Defense Attorneys Say Morales Maintains Viability of Comp as Exclusive Remedy

by Sherri Okamoto (Legal Reporter) - Monday, December 8, 2014

State: Florida Topic: Top Defense attorneys in and around the state are celebrating last week's decision from the Florida Supreme Court that they say establishes the continuing viability of the state comp system as the exclusive remedy for an industrial injury.

The high court ruled unanimously that the family of a landscaper who was killed by a falling tree could not collect a tort recovery in addition to the workers' compensation benefits they had already received from the Zenith Insurance Co.

Tallahassee attorney William Wells Large said he viewed Thursday's decision in Morales v. Zenith as a sign that "the exclusive remedy doctrine is alive and well in Florida, and that the workers' compensation system remains the only redress available for injured employees in the workplace."

Large filed an amicus brief in the proceedings on behalf of the Florida Justice Reform Institute, supporting Zenith.

"I believe the Morales case is a strong decision that will be cited by other appellate courts in the near future regarding the exclusive remedy doctrine," he said Friday. He also said the decision was an indication that "attempts by the claimants bar to get around the workers' compensation system are not going to be well-taken."

Claimant attorneys have been mounting increasing attacks on the Florida comp system in recent years, arguing that its limited remedies are inadequate.

Earlier this year, a Miami trial court judge agreed that the remedies for workers under the comp system have been so curtailed by the Legislature that it is a constitutionally inadequate substitute for the tort remedy it was designed to replace. That case has become State of Florida v. Florida Workers' Advocates and its currently pending before the state's 3rd District Court of Appeal.

Two other cases involving narrower constitutional challenges directed at the statutory limits on temporary total disability benefits and attorney fees are also pending at the Florida Supreme Court level.

Chief Judge of Compensation Claims David Langham said Friday that all of the cases "have the potential to be monumental," but whether they will be remains to be seen.

He noted that participants in the comp system have been waiting, with bated breath, to see what the Supreme Court will do with each of these matters. From what he's been seeing and hearing

though, Langham said he got the impression that most people thought the Morales decision had the potential to, but ultimately "didn't really change anything."

Rayford H. Taylor of Stiles Taylor & Grace – who represented the Associated Industries of Florida as an amicus for Zenith – said Friday that "what we were really talking about in Morales was whether there was another exception to tort immunity under this scenario."

Normally, a worker is limited to only receiving workers' compensation benefits for an industrial accident – but the family of Santana Morales Jr. had been able to obtain a default judgment against his former employer, Lawns Nursery and Irrigation Designs, which they insisted Zenith was obligated to pay.

Zenith had provided an insurance policy to Lawns, to cover both its workers' compensation and employer liability obligations.

According to "Part I" of the policy it issued to Lawns, Zenith would cover any benefits the landscape company might be required to pay under Florida workers' compensation law. "Part II" of the policy provided coverage of up to $100,000 for bodily injury sustained by an employee, although it stated that it was not applicable to "any obligation imposed by a workers' compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law."

Zenith paid workers' compensation benefits to Morales' family pursuant to "Part I" of the policy.

Morales' family later filed a wrongful death action against Lawns in Florida circuit court, alleging that Lawns' negligence in failing to secure the palm tree that fell on Morales was what had caused his fatal accident.

Zenith agreed to defend Lawns in accordance with "Part II" of the policy, but the company failed to cooperate in the litigation. Eventually, the attorney Zenith hired withdrew as counsel for Lawns.

After Lawns failed to respond to the family's discovery requests, the trial judge struck Lawns' pleadings as a sanction and entered a default judgment in favor of the family for $9.525 million in damages.

Meanwhile, Zenith continued to pay workers' compensation benefits to the Morales family. Then, in August 2003, Zenith agreed to settle the family's comp claim for a lump-sum payment of $20,000.

The settlement provided that the family waived any right to additional benefits under the Florida Workers' Compensation Act and that the execution of the settlement agreement would constitute an election of remedies by the family.

After a judge of compensation claims approved the settlement agreement, the Morales family sued Zenith seeking payment of the $9.525 million tort judgment against Lawns. The family argued that the carrier had to pay the judgment under Part II of the Lawns policy.

Zenith removed the dispute to the federal trial court for the Middle District of Florida. A district court judge then granted summary judgment in favor of Zenith.

