Interstate Fire & Casualty v. Abernathy (Florida)
(A minor festival attendee was injured while using an inflatable bungee run; the mother of the minor sued the club that was hosting the event; after settling with the club for millions of dollars and obtaining a judgment, the mother then filed an action against the club’s insurer for failing to provide coverage and for engaging in bad faith; the court ruled that the coverage did not extend back four days to liability for the prior known injury.)

Interstate Fire & Casualty appealed a final judgment against it awarding the injured minor more than six million dollars.  The trial court had determined that a certificate of insurance that was issued by a broker on April 18, 2007 conferred coverage on a purported additional insured (the club hosting the festival) for liability for the minor’s injury that occurred four days earlier on April 14, 2007.

The club hosting the festival did not have insurance.  However, the manufacturer of the inflatable bungee run was insured by a policy issued by Interstate.  The policy included an endorsement which provided that  “Who is An Insured” under the policy was “amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured.”  No person or organization was named or scheduled.  However, the Schedule, under the heading “Name of Person or Organization,” contained this language: “AS REQUIRED BY WRITTEN CONTRACT.”  At the time of the accident, the manufacturer had no written contract with the club, nor did the club have any agreement concerning liability insurance, written or oral, with either the manufacturer or Interstate.

Two days after the subject incident, a representative of the club contacted the manufacturer and asked for a certificate of insurance, naming the club as an additional insured under the manufacturer’s policy.  The request was forwarded to the manufacturer’s insurance broker, who then prepared and faxed a copy of the certificate two days later.

During the underlying lawsuit with the injured minor, Interstate defended the manufacturer, but notified the club that it would not provide it with a defense.  As part of the injured party’s settlement with the defendants, the club assigned its rights under the Interstate policy to the injured party.  Interstate was thereafter added as an additional defendant, facing claims for breach of contract and bad faith.  The trial court then granted the injured party’s motion for summary judgment, finding that the manufacturer’s insurance broker “had authority to issue the [certificate of insurance], that the [certificate of insurance] was part of the policy, based on the definition of ‘policy’ [under Florida law], and that there was no reason why an injured party could not acquire insurance coverage after the fact of the injury.”  Interstate appealed the decision.

On appeal, the Court reversed the trial court noting that “[t]he rule forbidding ‘insuring against’ known losses is part and parcel of the public policy to protect other policy holders against insolvent insurers. An agreement to assume a known loss is not insurance.”  The Court explained that “[t]he concept of insurance is that the parties, in effect, wager against the occurrence or non-occurrence of a specified event; the carrier insures against a risk, not a certainty.”  The Court then expressed the conclusion that “[i]f there is no risk, . . . there can be [no] insurance.”  Moreover, according to the Court, the fact that the manufacturer  had disclosed the fact that the minor had been injured at the festival to the broker before the broker issued the certificate of insurance “makes no difference.”

NOTE: This case highlights the need for detailed and organized advanced planning with regard to insurance protection at public events, particularly large festival and recreational activities.  Effective insurance brokers that specialize in event insurance should anticipate and prevent these types of issues. 

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