I.T.N. Consolidators, Inc., et al v. Northern Marine Underwriters L

Filing

Opinion issued by court as to Appellant-Cross Appellee Northern Marine Underwriters LTD.. Decision: Reversed and Remanded. Opinion type: Non-Published. Opinion method: Per Curiam. The opinion is also available through the Court's Opinions page at this link http://www.ca11.uscourts.gov/opinions. (15-14539X)--[Edited 06/28/2017 by JRP]

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[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 15-14439
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D.C. Docket No. 1:09-cv-20762-JAL

I.T.N. CONSOLIDATORS, INC.,
I.T.N. OF MIAMI, INC.,
Plaintiffs - Appellees,
versus
NORTHERN MARINE UNDERWRITERS LTD.,
individually and as agents for Lloyds of London,
Watkins Syndicate (WTK/457),
Defendant - Appellant.

________________________
Appeals from the United States District Court
for the Southern District of Florida
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(June 28, 2017)

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Before MARCUS and BLACK, Circuit Judges, and COHEN, * District Judge.
PER CURIAM:
This insurance coverage dispute is back before us for the second time.
Northern Marine Underwriters Ltd. (“Northern Marine”) appeals the entry of
summary judgment in favor of I.T.N. Consolidators, Inc. and I.T.N. Miami, Inc.
(“ITN”). ITN is a freight forwarding company that insured its shipments through
an open cover policy (the “Policy”) issued by Northern Marine. Under the Policy,
ITN could insure as many -- or as few -- cargo shipments as it chose. In November
2007, ITN learned that it had failed to obtain coverage for a shipment that was
hijacked. It subsequently filed a standard form in an attempt to obtain coverage for
the shipment and filed a claim for the loss. Northern Marine denied the claim, ITN
filed suit, and the district court granted summary judgment in favor of Northern
Marine.
On initial review, a prior panel of this Court held that the Policy did not
cover known losses. It nonetheless remanded for the district court to determine
whether the parties might have entered into a new contract whereby Northern
Marine agreed to cover the known loss in exchange for some additional
consideration. On remand, the district court erred in reading the mandate to

*

Honorable Mark H. Cohen, United States District Judge for the Northern District of Georgia,
sitting by designation.
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preclude consideration of Northern Marine’s argument that any new agreement
would have been void as a matter of public policy because that argument was
based on intervening case law -- a well-established exception to the mandate rule.
Having the benefit of oral argument, we now reverse and remand for entry of final
summary judgment in favor of Northern Marine.
I.
The essential facts are these. ITN is a freight forwarding company involved
in cargo transportation. Northern Marine was its insurer. Under the terms of the
Policy, when ITN wanted to insure a particular shipment it would enter
information relevant to the shipment (cargo, value, route, etc.) into a form on
Northern Marine’s website. Based on this information, a premium would be
automatically calculated and a Certificate of Insurance (“COI”) would be
generated.
On November 7, 2007, hijackers intercepted and stole an ITN shipment on
its way from Miami to Ciudad del Este, Paraguay. After learning that the shipment
had been stolen, ITN reviewed its records and realized that it had failed to obtain a
COI for the shipment. ITN proceeded to use the online form to issue itself a COI
and remit payment of the premium to the broker who handled billing for Northern
Marine. The broker later remitted these funds to Northern Marine, which received

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the funds on February 12, 2008. Northern Marine denied the claim on February
15, 2008.
ITN filed suit asserting Northern Marine’s denial was a breach of the
insurance contract and seeking a declaratory judgment that the Policy covered the
loss. Instead, the district court granted summary judgment in favor of Northern
Marine, holding that the policy did not cover the loss because the COI was issued
after ITN knew the loss had occurred.
On appeal, this Court affirmed the district court’s conclusion that ITN’s
claim was not insured under the Policy. I.T.N. Consolidators, Inc. v. Northern
Marine Underwriters Ltd., 464 F. App’x 788, 791 (11th Cir. 2012). The panel
nonetheless vacated the entry of summary judgment and remanded to the district
court to determine “whether Northern [Marine] in fact agreed to insure the lost
shipment” by accepting the premium after it knew that the loss had occurred, and
thus “whether a contract was formed.” Id. at 795 & n.13. The panel offered that
consideration for this new contract “might have been, for instance, the furtherance
of Northern [Marine]’s relationship with ITN, or the encouragement of the practice
ITN claims it followed: the invariable payment of premiums on every shipment.”
Id. at 794. After that remand, the Florida First District Court of Appeals decided
Interstate Fire & Cas. Co. v. Abernathy, 93 So. 3d 352 (Fla. 1st Dist. Ct. App.

