Federal Criminal Law Opinions

Virginia M. Hernandez Covington, Judge.

ORDER
This matter comes before the Court upon consideration of Defendant HCI’s motion for summary judgment (Doc. # 103) and Plaintiff ACC’s motion for summary judgment (Doc. # 105) , both filed on November 17, 2008. The cross motions for summary judgment are ripe for this Court’s review. (Doc. ## 116, 118) . Also before this Court is ACC’s motion to strike, in whole or in part, the affidavit of Philip J. Spengler, II, Esq. filed in support of HCI’s motion for summary judgment (Doc. # 117) , which was filed on December 5, 2008. HCI filed a response in opposition to the motion to strike on December 16, 2008. (Doc. # 122) .

Upon due consideration and for the reasons that follow, this Court grants HCI’s motion for summary judgment. This Court denies ACC’s motion for summary judgment and denies ACC’s motion to strike.

I. Background

ACC and HCI are both insurance companies that provided insurance coverage to Dorothy Butler, a speech pathologist who is not a party to the present suit.

ACC’s policy of insurance covered Butler’s actions regardless of where she performed such services. HCI, on the other hand, provided insurance to Edward White Hospital and hospital employees (including Butler) to the extent that the employees were performing services at the Hospital.

The purpose of this suit is to determine the liability as between ACC and HCI with respect to a sizeable jury verdict returned against Butler after a wrongful death/tort trial in state court as well as the $373,783.77 total defense costs incurred by ACC in defending Butler in the litigation. (Doc. # 133 at 6).1 On April 21, 2009, the parties filed their pretrial statement, which contains undisputed facts. (Id. at 8-12). This Court adopts the parties’ statement of the undisputed facts and expounds upon the facts from its independent review of the record.

A. The Underlying Litigation

In the underlying state court case, the plaintiff was the Estate of Linda O’Dell. (Doc. # 1-5) . Linda O’Dell died under the care of Butler as well as other doctors and nurses. (Id.) The operative complaint governing the O’Dell litigation was the Fifth Amended Complaint. (Id.) The named defendants in the O’Dell litigation included Butler, Dr. Pagan, Edward White Hospital, Greenbrook Nursing Home, Palm Rehab Services, L.L.C., Grand Management Group, L.L.C., and others. (Id.)

In general, the Fifth Amended Complaint alleged that Butler instructed Dr. Pagan to install a valve on O’Dell’s tracheotomy tube to allow O’Dell to swallow food, among other things. (Id.) Complications arose, and O’Dell died. (Id.) This Court draws from the following factual allegations as stated in the Fifth Amended Complaint, filed in the O’Dell litigation, to describe the nature of O’Dell’s condition and Butler’s role in her demise:

Defendant Dorothy Butler was a speech pathologist who was working as an agent, employee, servant, and/or contractor or consultant at multiple hospitals and nursing home facilities throughout Pinellas County, Florida. . . . On April 26, 2001, Linda O’Dell was admitted to Bayfront Medical Center after suffering bodily injuries when she was struck by a drunk driver in a motor vehicle collision. Ms. O’Dell remained hospitalized for approximately one month, at which time her condition stabilized and her treating physicians recommended placement in a nursing home facility for continued skilled care. On or about May 30, 2001, Linda O’Dell was discharged from the hospital and was accepted for placement at Greenbrook NH. When she was admitted to Greenbrook NH, Linda O’Dell was on antibiotics with a tube feed and had a tracheotomy in place, thus requiring continued respiratory and supportive care. Additionally, Ms. O’Dell was a bed-bound resident who was totally dependent upon the nursing home facility . . . for skilled nursing, tracheotomy, respiratory and supportive care. While a resident at Greenbrook NH, Linda O’Dell was under the care of . . . Defendant Butler and Defendant Pagan. On July 18, 2001, while working at Greenbrook NH, Defendant Butler recommended a video swallow study to be performed on Linda O’Dell to determine if she could tolerate oral dietary intake. On July 23, 2001, Ms. O’Dell was admitted to the Edward White Hospital where an evaluation was completed by Defendant Butler and a fluoroscopy study was subsequently performed. According to the “Edward White Hospital Department of Speech Language Pathology Videofluoroscopy Swallow Report” completed by [Defendant] Butler, Ms. O’Dell was positive for aspiration of thin liquid barium but not of thick liquid or puree. In her subsequent report Defendant Butler recommended that Linda O’Dell be placed on a regular diet, with thin liquids, and wear a Passy Muir valve for assistance while eating. Defendant Butler did not outline and/or provide any specific instruction or training as to the institution, placement or use of the Passy Muir device or make any recommendations that Ms. O’Dell be monitored for any specific timeframe to determine if she could tolerate the device without experiencing respiratory distress. Further, Defendant Butler did not outline and/or provide any specific instruction or training as to the tracheotomy cuff use, cuff deflation and the application of oxygen when instituting a Passy Muir valve. . . . Following placement of the Passy Muir valve and institution of said diet, Ms. O’Dell was left unattended in her room by the facility staff. Shortly thereafter, she experienced respiratory distress, suffocated and died on July 24, 2001, at the age of 46.

(Id. at ¶¶ 3-26) .

Thus, the O’Dell Estate accused Butler of negligence in her professional capacity while performing services at both Greenbrook Nursing Home and Edward White Hospital.

Butler, through counsel, requested that HCI contribute to her defense and indemnification. (Doc. # 105-27). HCI admits that it ignored Butler’s requests for insurance coverage. (Doc. # 105-21). Prior to the trial of the case, several of the defendants settled with the O’Dell Estate. Notably, in June 2005, the O’Dell Estate, Edward White Hospital, and HCI entered into a settlement agreement where HCI paid $75,000 to release Edward White Hospital. (Doc. # 62-2). Edward White Hospital was dismissed from the underlying suit with prejudice on July 29, 2005. (Doc. # 105-21). In the first paragraph of the release, it appears that both Edward White Hospital and Butler were released by the O’Dell Estate:

In and for consideration of the payment to the Plaintiff, Vinita Register, as Personal Representative of the Estate of Linda O’Dell, Deceased, (Releasor) by and on behalf of the Defendant, Edward White Hospital, Inc. and Health Care Indemnity, Inc. (Releasees) of the sum of Seventy-Five thousand Dollars and 00/100 ($75,000), . . . the Releasor hereby . . . discharges the Edward White Hospital and its insurer from liability for the actions of their agents, employees, and servants, including Defendant Dorothy Butler, on July 23, 2001, while Linda O’Dell was a patent [sic] at its hospital facility undergoing a video swallow study from 1:31 p.m. to 2:51 p.m. only.

(Doc. # 62-2 at 1).

However, in the second paragraph of the release, the O’Dell Estate specifically retains a cause of action against Butler for her actions prior to and after her activities at Edward White Hospital:

By executing this settlement, agreement, the parties do not intend to release any other persons, firms, corporations or any other named Defendant, including Defendant Dorothy Butler or her personal insurance carrier, from any and all causes of action in any way relate[d] to the allegations set forth in Plaintiff’s complaint, and there has been no consideration paid by the Releasees or . . . the remaining Defendants, including Defendant Dorothy Butler and/or her personal insurance carrier to the Releasor to release any other persons, firms, or corporations or the remaining Defendant for acts of negligence occurring prior to or subsequent to her hospitalization at Edward White Hospital on July 23, 2001 from 1:31 p.m. to 2:51 p.m.

(Doc. # 62-2).

On January 17, 2006, at the close of the O’Dell Estate’s case, and prior to closing arguments, counsel for Butler moved for a directed verdict in favor of Butler on the basis that the O’Dell Estate released Butler from liability. (Doc. # 56-13 at 12). The trial court, Hon. Amy Williams, denied the motion, holding that the release only released Edward White Hospital. (Id.) Notwithstanding the trial court’s ruling, HCI continues to advance the theory that the release covered Butler’s negligence at Edward White Hospital. ACC, on the other hand, contends that the release applied only to Edward White Hospital and that the O’Dell Estate retained its right to sue Butler for her actions at Edward White Hospital and elsewhere. Accordingly, there is a dispute between the parties as to whether the release applied to Butler in her capacity as employee of Edward White Hospital.2

On January 24, 2006, the jury in the O’Dell litigation rendered its verdict in favor of the O’Dell Estate in the amount of $2,577,980. (Doc. # 1 at ¶ 35). However, immediately prior to the return of the jury’s verdict, Butler and the O’Dell Estate entered into a “high-low agreement” and the agreement capped Butler’s liability at $1,000,000. (Doc. # 1 at ¶ 31-35, Doc. # 103-7).

