          Supreme Court of Florida
                                    ____________

                                    No. SC11-2320
                                    ____________



             INTERVEST CONSTRUCTION OF JAX, INC., et al.,
                            Appellant,

                                           vs.

               GENERAL FIDELITY INSURANCE COMPANY,
                              Appellee.

                                  [February 6, 2014]

QUINCE, J.

      This case is before the Court for review of two questions of Florida law

certified by the United States Court of Appeals for the Eleventh Circuit that are

determinative of a cause pending in that court and for which there appears to be no

controlling precedent. We have jurisdiction. See art. V, § 3(b)(6), Fla. Const. For

the reasons that follow, we hold that the insured in this case can use the payments

to it from a third party to satisfy the self-insured retention provision.

                  FACTUAL AND PROCEDURAL HISTORY
      This case involves the terms of a general liability insurance contract entered

into by General Fidelity Insurance Company (General Fidelity) with Intervest

Construction of Jax, Inc., and ICI Homes, Inc. (ICI). The dispute arose out of a

personal injury lawsuit filed against ICI by an injured homeowner.

      In 2000, ICI contracted with Custom Cutting, Inc. (Custom Cutting) to

provide trim work, including installation of attic stairs in a residence that ICI was

in the process of building. The contract between Custom Cutting and ICI

contained an indemnification provision requiring Custom Cutting to indemnify ICI

for any damages resulting from Custom Cutting’s negligence. In April 2007,

Katherine Ferrin, the owner of a residence constructed by ICI, fell while using the

attic stairs installed by Custom Cutting. This fall resulted in serious injuries to

Ferrin. Ferrin filed suit against ICI for her injuries; she did not file suit against

Custom Cutting. In turn, ICI sought indemnification from Custom Cutting under

the terms of the subcontract.

      At the time of the accident, Custom Cutting maintained a commercial

general liability insurance policy with North Pointe Insurance Company (North

Pointe). ICI was not an additional insured under Custom Cutting’s policy with

North Pointe. ICI held the General Fidelity policy at the time of the accident.

Contained in the General Fidelity policy was a Self–Insured Retention

endorsement (“SIR”) in the amount of $1 million. The SIR endorsement stated



                                          -2-
that General Fidelity would provide coverage only after the insured had exhausted

the $1 million SIR. The policy also included a transfer of rights clause granting

the insurer some subrogation rights, the extent to which the parties dispute.

      ICI, Custom Cutting, North Pointe, General Fidelity, and Ferrin participated

in a mediation of Ferrin’s claim. At the mediation, the parties agreed to a $1.6

million settlement of Ferrin’s claim. As part of the settlement, North Pointe agreed

to pay ICI $1 million to settle ICI’s indemnification claim against Custom Cutting.

ICI, in turn, would pay that $1 million to Ferrin. The instant dispute then arose as

to whether ICI or General Fidelity was responsible for paying Ferrin the remaining

$600,000.

      Because of the disagreement between General Fidelity and ICI over

coverage, North Pointe paid the $1 million into the trust account of ICI’s counsel

and each party reserved all rights and claims against the other. Approximately one

month later, both ICI and General Fidelity each paid $300,000 to Ferrin, in

addition to the $1 million from North Pointe, in order to settle Ferrin’s claim for

the full $1.6 million. However, the parties reserved the right to bring their claims

against each other in order to be reimbursed for their contribution to the settlement.

      ICI filed suit in the Circuit Court of the Fourth Judicial Circuit, in and for

Duval County, Florida for breach of contract and a declaratory judgment seeking

return of the $300,000 ICI paid above the $1 million indemnification payment and



                                         -3-
for attorneys’ fees and costs incurred in the Ferrin lawsuit. General Fidelity then

removed the case to the United States District Court for the Middle District of

Florida based on diversity jurisdiction. General Fidelity filed a counterclaim

seeking return of the $300,000 it had paid to Ferrin. The parties filed cross-

motions for summary judgment.

         In its complaint, ICI alleged that General Fidelity failed to perform its

obligation under the policy by refusing to pay $600,000 of the $1.6 million

settlement. ICI maintained that Custom Cutting/North Pointe’s contribution of $1

million to settle ICI’s indemnification claim, which was then passed on to Ferrin,

satisfied the SIR obligation in the policy and General Fidelity was required to pay

the remaining $600,000. General Fidelity argued that North Pointe’s $1 million

payment to settle the indemnity claim did not reduce the SIR because the payment

originated from Custom Cutting, not ICI. Thus, General Fidelity maintained that

the terms of the policy required ICI to pay the additional $600,000 to settle Ferrin’s

claim.

