Insurer Off the Hook in $500K Settlement to Spa Guest Who Had Stroke During Massage

A federal appeals court ruled that Evanston Insurance Co. doesn’t owe a $500,000 settlement that a Florida spa owner agreed to pay to a woman who suffered a stroke during a massage.

The decision, issued last month in an unpublished opinion, affirms a lower court finding.

According to facts outlined in the decision, in June 2012, Kalandra Lewis sustained a variety of injuries including a stroke, during a massage at the Serenity Spa for Total Health and Relaxation, Inc. in Lee County, Florida. Denise Vega owned the business and Hanzel Alpizar was the licensed massage therapist who performed the massage.

Vega was insured by a Medical Professions Professional Liability Policy issued by Evanston Insurance Company. The policy listed Vega as an insured, not her spa.

The court noted the following relevant policy language relating to the insurer’s duty to pay all claims:

“by reason of any act, error or omission in Professional Services rendered or that should have been rendered by the Insured [Vega] and arising out of the conduct of the Insured’s [Vega’s] Professional Services.” The policy defined Professional Services to include “[m]assage and [r]elated [m]odalities.” Even if “rendered” could mean done by the Insured herself or provided by the Insured, the omission or negligence still has to arise out of the Insured’s Professional Services. Additionally, in Exclusion B, the policy excluded coverage for “liability arising out of the insured’s activities in his/her capacity as proprietor, superintendent, executive officer, director, partner, trustee or employee of ․ [any] business enterprise ․ not named as an Insured under this policy.”

As a result of her injuries, Lewis and her husband filed a lawsuit against the spa, Vega and Alpizar in Florida state court alleging negligence and loss of consortium. The suit included a vicarious liability claim against Vegas since Alpizar was under Vega’s “supervision, employ and control” when he performed the massage.

Evanston notified Vega there would be no coverage for the defense or indemnification of the claim. In March 2015, Vega entered into a Colbentz agreement with the plaintiffs. This resulted in Vega assigning any causes of action she had against the insurer to the plaintiffs and she consented to a judgment of $500,000 against her. In exchange, the plaintiffs agreed they wouldn’t execute the consent judgment against her. A few months later, the plaintiffs filed an action against Evanston seeking a declaration there was coverage under the policy for vicarious liability claim. There was also a claim of breach of the insurance policy. The same day, Evanston had the action removed to the US District Court for the Middle District of Florida.

The parties filed cross motions for summary judgment. On June 17, 2016, the district court ruled in favor of Evanston.

Last month, the Eleventh Circuit U.S. Court of Appeals affirmed the district court decision after hearing oral arguments and determining the policy didn’t cover Vegas’ business.

Read the decision: http://media.ca11.uscourts.gov/opinions/unpub/files/201615109.pdf