The U.S. Court of Appeals for the Eleventh Circuit issued an opinion in June affirming summary judgment in favor of insurer StarStone National Insurance Co. and against the insured, Polynesian Inn LLC doing business as Days Inn of Kissimmee and Andrew James Bickford.

The panel held there was no coverage under StarStone's policy for a murder and attempted murder on hotel property.

In the opinion, the Eleventh Circuit adopted StarStone's proposed definition and interpretation of the word sublimit, thereby providing clarity to insurers, insureds and the public at large on a term frequently found in insurance policies but that Florida courts had never before defined.

Viviana Loshak, Rory Eric Jurman and James Wyman of Hinshaw & Culbertson represented StarStone. Gregory Smartwood and Michael Nation of The Nation Law Firm represented Polynesian. Todd Falzone and Karina Rodrigues of Kelly | Uustal represented Bickford.

The underlying incident involved a murder and attempted murder of two men at the Days Inn hotel operated by Polynesian, resulting in wrongful death and negligent security claims.

In April 2017, "a woman wielding a knife attacked Bickford and Zackery Ganoe while they were guests at a hotel operated by Polynesian in Kissimmee."

Polynesian was insured under a primary policy with $1 million in limits applicable to each occurrence. However, for assault and battery offenses, the limits were $25,000 per offense under an endorsement, an amendment to the policy. StarStone insured Polynesian under an excess policy, and the policy did not provide coverage for any claims that were subject to a "sublimit of liability" in the primary policy.

StarStone argued the $25,000 limit applicable to assault and battery offenses under the assault and battery endorsement was a "sublimit" in the primary policy and, therefore, its excess policy provided no coverage.

Polynesian and Bickford argued the limit in the endorsement was not a sublimit, but rather was a separate standalone limit. The Middle District of Florida granted summary judgment in favor of StarStone, which was appealed to the Eleventh Circuit.

The Eleventh Circuit held that the definition of sublimit advanced by StarStone and adopted by the district court — that a sublimit caps a carrier's exposure, or existing coverage, at an amount less than the otherwise applicable policy limit — is consistent with the ordinary meaning of that term as reflected in legal and nonlegal dictionaries.

The Eleventh Circuit acknowledged "Florida courts commonly adopt the plain meaning of words contained in legal and non-legal dictionaries" despite Polynesian and Bickford's arguments to the contrary.

The Eleventh Circuit rationalized that the $25,000 limit resulting from assault or battery would typically have been covered under the primary policy's general $1 million per occurrence limit for "bodily injury."

The operation of the A&B Endorsement is to cap the primary carrier's liability for that subcategory of loss to $25,000. As aptly noted by the Eleventh Circuit, "In other words, the effect of the A&B Endorsement was to cap existing coverage for a particular subcategory of loss, not to create a new category of coverage that did not exist before the A&B Endorsement."

The Eleventh Circuit dismissed Polynesian and Bickford's arguments, labeling them "convoluted." The appellants argued that if a limit is not subordinate to another limit, it is a standalone or separate limit even if it is lower than some other limit in the policy.

They argued that because the A&B Endorsement is not expressly made subject to the $1 million-per-occurrence limit, it cannot be a sublimit of that limit. As the Eleventh Circuit stated, it "fail[ed] to see why these facts would cause an 'ordinary person' to view the A&B Endorsement as something other than a sublimit." The court said, "Appellants' own convoluted interpretation of the A&B Endorsement 'transcend[s] the common understanding of the ordinary person.' "

The court further noted appellants' proposed interpretation is inconsistent with the policy as a whole.

The purpose and effect of the endorsement is to cap existing coverage for bodily injury for assault and battery offenses, which would otherwise be subject to the " each occurrence" limit of $1 million, at $25,000, not to provide additional coverage for that loss.

The policy ensures that StarStone does not take on greater risk with respect to certain subcategories of loss unless there is some additional agreement to cover that loss. Under appellants' proposed interpretation, StarStone's excess coverage responsibilities would be triggered at $25,000 for losses resulting from assault or battery but at $1 million for nearly every other type of loss. That result is "plainly inconsistent" with the intent of the StarStone policy as a whole.

The opinion provides guidance in what the Eleventh Circuit deems to be a "reasonable interpretation" of a policy provision. While both StarStone and Polynesian provided proposed interpretations for the policy provisions at issue, the Eleventh Circuit unequivocally held that the proposed interpretation of Polynesian was "convoluted" and that no ordinary person would have interpreted the policy in such a fashion.

Oftentimes, insureds aver all sorts of proposed interpretations of policy in an effort to create an ambiguity in a policy so that the ambiguity is construed against the insurer as the drafter and in favor of the insured. The opinion sends a clear message and signal to policyholders that not all proposed interpretations of a policy provision will be sufficient to create an ambiguity in a policy; it is only when there are two or more reasonable interpretations of a policy.

Additionally, despite how commonplace it is for excess carriers to exclude coverage for claims subject to a sublimit of liability in a primary policy, there was an overwhelming lack of case law on the definition of a sublimit.

The opinion and well-reasoned analysis provides clarity and guidance in how this frequently used term is to be defined with resultant clarity and guidance in whether impacted claims are covered, which is beneficial to all. Insurers now particularly can use the Eleventh Circuit's analysis to determine which coverages and limits are sublimits, as many excess policies do not provide coverage for claims subject to a sublimit in primary policies.

The impact going forward for insureds is that sublimited coverage is sublimited coverage. Excess and umbrella carriers will now be on firm ground in denying any coverage beyond the sublimit.

Both brokers and insureds must be cognizant of this change and draft towers of coverage appropriately if something else or if broader coverage is desired. The old adage that the attachment point is sacrosanct will now live on for the ages.

Viviana Loshak and Rory Eric Jurman are partners with Hinshaw & Culbertson in Fort Lauderdale. James Wyman is of counsel in the firm's Coral Gables officed.  with Hinshaw & Culbertson. s a partner with the U.S. law firm of Hinshaw & Culbertson. Loshak primarily represents clients in commercial litigation and can be reached at [email protected]. Jurman is an insurance litigator and can be reached at [email protected]. Wyman is an appellate practitioner and can be reached at [email protected].