         The district court denied ICI’s motion for summary judgment but granted

General Fidelity’s motion, holding that ICI could not use the $1 million

indemnification payment to satisfy the SIR. The district court cited four California

cases addressing similar SIR provisions in insurance policies. Based on the

reasoning in those California cases, the district court concluded that the language



                                           -4-
in the SIR provision at issue in this case is unambiguous because it provides that

the “Retained Limit” must be paid by the insured and that the “Retained Limit”

will only be reduced by payments made by the insured. Thus the district court

found that the indemnity payment that ICI received from Custom Cutting did not

exhaust the SIR obligation as required by the language of the policy. Additionally,

the district court found that even if ICI had paid the $1 million out of pocket,

General Fidelity had paid out the additional $600,000, and ICI was indemnified by

Custom Cutting at a later date, ICI would still not have exhausted the SIR as

required by the policy because the “transfer of rights” provision in section IV(8) of

the policy provides that if the insured has rights to recover all or part of any

payment that the insurer has made, those rights are transferred to the insurer.

Accordingly, the district court entered judgment in favor of General Fidelity for

$300,000.

      ICI appealed the district court’s ruling to the Eleventh Circuit Court of

Appeals. The Eleventh Circuit identified two issues that governed the outcome of

the case, but concluded there was no controlling Florida law on either issue.

Unlike the district court, the Eleventh Circuit did not find the California cases

persuasive in interpreting the General Fidelity policy because the California

policies were materially different. Thus, the Eleventh Circuit certified two

questions to this Court for resolution:



                                          -5-
      1. DOES THE GENERAL FIDELITY POLICY ALLOW THE
      INSURED TO APPLY INDEMNIFICATION PAYMENTS
      RECEIVED FROM A THIRD-PARTY TOWARDS
      SATISFACTION OF ITS $1 MILLION SELF-INSURED
      RETENTION?

      2. ASSUMING THAT FUNDS RECEIVED THROUGH AN
      INDEMNIFICATION CLAUSE CAN BE USED TO OFFSET THE
      SELF-INSURED RETENTION, DOES THE TRANSFER OF
      RIGHTS PROVISION FOUND IN THE GENERAL FIDELITY
      POLICY GRANT SUPERIOR RIGHTS TO BE MADE WHOLE TO
      THE INSURED OR TO THE INSURER?

Intervest Constr. of Jax, Inc. v. Gen. Fid. Ins. Co., 662 F.3d 1328, 1332-33 (11th

Cir. 2011). We address each question in turn below.

                                    ANALYSIS

      Under Florida law, the interpretation of insurance contracts, such as the

commercial general liability policy in this case, is governed by generally accepted

rules of construction. U.S. Fire Ins. Co. v. J.S.U.B., Inc., 979 So. 2d 871, 877 (Fla.

2007). “Insurance contracts are construed according to their plain meaning.

Ambiguities are construed against the insurer and in favor of coverage.” Taurus

Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So. 2d 528, 532 (Fla. 2005).

However, courts only look to the rules of construction “when a genuine

inconsistency, uncertainty, or ambiguity in meaning remains after resort to the

ordinary rules of construction.” Id. (quoting State Farm Mut. Auto. Ins. Co. v.

Pridgen, 498 So. 2d 1245, 1248 (Fla. 1986)). Courts may not “rewrite contracts,

add meaning that is not present, or otherwise reach results contrary to the


                                         -6-
intentions of the parties.” Id. (quoting Pridgen, 498 So. 2d at 1248). Further, “in

construing insurance policies, courts should read each policy as a whole,

endeavoring to give every provision its full meaning and operative effect.”

J.S.U.B., 979 So. 2d at 877 (quoting Auto-Owners Ins. Co. v. Anderson, 756 So.

2d 29, 34 (Fla. 2000)). “Although exclusionary clauses cannot be relied upon to

create coverage, principles governing the construction of insurance contracts

dictate that when construing an insurance policy to determine coverage the

pertinent provisions should be read in pari materia.” Id. (quoting State Farm Fire

& Cas. Co. v. CTC Dev. Corp., 720 So. 2d 1072, 1074-75 (Fla. 1998)).

        The text of the SIR endorsement in the instant case provides, in pertinent

part:


               THIS ENDORSEMENT CHANGES THE POLICY.
                      PLEASE READ IT CAREFULLY

                          SELF-INSURED RETENTION
                                Per Occurrence

                Self-Insured Retention: $1,000,000 Per Occurrence
                        Including Loss Adjustment Expense

In consideration of the premium charged, it is agreed the insurance afforded by the
policy to which this endorsement is attached is subject to the following additional
terms, conditions and provisions. In the event of a conflict between any of the
terms, conditions or provisions of the policy and this endorsement, this
endorsement will control the application of insurance to which the policy applies.