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2012), and held that contracts to insure known losses are unenforceable as a matter
of Florida public policy.
On remand, the district court granted summary judgment in favor of ITN. It
refused to consider Northern Marine’s argument that the contract was
unenforceable as against public policy under Interstate, holding that this argument
was outside the scope of the mandate handed down by this Court. The district
court found that ITN’s payment of a premium, occurring as it did after it learned of
the hijacking, constituted an offer to enter into a new insurance contract that
covered the known loss, which Northern Marine accepted by retaining the
premium. The district court then found that there was consideration because the
undisputed facts showed that ITN had continued to do business with Northern
Marine after the claim.
Northern Marine now appeals the district court’s entry of summary
judgment, arguing in relevant part that the district court erred in failing to consider
its argument that the hypothetical new contract was void as against public policy,
and that if it had considered this argument, the district court would necessarily
have entered summary judgment in Northern Marine’s favor. ITN defends the
district court’s judgment on its terms, but cross-appeals the district court’s denial
of its request for prejudgment interest.

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II.
We review de novo the question of whether a district court properly
construed the mandate from this Court. See Ad-Vantage Tel. Directory
Consultants, Inc. v. GTE Directories Corp., 943 F.2d 1511, 1517 (11th Cir. 1991).
“We review a district court’s grant of summary judgment de novo, viewing
all of the facts in the record in the light most favorable to the non-movant.”
Haynes v. McCalla Raymer, LLC, 793 F.3d 1246, 1249 (11th Cir. 2015) (internal
quotations omitted). Summary judgment is appropriate where “there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a).
Under the mandate rule, district courts must carry out any specific mandate
issued by the appellate court. Litman v. Mass. Mut. Life Ins. Co., 825 F.2d 1506,
1511 (11th Cir. 1987) (en banc). When an appellate court “remands for resolution
of a narrow factual issue, the lower court may not circumvent the mandate by
approaching the identical legal issue under an entirely new theory.” Barber v. Int’l
Bhd. of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers, & Helpers, Dist.
Lodge No. 57, 841 F.2d 1067, 1070 (11th Cir. 1988) (quotation omitted); see also
Ellard v. Ala. Bd. of Pardons & Paroles, 928 F.2d 378, 381–82 (11th Cir. 1991).
This doctrine ensures obedience from the lower courts and helps bring an end to
litigation by foreclosing infinite redress of settled issues. United States v.
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Williams, 728 F.2d 1402, 1406 (11th Cir. 1984). But, the mandate rule is not
absolute. It does not apply when “an intervening change in the controlling law
dictates a different result.” Piambino v. Bailey, 757 F.2d 1112, 1120 (11th Cir.
1985).
Here, Northern Marine argued that, based on Interstate Fire & Cas. Co. v.
Abernathy, 93 So. 3d 352 (Fla. 1st Dist. Ct. App. 2012), a contract to insure a
known loss is void as a matter of public policy. Interstate was decided after the
mandate issued in this case. Given ITN’s contention that the new contract arose
after the loss was known to both parties, 1 the district court was required to at least
consider whether Interstate reflected a change in controlling Florida law so that it
fell within the exception to the mandate rule and thus rendered the new contract
unenforceable. It was error for the district court to reject Northern Marine’s
argument out of hand.
Because the record is clear, we will address whether Interstate renders any
new contract unenforceable rather than remanding for a whole new round of
district court proceedings. For purposes of this determination, we review all of the
evidence in the light most favorable to ITN. See Chapman, 229 F.3d at 1023.
The dispute in Interstate arose out of a policy insurance company Interstate
issued to Emerald Coast, an entertainment company whose business included