As to Butler’s liability, the jury’s verdict was a simple one. The jury answered “yes” in response to a single interrogatory: “Was there negligence on the part of Dorothy Butler which was a legal cause of the death of Linda O’Dell?” (Doc. # 103-8 at 1).

The jury was not sent to deliberate with special interrogatories aimed at identifying when and where Butler committed the negligent acts that led to O’Dell’s demise. (Doc. # 103-8). The special interrogatories on the verdict form concerning Butler addressed damages only. (Id.).

B. ACC’s Complaint Against HCI

ACC paid the O’Dell Estate $1,000,000 on behalf of Butler, and ACC incurred $373,783.77 in fees and costs related to Butler’s defense. (Doc. # 1 at ¶¶ 40-41; Doc. # 133 at 6) . On March 8, 2007, ACC filed the present suit against HCI contending that HCI is liable for some or all of the $1,373,783.77. (Doc. # 1).3 ACC’s four-count complaint against HCI seeks declaratory relief and damages. (Doc. # 1). In count one, ACC asserts that its insurance policy provided Butler with excess coverage and that HCI was Butler’s primary carrier. Accordingly, ACC seeks a declaration that “In regard to the claims made against Ms. Butler in the O’Dell Estate’s Fifth Amended Complaint, HCI’s policy provides primary coverage; American Casualty’s policy provides excess coverage; and HCI breached its duties to defend and indemnify Ms. Butler in the O’Dell Litigation.” (Doc. # 1 at ¶¶ 49-57).

In count two, ACC seeks equitable/conventional subrogation from HCI in an amount equal to 100% of the amount paid by ACC in indemnity to the O’Dell Estate to settle the O’Dell Estate’s liability claims against Butler, and 100% of the amounts paid by ACC to defend Butler in the O’Dell litigation. (Doc. # 1 at ¶¶ 58-73) . In count three, ACC seeks an alternative declaratory judgment that HCI is Butler’s co-primary insurer and is obligated to pay a ten-elevenths pro rata by policy limits share of the one million dollar indemnity payment made by ACC on Butler’s behalf ($909,090.90). (Doc. # 1 at ¶¶ 74-82).4 Count four asserts an alternative claim for equitable contribution from HCI based on ACC’s theory that HCI breached its duty to defend and indemnify Butler . (Doc. # 1 at ¶¶ 83-96).5

C. Summary Judgment Proceedings

On April 17, 2008, prior to the close of discovery and with only one exhibit presented to the Court, HCI filed a motion for summary judgment. (Doc. # 47). This Court denied HCI’s initial motion for summary judgment without prejudice, essentially finding that the motion was filed prematurely. (Doc. # 96).

After the close of discovery and with a complete record presented to the Court, the parties filed cross motions for summary judgment on November 17, 2008. (Doc. ## 103, 105). HCI asserts, among other things, that it provided insurance coverage to Butler only in her capacity as an employee of Edward White Hospital and, because the jury entered a general verdict against Butler, it cannot be determined whether the jury found Butler liable for negligence as an employee of Edward White Hospital (that is, it is not possible to determine what portion, if any, of the verdict should be allocated to HCI).

In addition, HCI argues that it did not have a duty to defend Butler because ACC assumed the duty to defend Butler. Furthermore, HCI asserts that ACC was obligated to provide a defense to Butler as a primary insurer, and ACC has no right to reimbursement of defense fees from HCI. Finally, HCI asserts that a release shields HCI from ACC’s demands.

ACC, on the other hand, argues that HCI was Butler’s primary insurer, and that ACC was Butler’s excess insurer. Under that theory, ACC asserts that HCI had a duty to defend Butler, and HCI failed to defend Butler. Under an alternative theory of the case, ACC asserts that ACC and HCI are co-primary insurers of Butler, and that HCI owes a pro rata policy limits share of the jury verdict and accrued attorneys’ fees.

This Court will address these issues as necessary to rule on the cross motions for summary judgment.

II. Legal Standard

Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). A factual dispute alone is not enough to defeat a properly pled motion for summary judgment; only the existence of a genuine issue of material fact will preclude a grant of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

An issue is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Mize v. Jefferson City Bd. of Educ., 93 F.3d 739, 742 (11th Cir. 1996) (citing Hairston v. Gainesville Sun Publ’g Co., 9 F.3d 913, 918 (11th Cir. 1993)) . A fact is material if it may affect the outcome of the suit under the governing law. Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997). The moving party bears the initial burden of showing the court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial. Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004) [17 Fla. L. Weekly Fed. C195a] (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)). “When a moving party has discharged its burden, the non-moving party must then ‘go beyond the pleadings,’ and by its own affidavits, or by ‘depositions, answers to interrogatories, and admissions on file,’ designate specific facts showing that there is a genuine issue for trial.” Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 593-94 (11th Cir. 1995) (citing Celotex, 477 U.S. at 324).

If there is a conflict between the parties’ allegations or evidence, the non-moving party’s evidence is presumed to be true and all reasonable inferences must be drawn in the non-moving party’s favor. Shotz v. City of Plantation, Fla., 344 F.3d 1161, 1164 (11th Cir. 2003) [16 Fla. L. Weekly Fed. C1067a]. If a reasonable fact finder evaluating the evidence could draw more than one inference from the facts, and if that inference introduces a genuine issue of material fact, the court should not grant summary judgment. Samples ex rel. Samples v. City of Atlanta, 846 F.2d 1328, 1330 (11th Cir. 1988) (citing Augusta Iron & Steel Works, Inc. v. Employers Ins. of Wausau, 835 F.2d 855, 856 (11th Cir. 1988)). However, if non-movant’s response consists of nothing “more than a repetition of his conclusional allegations,” summary judgment is not only proper, but required. Morris v. Ross, 663 F.2d 1032, 1034 (11th Cir. 1981), cert. denied, 456 U.S. 1010 (1982).

III. Analysis

In this diversity case, the Court applies the substantive law of the forum state unless federal constitutional or statutory law compels a contrary result. Tech. Coating Apps., Inc. v. United States Fid. & Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998). Furthermore, this Court must apply Florida law in the same manner that the Florida Supreme Court would apply it. Brown v. Nicholas, 8 F.3d 770, 773 (11th Cir. 1993).

In the present case, both parties agree that Florida insurance law governs the issues before the Court. (Doc. # 105-31). Under Florida law, the interpretation of an insurance contract is a matter of law to be decided by the court. Gas Kwick, Inc. v. United Pac. Inc. Co., 58 F.3d 1536, 1539 (11th Cir. 1995). Courts must construe an insurance contract in its entirety, striving to give every provision meaning and effect. Id. (citing Dahl-Eimers v. Mut. of Omaha Life Ins. Co., 986 F.2d 1379, 1382 (11th Cir. 1993)). Furthermore, the Eleventh Circuit recently noted that “insurance contracts are to be construed in a manner that is reasonable, practical, sensible, and just. . . . Terms used in a policy are given their plain and ordinary meaning and read in the light of the skill and experience of ordinary people. Provisions that exclude or limit liability of an insurer are construed more strictly than provisions that provide coverage.” United States Fire Ins. Co. v. Freedom Village of Sun City Ctr., 279 F. App’x 879, 880-881 (11th Cir. 2008) (internal citations omitted). The Eleventh Circuit further explained that if provisions in an insurance contract are “reasonably susceptible of more than one meaning, they are ambiguous and construed in favor of the insured. That rule applies if a genuine inconsistency, uncertainty, or ambiguity in meaning remains after a review of the plain language.” Id. at 881.

With this in mind, this Court will evaluate the policies in order to make a coverage determination.

A. The Policies

ACC issued an occurrence-based Healthcare Providers Professional Liability Insurance Policy to Butler. (Doc. # 1-2) . The policy contained a one million dollar each occurrence liability limit with an aggregate liability limit of five million dollars. (Id. at 2). Under the ACC policy, Butler was covered as follows: “We will pay all amounts up to the limit of liability which you become legally obligated to pay as a result of injury or damage. In addition to the limit of liability, we will also pay claim expenses. The injury or damage must be caused by a medical incident arising out of the supplying of, or failure to supply, professional services by you, or by anyone for whose professional acts or omissions you are legally responsible.” (Id. at 9).

In contrast, HCI’s policy, which was also an occurrence-based health care professional liability insurance policy, covered “HCA-Health Care Company and subsidiary organizations existing now or hereafter created or acquired.” (Doc. # 1-3 at 1). HCI’s policy was subject to a ten million dollar each occurrence limit of liability and an unlimited aggregate limit of liability. (Doc. # 1-3 at 2). HCI’ s policy covered Edward White Hospital. Additionally, HCI stipulates that its policy covered Butler, but only to the extent that Butler performed services at Edward White Hospital. (Doc. # 105-8 at 2; Dep. Halliburton Doc. # 111-2 at 48:14-16, 61:10-14).