Unless otherwise specified, all terms used in this endorsement have the meaning
set forth in the policy.


                                         -7-
1. The Self-Insured Retention, shown above, applies to each and every
“occurrence” or offense made against any insured, to which this
insurance applies, irrespective of the number of claims which may be
joined in to any one “suit” or claim.

2. Our total liability will not exceed the Limits of Insurance as
specified in the policy Declarations, Coverage Parts or endorsements.
The Limits of Insurance will apply only in excess of the Self-Insured
Retention, hereinafter referred to as the “Retained Limit.”

3. We have no duty to defend or indemnify unless and until the
amount of the “Retained Limit” is exhausted by payment of
settlements, judgments, or “Claims Expense” by you.

....

5. Should any claim arising under this policy result in a settlement or
judgment, including “Claims Expense” incurred by the insured or on
the insured's behalf, in excess of the “Retained Limit,” we will pay
those amounts in excess of the “Retained Limit” to which this
insurance applies subject to the Limits of Insurance as specified in the
Declarations.

6. The “Retained Limit” will only be reduced by payments made by
the insured.

....

11. With respect to any claim payable under this insurance and subject
in whole or in part to the “Retained Limit” as provided in this
endorsement, we will have the right, but not the obligation to assume
the control of said claim and to pay any part of or all of the amount of
any such loss including “Claims Expense” within the “Retained
Limit” on behalf of and for the account of the insured to affect
settlement of said claim. Amounts paid by us pursuant to this
paragraph will be reimbursed to us by the insured within ten (10) days
from the date of our written request to the insured. We will have the
right to make partial recoveries from the insured when partial



                                  -8-
      settlements or “Claims Expense” are incurred by us within the
      “Retained Limit” as provided by this endorsement.

      ....

      14. The insolvency, bankruptcy, receivership of the insured, or any
      refusal by or inability of the insured to satisfy its obligations pursuant
      to this endorsement will not reduce the “Retained Limit” as set forth
      in the endorsement, nor will it require us to pay any amounts within
      the “Retained Limit.” The payment of the “Retained limits” by the
      insured is a condition precedent for our obligation to pay any sums
      either in defense or indemnity and we shall not pay any such sums
      until and unless the insured has satisfied its “Retained limits.”

The underlined portions of the endorsement were cited by the district court as

unambiguously requiring the insured to pay the “Retained Limit” from his or her

own funds.

      Both parties filed motions for summary judgment on the issue of whether

ICI’s self-insured retention obligation was exhausted by an indemnification made

by one of its subcontractors. The district court denied ICI’s motion and granted

General Fidelity’s motion, entering judgment in its favor for $300,000. Intervest

Constr. of Jax, Inc. v. Gen. Fid. Ins. Co., Case No. 3:09-cv-00894-HES-JRK (M.D.

Fla. Apr. 22, 2010). The district court recognized that no Florida law addressed

this narrow issue and cited three California decisions as persuasive authority. Id. at

6. The cited cases included Vons Cos. v. United States Fire Insurance Co., 92 Cal.

Rptr. 2d 597 (Ct. App. 2000), Travelers Indemnity Co. v. Arena Group 2000, L.P.,

2007 WL 935611 (S.D. Cal. Mar. 8, 2007), and Forecast Homes, Inc. v. Steadfast



                                         -9-
Insurance Co., 105 Cal. Rptr. 3d 200 (Ct. App. 2010). The district court briefly

summarized the reasoning in the cases and noted that “the instant case does not fall

directly in line with any of the policy language discussed” in these cases. Intervest

Constr., Case No. 3:09-cv-00894-HES-JRK , slip op. at 8. However, the district

court found that the SIR endorsement in the policy repeatedly stated that the

retained limit must be paid by the insured and that the limit would only be reduced

by payments made by the insured. The district court found these terms to be

unambiguous and required ICI to exhaust the SIR by payment of its own funds, not

by application of the indemnification funds. Id.

      On appeal, the Eleventh Circuit stated that the crux of the dispute between

the parties focuses on two provisions of the General Fidelity policy, the SIR

endorsement and the transfer of rights clause. 1 Intervest Constr., 662 F.3d at 1329.

The Eleventh Circuit noted that the particular language at issue in the General

Fidelity policy is different from the language in the California cases.2 Id. at 1330.



