Underwriters at Lloyd's of London v. AXA Equitable Life Insurance Company et al
Filing
132
OPINION ORDER granting 120 Plaintiffs' Motion for Summary Judgment and denying 117 Defendant's Motion for Partial Summary Judgment. Signed by Judge Daniel T. K. Hurley on 11/7/13. (lr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 10-62061-CV-HURLEY/HOPKINS
CERTAIN INTERESTED UNDERWRITERS
AT LLOYD’S, LONDON,
Plaintiffs,
v.
AXA EQUITABLE LIFE INSURANCE
COMPANY, et al.,
Defendants.
_________________________________________/
ORDER GRANTING PLAINTIFFS’ MOTION FOR FINAL SUMMARY
JUDGMENT, AND DENYING DEFENDANT’S MOTION FOR
PARTIAL SUMMARY JUDGMENT
THIS CASE is before the Court upon Plaintiffs’ Certain Interested Underwriters at
Lloyd’s, London’s (“Lloyd’s”) Motion for Final Summary Judgment [ECF No. 120], and
Defendant The GIII Accumulation Trust’s (“GIII”) Motion for Partial Summary Judgment on
Coverage [ECF No. 117]. The motions were fully briefed, and the court has had the benefit of
oral argument. Upon review, the Court will grant summary judgment in Plaintiffs’ favor.
BACKGROUND
The resolution of this case turns on the actions of an insurance broker, and the
interpretation of his professional liability policy. Steven M. Brasner worked as an independent
insurance broker, soliciting clients and selling life insurance policies on behalf of several
insurance companies, including the AXA Equitable Life Insurance Company (“AXA”). To
protect him from liability for negligence or mistakes in the performance of his work, Brasner
procured a professional errors and omissions policy from Lloyd’s.
In the summer of 2006, Brasner solicited Geoffrey Glass as a prospective client. To
facilitate the purchase of two life insurance policies, one for ten and another for twenty million
dollars, Glass created two insurance trusts, naming his brother Walter and the GreatBanc Trust
Company as joint trustees. Both applications stated that Geoffrey Glass had an annual income of
one million dollars and a net worth of fifty million dollars. 1 Additionally, both applications had
a box checked “no” to the question, “Do you, the owner, intend to use or transfer the policy for
any type of pre-death financial settlement, such as viatical settlement, senior settlement, life
settlement, or for any other secondary market?”
AXA processed the Glass applications and issued both policies on February 6, 2007. The
next month, the trusts sold both policies to GIII. In connection with the sale, Brasner executed
an “agent certificate” which, among other things, stated
Each document submitted to the Insurer by the Agent on behalf
Seller with respect to the Policy, including, but not limited to,
preliminary policy applications, medical records and other
documents containing information with respect to Seller or the
Agent, were, to the knowledge of the Agent, true and accurate as
of the date of delivery.
In fact, however, Brasner was far from truthful; he falsified insurance applications on a
regular basis. His purpose was to induce insurance companies to issue life insurance policies
which would be held beyond the contestability period and then offered for sale on the secondary
1
GIII, in opposition to Brasner’s motion for summary judgment in an underlying case, AXA
Equitable Life Insurance Co. v. Infinity Financial Group, LLC, No. 08-cv-80611, submitted an
excerpt from Geoffrey Glass’s deposition. There he stated that the handwriting on the insurance
application was not his, that the one million and fifty million figures were not correct, and that he
had not authorized anyone to make these representations on his behalf.
2
market, i.e., repurchased and maintained as investment vehicles by someone other than the
named insured.
When the scheme was discovered, AXA and other insurance companies
instituted civil actions to recover paid commissions and rescind the fraudulently-induced
policies. More important for the resolution of this case, the State of Florida initiated criminal
proceedings against Brasner, charging him in a 22-count information with insurance fraud, grand
theft, and engaging in a scheme to defraud. Brasner ultimately entered an Alford 2 plea of guilty
in his best interest to three crimes, two of which have direct relevance to this case.
Brasner pled guilty to Count 13, which charged a violation of Fla. Stat. § 817.234(1)(a)3.
It alleged that Brasner had defrauded AXA by providing materially false information in
insurance applications. He also pled guilty to Count 21, which charged a violation of Fla. Stat.
