08-5432 LLOYDS UNDERWRITERS and OSPREY UNDERWRITING AGENCY, LTD., v. REBECCA NETTERSTROM, The M/V or T/B JEFFERSON and MAR-K TOWING, INC.

SUPREME COURT CASES

Laws-info.com » Cases » Florida » Florida First District Court » 2009 » 08-5432 LLOYDS UNDERWRITERS and OSPREY UNDERWRITING AGENCY, LTD., v. REBECCA NETTERSTROM, The M/V or T/B JEFFERSON and MAR-K TOWING, INC.

State: Florida

Court: Florida First District Court

Docket No: 08-5432

Case Date: 07/16/2009

Preview:IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA LLOYDS UNDERWRITERS and OSPREY UNDERWRITING AGENCY, LTD., Appellants, CASE NO. 1D08-5432 v. REBECCA NETTERSTROM, The M/V or T/B JEFFERSON and MAR-K TOWING, INC., Appellees. ________________________________/ NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

Opinion filed July 16, 2009. An appeal from the Circuit Court for Bay County. James B. Fensom, Judge. J. Andrew Talbert of Bozeman, Jenkins & Matthews, Pensacola; David Bland and Robert P. Vining of Leblanc Brand, P.L.L.C., Houston, TX, for Appellants. Lloyd N. Frischhertz and Dominick F. Impastato, III, of Frischhertz & Associates, New Orleans, LA; Rayo Moreno of Moreno & Gallagher, Ft. Lauderdale; John L. Fishel, II, of Boggs & Fishel, Panama City; Rufus C. Harris, III, and Alfred J. Rufty, III, of Harris & Rufty, LLC, New Orleans, LA, for Appellees.

PADOVANO, J. This is an appeal from a nonfinal order determining that a party is not entitled to arbitration. We hold that the arbitration clause in the insurance policy at issue is clear and unambiguous and that the case law prohibiting arbitration of

insurance coverage disputes must give way to the contrary requirements of the Federal Arbitration Act and the Convention governing international arbitration agreements. We therefore reverse. The present controversy arose from a dispute over insurance coverage for a tort claim. Lars Nettersom died in a marine accident while working aboard a tugboat owned and operated by Mar-K Towing, Inc. His wife, Rebecca, filed a wrongful death suit against Mar-K, alleging that the accident was caused by the poor condition of the vessel and the negligence of the crew. Mar-K had a maritime insurance policy with Lloyds of London, which it had negotiated with Osprey Underwriting, Lloyds' agent in London. The policy

insured vessels Mar-K operated throughout an area from Savannah, Georgia, to Brownsville, Texas. Lloyds and Osprey declined coverage under the policy or to defend Mar-K in the suit by Mrs. Nettersom. They contended that Mar-K had failed to comply with certain requirements in the policy. Mar-K filed a third-party complaint against Lloyds and Osprey for indemnification. Lloyds and Osprey filed a motion to compel arbitration under the provisions of the insurance policy. The trial court denied the motion on two grounds. First, the court concluded that the arbitration clause in the policy could not be enforced because it was in conflict with another provision, known as the service of suit 2