       1. The transfer of rights clause is set forth and addressed in the analysis of
the second certified question below.

       2. The Eleventh Circuit also cited a fourth California case as being
materially different from the instant case. The Eleventh Circuit noted in a footnote
that the SIR endorsement at issue in Insurance Co. of the State of Pennsylvania v.
Acceptance Insurance Co., 2002 WL 32515066 (C.D. Cal. Apr. 29, 2002),
contained a provision expressly addressing the possibility that the insured had
other insurance covering the same claims.



                                        - 10 -
The Eleventh Circuit considered these distinctions to be “potentially significant”

and found the policies in the California cases to be “materially different for two

reasons: (1) the General Fidelity Policy, unlike those policies examined by other

courts, does not contain an explicit provision addressing the precise issue in

question, and (2) the language of the General Fidelity Policy is arguably less

restrictive than the language of the policies at issue in those cases.” Id. (footnotes

omitted). The Eleventh Circuit explained that “[r]equiring that a payment be made

from one’s ‘own account’ is not necessarily the same as requiring that the retained

limit be paid ‘by you’.” Id. In fact, the Eleventh Circuit reasoned that “a strong

argument could be made that ICI exhausted its SIR because it paid for the

protection afforded in the indemnification clause; to wit, ICI paid for that

indemnity protection in the purchase price of the Custom Cutting subcontract and

therefore hedged its retained risk, just as it could have paid for a loan or paid a

premium on an insurance policy.” Id. Thus the Eleventh Circuit expressed

skepticism of the district court’s analysis of this issue of Florida law. Id. at 1330-

31. The Eleventh Circuit also noted that the policy at issue here “appears on its

face to be more permissive” than those in the California cases because it did not

contain any other provision requiring payments directly from the insured’s own

account or expressly prohibiting the use of indemnification payments to satisfy the

SIR. Id. at 1331.



                                         - 11 -
      Although each of the California cases cited by the district court and the

Eleventh Circuit addressed the satisfaction of a SIR obligation, none involved the

same policy language at issue here. What the cases have in common with each

other, and with the resolution of the instant case, is that the policy language

controlled—because it either clearly addressed or was ambiguous on the issue of

how or by whom the SIR could be paid.

      Vons involved an issue similar to the one presented here. A person was

injured by a pallet jack being operated by a Vons employee in the common area of

a shopping center owned by Vons’ landlord, Longs Drug Stores (Longs). Vons, 92

Cal. Rptr. 2d at 599. The victim sued Vons for his injuries. Vons in turn cross-

complained against Longs, alleging that Longs had expressly agreed to indemnify

Vons for injuries that occurred in the common area and that Longs was partially to

blame for the accident. Id. As part of Vons’ lease agreement with Longs, Vons

was named an additional insured under Longs’ comprehensive general liability

(CGL) insurance policy. The insurance policy contained a SIR endorsement, but it

had been exhausted at the time the injured man filed his complaint. Thus the

insurance policy provided first dollar coverage for the victim’s injuries. Id.

      Vons was also insured under its own CGL policy issued by U.S. Fire. The

Vons policy provided $1 million in coverage, but also included a $1 million SIR

endorsement. The SIR endorsement in the Vons policy also provided that it was



                                        - 12 -
“subject to the limits of liability, exclusions, conditions, and other terms of the

policy to which this agreement is attached . . .” and that “all other terms and

conditions of this Policy remain unchanged.” Id. Longs’ insurer issued a $1

million check to Vons as an additional insured under the Longs policy; Vons

contributed $539,905 of its own funds to pay all of the settlement to the injured

man. Vons and U.S. Fire disagreed on whether the $1 million SIR in the Vons

policy would be deemed exhausted if that sum were paid on behalf of Vons as an

additional insured under the Longs policy.

      Vons sued U.S. Fire for declaratory relief on the issue. The trial court ruled

that U.S. Fire had to reimburse Vons the $539,905 contributed to the settlement.

The trial court determined that the Vons policy did not limit the source of the $1

million SIR in any way and did not require Vons to pay the SIR exclusively from

its own pocket. Id. at 600. U.S. Fire appealed to the California appellate court,

which concluded that the “subject to” language in the SIR endorsement made the

endorsement subordinate to the other policy terms and conditions, including the

“other insurance” provision that made the insurance excess in the event that other

insurance was available. Id. at 604-05. The court explained that the SIR standing

alone would ordinarily make the Vons policy excess, but this provision was

expressly made subject to policy terms which also provided that U.S. Fire’s

coverage was excess if any other valid insurance were available for the same



                                         - 13 -
coverage. The appellate court concluded that the most reasonable construction of

this provision permitted the payment of the SIR amount through other valid and

collectible insurance. Id. at 605. At the very least, the court stated, it rendered the

SIR ambiguous on this point. Id. As the appellate court explained:

      Nowhere does the SIR expressly state that Vons itself, not other
      insurers, must pay the SIR amount. Because the SIR was subject to
      the other insurance provisions, which also made the Vons policy
      excess if there were another policy covering the accident, Vons as a
      reasonable insured could read the policy as permitting the use of other
      insurance proceeds to cover the SIR amount.