Both policies contain “other insurance” clauses. HCI’s policy contains two “other insurance” clauses. HCI’s specific “other insurance” clause states as follows:

Other Insurance. If other insurance not afforded by the Company is available to any insured covering an occurrence also covered hereunder, the insurance afforded hereunder shall be excess of and not contribute with such other insurance. Amounts collectible under a self-insured trust plan or any other self-insured program are other insurance for the purposes of this policy. This Article VI, Paragraph 7, does not apply to excess insurance written specifically to be in excess of this policy. Nothing contained herein shall be construed to make this policy subject to terms, conditions, and limitations of any other insurance.

Doc. # 1-3 at 16). Additionally, HCI’s coverage section states:

[I]n any state or county where there exists a state fund or where other primary insurance has been purchased for purpose of providing compensation for patient injury and for which application has been made and for which coverage is included in this policy, the limits of liability shall apply excess over any other valid and collectible insurance. However, in no event shall the combination of such other insurance and the insurance afforded hereunder exceed the limit of liability as stated under Item 4, Coverage C of the Declarations.

(Doc. # 1-3 at 9).

ACC’s policy states as follows with respect to other insurance policies:

OTHER INSURANCE AND RISK TRANSFER ARRANGEMENTS

Any loss resulting from any claim insured under any other insurance policy or risk transfer instrument, including but not limited to, self-insured retentions, deductibles or other alternative arrangements, which applies to this loss, shall be paid first by those instruments, policies or other arrangements. This insurance will not serve as primary insurance where there is other applicable insurance. It is the intent of this policy to apply only to loss which is more than the total limit of all deductibles, limits of liability, self-insured amounts or other valid and collectible insurance or risk transfer arrangements, whether primary, contributory, excess, contingent, or otherwise. This insurance will not contribute with any other applicable insurance. In no event will we pay more than our limit of liability.

(Doc. # 1-2 at 4).

ACC advances a number of arguments concerning its status as Butler’s insurer. Initially, ACC argues that its policy is a “super excess” policy and that HCI’s policy is Butler’s primary insurance policy. In the alternative, ACC submits that ACC and HCI are co-primary insurers of Butler. Under both of ACC’s theories, ACC contends that HCI breached its duty to defend and indemnify Butler.

Where more than one policy provides coverage for a loss, as in the present case, the priority of the competing policies should be decided by reference to “other insurance” clauses in the policies. Sentry Ins. Co. v. Aetna Ins. Co., 450 So.2d 1233, 1236 (Fla. 2d DCA 1984). There are three types of other insurance clauses: (1) pro rata or proportionate recovery clauses; (2) excess insurance clauses; and (3) escape or no liability clauses. Id. In Auto-Owners Ins. Co. v. Palm Beach County, the Court further described the three categories of other insurance clauses. 157 So.2d 820, 822 (Fla. 1963). The court described a pro rata other insurance clause as “a provision to the effect that in the event of other insurance, the loss shall be borne pro-rata dependent upon the monetary limits of coverage.” Id. The Auto-Owners case further noted that an excess other insurance clause is “a provision that the policy shall be excess over any other valid and collectible insurance applicable to the liability” and that an escape other insurance clause is “a provision that if there is other valid and collectible insurance, the policy shall not apply.” Id.

As noted, ACC initially asserts that its policy is a super excess policy and, in the alternative, ACC argues that its policy is an excess policy and HCI’s policy is a primary insurance policy. This Court rejects ACC’s argument that its policy contains a “super-excess” other insurance clause. The cases discussing “super excess” other insurance clauses, such as Md. Cas. Co. v. Horace Mann Ins. Co., 551 F. Supp. 907 (W.D. Pa. 1982), are not applicable to this case. To this Court’s knowledge, Florida law does not recognize a “super excess” other insurance clause. Furthermore, ACC’s policy does not contain an “escape” or “no liability” other insurance clause.

After evaluating the policies in question, this Court determines that ACC provided primary insurance coverage to Butler to the extent that Butler performed medical services at Greenbrook Nursing Home. ACC’s policy is broader than HCI’s policy because ACC provided coverage to Butler regardless of whether her services were performed at Edward White Hospital, Greenbrook Nursing Home, or at some other location.

HCI’s policy (which was issued to the Health Care Company) only covered Butler when she was acting as an employee of Edward White Hospital. Thus, as between ACC and HCI, it cannot be disputed that ACC’s policy was the only policy — the primary policy — providing coverage for O’Dell’s claims of negligence occurring at Greenbrook Nursing Home. To the extent that ACC asserts that its “other insurance” clause is an excess insurance clause with respect to Butler’s actions at Greenbrook Nursing Home, ACC’s arguments fail. There was no other insurance covering Butler’s actions at Greenbrook Nursing Home, and ACC was Butler’s primary insurance for those actions.

Moving on to Butler’s negligence, if any, at Edward White Hospital, this Court determines that ACC and HCI’s “other insurance” clauses — both purporting to be excess insurers — are mutually repugnant under Florida law and cancel each other out. Thus, both HCI and ACC provided primary coverage for Butler at Edward White Hospital. As explained in Twin City Fire Ins. Co. v. Fireman’s Fund Ins. Co., 386 F. Supp. 2d 1272 (S.D. Fla. 2005) [18 Fla. L. Weekly Fed. D964a]:

Where there is no incompatibility among other insurance provisions, they are to be enforced by their terms. Difficulties arise when two policies contain the same other insurance provisions. For example, where two policies both have excess clauses, there is no direct way to determine which should be treated as excess simply by reference to the policies. In such cases, each policy provides that it does not attach until the other has paid its limits. If a court were to give literal effect to each of the excess clauses, each policy would be cancelled out and the final result would depend upon which policy was read first. Courts have, therefore, developed what is known as the rule of mutual repugnancy. Under that rule, where two policies cover the same occurrence and both contain other insurance clauses, the excess insurance provisions are mutually repugnant and must be disregarded. Each insurer is then liable for a prorata share of the settlement or judgment.

Id. at 1278 (internal citations and quotations omitted); See also Allstate Ins. Co. v. Executive Car & Truck Leasing, Inc., 494 So.2d 487, 489 (Fla. 1986) (“The Allstate policy and both Commercial policies contain an ‘other insurance’ clause which states that its policy will be excess over other collectible insurance. The ‘other insurance’ clauses in the respective policies cancel each other out . . .”); Travelers Ins. Co. v. Lexington Ins. Co., 478 So. 2d 363, 365 (Fla. 5th DCA 1985) (“In Florida, where two insurance policies contain excess insurance clauses the clauses are deemed mutually repugnant and both insurers become primary . . .”).

In the present case, both policies state that they will not serve as primary insurance where there is other applicable insurance. This is a classic excess “other insurance” clause, and the other insurance clauses in the ACC and HCI policies cancel each other out.

Having determined that ACC provided primary insurance coverage for Butler’s alleged negligence at Greenbrook Nursing Home, and having also determined that ACC and HCI both provided primary insurance coverage for Butler at Edward White Hospital, this Court must apportion, if possible, the one million dollar indemnity payment made to the O’Dell Estate and the associated fees and costs as between ACC and HCI.

B. The Ramifications of the Jury’s Verdict

As noted above, the jury’s verdict against Butler did not mention Edward White Hospital or Greenbrook Nursing Home. On this basis, HCI argues that ACC is barred from seeking reimbursement from HCI for the one million dollar payment made to the O’Dell Estate after entry of the jury’s verdict. Specifically, HCI contends, “Because O’Dell alleged that Butler was liable for acts committed prior to or subsequent to the decedent’s hospitalization at Edward White Hospital while Butler was acting as an employee/agent of other entities (including Greenbrook Nursing Home), and not as an employee of Edward White Hospital, the jury might have determined liability and damages based on acts/claims which were not covered under HCI’s policy and for which HCI is not liable.” (Doc. # 103 at 4).

A plethora of cases support HCI’s position. Particularly relevant to this Court’s determination is Guarantee Ins. Co. v. Gulf Ins. Co., 628 F. Supp. 867, 870 (S.D. Fla. 1986), aff’d, 811 F.2d 610 (11th Cir. 1987). In Guarantee, an attorney, Richard Marx, was insured for professional malpractice by two insurance companies. 628 F. Supp. at 868. Specifically, Gulf insured Marx from January 28, 1974, until January 28, 1978, on an “occurrence” basis and insured Marx from January 28, 1978, until January 28, 1980 under a “claims made” policy. Id. In addition, Guarantee insured Marx under a “claims made” policy from January 28, 1982, until January 28, 1983. Id.

