALLAHASSEE, FL 32302-0110 CERTIFICATE OF COMPLIANCE The undersigned hereby certifies that this brief was written in a proportionally spaced Times New Roman 14-point font in compliance with Rule 9.210(a)(2) of the Florida Rules of Appellate Procedure. JAMES A. MCKEE 11 Foley & Lardner LLP