Id.

      Another case which involved the question of whether a policy required the

SIR to be paid from the insured’s own account is Arena Group. The underlying

action involved personal injuries sustained when a two-ton marquee sign at the San

Diego Sports Arena fell on two individuals. Arena Group, 2007 WL 935611, at

*1. The Arena Group was an additional insured under a policy that included a SIR

of $500,000. The court noted that “a policy may prohibit the use of other

insurance to satisfy a retention by including a policy provision requiring the

insured to personally pay the retained amount.” Id. at *5. The court focused on

the language of the policy, which stated, “Insured shall pay from its own account

all amounts within the Retained Amount” and “The Retained Amount is the

responsibility of the Insured and is to be paid from the Insured’s own account.” Id.

Thus, the court concluded, the policy “unambiguously requires the Insured to pay

                                         - 14 -
the Retained Amount from its ‘own account’ ” and payments made by Arena

Group’s other insurers to the injured parties did not satisfy the SIR. Id.

      The language of the insurance policy in Forecast Homes was even more

explicit, expressly limiting who could satisfy the SIR. The SIR endorsement

required that the named insured “make actual payment” of the SIR amount and

provided that “[p]ayments by others, including but not limited to additional

insureds or insurers, do not serve to satisfy the self-insured retention.” Forecast

Homes, 105 Cal. Rptr. 3d at 208. The court found that “[t]his section of the policy

regarding who can make the payment to satisfy the SIR is clear and unambiguous.”

Id.

      Acceptance Insurance involved a number of underlying actions for

construction defects and property damage in homes based on work performed by a

developer of residential real estate and the developer’s subcontractors. 2002 WL

32515066 at *1. The developer had a number of insurance contracts, including

two with Insurance Company of the State of Pennsylvania (ISOP) and a

comprehensive general liability policy with North American Capacity Insurance

Company (NACIC). Id. Pursuant to its contracts, ISOP expended substantial

funds in defending the underlying actions and making settlement payments. ISOP

sought indemnification from NACIC for a portion of the expenditures. Id. The

NACIC policy included a $250,000 per occurrence SIR endorsement. NACIC



                                        - 15 -
argued that the SIR had not been satisfied because the developer did not pay any

portion of its defense or settlement costs. Id. at *2. Those costs were paid by

ISOP and other insurance companies not parties to the action between ISOP and

NACIC. Thus, the issue to be resolved was whether the NACIC insurance contract

required the developer to fund the SIR itself.

      The court determined that the SIR provision “clearly and unambiguously”

required the developer to be responsible for satisfying the SIR with its own funds,

regardless of any insurance coverage applicable to the underlying actions. Id. at

*7. The SIR contained a provision stating that regardless of other insurance, the

insured would continue to be responsible for the full SIR before the limits of

insurance under the NACIC policy would apply. Id. The court noted that this

provision in the SIR endorsement would be meaningless if not interpreted as

requiring the insured to satisfy the SIR with its own funds. Id. Otherwise, the

provision “would be reduced to simply reiterating the more general terms” of the

policy. Id. Additionally, the endorsement expressly stated that it changed the

policy and that it controlled in the event of a conflict with other policy provisions.

Id. at *6. The court explained that the SIR endorsement in the NACIC policy

“clearly place[d] the insured on notice that the additional provisions of the

Endorsement change[d] the general policy terms and conditions and [were]

separate requirements.” Id.



                                         - 16 -
      We agree with the Eleventh Circuit that the policies at issue in the California

cases are materially different from the instant policy. See Intervest Constr., 662

F.3d at 1330. While the SIR endorsement in the instant case contains the same

notice of change to the policy that the SIR endorsement in Acceptance Insurance

contained, it does not contain a provision addressing other insurance within the

context of the SIR. The policy in Acceptance Insurance contained a provision

expressly stating that regardless of other insurance the insured would continue to

be responsible for the full SIR before the limits of the policy applied. Acceptance

Ins., 2002 WL 32515066 at *7. The SIR endorsement in the Forecast Homes

policy required the named insured to “make actual payment” of the SIR amount

and expressly provided that “[p]ayments by others, including but not limited to

additional insureds or insurers, do not serve to satisfy the self-insured retention.”

