Travelers not obligated to pay $3M citrus grove settlement

A Travelers Cos. Inc. unit is not obligated to pay an almost $3 million settlement between a Florida citrus grove owner and its manager based on an exclusion in the manager’s policy, an appellate court said Thursday, in affirming a lower court ruling. 

In 2009, Richard Hermanns bought his first citrus grove and hired Richard McKenzie, who had experience with starting and managing citrus groves, to take care of it, according to the ruling by the 11th U.S. Circuit Court of Appeals in Atlanta in The Travelers Indemnity Co. of Connecticut v. Richard McKenzie & Sons Inc., Hermanns Real Estate Ventures, LLC. 

“Trusting McKenzie was a mistake,” the ruling said. Mr. Hermanns would later allege Mr. McKenzie billed him for hundreds of thousands of dollars’ worth of trees that were never planted, fertilizer that was never applied and diesel fuel that was never delivered, stealing some of Mr. Hermanns' diesel fuel for his own use, and damaging the groves, the ruling said. 

Ensuing litigation between the two men led to a $2,965,750 consent agreement, with Mr. Hermanns agreeing to seek coverage under Mr. McKenzie’s Travelers coverage, the ruling said. 

Travelers filed suit in U.S. District Court in Tampa, Florida, seeking a ruling the consent judgment was unenforceable because it was the result of collusion between the two men and for an unreasonable amount of money. 

The district court ruled in Travelers' favor, and was affirmed by a unanimous three-judge appeals court panel. 

The panel cited a policy exclusion for property damage arising out of operations in its ruling. 

“One of the bases for (the district court’s) ruling was that the damages alleged in Hermanns’ amended complaint were not covered by the insurance policy because of an applicable policy exclusion. We agree.   

“And because there was not duty to defend, there was no wrongful refusal by Travelers to defend McKenzie, which means the settlement agreement is unenforceable,” the ruling said. 

Attorneys in the case had no comment or did not respond to a request for comment.