§817.034(4)(a). It alleged that Brasner had engaged in an ongoing scheme to defraud one or
more persons by making false or fraudulent representations and, as a result, obtained $50,000 or
more from the victims.
In an entry-of-plea proceeding conducted in open court in the presence of Brasner and his
attorney, the prosecutor presented the following statement of facts.
This is a course of conduct that takes place between January 1,
2006 to December 31, of 2007. There are three insurance
companies that are involved, Trans America, Citizens and AXA.
In its simplest terms, if the State were to proceed to trial, we would
prove by testimony and physical evidence that the defendant
enlisted elderly people wherein he supplied information on
insurance applications that was not known to them. In that course,
the insurance policies were placed. He derived significant
commission income. That occurred here in Palm Beach County.
2
See North Carolina v. Alford, 400 U.S. 25 (1970).
3
The negotiated disposition called for a term of probation with special terms. Among the
terms set forth in a written document, signed by Brasner and his attorney, were the following:
“No work in the insurance industry whatsoever. Defendant may continue to receive income
from prior placed insurance renewal income. Excluded from renewal income AXA policies for
Walter & Geoffrey Glass, Altman, Gelch & Sciolino.” (Emphasis in original). These special
conditions of probation were orally restated before the trial judge, after which Brasner formally
entered his pleas and was adjudicated guilty.
In the ensuing time period, two civil actions were instituted. AXA sued Brasner for
disgorgement of the fraudulently obtained commissions. This case was referred to arbitration
and has since been dismissed. GIII brought suit against Brasner, contending that his agent
certificate contained negligent misrepresentations. This case resulted in a consent judgment
against Brasner for the $1,450,000 and an assignment of Brasner’s right to sue Lloyd’s for
breach of its insurance contract.
JURISDICTION
The Court has subject-matter jurisdiction because the parties, including each of the
Lloyd’s syndicates participating in the subject insurance policy, are completely diverse, and the
amount in controversy exceeds $75,000. 28 U.S.C. § 1132. Venue is proper because the
underlying facts occurred in the Southern District of Florida. 28 U.S.C. § 1391.
DISCUSSION
LEGAL STANDARD
A movant may obtain summary judgment if it “shows that 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.
4
56(a); Celotex Corp. v. Cattrett, 477 U.S. 317, 322 (1986). The movant bears the burden of
meeting this requirement. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). The
movant may discharge this burden by “pointing out to the district court [] that there is an absence
of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325. If the movant
discharges its burden, the burden then shifts to the nonmoving party to establish that there is a
genuine dispute of material fact. Id. at 324. “A mere ‘scintilla’ of evidence supporting the
opposing party’s position will not suffice; there must be enough of a showing that the jury could
reasonably find for that party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990). If the
nonmoving party fails to make a sufficient showing, the movant is entitled to a judgment as a
matter of law. Celotex, 477 U.S. at 323.
When deciding summary judgment, the Court may look to materials in the record such as
depositions, documents, affidavits or declarations, and admissions. Fed. R. Civ. P. 56(c)(3). The
Court reviews all evidence and factual inferences in the light most favorable to the non-moving
party, and resolves all reasonable doubts about the facts in favor of the non-movant. Morton v.
Kirkwood, 707 F.3d 1276, 1280 (11th Cir. 2013).
LLOYD’S GROUNDS FOR SUMMARY JUDGMENT
1.
CONDUCT NOT COVERED
As its first ground for summary judgment, Lloyd’s contends that Brasner, in the
solicitation and sale to Glass, stepped beyond the role of an insurance broker and acted as a
financial investments salesman. Brasner’s error and omissions policy covers “Damages resulting
from any Claim(s) . . . for any Wrongful Act of the Insured in the performance of or failure to
5
perform Professional Services . . . .” Under the policy, Professional Services are defined as “the
marketing, sale or servicing of insurance products . . . .” (Emphasis added).
Rather than selling “insurance products,” Lloyd’s contends that Brasner was actually
selling investment products, specifically stranger-originated-life-insurance financial instruments.
While this contention may be true, it has not been developed adequately in the record. We know
nothing of the back-and-forth between Brasner and Glass that led to Glass’s decision to purchase
life insurance from AXA. Lloyd’s might have used Local Rule 56.1 in this effort, but it failed to
do so. Its repetitive statements that the complaint alleged one fact or another do not satisfy the
rule’s requirements that facts be listed with citations to documents having evidentiary value.