Former clients sued Marx for malpractice alleging that Marx negligently prepared a 1973 stock option agreement and negligently represented a client in a lawsuit that commenced in 1975, and was settled prior to trial. Id. The jury found that Marx was negligent and returned a verdict in the former clients’ favor. Id. However, as in the present case, “the malpractice suit . . . was presented to the jury without specific interrogatories delineating the various acts of negligent conduct; rather a general verdict was submitted to the jury.” Id. Guarantee appointed counsel for Marx and Gulf paid 50% of the attorneys’ fees. Id. Gulf refused to pay any portion of the judgment or to indemnify Guarantee for its expenditures. Id.

It was not disputed that Gulf covered Marx from 1975 until 1978, and the complaint against Marx alleged negligence outside of this temporal proximity. Id. at 870. Specifically, the complaint against Marx alleged negligence from 1978 until 1980. Id. Similar to HCI’s position in the present case, Gulf asserted that it was responsible for some, but not all of Marx’ negligence, but Gulf was not required to pay any portion of the judgment against Marx because the jury returned a general verdict against Marx.

Applying Florida law, the court in Guarantee determined:

Where the judgment includes elements for which an insurer may be liable as well as elements beyond the coverage of the policy, the burden of apportioning the damages is on the party seeking to recover from the insurer. There is no question that the issue of Marx’ negligence is res judicata. The jury, however, returned a general verdict and no evidence now exists as to what portions, if any, of the verdict were based upon acts for which Gulf is liable. Guarantee, as the party seeking indemnity, has the burden of apportioning the damages and this it has failed to do.

Id. (citing Universal Underwriters Ins. Corp. v. Reynolds, 129 So.2d 689, 691 (Fla. 2d DCA 1961)).

The Guarantee court further noted that “Guarantee had appointed an attorney and had undertaken the defense of Marx. Guarantee had every opportunity to request a special verdict and thereby avoid the unfortunate situation it is now in. Having failed to obtain a special verdict, Guarantee is precluded, pursuant to the Florida case law cited herein, from recovering any payments from Gulf.” Id. at 871.

In the present case it is not disputed that HCI’s policy only provided coverage for Butler’s negligence as an employee of Edward White Hospital. Because the O’Dell Estate alleged that Butler was negligent both at Edward White Hospital and elsewhere, ACC cannot show what portions, if any, of the jury’s verdict were based on acts for which HCI may be liable.

As in the Guarantee case, ACC appointed an attorney for Butler and defended her throughout the action. ACC had every opportunity to prepare and submit to the jury a special verdict form containing interrogatories. ACC cannot meet its burden of proof. See Aetna Ins. Co. v. WACO Scaffold & Shoring Co., 370 So.2d 1149, 1151 (Fla. 4th DCA 1978) (regardless of the duty to defend, “the burden of proving the allegations regarding coverage is upon [the party seeking contribution] and [that party] failed to prove that [the other insurance company's] policies covered the liability upon which the verdict and judgment were founded.”); Keller Indus., Inc. v. Employers Mut. Liab. Ins. Co. of Wis., 429 So.2d 779, 780 (Fla. 3d DCA 1983) (the party claiming coverage has the burden “to apportion damages and show that the settlement or portions thereof, represents costs that fell within the coverage provisions of the policy” and “an unjustified failure to defend does not require the insurer to pay a settlement where no coverage exists.”); Jones v. Holiday Inns, 407 So.2d 1032, 1034 (Fla. 1st DCA 1981) (“the party seeking indemnification had the burden of showing entitlement to indemnification and failed to request the use of a special verdict, the use of a general verdict should stand as a bar to indemnification.”); Reynolds, 129 So.2d at 691 (“where a judgment includes elements for which an insurer is liable and also elements beyond the coverage of the policy, the burden of apportioning these damages is on the party seeking to recover from the insurer. . . . That it is impossible for the plaintiff to do so in the case at bar does not change the basic predicament in which [plaintiff] finds himself.”); Spencer v. Assurance Co. of Am., 39 F.3d 1146, 1149 (11th Cir. 1994) (“Florida law clearly states that liability of an insurer depends upon whether the insured’s claim is within the coverage of the policy. This remains true even when the insurer has unjustifiably failed to defend its insured in the underlying action.”)

Under Florida law and based upon the use of a general verdict at Butler’s trial, ACC failed to meet its burden of proof for contribution from HCI with respect to the one million dollar indemnity payment that ACC made to the O’Dell Estate on behalf of Butler. As such, this Court grants summary judgment in favor of HCI as to the one million dollar indemnity payment that ACC made to the O’Dell Estate.

This Court will now determine whether HCI is liable for attorneys’ fees and costs.

C. Attorneys’ Fees Generated in the O’Dell Litigation

ACC contends that HCI had a duty to defend Butler and that HCI breached that duty. Under Florida law, the duty to defend is “distinct from and broader than the duty to indemnify.” Baron Oil v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 813-814 (Fla. 1st DCA 1985). Further, as stated in Baron Oil, “if the complaint alleges facts showing two or more grounds for liability, one being within the insurance coverage and the other not, the insurer is obligated to defend the entire suit.” Id.In addition, “if the allegations of the complaint leave any doubt regarding the duty to defend, the question must be resolved in favor of the insured requiring the insurer to defend.” Id. at 814. Hence, “if the complaint alleges facts which create potential coverage under the policy, the duty to defend is triggered.” Trizec Properties v. Biltmore Constr. Co., 767 F. 2d 810, 812 (11th Cir. 1985). However, as clarified in Freedom Village, “that duty does not extend to an excess insurer when a primary insurer has a duty to defend.” 279 F. App’x at 881.

The underlying complaint in the O’Dell litigation alleged that Butler committed lethal negligence at Edward White Hospital in her capacity as an employee of Edward White Hospital. (Doc. # 1-5 at ¶¶ 3, 5, 6). Upon consideration of the HCI policy, it cannot reasonably be contested that HCI’s duty to defend Butler was triggered by the operative complaint in the O’Dell litigation. It does not appear that HCI contends that Butler was not an employee of Edward White Hospital or that she was acting outside the scope of her employment. Rather, HCI asserts that it did not breach its duty to defend Butler because ACC assumed the burden of defending Butler.

This Court agrees with ACC’s contention that HCI had a duty to defend Butler. However, it is well settled Florida law that there is no right to contribution between insurance companies as to legal fees and costs. As stated in Argonaut Ins. v. Md. Cas. Co., 372 So.2d 960 (Fla. 3d DCA 1979), “The duty of each insurer to defend its insured is personal and cannot inure to the benefit of another insurer. Contribution is not allowed between insurers for expenses incurred in defense of a mutual insured.” Id. at 963 (internal citations omitted).

The Argonaut case further explained that the duty to defend is contractual, and that if it is breached it is the insured who has the right to sue, not a co-insurer who has no right to contribution. Id. at 964. ACC’s policy stated: “We have the right and will defend any claim. We will (A) do this even if any of the charges of the claim are groundless, false, or fraudulent; and (B) investigate and settle any claim, as we feel appropriate.” (Doc. # 1-2 at 11, 15).6

The cases cited by ACC in support of shifting the fees and costs to HCI do not support ACC’s position. Rather, Cont’l Cas. Co. v. United Pac. Ins. Co., 637 So.2d 270 (Fla. 5th DCA 1994), “declines” an invitation from the parties to allow suits for contribution between insurance companies. The Continental court acknowledged:

The Legislature has not seen fit to allow contribution for costs or attorney’s fees between insurance companies. If contribution for costs were allowed between insurance companies, there would be multiple claims and law suits. The insurance companies would have no incentive to settle and protect the interest of the insured, since another law suit would be forthcoming to resolve the coverage dispute between the insurance companies. This is contrary to public policy, particularly since the insured has been afforded legal protection and has not had to personally pay any attorney’s fees.

Id. at 272 (citing Argonaut, 372 So.2d at 964). Likewise, Fla. Ins. Guar. Assoc., Inc. v. Reliance Ins. Co., 864 So.2d 1126 (Fla. 2d DCA 2003), provides: “The law is well established that when an insurer unjustifiably refuses to defend its insured, the insurer is liable to the insured for the reasonable attorney’s fees and other expenses incurred in defending the action . . .” Id. at 1129. Thus, Butler, the insured, not ACC, has standing to allege that HCI breached its duty to defend Butler.