Forecast Homes, 105 Cal. Rptr. 3d at 208. There is no similar language or

provision in the instant case.

      The Eleventh Circuit also noted that the language of the instant policy “is

arguably less restrictive than the language of the policies at issue in [the California]

cases.” Intervest Constr., 662 F.3d at 1330. For example, in Arena Group, the

“other insurance” provision required the insured to pay all amounts within the

retained amount “from its own account” and was also stated prominently on the

first page of the policy—“The Retained Amount is the responsibility of the Insured



                                         - 17 -
and is to be paid from the Insured’s own account.” Arena Group, 2007 WL

935611 at *5. The Arena Group policy clearly and unambiguously informed the

insured that the retained amount had to be paid from its own funds. The language

of the instant policy states that the retained limit must be paid by the insured, but

does not specify where those funds must originate. Requiring payment to be made

from the insured’s “own account” is not necessarily the same as requiring that it be

paid “by you.”

      Moreover, as the Eleventh Circuit noted in its opinion, “a strong argument

could be made that ICI exhausted its SIR because it paid for the protection

afforded in the indemnification clause.” Intervest Constr., 662 F.3d at 1330. The

contract between Custom Cutting and ICI, which included the right to

indemnification, was entered into six years before the General Fidelity policy was

purchased by ICI. ICI paid for the indemnity protection in the purchase price of

the Custom Cutting subcontract and therefore hedged its retained risk in this

manner. ICI bargained for and paid for this right to indemnification and, without

an express policy provision to the contrary, should be able to use it to satisfy the

SIR. The instant case is more akin to the policy in Vons, in which the SIR did not

“expressly state that Vons itself, not other insurers, must pay the SIR amount.”

Vons, 92 Cal. Rptr. 2d at 605.




                                         - 18 -
      In light of the language of the policy and the right to indemnification for

which ICI paid, we answer the first certified question in the affirmative and find

that the General Fidelity policy allows the insured to apply indemnification

payments received from a third party toward satisfaction of its $1 million self-

insured retention.

      The second certified question asks whether the common law rule of the

“made whole doctrine” applies here or whether the transfer of rights clause in the

policy abrogated the doctrine. The district court did not address this issue.

However, the Eleventh Circuit considered the effect of the transfer of rights clause

if ICI was permitted to use the Custom Cutting indemnification to satisfy the SIR

obligation. See Intervest Constr., 662 F.3d at 1331. As the Eleventh Circuit

explained, that right alone “would be of little value if the General Fidelity Policy

gave General Fidelity the priority to be made whole before ICI could use any of the

indemnity payment towards the SIR.” Id. at 1331 n.6.

      The text of the transfer of rights provision is found in SECTION IV—

COMMERCIAL GENERAL LIABILITY LIMITS, and provides in full:


      8. Transfer Of Rights Of Recovery Against Others To Us

      If the insured has rights to recover all or part of any payment we have
      made under this Coverage Part, those rights are transferred to us. The
      insured must do nothing after loss to impair them. At our request, the
      insured will bring ‘suit’ or transfer those rights to us and help us
      enforce them.


                                        - 19 -
      As the Eleventh Circuit stated, the language of this provision is clear—it

gives the insurer General Fidelity subrogation rights. However, the provision gives

no guidance as to the priority to recover when the indemnity amount is insufficient

to “make whole” both parties. See Intervest Constr., 662 F.3d at 1331. In its

appeal to the Eleventh Circuit, ICI made two arguments regarding why the transfer

of rights provision did not affect its priority to the indemnification funds. First, the

plain language of the provision allows General Fidelity to recover only for

payments “we have made,” and, at the time ICI received the indemnification

payment from Custom Cutting, General Fidelity had not yet made any payment.

Second, even if the court disregards the tense of the language, the General Fidelity

policy did not abrogate the “made whole doctrine” and thus ICI has priority to

receive any indemnification before General Fidelity. Id. In turn, General Fidelity

argued that the court cannot place excessive emphasis on the tense of the language,

and further that the transfer of rights provision in the policy abrogated the common

law rule of the “made whole doctrine” by writing into the policy priority rights for

General Fidelity. Id.