Therefore, the Court concludes that, on this issue, Lloyd’s has failed to carry its burden of
demonstrating an entitlement to summary judgment.
2.
FALSIFICATION EXCLUSION
Lloyd’s second ground for summary judgment is founded upon the falsification
exclusion. Section II.A.2 bars coverage for claims
based upon, arising out of, directly or indirectly relating to or in
any way involving . . . Falsification of any offer of an insurance
contract or document, including but not limited to quotes, binders,
indications or policies.
Lloyd’s contends the term “document” in the exclusion should be give its plain allinclusive meaning, viz., written or printed information used in the marketing, sale or servicing of
insurance products. If correct, this would include insurance applications. GIII, on the other
hand, argues that the term “offer of an insurance contract,” which precedes the word “document”
and the terms “quotes, binders, indications or policies” — albeit introduced by the phrase
6
“including but not limited to” — cabin the term “document” and narrow its definition to
encompass only written or printed information emanating from the insurer listing significant
aspects of proposed coverage. In support of this contention, GIII notes that the phrase “offer of
an insurance contract” by its plain meaning points to a communication from the insurer. By the
same token, Lloyd’s own website defines a “quotation” as a “statement of the premium that an
underwriter requires to underwrite an insurance/reinsurance risk based on the information
supplied by the person seeking cover, either directly or via their broker.” Glossary, Lloyd’s: the
World’s Specialist Insurance Market, http://www.lloyd.com/common/help/glossary (last visited
Nov. 6, 2013). Similarly, Lloyd’s defines an “indication” as a “nonbinding statement by an
underwriter of the likely level of premium that he would charge to underwrite a risk, subject to
the provision of additional information.” Id. The terms “binders” and “policies” also connote
communications from the insurer. A “binder” is an “insurer’s memorandum giving the insured
temporary coverage while the application for an insurance policy is being processed or while the
formal policy is being prepared.”
Black’s Law Dictionary (9th ed. 2009).
Similarly, an
insurance “policy” is a “contract of insurance [or] document detailing such a contract.” Id.
A careful evaluation of both proposed interpretations suggests that neither is
unreasonable.
They are, however, incompatible.
invocation of the exclusion to deny coverage.
Lloyd’s interpretation will permit the
GIII’s interpretation renders the exclusion
inapplicable to the facts of this case, thus allowing coverage. Faced with such a conflict, the
Court has no hesitancy in finding the term “document,” as used in the exclusion, ambiguous.
Under Florida insurance law, if the “relevant policy language is susceptible to more than one
reasonable interpretation, one providing coverage and the [ ] other limiting coverage, the
7
insurance policy is considered ambiguous.” Travelers Indemnity Co. v. PCR, Inc., 326 F.3d
1190, 1193 (11th Cir. 2003) (alteration in original) (quoting Auto-Owners Ins. Co. v. Anderson,
756 So. 2d 29, 34 (Fla. 2000)) (internal quotation marks omitted).
A finding of ambiguity requires the Court to resort to well settled principles of insurance
contract construction. “An ambiguous provision is construed in favor of the insured and strictly
against the drafter.” Swire Pacific Holdings, Inc. v. Zurich Ins. Co., 845 So. 2d 161, 165 (Fla.
2003). “[E]xclusionary provisions which are ambiguous or otherwise susceptible to more than
one meaning must be construed in favor of the insured, since it is the insurer who usually drafts
the policy.” Id. (alteration in original) (citation and internal quotation marks omitted). In this
case, the canon of noscitur a sociis provides additional support to these principles for it holds
that an ambiguous term may be given more precise content by the neighboring words with which
it is associated. All of the terms Lloyd’s elected to use in its falsification exclusion involve
communications from the insurer to the client listing important aspects of the proposed
insurance. Accordingly, the Court concludes that GIII’s proposed interpretation is correct. As
crafted by Lloyd’s, the falsification exclusion is not triggered by a broker-falsified insurance
application.
C.
CRIMINAL CONDUCT EXCLUSION
Lloyd’s third basis for summary judgment is founded upon the “criminal conduct”
exclusion. Section II.A.7 bars coverage for claims
based upon, arising out of, directly or indirectly relating to or in
any way involving . . . Conduct which is fraudulent, dishonest,
criminal, willful, malicious, intentionally or knowingly wrongful,
or otherwise intended to cause damage or injury to personal
property; however, this exclusion shall not apply . . . unless there is
8
a finding or adjudication in any proceeding of such conduct or an
admission by an Insured of such conduct . . . .