To the extent that ACC seeks contribution from HCI for attorneys’ fees and costs associated with Butler’s defense, its request is flatly denied. ACC has not supplied this Court with one binding case allowing contribution between HCI and ACC as to Butler’s attorneys’ fees and costs. The cases of Phoenix Ins. Co. v. Fla. Farm Bureau Mut. Ins. Co., 558 So.2d 1048 (Fla. 2d DCA 1990) and Galen Health Care, Inc. v. Am. Cas. of Reading Pa., 913 F. Supp. 1525, 1534 (M.D. Fla. 1996), cited by ACC, allows for equitable subrogation between a primary insurer and an excess insurer. The Galen Health Care case provides: “Florida law recognizes a cause of action for equitable subrogation between primary and excess insurers arising from the payment of a claim by the excess insurer.” Id. at 1531. In the present case, this Court has determined that HCI and ACC both provided primary coverage. Therefore, the type of equitable subrogation discussed in Galen Health Care is not applicable.

On its face, this Court’s decision to deny contribution and subrogation may appear to reward HCI’s behavior of ignoring its insured’s requests for coverage. However, Florida law dictates this outcome, especially because it cannot be contested that ACC was contractually obligated to defend Butler during the O’Dell litigation. While Butler is the proper person to bring a suit against HCI for failure to defend, on the facts of the present case, this Court acknowledges that there is little incentive for her to do so.

This Court has painstakingly applied Florida law to come to this conclusion. However, this Court finds support for this outcome in Continental:

Continental contends broadly that, without the creation of this rule [the right to contribution among insurers], insurers will seek with impunity to evade their responsibilities to defend their Florida insureds. No evidence was offered below, however, that Florida’s current rule disallowing contribution has led to “shirking,” “lagging behind” or “bad faith” on the part of insurers. Presumably, Continental, one of the most prominent liability insurers in Florida, would deny it has ever been induced to act in such a manner. Several factors discourage such misconduct, including exposure to greater loss if the other insurer is ineffective in its defense, and the risk of suits by its own insured on theories of breach of contract and statutory and common law “bad faith.” It is important to keep in mind that insurers have not only the duty to defend but often contractually reserve the right to defend. Insurers know the ability to control the defense of a liability case is the most effective way to limit their loss and protect themselves from extra-contractual claims.

Cont’l, 637 So.2d at 273.

To the extent that ACC asks this Court for contribution and subrogation for fees and costs against HCI, ACC is requesting this Court to create new law. This Court refuses to do so.

Accordingly, it is hereby

ORDERED, ADJUDGED, and DECREED:

(1) Defendant HCI’s motion for summary judgment (Doc. # 103) is GRANTED.

(2) Plaintiff ACC’s motion for summary judgment (Doc. # 105) is DENIED.

(3) Plaintiff ACC’s motion to strike, in whole or in part, the affidavit of Philip J. Spengler, II, Esq. filed in support of HCI’s motion for summary judgment (Doc. # 117) is DENIED AS MOOT.

(4) The Clerk is directed to enter judgment in favor of Defendant HCI and close this case.

__________________

1Over the course of this litigation, the parties have provided varying amounts for the total litigation expense that ACC expended in defending Butler. For instance, in ACC’s complaint against HCI, ACC reported that it expended $429,255.72 in its defense of Butler. (Doc. # 1 at ¶ 41). Likewise, in its trial brief, HCI indicates that the legal fees amounted to $429,255.72. (Doc. # 129 at 1). This Court utilized $373,783.77 as the total litigation expense for Butler because this is the amount that the parties agreed upon in the pretrial statement. (Doc. # 133 at 6).

2Because this Court’s adjudication of the cross motions for summary judgment is not impacted in any way by the release, the parties’ differing interpretations of the release do not prevent the entry of summary judgment. In addition, because the motion to strike pertains solely to the release document, this Court denies the motion to strike as moot because it was not necessary to consider the document (an affidavit) regarding the release.

3The basis of this Court’s jurisdiction is diversity of citizenship pursuant to 28 U.S.C. § 1332.

4ACC asserts that HCI’s share is ten-elevenths because ACC’s per occurrence policy limit is one million dollars, and HCI’s per occurrence policy limit is ten million dollars.

5ACC has attached to its complaint the ACC policy (Doc. # 1-2); the HCI Policy (Doc. # 1-3); and the Fifth Amended Complaint as filed in the O’Dell litigation (Doc. # 1-4).

6HCI’s policy similarly stated, “The Company shall have the right and duty to defend any suit against the insured seeking such damages even if any of the allegations of the suit are groundless, false, or fraudulent.” (Doc. # 1-3 at 1) .

* * *

Virginia M. Hernandez Covington, Judge.

ORDER
This cause comes before the Court on consideration of Terri L. Steffen’s Motion for Rehearing and Renewed Request for Oral Argument (Doc. # 31), filed on March 30, 2009, and the Government’s response thereto (Doc. # 32), filed on April 3, 2009. Upon due consideration of the parties’ submissions on this issue, the Court finds it appropriate to grant Steffen’s motion for rehearing as to this Court’s March 20, 2009, Opinion (Doc. # 30). However, for the reasons previously stated in its March 20, 2009, Order, the Court finds that the facts and legal issues are adequately presented such that oral argument is unnecessary. (See Doc. # 30 at 8 n. 2).

The present action concerns Steffen’s appeal from the United States Bankruptcy Court’s Order on Amended Motion by United States for Summary Judgment on Objection to Homestead Exemption and Debtor’s Cross-Motion for Summary Judgment (Doc. # 1-3), entered on April 25, 2008. On March 20, 2009, this Court issued its Opinion affirming the Bankruptcy Court’s decision granting summary judgment in favor of the Government on its objection to Steffen’s claim of homestead exemption. Steffen has filed a motion for rehearing under Bankruptcy Rule 8015, arguing that the Court applied the wrong standard of review in reaching its decision on appeal.

The District Court for the Middle District of Florida has previously applied the same standard to motions for rehearing under Bankruptcy Rule 8015 as is applied to motions for reconsideration under Federal Rule of Civil Procedure 59(e) or 60(b). In re Envirocon Int’l Corp., 218 B.R. 978, 979 (M.D. Fla. 1998) (citing Cover v. Wal-mart Stores, Inc. 148 F.R.D. 294, 295 (M.D. Fla. 1993)). Thus, the Court requires the movant to “set forth facts or law of a strongly convincing nature to induce the Court to reverse its prior decision.” Id.

In reviewing the Bankruptcy Court’s decision on homestead exemption, the Court applied the standard of review as set forth in Rule 8013, Federal Rules of Bankruptcy Procedure, which provides that “[f]indings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous . . . .” Fed.R.Bankr.P. 8013. Steffen asserts, and the Court agrees, that the Court was mistaken in applying a clearly erroneous standard to the factual findings of the Bankruptcy Court. As the Eleventh Circuit clarified in In re Optical Technologies, Inc., 246 F.3d 1332 (11th Cir. 2001), the standard for review of a summary judgment ruling must be de novo because by definition a court is precluded from making factual findings on summary judgment. Id. at 1335 (reasoning that because summary judgment may only be granted in the absence of a genuine issue of material fact, the bankruptcy court’s “factual findings” are actually “conclusions as a matter of law that no genuine issue” exists).

For this reason only, the Court finds that rehearing of the appeal is warranted. Accordingly, the Court finds it appropriate to conduct a de novo review of the Bankruptcy Court’s order on summary judgment based on the record in this case as it existed at the time of the Court’s March 20, 2009, Order. Any renewal of arguments on the issue of homestead exemption that have already been considered in the Court’s previous Order will not be addressed.

I. Background

In 1987, the SEC began a criminal investigation of Steffen’s husband, Paul A. Bilzerian. (Doc. # 16 at 19.) Bilzerian was indicted in 1988 and was convicted on nine counts of the indictment for securities fraud and conspiracy in the United States District Court for the Southern District of New York on June 9, 1989. (Doc. # 1-25); United States v. Bilzerian, Case No. 88 CR. 962 (RJW), 1992 WL 301390, at *1 (Sept. 2, 1992).1 Three weeks after the criminal conviction, the SEC initiated a civil suit against Bilzerian in the District Court for the District of Columbia, seeking a permanent injunction to prevent further violations of securities laws and a judgment of disgorgement to return the unlawful profits to injured shareholders. S.E.C. v. Bilzerian, 814 F. Supp. 116, 117 (D.D.C. 1993). The injunction was granted and Bilzerian was ordered to disgorge profits in the amount of $33,140,787.07 on January 28, 1993, and he was ordered to disgorge an additional $29,196,812.46 in prejudgment interest on June 25, 1993. Id. at 124; S.E.C. v. Bilzerian, CIV. A. No. 89-1854 (SSH), 1993 WL 542584, at *1 (D.D.C. June 25, 1993).