      “Subrogation is the substitution of one person in the place of another with

reference to a lawful claim or right.” W. Am. Ins. Co. v. Yellow Cab Co. of

Orlando, Inc., 495 So. 2d 204, 206 (Fla. 5th DCA 1986) (quoting Boley v. Daniel,

72 So. 644, 645 (Fla. 1916)). Florida recognizes two types of subrogation:


                                         - 20 -
conventional subrogation and equitable or legal subrogation. Conventional

subrogation arises or flows from a contract between the parties establishing an

agreement that the party paying the debt will have the rights and remedies of the

original creditor. See Dade Cnty. Sch. Bd. v. Radio Station WQBA, 731 So. 2d

638, 646 (Fla. 1999). Since subrogation is an offspring of equity, equitable

principles apply, even when the subrogation is based on contract, except as

modified by specific provisions in the contract. In the absence of express terms to

the contrary, the insured is entitled to be made whole before the insurer may

recover any portion of the recovery from a tortfeasor. See Fla. Farm Bureau Ins.

Co. v. Martin, 377 So. 2d 827, 830 (Fla. 1st DCA 1979).

      The “made whole doctrine” provides, absent a controlling contractual

provision that states otherwise, that the insured has priority over the insurer to

recover its damages when there is a limited amount of indemnification available.

See Schonau v. GEICO Gen. Ins. Co., 903 So. 2d 285, 287 (Fla. 4th DCA 2005)

(“Decisions applying the ‘made whole’ doctrine essentially hold that where both

the insurer and the insured simultaneously attempt to recover all of their damages

from a tortfeasor who cannot (because of insolvency, limited insurance coverage,

or other reasons) pay the full value of damages, the insured has priority of recovery

over the insurer.”). Martin and the subsequent cases involving the “made whole

doctrine” all deal with the insured’s primary right to recover before the insurance


                                         - 21 -
carrier. See, e.g., Monte de Oca v. State Farm Fire & Cas. Co., 897 So. 2d 471

(Fla. 3d DCA 2004); Centex-Rodgers Constr. Co. v. Herrera, 761 So. 2d 1215 (Fla.

4th DCA 2000); Humana Health Plans v. Lawton, 675 So. 2d 1382 (Fla. 5th DCA

1996). We have acknowledged the application of the made whole doctrine in

Florida. See Ins. Co. of N. Am. v. Lexow, 602 So. 2d 528, 529-30 (Fla. 1992)

(“Using the common law subrogation principle, endorsed by Florida courts, the

district court reasoned that the insured was entitled to be made whole before the

subrogated insurer could participate in the recovery from a tortfeasor.”).

      ICI cites a Washington case for the proposition that the specific language of

the transfer of rights provision found in the General Fidelity policy does not write

out the “made whole doctrine,” thereby preserving ICI’s right of priority. See

Bordeaux, Inc. v. Am. Safety Ins. Co., 186 P.3d 1188, 1192-93 (Wash. Ct. App.

2008) (holding that “[t]he trial court properly ruled that [the insureds] were entitled

to be made whole before any third-party recovery funds are paid to the insurers”).

General Fidelity argues that Bordeaux is not on point.

      Bordeaux addressed the nature of SIR provisions in commercial general

liability policies that American Safety Insurance Company (American Safety)

issued to the condominium developer, Bordeaux, Inc. When the condominium

association filed a lawsuit against Bordeaux alleging extensive construction defects

and property damage relating to the condominiums, Bordeaux tendered its defense


                                        - 22 -
to its two insurers, American Safety and Steadfast Insurance. Id. at 1189. The

American Safety policy contained a SIR provision that obligated Bordeaux to pay

$100,000 before American Safety had an obligation to provide indemnity,

coverage, or defense under the policy. Id. The policy also contained a subrogation

provision which stated that “[i]f the insured has rights to recover all or part of any

payment we have made under this Coverage Part, those rights are transferred to

us.” The policy defined the word “we” as “American Safety.” Id. at 1190. The

Washington court determined that “the subrogation provision clearly only allows

American Safety to recover payments it actually made.” Id. at 1192 (emphasis

added). Additionally, despite the subrogation provision in the policy, the court

concluded that the “made whole doctrine” 3 applied in the case and affirmed the

trial court’s ruling that the insureds “were entitled to be made whole before any

third-party recovery funds are paid to the insurers.” Id. at 1192-93.

      Bordeaux cited two Florida cases in support of its conclusion that the SIR

did not operate as primary insurance, thereby making American Safety’s policy

provide excess insurance. This conclusion was significant because had the self-

insurance provisions constituted insurance and American Safety’s policy been



       3. The court did not use the term “made whole doctrine,” instead referring
to the “long-standing rule . . . favoring full compensation of insureds over
subrogation rights of insurers.” Bordeaux, 186 P.3d at 1192. This clearly is the
same as the “made whole doctrine” under Florida law.