Lloyd’s contends that the entry-of-plea proceeding, followed by an adjudication of guilt
in the Circuit Court for the Fifteenth Judicial Circuit of Florida, conclusively establishes that
Brasner engaged in criminal fraud with respect to the AXA/Glass life insurance policies.
Initially, in citing the quantum of proof that could be considered on this issue, Lloyd’s urged the
court to evaluate the probable cause affidavit that led to Branser’s arrest.
That affidavit,
however, is inadmissible hearsay that cannot be considered for summary judgment purposes.
See Jones v. UPS Ground Freight, 683 F.3d 1283, 1293–94 (11th Cir. 2012); see also Shepard v.
United States, 533 U.S. 13 (2005). Thus, the Court will limit its focus to what was said in
Brasner’s presence and to which he assented at the entry-of-plea proceeding. Also, the Court
will consider Brasner’s signed agreement listing the special conditions of probation.
The
statement of facts presented by the prosecutor, to which Brasner assented, indicates that Branser,
between January 1, 2006 and December 31, 2007, engaged in an ongoing scheme to defraud
multiple insurance companies, one of which was AXA, by providing materially false information
on applications. A plea document, signed by Brasner and his attorney, listing various special
conditions of probation was read into the record. Among other conditions, it stated, “No work in
the insurance industry whatsoever. Defendant may continue to receive income from prior placed
insurance renewal income. Excluded from renewal income [are] AXA policies for Walter &
Geoffrey Glass, Altman, Gelch & Sciolino.” (Emphasis in original). The totality of admissible
evidence establishes conclusively that Brasner victimized AXA by making false and material
misrepresentations on insurance applications. Furthermore, the statement of a special condition
of probation which permitted Brasner to receive renewal income from “prior placed insurance,”
9
but prohibited him from receiving renewal income from the Walter & Geoffrey Glass AXA
policies demonstrates that the Glass policies were integral components of Brasner’s scheme to
defraud.
GIII, in an effort to satisfy its burden under Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986), offered an excerpt from Brasner’s deposition. When questioned about his understanding
of the plea, Brasner responded, “I don’t have an independent understanding because I’m not an
attorney, and as I said, I let my attorney handle the day-to-day legal, technical plea arrangements.
I don’t have a legal understanding or even a general understanding of what the definition of it
truly means.” In short, Brasner professed to have no idea about what his plea encompassed.
Thus GIII has failed to demonstrate the existence of a genuine dispute of a material fact. And
the court concludes that no reasonable jury could find that Brasner’s plea and subsequent
adjudication did not encompass the Glass applications and policies.
GIII, of course, asserts that it is not relying on any misrepresentations in the applications
for life insurance, but rather on a “negligent misrepresentation” in the agent certificate. Recall
that Brasner in the agent certificate stated that the information provided to AXA in the
applications for life insurance was “to the knowledge of the Agent, true and accurate . . . .” In
other words, Brasner merely repeated his prior fraudulent misrepresentation.
As such, his
certification to GIII was based upon and arose out of Brasner’s fraudulent, criminal conduct for
which he was adjudicated guilty. Consequently, the criminal conduct exclusion in Lloyd’s
professional error and omissions policy is operative and relieves Lloyd’s of liability to Brasner
and/or GIII.
10
CONCLUSION
For the reasons set forth above, the Court concludes that Lloyd’s has demonstrated its
entitlement to summary judgment.
Accordingly, it is hereby
ORDERED and ADJUDGED that:
1. Plaintiffs Certain Interested Underwriters at Lloyd’s, London’s Motion for Final
Summary Judgment [ECF No. 120] is GRANTED. The Court will enter Final
Judgment by separate order.
2. Defendant The GIII Accumulation Trust Motion for Partial Summary Judgment on
Coverage [ECF No. 117] is DENIED.
DONE and SIGNED in Chambers at West Palm Beach, Florida this 7th
day of
November, 2013.
Daniel T. K. Hurley
United States District Judge
Copies provided to counsel of record
11
For updated court information, visit unofficial webpage at http://www.judgehurley.com
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?