On August 15, 1991, before the disgorgement judgments were entered, Bilzerian filed for bankruptcy in the Middle District of Florida. In re Bilzerian, 146 B.R. 871, 872 (M.D. Fla. 1992). Shortly thereafter, Bilzerian filed a Complaint for Injunctive Relief in the District Court, seeking to prevent the SEC from further pursuing monetary damages due to the automatic stay provisions of 11 U.S.C. § 362(a). Id. After protracted litigation on this issue, the Eleventh Circuit ultimately held that the disgorgement judgments were not dischargeable in bankruptcy. In re Bilzerian, 153 F.3d 1278 (11th Cir. 1998). The SEC did not attempt to enforce the disgorgement judgments against Bilzerian until after the Eleventh Circuit’s decision in 1998. SEC v. Bilzerian, 131 F. Supp. 2d 10, 12 (D.D.C. 2001). On August 21, 2000, the Bankruptcy Court found Bilzerian in contempt for failure to make any payments on the roughly $62 million in disgorgement judgments. Id.

On January 27, 1992, Bilzerian’ s bankruptcy trustee filed an adversary proceeding against Appellant Terri L. Steffen to prevent pre-bankruptcy transfer of certain real property located at [Editor's note: address omitted] to Steffen individually. (Id.) The Bankruptcy Court subsequently approved a settlement agreement between Steffen and the bankruptcy trustee on February 23, 1994, permitting Steffen to purchase Bilzerian’s interest in the Villarreal Property. (Id.; Doc. # 16 at 19 n. 7.) Steffen asserts that in June 1994 she transferred the Property back to herself and Bilzerian as tenants-by-the-entireties, without consideration and subject to an agreement whereby Bilzerian was obligated to transfer the Property back to Steffen on demand. (Doc. # 1-7 at 3 n.1; # 16 at 8.) According to Steffen, this transfer was executed so that she and Bilzerian could contest the property taxes on the Property. (Doc. # 1-16 at 55; # 16 at 8.)

In March 1997, Steffen and Bilzerian conveyed the Villarreal Property to the Overseas Holding Limited Partnership (“OHLP”), an entity that was created in 1995 to hold certain assets of the couple. (Doc. # 1-7 at 3 n. 1; # 1-13; # 1-16 at 56-57; # 2-10 at 8.) OHLP was formed in conjunction with the Paul A. Bilzerian and Terri L. Steffen Revocable Trust of 1995 (the “1995 Trust”). (Doc. # 2-10 at 8.) The 1995 Trust is the limited partner of OHLP and owns 99% of OHLP. (Id.; Doc. # 16 at 2 n. 2, 3.) Overseas Holding Company (“OHC”), a corporation formed in 1996, is the 1% general partner of OHLP. (Id.) The 1995 Trust owns 100% of the stock of OHC, and Steffen claims that she was the sole beneficiary of the 1995 Trust at the time that she filed for bankruptcy on May 29, 2001. (Doc. # 1-7 at 3 n. 1; # 16 at 8 n. 2, 9 n. 4.)

According to Steffen, she continually resided at the Villarreal Property from 1992 through and including her bankruptcy filing date of May 29, 2001. (Doc. 16 at 6, 9.) In addition, Steffen asserts that she claimed the Villarreal Property as her homestead for property tax exemption purposes prior to and through the year 2001. (Doc. # 3-8 at 3, 5.)

After Steffen’s petition for bankruptcy was filed, on January 16, 2002, the District Court for the District of Columbia entered a final judgment by consent holding that Steffen or OHLP had a 50% interest in the Villarreal Property and that the remaining 50% interest belonged to Bilzerian’s bankruptcy receivership estate. (Doc. # 1-14 at 2.) The court ordered that the Property be sold and that 50% of the net proceeds be delivered to Steffen or OHLP and the other 50% be delivered to the receiver. (Id. at 2-3.) Steffen attests that the Property was sold to the Guerrini Trust in 2004 for $2,550,000, that she received $800,000 in proceeds from the sale, and that she deposited those proceeds in a “homestead account” in OHLP’s name. (Doc. # 3-11 at 23-25.)

II. Procedural History

On May 29, 2001, Appellant Terri L. Steffen filed in the United States Bankruptcy Court for the Middle District of Florida a voluntary petition for protection under Chapter 11 of the Bankruptcy Code (the “Bankruptcy Case”). (Bankr. Doc. # 1.) On September 19, 2001, Steffen filed her Schedule C in which she claimed as exempt the real property located at [Editor's note: address omitted]. (Doc. # 1-7 at 13; # 16 at 6.) Schedule C listed the current market value of the Property as $3,500,000. (Bankr. Doc. # 1-7 at 13.)

The bankruptcy proceedings were suspended by order of the Bankruptcy Court on July 10, 2001, and became active again on January 25, 2002. (Bankr. Doc. ## 14, 22, 34, 35.) Thereafter, on March 20, 2002, a meeting of creditors pursuant to 11 U.S.C. § 341 of the Bankruptcy Code was conducted. (Doc. # 1-16 at 85; Bankr. Doc. # 46.) The Section 341 meeting was not formally concluded on that date, but the parties did not set a particular date to reconvene the meeting. (Doc. # 1-16 at 85.) On June 13, 2002, the Government filed an objection to Steffen’s claim of homestead exemption as to the Property. (Doc. # 1-9.)

On August 19, 2002, the Government filed a motion for summary judgment on their objection to the homestead exemption in the Bankruptcy Court. (Doc. # 1-15.) Steffen filed a cross-motion for summary judgment on September 17, 2002. (Bankr. Doc. # 97.) On October 8, 2002, the Bankruptcy Court deferred ruling on the homestead matter pending further proceedings on Steffen’s proposed plan of reorganization. (Doc. # 1-23.) On December 19, 2007, Steffen’s Chapter 11 case was converted to a case under Chapter 7 of the Bankruptcy Code. (Doc. # 18 at 8; Bankr. Doc. # 470.) A Section 341 meeting of creditors in the Chapter 7 case was then held on January 23, 2008. (Doc. ## 3-10, 3-11.)

Upon order of the Bankruptcy Court, the parties filed renewed cross-motions for summary judgment on March 28, 2008. (Doc. ## 3-6, 3-9.) On April 25, 2008, the Bankruptcy Court issued an order granting the Government’s summary judgment motion and ruling that the Property was not subject to homestead exemption. (Doc. # 1-3.) The Bankruptcy Court held that (1) the Government’s objection to Steffen’s homestead exemption claim was timely; (2) the Property was not entitled to homestead exemption because the Property was not owned by a “natural person” at the time that Steffen filed for bankruptcy; (3) the evidence did not show that Steffen had an equitable interest in the Property sufficient to claim it as exempt; and (4) because the Property itself was non-exempt, the proceeds from the sale of the Property were also not exempt from claims of Creditors. (Id. at 9-16.) The Bankruptcy Court denied Steffen’s subsequent motion for reconsideration on May 8, 2008. (Doc. # 3-24.)

Steffen filed her notice of appeal from the Bankruptcy Court’s Order denying her claim of homestead exemption on May 19, 2008. (Doc. # 1-2.) On appeal, Steffen argues that: (1) the Government’s objection to Steffen’s homestead claim was untimely because it did not comply with the thirty-day deadline imposed by Federal Rule of Bankruptcy Procedure 4003(b); (2) the Bankruptcy Court failed to apply the appropriate summary judgment standard under Rule 56; (3) the Bankruptcy Court erred when it determined that Steffen did not have sufficient ownership in the Property to claim it as exempt; (4) it was error for the Bankruptcy Court to determine on summary judgment that Steffen had transferred the Property to OHLP before filing for bankruptcy for the sole purpose of shielding it from the reach of creditors; and (5) it was error for the Bankruptcy Court to determine on summary judgment that the transfer of the Property to OHLP was tantamount to abandonment. (Doc. # 16 at 10.)

The Government filed a responsive brief, arguing that the Bankruptcy Court correctly ruled that the Government’s objection to Steffen’s homestead claim was timely and that Steffen had no legal or equitable interest in the Villarreal Property as of the petition date. (Doc. # 18 at 10-15.) In addition, the Government asserts that any factual errors recited by the Bankruptcy Court were immaterial to the Bankruptcy Court’s holding and were therefore harmless. (Id. at 15.) In her reply, Steffen presents further argument on the timeliness of the Government’s objection and on Steffen’s asserted beneficial ownership of the Property. (Doc. # 28 at 5-15.) She also disputes the Government’s claim that the Bankruptcy Court’s factual errors were immaterial. (Id. at 15-17.)

III. Legal Standard

An individual is permitted to exempt property from the bankruptcy estate by claiming exemptions authorized by 11 U.S.C. § 522. Section 522 permits states to opt out of the federal exemptions provided for in subsection 522(d) and limit its residents to those exemptions provided for under state law. 11 U.S.C. § 522(b). The state of Florida has exercised this option. Fla. Stat. § 222.20 (2006). Article X, Section 4(a)(1) of the Florida Constitution provides, in pertinent part:

There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, . . . the following property owned by a natural person:

(1) a homestead, . . . upon which the exemption shall be limited to the residence of the owner or the owner’s family . . . .

