Global Travel International, Inc. v. Mount Vernon Fire Insurance Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-10227
Non-Argument Calendar
____________________
GLOBAL TRAVEL INTERNATIONAL, INC.,
Plaintiff-Appellant,
versus
MOUNT VERNON FIRE INSURANCE COMPANY,
A foreign corporation,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Florida
D.C. Docket No. 6:21-cv-00716-GAP-GJK
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2 Opinion of the Court 22-10227
____________________
Before WILSON, L UCK , and B RASHER , Circuit Judges.
PER CURIAM:
This is a duty to defend insurance dispute brought by the
insured, Global Travel International, Inc. (GTI), seeking a declara-
tion that Mount Vernon Fire Insurance Company (Mt. Vernon) has
a duty to defend GTI in a breach of contract arbitration proceeding.
GTI appeals from the district court’s grant of summary judgment
in favor of Mt. Vernon. The order held that Mt Vernon had no
duty to defend GTI because the claim fell within a relevant policy
exclusion (exclusion Q). An appeal ensued. At issue now is
whether the district court erred by holding that the amended arbi-
tration demand’s language was akin to “conclusory buzz words”
that do not trigger coverage.
After careful review of the policy and the allegations in the
amended arbitration demand, we affirm the district court’s holding
for the reasons set out below.
I. Background
A. The Policy
GTI is a travel agency that provides hotel reservation and
other travel-related services to its customers, primarily over the in-
ternet. Mt. Vernon insured GTI under a professional errors and
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22-10227 Opinion of the Court 3
omissions liability insurance policy (the policy). At all relevant
times, Mt. Vernon insured GTI under the policy.
The Parties agree that coverage part A is the relevant cover-
age part for this dispute. Coverage part A states that “the Company
will pay on behalf of an Insured, Loss and Claim Expenses resulting
from a Claim . . . such Claim must be reported to the Com-
pany . . . .” Doc. 1-2 at 39 (emphasis in original). Exclusion Q to
coverage part A provides the condition that:
The Company shall not be liable for Loss or Claim
Expenses on account of any Claim or Cyber Event:
…
Q. arising out of, directly or indirectly resulting from
or in consequence of or in any way involving actual
or alleged contractual liability, obligation, warranty,
representation or guarantee including:
1. any breach of a written contract…
Except this exclusion shall not apply to:
…
(3) unintentional breach of a written contract result-
ing from the rendering of or failure to render Profes-
sional Services.
Doc. 1-2 at 24, 26 (emphasis in original).
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4 Opinion of the Court 22-10227
B. The Underlying Arbitral Demand
GTI entered into a Merchant Card Processing Agreement
with Qualpay, Inc. (Qualpay), a credit card processor, to help carry
out GTI’s business as a travel agent. Under the agreement,
Qualpay “agreed to process GTI’s credit and debit card transac-
tions, and GTI, as Qualpay’s merchant, agreed to pay Qualpay cer-
tain fees and expenses associated with that processing activity,” in
addition to reimbursing Qualpay for “chargebacks.”1 Doc. 1-6 at
6.
In February 2019, GTI discovered that an employee respon-
sible for reconciling financial transactions had been using his posi-
tion to engage in fraudulent activities that resulted in approxi-
mately $1.1 Million being embezzled from company funds. Con-
sequently, GTI was left unable to fulfill many financial commit-
ments, including its payment obligations to Qualpay under the Pro-
cessing Agreement. Qualpay began arbitration proceedings for
breach of contract. The demand first alleged in paragraph 11 that
1 The Merchant Card Processing Agreement describes a chargeback as an oc-
currence where “a customer contacts the bank issuing a credit or debit card
and asks that a sales transaction be reversed… Upon the initiation of a charge-
back by a consumer, funds that were previously paid to a merchant (such as
GTI) for a transaction are debited back from its processor (here, Qualpay),
leaving the processor to collect the chargeback from its merchant customer.”
Doc. 1-6 at 6.
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22-10227 Opinion of the Court 5
GTI2 and its guarantor have not paid Qualpay for chargebacks or
fees as required under their agreement, which left Qualpay “hold-
ing the bag” for more than $300,000. Doc. 1-6 at 7.
Later, Qualpay filed an amended demand that changed only
paragraph 11; the amendment added that: “[u]pon information and
belief, these breaches of contract were not reflections of intentional
obstinacy by GTI or based upon a denial that the amounts are due,
but rather were unintentional and caused by an embezzlement
event within GTI that left it unable to pay its debts and obliga-
tions.” Doc. 1-6 at 2 (the amended language).