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Northern disputes that it knew of the loss.
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leasing out inflatable recreational gear for local events. 93 So. 3d at 354–55. The
policy also covered unnamed additional insureds with respect to liability arising
out of Emerald Coast’s ongoing operations, provided that the additional insured’s
coverage was “required by written contract.” Id. at 355. On April 14, 2007, 14year-old Dakota Abernathy was injured on an inflatable bungee run provided by
Emerald Coast at a festival hosted by the Choctaw Touchdown Club (“the Club”).
Id. at 354–55. The Club did not have liability insurance or a written contract with
Emerald Coast at the time of the accident. Id. at 355. Nonetheless, four days after
the accident, the insurance broker issued a certificate of insurance naming the Club
as an additional insured, backdated to the date of the accident. Id. at 355 & n.4. In
the litigation that ensued, the trial court denied the defendant’s motion for
summary judgment and entered judgment in favor of the plaintiff, holding that the
parties had formed a contract to insure the known loss and that such a contract was
not forbidden. Id. at 356–57.
On appeal, the Florida First District Court of Appeal reversed. Id. at 360.
The appellate court began its discussion by describing the concept of insurance and
how it is defined under Florida law. Id. at 358. It emphasized that insurance
necessarily involves contingencies so that payment for a non-contingent loss is
contrary to the very idea of insurance. Id. The court then surveyed Florida laws
regulating insurers and insurance markets. It noted that Florida law requires
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insurers to maintain reserves and surpluses. Id. (citing Fla. Stat. §§ 624.404,
624.408). The court also pointed out that the Florida legislature had enacted
substantive protections to “avoid financial loss to claimants or policyholders
because of the insolvency of an insurer.” Id. at 359 (quoting Fla. Stat. §
631.51(1)). These protections included the creation of the Florida Insurance
Guaranty Association (FIGA), to handle the claims of insolvent insurers. Id.; see
also Fla. Stat. 631.50, et seq. (establishing the powers and duties of FIGA).
From these and other provisions, the court divined a general public policy
interest in protecting the public from insolvent insurers. Id. at 358–59. It reasoned
that the rule against contracts to insure a known loss is “part and parcel” of that
policy, because such agreements risk the solvency of the insurer. Id. The court
explained:
This basic doctrine does not arise from a desire to protect an
individual insurance company from something akin to fraud, . . . but
from a recognition that the insured’s risk is, in a real sense, borne by
the insurer’s policyholders as a group, from whose pool of premiums
all claims must be paid if the insurer is to remain in business. In other
words, because society as a whole relies on insurance, public policy
will not permit a transaction that is anathema to the very concept of
insurance which, if allowed in the aggregate, could put insurance at
risk for all.
Id. at 359 (quoting Nourachi v. First Am. Title Ins. Co., 44 So. 3d 602, 610
(Fla. 5th Dist. Ct. App. 2010) (Lawson, J., concurring)) (quotations omitted).
Because the rule was not founded on fraud protection, the court rejected the
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plaintiff’s contention that the contract was enforceable so long as the insurer also
knew about the loss. Id.
Applying Interstate to our facts, the new contract hypothesized by the prior
panel would be unenforceable because it would be an agreement to insure a known
loss. Interstate squarely forbids enforcement of such an agreement.
When questioned at oral argument ITN argued that Interstate was
distinguishable. Counsel argued that Interstate forbids coverage only under the
original insurance contract; it has nothing to say about a new contract. This
argument finds no support in the Interstate opinion. Just like in Interstate, ITN
claims that the COI is the new contract. Both the Interstate contract and the new
contract in this case would require the insurer to pay for a known loss. On these
facts, Interstate is not distinguishable.
ITN also argued in district court -- but not in its briefing on appeal -- that
Florida law is unsettled on this issue. It pointed to the majority opinions in
Nourachi, 44 So. 3d at 608, and National Life Ins. Co. v. Harriott, 268 So. 2d 397,
400 (Fla. 2d Dist. Ct. App. 1972), both of which held that an agreement to insure a
loss known to the insured is unenforceable where the insured does not disclose the
loss to the insurer. But these cases do not conflict with Interstate. Neither case
held that an agreement to insure a known loss is enforceable if the insurer does
know about the loss, because that issue was never presented. Indeed, Interstate
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itself is based on a concurring opinion from Nourachi. In Nourachi, the majority
held that the agreement to insure a known loss was unenforceable where the fact
was not disclosed to the insurer. Id. at 608. The concurrence would have gone
further and held that a contract to insure a known loss is never enforceable, even if
the insurer had known. Id. at 610. Nothing about either the majority or concurring
opinion suggests that those rules are in conflict.
Interstate is on all fours with the case before us. Because agreements to
insure a known loss are void as a matter of public policy in Florida, any
hypothetical agreement to insure the hijacked shipment after it was known to be
lost is unenforceable. In the absence of a holding on point from the Florida
Supreme Court, “we are bound by the decisions of intermediate state courts unless
there is some persuasive indication that the state’s highest court would decide the
issue differently.” Media Servs. Grp., Inc. v. Bay Cities Commc’ns, Inc., 237 F.3d
1326, 1329 n.5 (11th Cir. 2001). We are aware of no indication that the Florida
Supreme Court would reject Interstate, and ITN has pointed us to none.
Accordingly, we must apply Interstate, and Northern Marine is entitled to summary
judgment.
The district court erred when it construed the mandate to preclude arguments
based on intervening case law. Considering these arguments, we conclude that any
new contract would be unenforceable as a matter of Florida public policy. The
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failure of this new contract theory eliminates the last remaining basis for recovery
by ITN. Therefore, we reverse and remand to the district court with instructions to
enter final summary judgment in favor of Northern Marine.
REVERSED AND REMANDED.

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