The party objecting to the homestead exemption has the burden of proving, by a preponderance of the evidence, that the debtor is not entitled to the exemptions claimed. In re Wilbur, 206 B.R. 1002, 1006 (Bankr. M.D. Fla. 1997). If the objector succeeds in making a prima facie showing, the burden then shifts to the debtor to prove that the exemptions are legally valid. Id.

As previously stated, the Court reviews the Bankruptcy Court’s summary judgment decision de novo. In re Optical Technologies, Inc., 246 F.3d at 1335.

IV. Analysis

A. Was the Government’s Objection Timely?

Steffen contends that the Bankruptcy Court erred when it found that the Government’s objection to Steffen’s claim of homestead exemption was timely made under Federal Rule of Bankruptcy Procedure 4003(b). Rule 4003(b) provides in part:

[A] party in interest may file an objection to the list of property claimed as exempt within 30 days after the meeting of creditors held under § 341(a) is concluded or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later.

In this case, the Section 341 meeting of creditors for Steffen’s Chapter 11 case was held on March 20, 2002. At the conclusion of that meeting, the United States Trustee continued the meeting indefinitely and did not schedule a date for the meeting to be reconvened. On June 16, 2002, the Government filed its objection to Steffen’s homestead claim. Steffen asserts that, because a date to reconvene the Section 341 meeting was not announced within a reasonable time, the initial meeting was deemed concluded and the thirty-day deadline began on March 20, 2002. Thus, Steffen contends that the Government’s objection, filed sixty days after the thirty-day period ended, was untimely.

Courts are not in agreement as to when a Section 341 meeting is deemed concluded in the absence of a specified date and time for continuation of the meeting. Some courts “apply a ‘bright-line’ approach, holding that if a trustee does not announce a specific date to which the meeting is being continued within 30 days of the last meeting held, the meeting will be deemed to have been concluded on the last date it was convened.” See In re Peres, 530 F.3d 375, 377 (5th Cir. 2008) (discussing the various approaches to this issue and collecting cases that apply this bright-line approach). As the Fifth Circuit recently noted in In re Peres, a majority of courts reject this bright-line approach, choosing instead to adopt a case-by-case approach or require the trustee or the court to declare that the Section 341 meeting is concluded. Id.; see e.g. In re Cherry, 341 B.R. 581, 587 (Bankr. S.D. Tex. 2006) (finding a case-by-case approach most appropriate because it allows a trustee discretion in complicated cases); In re Brown, 221 B.R. 902, 906-07 (Bankr. M.D. Fla. 1998) (approving the case-by case approach which analyzes the facts of the case to determine whether the trustee acted reasonably); Petit v. Fessenden, 182 B.R. 59, 63 (D. Me. 1995) (applying a case-by-case approach).

One of the rationales for rejection of a bright-line rule is that such a rule could impede justice where a trustee requires “further time and information to fully understand a debtor’s financial affairs.” In re Peres, 530 F.3d at 378. Under a case-by-case approach, the court must determine whether any delay in reconvening the Section 341 meeting was reasonable under the circumstances. Id.

The Court agrees with the Bankruptcy Court that application of the more flexible case-by-case approach to determining whether the continued meeting of creditors should be deemed concluded as of March 20, 2002, is appropriate in this case. The complex nature of this case and the need for further information from Steffen rendered the Trustee’s delay in continuing the Section 341 meeting reasonable.

Steffen included a “Preliminary Statement” with her Schedules of Assets and Statement of Financial Affairs stating that, because Steffen had not been granted access to certain seized documents, “it [was] impossible to ensure the accuracy of those Schedules and Statements.” (Doc. # 1-7 at 2.) Steffen further indicated that those Schedules and Statement of Financial Affairs were “subject to amendment, modification, restatement and revision.” (Id.)

The transcript of the Section 341 meeting reflects that the reason for the indefinite continuation was the fact that Steffen could not commit to the reliability of her Statement of Financial Affairs. (Doc. # 1-16 at 77-78.) According to the Trustee, this made the Statement “unusable as a document against which someone could say that there was perjury in that document.” (Id.)

The complexity of this case is exemplified by its duration of nearly eight years and its conversion from a Chapter 11 case to a Chapter 7 case nearly six years after it was filed. (Bankr. Doc. # 470.) Complications regarding the homestead issue resulted in a decision by the Bankruptcy Court on October 8, 2002, to defer ruling on the homestead matter pending further proceedings on Steffen’s proposed plan of reorganization. (Doc. # 1-23.) The summary judgment motions regarding homestead exemption were not re-filed until March 2008, after the case had been converted to Chapter 7. (Doc. # 3-6.)

The Bankruptcy Court also found that the Government’s objection to the homestead exemption was timely because the transcript of the March 20, 2002, meeting of creditors clearly showed that Steffen’s counsel, Harley Riedel, did not insist on a decision regarding the conclusion of that meeting. (Doc. # 1-3 at 9.) Steffen asserts that the Bankruptcy Court “misread the transcript” and that it is clear from Riedel’s statements that he “objected to the meeting not being concluded.” (Doc. # 16 at 16-17.) The Court disagrees. The transcript of the Section 341 meeting establishes that Riedel did not clearly object to the continuation of the Section 341 meeting.

As the Section 341 meeting was coming to a close, the hearing officer stated that he was going to continue the meeting indefinitely because Steffen’s preliminary statement to her financial schedules was essentially a blanket disclaimer to the effect that it was impossible at that time for Steffen to ensure the accuracy of those schedules and that they were subject to modification or revision at any time. (Doc. # 1-7 at 2; # 1-16 at 77.) The hearing officer suggested that Steffen submit amended schedules without the blanket disclaimer and with footnotes to those specific entries that Steffen believed to be compromised due to her lack of access to certain records. (Doc. # 1-16 at 79.) Riedel disagreed with that suggestion and proposed instead that, subject to the approval of counsel for the United States Trustee, the Section 341 meeting be concluded as of March 20, 2002, and then be reconvened at a later date if necessary. (Id. at 79-81.)

Further discussions ensued and then the hearing officer said, “Well, why don’t we do this, we’re going to hold open the issue of whether this meeting is continued,” to which Riedel replied, “Okay.” (Id. at 85.) The hearing officer indicated that he would discuss the issue with the Trustee and then decide whether to formally conclude the Section 341 meeting. (Id.) Riedel asked if they would be notified if it was decided that the meeting was going to be closed, and the hearing officer stated that a proceeding memo would be filed indicating whether the meeting was closed, continued indefinitely, or set for a specific date to reconvene. (Id.) As the meeting concluded, Riedel and counsel for the Government were discussing logistics for attendance at a second Section 341 meeting and when it might be scheduled. (Id. at 86.)

It is clear from the transcript of the March 20, 2002, meeting of creditors that the parties expressed their understanding that the meeting was not concluded as of that date. Although Riedel stated his preference to conclude, he expressed agreement to leaving the issue unresolved. Based on the transcribed statements made at the Section 341 meeting, the Court finds as a matter of law that Steffen’s counsel did not demand conclusion of the meeting. Importantly, Steffen also did not exercise her right to file a motion to compel conclusion of the Section 341 meeting of creditors. See In re Brown, 221 B.R. 902, 906 (Bankr. M.D. Fla. 1998) (“If a trustee is not acting reasonably . . . the debtor is encouraged to bring an appropriate motion to seek a judicial determination that the meeting of creditors is concluded”).

The Court concludes that, on the record before this Court, there are no genuine issues of material fact as to the reasonableness of the Government’s delay in reconvening the Section 341 meeting. The record further establishes that the Government had ample reason to believe that the Section 341 meeting was not concluded as of that date. The Court finds as a matter of law that the Government’s June 16, 2002, objection was timely filed under Bankruptcy Rule 4003(b). Therefore, the Bankruptcy Court’s decision on this issue is affirmed.

B. Is Steffen Entitled to the Homestead Exemption?

Steffen next asserts that the Bankruptcy Court erred when it found that Steffen did not have sufficient ownership interest in the Villarreal Property to claim it as exempt. In reaching this conclusion, the Bankruptcy Court found that (1) Steffen’s status as 100% stockholder of OHC, which is the general partner of OHLP, did not support her claim for homestead exemption of property owned by OHLP; (2) Steffen’s claimed status as sole beneficiary of the 1995 Trust, which is the 99% limited partner of OHLP, did not give her a right to claim homestead exemption; and (3) under the circumstances of this case, Steffen’s possession of the Property on the filing date was not itself sufficient to support the homestead claim. (Doc. # 1-3 at 10-13.)

