Eleventh Circuit Concludes Significant Litigation Involving Surplus Lines Carrier


On January 18, 2011, the Eleventh Circuit Court of Appeals in Essex Insurance Co. v. Zota brought an end to seven years of litigation and four appellate proceedings, when it affirmed a final declaratory judgment entered in favor of a surplus lines insurer, Essex Insurance Company, following a jury trial. Although the Eleventh Circuit’s decision is brief and unpublished, the Court’s decision and the earlier appeals in the case established certain significant precedent for surplus lines insurers doing business in the State of Florida on issues relating to policy form filing, policy delivery, and the reach of Chapter 627, Florida Statutes to surplus lines carriers.


Mercedes Zota was injured when she fell while painting a mural on the second-story ceiling of a “spec” home under construction in Lighthouse Point, Florida. After the incident, Zota and her husband brought a negligence action against Lighthouse Intracoastal, Inc.; Broward Executive Builders, Inc., the general contractor for the project; and Jack Farji, a 50% shareholder of Lighthouse and the owner of Broward Executive. Lighthouse’s insurer, Essex, then sought declaratory relief in federal district court regarding its obligations with respect to the defendants in the negligence action. After the district court narrowed the issues for trial during summary judgment proceedings, the case proceeded to trial on the two remaining factual issues arising from the policy exclusion at issue:

(1) Whether Lighthouse was a contractor at the time of the construction; and (2) Whether Lighthouse was a builder at the time of the construction. Because the jury found that Lighthouse was a builder, the Essex policy did not provide coverage and final judgment was entered in Essex’s favor.


In the district court, the insured and the injured claimant both argued that the surplus lines insurer’s failure to file its policy forms with the Florida Office of Insurance Regulation (OIR) estopped it from denying coverage based on a policy exclusion. The district court found that while §627.410 applies to surplus lines insurers and it was violated, there was no express penalty for the violation and selectively voiding the exclusion “would raise grave constitutional concerns.” Zota SJ Order (.pdf) (reported at 607 F. Supp. 2d 1340).

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