Eleventh Circuit Upholds District Court’s Grant of Summary Judgment in Workers’ Compensation Case

In Morales v. Zenith Insurance Company, No. 12-11755 (Jan. 22, 2015), the Eleventh Circuit Court of Appeals upheld the district dourt’s grant of summary judgment in favor of Zenith, holding that the workers’ compensation exclusion barred Zenith from covering the $9.525 million tort judgment at issue in this case.

This case arose from a breach of contract claim filed by the Morales estate against defendant insurance company Zenith. Santana Morales was killed during the course of his employment with Lawns Nursery and Irrigation Designs, Inc. Lawns had an insurance policy with Zenith including standard workers compensation insurance, in addition to employer liability coverage. The employer liability coverage contained an exclusionary provision for obligations imposed by a workers’ compensation law.  Zenith paid workers’ compensation benefits to the Estate under the policy. The Estate filed and won a wrongful death action in Florida circuit court against Lawns for negligence, winning $9.525 million in damages. Zenith then refused to pay the tort judgment against Lawns, asserting that the workers’ compensation exclusion barred coverage. The Estate then filed suit against Zenith, alleging breach of contract for Zenith’s failure to pay the judgment against Lawns. The district court reasoned that since Florida Law “provides worker’s compensation benefits as the exclusive remedy for an employee injury caused by an employer’s negligence,” the state court lawsuit against Lawns for negligence fell within the worker’s compensation exclusion of their insurance policy with Zenith. The district court granted summary judgment to Zenith as a result, from which the Morales Estate appeals.

The Eleventh Circuit certified three questions to the Florida Supreme Court, two of which are relevant in the decision. The first question was an issue of whether the Estate had standing to bring a breach of contract claim against Zenith under the insurance policy. The second question was whether the exclusionary provision in the insurance policy bars coverage of the estate’s claim against Zenith for the tort judgment. The third question was whether a worker’s compensation release, furnished by Zenith and signed by the Estate, otherwise prohibits the Estate’s collection of the tort judgment.

The Florida Supreme Court stated that the Estate has standing, but that both the workers compensation exclusion and the release prevent it from collecting the judgment from Zenith. In light of the Florida Supreme Court’s answer to these questions, the Eleventh Circuit held that the district court was correct in determining that the workers’ compensation exclusion in Zenith’s insurance policy with Lawns barred coverage for the $9.525 million tort judgment against Lawns. Therefore the breach of contract claim fails, as Zenith had no duty to pay the judgment, and breached no contract with Lawns as a result.  The Court declined to address the issue of whether, on an alternative basis, the release signed by the Estate would otherwise prevent such relief.

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