Steffen contends that the Bankruptcy Court made several factual errors that directly affected the Court’s ultimate holding and therefore the Bankruptcy Court’s Order should be reversed. Upon review of the Bankruptcy Court’s Order and the record on appeal, this Court must disagree with Steffen’s contention. The Bankruptcy Court’s misstatements regarding the timing of certain background events did not form the basis of the Bankruptcy Court’s holding, as Steffen submits.2 In any event, this Court’s de novo review of the Bankruptcy Court’s summary judgment order will consider whether the true material facts of this case require reversal of that Order.

As to the Bankruptcy Court’s analysis, Steffen first argues that the Bankruptcy Court misconstrued the requirement under Florida law that only a “natural person” can claim homestead exemption. (Doc. # 16 at 22.) According to Steffen, she, and not OHLP, was claiming the homestead exemption and “there is no dispute that she was a natural person entitled to claim a homestead in Florida as of the Filing Date.” (Id.) Steffen’s argument is misplaced, however, because the Florida Constitution provides that the property must be owned by a natural person, not that the claimant must be a natural person. Fla. Const. Art. X, § 4(a). The issue central to this dispute, then, is not whether Steffen is a natural person, but whether she owned the Property on the filing date.

Steffen next contends that the Bankruptcy Court erred when it concluded that “a stockholder cannot claim homestead in an effort to insulate the property from forced sale” and therefore Steffen did not qualify for the exemption based on her claimed position as 100% stockholder of OHC. (Doc. # 1-3 at 11 (citing In re Duque, 33 B.R. 201 (Bankr. S.D. Fla. 1983)). According to Steffen, she never asserted the exemption based on her stockholder status, because OHLP “was 100% owned by the [1995] revocable trust.” (Doc. # 16 at 21.) Thus, Steffen asserts that her ownership interest arises from her status as sole beneficiary of the 1995 Trust, which was 99% limited partner of OHLP and owned all of the stock in OHLP’s general partner, OHC. (Id. at 8 n. 2, 25.)

Steffen cites to several cases holding that the trustee and beneficiary of a revocable trust can claim property held in the name of the trust as exempt homestead. (Id. at 23). See e.g. In re Edwards, 356 B.R. 807, 811 (Bankr. M.D. Fla. 2006) (holding that debtor, as grantor and trustee of a trust that held legal title to the property, held a sufficient equitable interest in the property to claim it as exempt homestead where she resided on the property pre-petition with the intent to maintain it as her primary residence); In re Alexander, 346 B.R. 546, 551 (Bankr. M.D. Fla. 2006) (finding that debtor had a sufficient interest in property to claim it as exempt homestead where she was principal beneficiary and trustee of the revocable trust which held title to the property and she resided in the property as her sole residence on the filing date).

The Court finds those cases distinguishable, however, because in the cited cases the property was titled in the name of the trust, where here the Property is titled in the name of a limited partnership. Steffen has cited no case law for the proposition that property titled in the name of a partnership may be claimed as homestead and this Court’s research has turned up no such cases. The cases that have recognized a homestead exemption claim for property held in a revocable trust have done so based on the reasoning that, because the debtor could revoke the trust at any time and the property would revert to the debtor, the debtor had a beneficial ownership in the property sufficient to maintain the exemption. Id.; In re Edwards, 356 B.R. at 810-11. Here, revocation of the 1995 Trust would not result in Steffen’s ownership of the Property. Thus, the Court finds that Steffen’s status as sole beneficiary of the 1995 Trust does not confer a legal or equitable interest in the Property to support her homestead claim.

Steffen’s argument that she possessed a beneficial interest in the Property because she resided in the Property and maintained it as her residence at the time of her petition is equally unavailing. Courts faced with the issue of entitlement to homestead exemption in the absence of title in the property have held that “in order to claim property in which the individual resides as exempt it is sufficient that: (1) the individual have a legal or equitable interest which gives the individual the legal right to use and possess the property as a residence; (2) the individual have the intention to make the property his or her homestead; and (3) the individual actually maintain the property as his or her principal residence.” In re Alexander, 346 B.R. at 548. As discussed above, Steffen has not offered evidence to show that she had a legal right to use and possess the Property as of the filing date.

The Bankruptcy Court, on consideration of this issue, stated that “the record is devoid of any believable evidence to establish [Steffen's] right to occupy the residence . . . .” (Doc. # 1-3 at 12.) In her appellate brief, Steffen has asserted no evidence on this issue that was overlooked by the Bankruptcy Court, but merely reasserts the argument that legal interest arises from her status as sole beneficiary of the 1995 Trust. (Doc. # 16 at 21-25.) Steffen also points to the affidavit she presented to the Bankruptcy Court, in which she asserted that “I claim both the equitable and beneficial ownership of [Editor's note: address omitted].” This statement does not prove that the claimed ownership rights exist. And as previously discussed, her status under the 1995 Trust is insufficient to establish a legal interest in the Property and thus does not give rise to a legal right to occupy the property as her residence.

The record reflects no evidence of any agreement between Steffen and OHLP or any other basis for finding that she had the legal right to use and possess the property as her residence on the filing date. Thus, the Court concludes as a matter of law that Steffen did not have an equitable ownership interest in the Villarreal property at the time that she filed for bankruptcy.

In its opinion, the Bankruptcy Court considered the well established principle that homestead exemption laws are to be construed liberally in favor of the claimant, but also observed that the protection “should not be used to shield fraud or reprehensible conduct.” (Doc. # 1-3 at 14.) Steffen strenuously objects to the Bankruptcy Court’s related inference that the Property was transferred to OHLP in 1997 to fraudulently shield it from creditors such as the SEC, stating that the transfer occurred almost a decade after her husband’s indictment and conviction and “had absolutely nothing whatsoever to do with the disgorgement judgment entered [against him] in 1993.” (Doc. # 16 at 20, 25.) This issue was not dispositive of the Bankruptcy Court’s summary judgment determination, nor does the purpose behind the 1997 transfer of the Property ultimately affect this Court’s decision as to the validity of Steffen’s claimed exemption. Nonetheless, the Court rejects Steffen’ s assertion that there is no evidence to support the Bankruptcy Court’s conclusion regarding the fraudulent purpose behind the Property’s conveyance.

The disgorgement judgments against Steffen’s husband were issued in 1993, but Bilzerian challenged the SEC’s right to pursue the money damages due to his ongoing bankruptcy proceedings. While that issue was being litigated, Bilzerian and Steffen established both OHLP and the 1995 Trust, and transferred the Villarreal Property to OHLP. The SEC was not able to enforce the disgorgement judgments until the Eleventh Circuit’s decision in 1998, one year after the Property was conveyed to OHLP. Thus, Steffen’s contention that the transfer of the Property to OHLP in 1997 had nothing to do with the SEC’s pursuit of the disgorgement judgments is not entirely credible.

The Court finds it unnecessary to reach Steffen’s final argument, that the Bankruptcy Court erred when it concluded that the 1997 conveyance to OHLP was tantamount to abandonment. The abandonment issue was merely an additional basis for denying Steffen’s homestead exemption claim. Based solely on the foregoing analysis, the Court finds a sufficient basis to affirm the Bankruptcy Court’s decision awarding summary judgment in the Government’s favor.

IV. Conclusion

The Court finds that the Government’s June 13, 2002, objection to Steffen’s claim of exemption for the Villarreal Property was timely filed under Bankruptcy Rule 4003(b). It is further held that Steffen did not have the necessary ownership interest in the Property to validly claim it as a homestead exemption as of her May 29, 2001, filing date.

Accordingly, it is now

ORDERED, ADJUDGED, and DECREED:

(1) Terri L. Steffen’s Motion for Rehearing (Doc. # 31) is GRANTED.

(2) This Court’s March 20, 2009, Opinion (Doc. # 30) is VACATED.

(3) The Bankruptcy Court’s April 25, 2008, Order granting summary judgment for the Government on its objection to homestead exemption, and denying Steffen’s cross-motion for summary judgment, is AFFIRMED.

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1The Second Circuit affirmed Bilzerian’s criminal conviction on January 3, 1991. United States v. Bilzerian, 926 F.2d 1285 (2d Cir. 1991), cert. denied, 502 U.S. 813 (1991).

2This Court does not dispute Steffen’s assertions that the Bankruptcy Court’s Order contained misstatements as to the timing of: (1) the Villarreal Property’s conveyance to OHLP, (2) the entry of judgment against Bilzerian, and (3) Steffen’s settlement with the District of Columbia Bankruptcy Court.

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