Rosen v. Florida Ins. Guar. Ass'n
2001 WL 1095308, 802 So. 2d 291 (2001)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A settlement agreement between an injured party and an insured constitutes a covenant not to execute, rather than a full release, and therefore does not extinguish the injured party's claim against the insurer if the parties' intent, as expressed in the agreement, clearly indicates a reservation of rights against the insurer and the underlying claim against the insured continues to exist.
Facts:
- Bonnie Rosen sued 'the AB Law Firm' (its principal and an employee) for various claims including breach of contract, fraud, and negligent supervision, alleging gross overbilling and other misconduct during their legal representation of her.
- AB Law Firm held a $1,000,000 liability insurance policy with Manatee Insurance Company, which featured a 'declining balance' provision where defense costs reduced the available coverage for damages.
- Manatee Insurance Company was declared insolvent, leading the Florida Insurance Guaranty Association (FIGA) to assume the defense of AB Law Firm, subject to FIGA's statutory $300,000 per-claim liability limit.
- Before Manatee's insolvency, nearly $200,000 was spent on defense, and by the time FIGA took over, $261,000 of its $300,000 statutory limit had been consumed by defense costs, leaving only $39,000 for potential indemnification.
- Rosen and AB Law Firm entered into a settlement agreement where AB Law Firm consented to a $261,000 judgment, but the agreement stipulated this judgment would not be recorded, create liens, or be executed against AB Law Firm.
- The settlement agreement explicitly stated it was not intended to prejudice Rosen's potential claim against FIGA and preserved her right to pursue a lawsuit against FIGA for the remaining balance of the $300,000 limit.
- Rosen agreed to accept $39,000 from FIGA and, upon conclusion of her litigation with FIGA, would release AB Law Firm or file a notice of satisfaction of judgment.
- FIGA paid the $39,000 to Rosen and reviewed the settlement documents multiple times, but did not obtain a release from Rosen at that time.
Procedural Posture:
- Bonnie Rosen sued 'the AB Law Firm,' its principal, and an employee in an unspecified trial court for multiple causes of action.
- Manatee Insurance Company, AB Law Firm's insurer, was declared insolvent, and Florida Insurance Guaranty Association (FIGA) assumed the defense.
- Rosen filed a declaratory judgment action against FIGA in an unspecified trial court, seeking payment of $261,000 and a determination that FIGA could not deduct defense costs from its statutory liability limit.
- Both Rosen and FIGA filed motions for summary judgment in the trial court.
- The trial court granted FIGA's motion for summary judgment, ruling that the settlement agreement between Rosen and AB Law Firm constituted a release, thereby extinguishing FIGA's liability.
- Rosen appealed the trial court's decision to the First District Court of Appeal (1st DCA).
- The First District Court of Appeal affirmed the trial court's summary judgment, concluding that Rosen's release of AB Law Firm precluded her action against FIGA.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a settlement agreement between an injured party and an insured, which stipulates a judgment against the insured that will not be recorded or executed, but expressly reserves the right to pursue claims against the insurer, constitute a release that extinguishes the insurer's liability, or a covenant not to execute that preserves the claim against the insurer?
Opinions:
Majority - Pariente, J.
No, a settlement agreement of this nature constitutes a covenant not to execute against the insured, and therefore does not extinguish the insurer's liability where the parties' intent, as expressed in the agreement, clearly reserves the claim against the insurer and the underlying claim against the insured continues to exist. The Court emphasized that the intent of the parties controls the interpretation of settlement agreements. Distinguishing between a 'release' (an outright cancellation of obligation) and a 'covenant not to sue' (recognition of continuing liability with an agreement not to assert rights against a specific party), the Court found the settlement here to be a covenant not to execute. The agreement explicitly stated it did not prejudice Rosen's claim against FIGA and preserved her right to pursue a lawsuit against FIGA. Unlike previous cases like Fidelity & Casualty Co. v. Cope where underlying claims no longer existed after full releases or satisfaction of judgment, Rosen's agreement specifically preserved the underlying claim for the purpose of litigating the coverage dispute with FIGA. The mere fact that a judgment may not be enforced against a party does not mean that the party is not 'legally obligated to pay,' especially when the agreement is structured to pursue a claim against an insurer. The Court cited public policy reasons for its decision, including enforcing parties' intentions, broadly interpreting coverage to protect injured persons, and encouraging partial settlements. Therefore, the failure to obtain a recordable judgment against the insured is not fatal where the sole question remaining is the coverage dispute, which was clearly contemplated by the parties.
Dissenting - Wells, C.J.
I dissent. Chief Justice Wells argued that the Supreme Court of Florida lacked conflict jurisdiction to hear the case. He contended that for the Court to find a conflict, it had to interpret the First District's holding that the settlement was a release as incorrect, which could not be determined solely from the 'four corners' of the First District's opinion. Therefore, he believed there was no clear misapplication of Fidelity & Casualty Co. v. Cope evident within the First District's decision itself, which is a prerequisite for conflict jurisdiction.
Analysis:
This case significantly clarifies the distinction between a release and a covenant not to execute under Florida law, particularly concerning claims against insurers following an insured's insolvency. It solidifies the principle that the paramount consideration in interpreting settlement agreements is the expressed intent of the parties. The decision supports public policy by encouraging partial settlements that allow injured parties to pursue recovery from insurers while providing a mechanism for insureds to limit their direct exposure, thereby protecting claimants and promoting efficient dispute resolution. Future cases will rely heavily on clear, unambiguous language in settlement documents to establish the parties' intent regarding the preservation of claims against third-party insurers.