Since Florida law provides workers' compensation benefits as the exclusive remedy for an employee injury caused by an employer's negligence, the district court judge reasoned that the verdict in the family's negligence suit against Lawns was an "obligation imposed by" Florida's Workers' Compensation Act that fell within the policy exclusion in "Part II."

The Morales family appealed to the 11th Circuit, which then turned to the Florida Supreme Court for guidance on three issues, since the 11th Circuit had to apply Florida law to the dispute.

As an initial matter, the 11th Circuit asked whether the family even had standing to bring a breach-of-contract claim against Zenith based on a policy it has issued to Lawns. If so, then the 11th Circuit asked whether the coverage exclusion in Part II applied to the family's claim against Zenith for payment of a judgment from a tort action.

The 11th Circuit also asked whether the release the Morales family had signed in connection with the settlement of its comp claim prohibited them from collecting on the default judgment.

A unanimous Florida Supreme Court on Thursday answered all three questions affirmatively.

Under Florida law, the court said, a judgment creditor has standing to bring suit against a liability insurer that may owe coverage for the judgment, so the Morales family could sue Zenith. Under the plain language of Zenith's policy to Lawns, however, the court said, the estate couldn't actually recover from the carrier.

The court reasoned that if Lawns’ negligence caused Morales’ death, as the family alleged, then the family's exclusive remedy lay in the comp system. Thus, the court said, the estate didn't have a right to bring the tort action and secure the default judgment.

Additionally, the court said, the release the family executed in the settlement of their comp claim precluded it from collecting the tort judgment from Zenith.

Taylor said Friday that he thought the court reached the right conclusion on each of these issues, as its decision was "consistent with prior cases and consistent with what most courts in other states have held."

He said that most of the insurance policies he's seen for both comp and employer liability are worded the same way as the Zurich policy in this case, and to his knowledge, "no court has said you can get benefits under Part I and then sue under Part II."

If the family could do so, Taylor said it "wouldn't have caused ripples that would have caused waves." Every injured worker "would be entitled to get comp with the left hand and then sue the employer or carrier with the right," even after the employer or carrier paid the worker all the comp benefits he was entitled to receive, and the worker agreed to limit himself to the comp remedy, Taylor said.

Bill Rogner of Hurley, Rogner, Miller, Cox, Waranch & Westcott represented the Florida Association of Insurance Agents in supporting Zenith's position in the case.

He said Thursday that he was "very pleased with the ruling, as it properly recognized that Part I and Part II of the standard Florida workers' compensation policy are alternate coverages."

Since Part I covered "the unfortunate death of Mr. Morales," Rogner said he thought, "Part II of the policy should never have been implicated." He said he also believed that the settlement agreement between the Morales family and Zenith "clearly elected workers’ compensation coverage (Part I) as the sole remedy," so the Supreme Court's opinion "affirms what we believed all along."

Katherine Eastmoore Giddings of Akerman LLP – who represented the Florida Justice Reform Institute and the Florida Chamber of Commerce as Zenith amici – said she too was "very pleased" with Thursday's ruling.

"The court's decision confirms that releases contained in workers' compensation settlement agreements are valid – which brings needed certainty to both employers and employees alike," she opined. "Given that workers' compensation benefits were already paid in this case, the court's prohibiting the estate's attempted collection of the $9.5 million tort judgment against the employer's insurance company was the right decision."

Defense attorney George Kagan of Miller Kagan Rodriguez & Silver said that based upon his reading of Thursday's decision, it set a helpful precedent for employers and carriers in Florida.

"It reaffirms the strength of a release when one is entered into and validates the principle of the exclusive remedy," he remarked.

What he said he liked about it was that the court basically "turned a deaf ear" to the family's argument that the comp claim release was not binding on the estate since Morales' widow had signed the release in her capacity as a surviving spouse and guardian of Morales' four minor children, not her capacity as the representative of the estate.

Kagan said he frequently sees claimants make similar arguments to keep an employer's lien from attaching to a third-party recovery, so he was glad the court rejected it in this case.

Tracy Raffles Gunn and Lee D. Gunn IV of Gunn Appeals and the Gunn Law Group represented the Morales family before the Florida Supreme Court. They could not be reached for comment Friday.

William Spivey, Courtney M. Keller, Elliott Scherker, Julissa Rodriguez and Jay A. Yagoda of Greenberg Traurig represented Zurich.

Spivey said Friday that the defense would not be making immediate comment on the decision, which is available here.

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