                                         - 23 -
deemed “excess” insurance, then American Safety’s rights to subrogation would

have been superior to Bordeaux’s, and American Safety would have been entitled

to recover third-party settlement funds before its insured. 4 The Bordeaux court

cited the Fourth District Court of Appeal’s decision in Zinke-Smith, Inc. v. Florida

Insurance Guaranty Ass’n, 304 So. 2d 507, 509 (Fla. 4th DCA 1974), and this

Court’s decision in Young v. Progressive Southeastern Insurance Co., 753 So. 2d

80, 85-86 (Fla. 2000), for the proposition that self-insurance does not constitute

insurance. Both parties make much of the fact that Florida cases were cited in

Bordeaux. ICI cites this as evidence that Washington law is similar to Florida’s.

However, General Fidelity correctly notes that the Florida cases cited turned on a

different point of law. Zinke-Smith is based on statutory construction, not on

interpretation of policy language. The Fourth District held that an employer who

secures worker’s compensation as a self-insurer does not become an insurer under

the insurance code. In Young, this Court dealt with the meaning of “insurance” in

the Uninsured Motorists Statute, holding that a self-insured party is not insured.

Young did not involve interpretation of policy terms at all, only statutory

interpretation.

      However, the language of the transfer of rights clause in the instant case is

exactly the same as that in Bordeaux. While Bordeaux is not controlling precedent

      4. General Fidelity did not make that argument in this case.


                                        - 24 -
in this case, it is persuasive authority that the “made whole doctrine” is still

applicable despite the insurance subrogation provision. As Florida law explains,

because subrogation is an offspring of equity, equitable principles (such as the

“made whole doctrine”) apply even when the subrogation is based on contract,

unless the contract contains express terms to the contrary. See Fla. Farm Bureau,

377 So. 2d at 830. Here, the transfer of rights clause does not address the priority

of reimbursement nor does the clause provide that it abrogates the “made whole

doctrine.” In the absence of such express language, equitable principles prevail.

Thus, we answer the second certified question by stating that the transfer of rights

provision in the policy does not abrogate the made whole doctrine, thereby

preserving ICI’s right of priority.

                                      CONCLUSION

      Accordingly, we answer the Eleventh Circuit’s first certified question in the

affirmative and the second certified question by concluding that the transfer of

rights provision in the policy does not abrogate the made whole doctrine. Having

answered the certified questions, we return this case to the United States Court of

Appeals for the Eleventh Circuit.

      It is so ordered.

PARIENTE, LEWIS, LABARGA, and PERRY, JJ., concur.
CANADY, J., dissents with an opinion in which POLSTON, C.J., concurs.




                                         - 25 -
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.


CANADY, J., dissenting.

      Based on the unambiguous allocation of risk under the provisions of the

policy, I would conclude that indemnification payments received from a third party

may not be applied to satisfy the self-insured retention. I thus would answer the

first certified question in the negative. That negative answer to the first question

renders the second certified question moot.

      Paragraph 3 of the self-insured retention endorsement plainly states that the

insurer has “no duty to defend or indemnify unless and until the amount of the

‘Retained Limit’ is exhausted by payment of settlements, judgments, or ‘Claims

Expense’ by you”—that is, by the insured. Paragraph 6 of the endorsement plainly

states that “the ‘Retained Limit’ will only be reduced by payments made by the

insured.” No other provisions of the policy render these provisions ambiguous.

      A payment made by a third party pursuant to an indemnification agreement

is not a payment “made by the insured.” The insurance policy should not be

rewritten to allow satisfaction of the self-insured retention limit in a manner other

than the manner specifically provided for in the policy. I thus would reject the

legal fiction adopted by the majority that a payment made by a third party pursuant

to a contractual indemnity provision is a payment “made by the insured.”



                                        - 26 -
Imposing that legal fiction effectively reads the phrase “by you” out of paragraph

3. And it reads the entirety of paragraph 6 out of the endorsement. The majority’s

unjustified interpretation of the endorsement gives the endorsement a meaning that

is no different than if those provisions were absent from the policy.

      I dissent.

POLSTON, C.J., concurs.


Certified Question of Law from the United States Court of Appeals for the
Eleventh Circuit - Case No. 10-12613-GG

W. Braxton Gilliam, IV and Robert M. Dees of Milam Howard Nicandri Dees &
Gilliam, P.A., Jacksonville, Florida,

      for Appellants

Louis Schulman of Dutton Law Group, P.A., Tampa, Florida,

      for Appellee




                                        - 27 -