GTI notified Mt. Vernon after each demand, requesting that
they provide a defense under the policy. Both times, Mt. Vernon
declined coverage, concluding that the claims asserted against GTI
were not covered under the policy.
GTI subsequently filed an action seeking declaratory judg-
ment that Mt. Vernon must defend GTI in the arbitration proceed-
ing. The parties cross motioned for summary judgment on the is-
sue. The district court granted summary judgment for Mt.
Vernon, finding that the amended arbitration demand falls within
Exclusion Q. GTI timely appealed.
II. Discussion
2 The initial demand incorrectly stated that a demand for payment was made
upon Qualpay. The language is corrected in the amended demand to reflect
that demand for payment was made to GTI and its guarantor.
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6 Opinion of the Court 22-10227
On appeal, GTI argues that the amended language is enough
to place the arbitration demand within the exception to Exclusion
Q and trigger the duty to defend. Mt. Vernon argues that the dis-
trict court was correct because Qualpay’s claim is based upon an
alleged breach of contract, and simply calling GTI’s alleged breach
“unintentional,” as the amended language does, amounts to a con-
clusory ‘buzz word.’
We review a district court’s order granting summary judg-
ment de novo
. Huff v. DeKalb County, 516 F.3d 1273, 1277 (11th
Cir. 2008). Construction of an insurance contract is a question of
law to be reviewed de novo.
Technical Coating Applicators, Inc.
v. United States Fid. & Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998).
In this diversity case, the parties have agreed that Florida substan-
tive law applies.
See Provau v. State Farm Mut. Auto. Ins., 772 F.2d
817, 819 (11th Cir. 1985). In Florida, ordinary contract principles
govern the interpretation and construction of insurance policies.
Atlantic Cas. Ins. v. Innovative Roofing Sys., Inc., 411 F. Supp. 3d
1287 (M.D. Fla 2019). “[T]he central inquiry in a duty to defend
case is whether the complaint ‘alleges facts that fairly and poten-
tially bring the suit within policy coverage.’”
Hartford Accident &
Indem. Co. v. Beaver, 466 F.3d 1289, 1292 (11th Cir. 2006) (quoting
Jones v. Fla Ins. Gar. Ass’n., 908 So. 2d 435, 442–43 (Fla. 2005) (per
curiam));
see also State Farm Fire & Cas. Co. v. Steinberg, 393 F.3d
1226, 1230 (11th Cir. 2004) (“Under Florida law, the general rule is
that an insurance company’s duty to defend an insured is deter-
mined solely from the allegations in the complaint against the
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22-10227 Opinion of the Court 7
insured, not by the true facts of the cause of action against the in-
sured, the insured’s version of the facts or the insured’s defenses.”).
But “conclusory ‘buzz words’ unsupported by factual allegations
are not sufficient to trigger coverage.”
Steinberg, 393 F.3d at 1230
(citing
Amerisure Ins. v. Gold Coast Marine Distributors, Inc., 771
So.2d 579, 582 (Fla. Dist. Ct. App. 2000)). In addition, inferences
are insufficient to trigger coverage.
Fun Spree Vacations, Inc. v.
Orion Ins., 659 So. 2d 419, 421–22 (Fla. Dist. Ct. App. 1995).
The threshold question in this case is whether the amended
language sufficiently alleges unintentional conduct. The district
court held that it does not, but instead alleges only that GTI
breached the Qualpay contract because it could not afford to pay
the fees due under the agreement—a statement that amounts to a
conclusory ‘buzz word.’ We agree.
The parties agree that GTI had a contractual obligation to
pay Qualpay for fees associated with the service provided, and that
Qualpay initiated the underlying action as a result of the breach of
that obligation. The amended language creates, at most, an infer-
ence into the circumstances that created the breach. Qualpay’s
“belief” that an “embezzlement event” caused the breach, standing
alone, is not enough to allege an unintentional breach of contract.
As the district court noted, Qualpay needed to point to an alleged
fact that would show the breach is unintentional. Here, the
amended demand alleges only that Qualpay
believes the breach
was unintentional.
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8 Opinion of the Court 22-10227
Additionally, the use of the word ‘unintentional’ is not
enough to bring the claim within coverage because, without facts
to support its claim, it is a conclusory buzz word meant to unlock
coverage. For these reasons, the amended demand does not allege
facts to support Qualpay’s belief that an embezzlement event re-
sulted in an unintentional breach of contract.
Because the underlying action seeks to recover for breach of
contract, and the amended language amounts to a conclusory
‘buzz word’ that infers Qualpay’s subjective belief, we AFFIRM.
AFFIRMED.
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