clause. Second, the court concluded that Florida law prohibits the arbitration of insurance coverage disputes and that the Florida law on this point takes precedence over contrary, but more general, provisions of the Federal Arbitration Act. Lloyds and Osprey appealed to this court to review the order. A nonfinal order denying a motion to compel arbitration is subject to review by appeal to the district court of appeal. See Fla. R. App. P. 9.130(a)(3)(C)(iv); Cintas Corp. No. 2 v. Schwalier, 901 So. 2d 307 (Fla. 1st DCA 2005). Because the outcome of the dispute in this case depends on an interpretation of the arbitration clause in the insurance policy and the effect of the applicable state and federal laws, the order is reviewable by the de novo standard. See Florida Title Loans, Inc. v. Christie, 770 So. 2d 750 (Fla. 1st DCA 2000). We conclude that the trial court erred as a matter of law in construing the insurance policy. An ambiguity exists only where contractual terms cannot be reconciled. See Deni Assocs. of Fla., Inc. v. State Farm Fire & Cas. Ins. Co., 711 So. 2d 1135, 1139 (Fla.1998); See Harris v. School Bd. of Duval County, 921 So.2d 725, 733 (Fla. 1st DCA 2006); Dune I, Inc. v. Palms N. Owners Ass'n, Inc., 605 So. 2d 903, 905 (Fla. 1st DCA 1992); Thrasher v. Arida, 858 So. 2d 1173, 1175 (Fla. 2d DCA 2003). But where the terms can be reconciled, the clear language of the contract controls. See Harris, 921 So. 2d at 733; Dune I, 605 So. 2d 3

at 905; Thrasher, 858 So. 2d at 1175. When a contract contains apparently conflicting clauses, we must interpret it in a manner that would reconcile the conflicting clauses, if possible. See Harris at 733; Dune I at 905; Thrasher at 1175. In the contract under consideration here, the arbitration and service of suit clauses serve different purposes and they do not conflict with each another. The arbitration clause provides a method of resolving a dispute between the insurer and the insured. This clause states, Notwithstanding anything else to the contrary, this insurance is subject to English law and practice and any dispute arising under or in connection with this insurance is to be referred to Arbitration in London, one Arbitrator to be nominated by the Assured and the other by Osprey on behalf of Underwriters. The Arbitration shall be conducted pursuant to exclusive supervision of the English High Court of Justice. In case the Arbitrators shall not agree, then the dispute shall be submitted to an Umpire to be appointed by them. The award of the Arbitrators or the Umpire shall be final and binding upon both parties. In the event of a conflict between this clause and any other provision of this insurance, this clause shall prevail and the right of either party to commence proceedings before any Court or Tribunal in any other jurisdiction shall be limited to the process of enforcement of any award hereunder. By this clause the parties plainly agreed to resolve a coverage dispute such as this in an arbitration proceeding in London. In contrast, the service of suit clause merely provides a method of obtaining a judgment against the insurer in the United States. This clause states:

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It is agreed that in the event of the failure of the Underwriters severally subscribing this insurance (the Underwriters) to pay any amount claimed to be due hereunder, the Underwriters, at the request of the Assured, will submit to the jurisdiction of a court of competent jurisdiction within the United States of America. An American company purchasing insurance from an international insurance company like Lloyds of London might find this clause to be useful. If a coverage dispute is resolved favorably to the American company in arbitration, the company will be able to sue Lloyds in the United States to enforce the award. Lloyds has subjected itself to a lawsuit in the United States for this purpose and presumably for any purpose other than to resolve a dispute regarding the obligations between the insurer and insured under the policy. Even if we were to accept the argument that there is a conflict between the service of suit clause and the arbitration clause, we would nevertheless be compelled to hold that the arbitration clause prevails. The last sentence of the arbitration clause states, "In the event of a conflict between this clause and any other provision of this insurance, this clause shall prevail and the right of either party to commence proceedings before any Court or Tribunal in any other jurisdiction shall be limited to the process of enforcement of any award hereunder." This provision plainly signifies that, in the event of a conflict, the arbitration clause should take precedence over the conflicting provision. 5

The trial court concluded that the arbitration clause would not be enforceable in any event, because Florida law prohibits the arbitration of insurance coverage disputes. The major premise of this conclusion was that state laws regulating the business of insurance take precedence over federal laws that would otherwise require the enforcement of an arbitration agreement. This statement is correct as a general principle, but the error in the trial court's reasoning is that state laws regulating the business of insurance have a preemptive effect only as to insurance contracts within the United States, and not to international insurance contracts such as the one in this case. The Federal Arbitration Act, enacted in 1925, 9 U.S.C.

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