Florida’s Concurrent Cause Doctrine May Be a Valuable Tool to Overcome Insurance Policy “Intentional Acts” Exclusions
Plaintiff “V” is yet another victim of unscrupulous business practices perpetrated by the evil Defendant B. V retains counsel to investigate and prosecute its claims to the fullest extent permitted by law. V’s counsel reviews the facts and serves a carefully crafted, professionally envious demand letter, filled with details of every facet of wrongdoing, backed with volumes of evidence sure to drive any wrongdoer into imminent capitulation. B’s counsel responds not with a denial, not with excuses, but rather with a curt response indicating that B is no longer in business, and its key principal has fled the country. In other words, “Go ahead and shoot ‘cause there’s nothing here to hit!”
In the not-so-distant past, victims such as V could look to B’s errors and omissions insurance coverage and recover most of the losses, depending only on the amount of coverage available. Errors and omissions policies are, after all, designed to protect, defend and indemnify the insured from acts of negligence and accidental misconduct, thus ensuring that the insured’s business can continue without serious interruption and further that victims will be compensated for their losses. However, in this world of Ponzi-perpetrated losses, insurance companies have fought back, and are now more than ever exploiting their Policy’s “Intentional Acts” exclusions to avoid paying for either coverage or indemnification for the losses. The insurer’s aggressive tactics have left victims holding the bag in the long line of trustee-driven check-out registers.
“Intentional Acts” exclusions typically allow the insurer to avoid defending against or paying for claims based on an insured wrongdoer’s conduct which was intentionally designed to cause injury. The “Intentional Act” exclusion most heavily litigated typically includes claims centered on allegations of the insured’s intentional fraud. Thus, where Plaintiff V is the victim of Defendant B’s fraud, Defendant B’s insurer will escape paying against any of the policy’s protections.
All may not be lost. What if Plaintiff V had not only suffered from B’s fraud, but also suffered from Defendant B’s separate, independent claims of negligence? In other words, what happens when an insured is sued for a covered claim and an excluded claim? Florida courts traditionally construe insurance policies to afford the greatest degree of coverage.
Florida has adopted the concurrent cause doctrine to dispose of this very scenario. See Wallach v. Rosenberg, 527 So.2d 1386 (Fla. 3d DCA 1988); see further Paulucci v. Liberty Mut. Fire Ins. Co., 190 F.Supp.2d 1312, 1318-19 (M.D. Fla. 2002). The concurrent cause doctrine mandates that coverage shall be provided when a loss would not have occurred but for the joinder of independent covered and excluded causes. Wallach, 527 So.2d 1387. The Court must find coverage “where an insured risk constitutes a concurrent cause of the loss even where ‘the insured risk [is] not … the prime or efficient cause of the accident.’” Id. (quoting 11 G. Couch, Couch on Insurance 2d § 44:268 (rev. ed.1982)).
The Wallach Court reviewed a homeowner’s policy which insured against “physical loss to the property.” The property included a sea wall. The policy excluded coverage for “for loss resulting directly or indirectly … water damage.” After a flood, the sea wall collapsed, causing damage to the Property. The coverage issue was whether the loss was caused by the negligent construction of the sea wall, which would be a covered loss, or by the flood, which was excluded. Ultimately, the court found it unnecessary to find causation by one over the other causes, because under the doctrine of concurrent causes, coverage existed because a covered event contributed to the loss. The insurer then argued that it would inequitable to provide coverage if an excluded event was “one of the causes” of the occurrence. The Third District disagreed and held:
We reject that theory and adopt what we think is a better view”that the jury may find coverage where an insured risk constitutes a concurrent cause of the loss even where “the insured risk [is] not … the prime or efficient cause of the accident.”
Wallach, 527 So.2d at 1387. The court, relying on authority from other jurisdictions, explained:
Where a policy expressly insures against loss caused by one risk but excludes loss covered by another risk, coverage is extended to a loss caused by the insured risk even though the excluded risk is a contributory cause.
Id. at 1388.
Like everything in the law, the clarity of this doctrine is the color of mud. What, for example, would happen if a victim has a claim against a securities lawyer for professional negligence and statutory securities fraud? Is the covered claim for malpractice sufficiently separate and independent from the excluded claim for securities fraud to allow coverage?
While there are no Florida cases directly on point, the plaintiff would need to show that the defendant’s underlying negligence “resulted in and was the proximate cause of actual loss to the plaintiff. If the client cannot show that it would have suffered harm ‘but for’ the [professional] negligence, the client will not prevail.” KJB Vill. Prop., LLC v. Craig M. Dorne, P.A., 36 Fla. L. Weekly D2557 (Fla. 3d DCA 2011). Thus, the plaintiff must prove that its asserted claim of negligence was the contributing cause of actual loss in order to prevail.
Guideone Elite Ins. Co. v. Old Cutler Presbyterian Church, Inc., 420 F.3d 1317, 1330 (11th Cir. 2005), is particularly illustrative. In Guideone, the defendant sought insurance coverage when the loss was the result of a crime involving both robbery and rape. The court reviewed an insurance policy where sexual assault was expressly excluded from the insurance policy, but other criminal acts, including robbery, were deemed to be covered losses. Applying Florida law, the court held, “Florida’s concurrent cause doctrine permits coverage under an insurance policy when the loss can be attributed to multiple causes, ‘as long as one of the causes is an insured risk.’” In noting the independence of the two criminal acts which took place at the same time by the same actor, the Court explained:
Causes are dependent when one peril instigates or sets in motion the other. In this case, the perils were independent. Robbery and rape have separate objectives that can work in tandem to cause one loss Where two crimes combine to cause a loss, it seems ‘logical and reasonable to find the loss covered … even if one of the causes is excluded from coverage.’
Id. Explaining its rationale, the Court reasoned:
Robbery is not part and parcel to the crime of rape, and the same is true of kidnapping, assault, imprisonment, and battery. Perhaps the confusing element here is that the same actor committed all of the crimes. If the actions perpetrated that day, however, were only parts of one larger crime, that would obviate the rationale behind multiple criminal statutes under which an offender could be charged.
Id.
Thus, if the plaintiff can prove that the claims for professional negligence are not dependent upon or arise from any claim for securities fraud, the insurer will not likely be able to escape from meeting its duties and obligations owed under the insurance policy. In other words, at every stage of representing the plaintiff-victim, plaintiff’s counsel must plot the litigation strategy by focusing not only on the defendant, but on the underlying insurance policy which may be the only source of recovery.