Houston Specialty Insurance Company v. Titleworks of Southwest Florida, Inc. et al

Filing 20

OPINION AND ORDER denying 5 Defendant Titleworks of Southwest Florida, Inc.'s Motion to Dismiss; and granting 8 Defendant Westcor Land Title Insurance Company's Motion to Dismiss. As to Defendant Westcor only, the Complaint is dismissed without prejudice to filing an Amended Complaint within 14 days of this Opinion and Order. Signed by Judge John E. Steele on 6/22/2015. (MAW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
HOUSTON SPECIALTY INSURANCE
COMPANY,
Plaintiff,
v.

Case No: 2:15-cv-219-FtM-29DNF

TITLEWORKS
OF
SOUTHWEST
FLORIDA,
INC.,
MIKHAIL
TRAKHTENBERG, and WESTCOR
LAND
TITLE
INSURANCE
COMPANY,
Defendants.

OPINION AND ORDER
This matter comes before the Court on review of Defendants’
Motions to Dismiss (Docs. ##5, 8) filed on May 8 and May 12, 2015.
Plaintiff filed Responses (Docs. ##16, 17) on June 1, 2015.

For

the reasons set forth below, Defendant Titleworks of Southwest
Florida, Inc.’s Motion to Dismiss (Doc. #5) is denied and Defendant
Westcor Land Title Insurance Company’s Motion to Dismiss (Doc. #8)
is granted.
I.
Plaintiff Houston Specialty Insurance Company (Plaintiff or
HSIC) has filed a Complaint (Doc. #1) against Defendants Titleworks
of Southwest Florida, Inc. (Titleworks), Mikhail Trakhtenberg
(Trakhtenberg), and Westcor Land Title Insurance Company (Westcor)

seeking declaratory relief regarding coverage under an insurance
policy.

The underlying facts, as set forth in the Complaint, are

as follows:
In

2014,

HSIC

issued

a

professional

policy (the Liability Policy) to Titleworks.

liability

insurance

(Id. at ¶ 9.)

The

Liability Policy is effective from August 2, 2014 through August
2, 2015 with a “Retroactive Date” of August 2, 2005 and “Prior and
Pending Litigation Date” of August 2, 2014.

(Id. at ¶ 10.)

On

August 22, 2014, Trakhtenberg filed suit against Titleworks in
Florida state court.

(Id. at ¶ 12.)

In that suit, Trakhtenberg

alleges that he retained Titleworks as his closing agent and title
examiner for the purchase of real property and that Titleworks
failed to uncover certain defects in title.

(Id.)

As a result,

Trakhtenberg purchased the property unaware that it was encumbered
by over $2 million in liens.

(Id.)

Pursuant to the Liability

Policy, Titleworks requested that HSIC provide a defense against
Trakhtenberg’s lawsuit, and HSIC did so.

(Id. at ¶ 13.)

Trakhtenberg also purchased a title insurance policy (the
Title Insurance Policy) from Westcor.

The Title Insurance Policy

affords coverage for certain claims of clouded title on the same
parcel of property purchased by Trakhtenberg for which Titleworks
served as closing agent and title examiner.

(Id. at ¶ 16.)

In

response to an interrogatory served by Titleworks in the state
court lawsuit, Trakhtenberg stated that he spoke with a Titleworks

2

representative in July 2014 concerning the title defects.
¶ 14.)

(Id. at

During that conversation, the Titleworks representative

told Trakhtenberg that Titleworks had “missed” the clouded title
and, as a result, Trakhtenberg could “go after [Titleworks] or go
after his title insurance.”
According

to

HSIC,

(Id.)

Trakhtenberg’s

interrogatory

response

demonstrates that Titleworks knew of Trakhtenberg’s claims against
it (e.g., its failure to uncover title defects) prior to the
Liability Policy’s August 2, 2014 inception date.
21.)

(Id. at ¶¶ 18-

As a result, HSIC alleges that the Liability Policy does not

cover Trakhtenberg’s claims against Titleworks in the state court
law suit. (Id.) Based on these allegations, HSIC seeks a judgment
declaring

that

it

has

no

duty

to

defend

Titleworks

against

Trakhtenberg’s lawsuit because there is no coverage under the
Liability Policy for those claims.

(Id.)

Titleworks now moves to

dismiss, arguing that HSIC’s claim for declaratory relief is
inadequately pled.

Westcor also moves to dismiss, arguing that it

is not a necessary party to this case.
II.
Under Federal Rule of Civil Procedure 8(a)(2), a Complaint
must contain a “short and plain statement of the claim showing
that the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

This obligation “requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not

3

do.”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)

(citation omitted).

To survive dismissal, the factual allegations

must be “plausible” and “must be enough to raise a right to relief
above the speculative level.”

Id. at 555.

See also Edwards v.

Prime Inc., 602 F.3d 1276, 1291 (11th Cir. 2010).
“more

than

accusation.”

an

unadorned,

Ashcroft

v.

This requires

the-defendant-unlawfully-harmed-me
Iqbal,

556

U.S.

662,

678

(2009)

(citations omitted).
In deciding a Rule 12(b)(6) motion to dismiss, the Court must
accept all factual allegations in a complaint as true and take
them in the light most favorable to plaintiff, Erickson v. Pardus,
551 U.S. 89 (2007), but “[l]egal conclusions without adequate
factual support are entitled to no assumption of truth,” Mamani v.
Berzaín, 654 F.3d 1148, 1153 (11th Cir. 2011) (citations omitted).
“Threadbare

recitals

of

the

elements

of

a

cause

of

action,

supported by mere conclusory statements, do not suffice.” Iqbal,
556 U.S. at 678.
with

a

“Factual allegations that are merely consistent

defendant’s

plausible.”

liability

fall

short

of

being

facially

Chaparro v. Carnival Corp., 693 F.3d 1333, 1337 (11th

Cir. 2012) (internal quotation marks and citations omitted). Thus,
the Court engages in a two-step approach: “When there are wellpleaded factual allegations, a court should assume their veracity
and

then

determine

whether

entitlement to relief.”

they

plausibly

give

Iqbal, 556 U.S. at 679.

4

rise

to

an

III.
A.

Titleworks’s Motion To Dismiss
HSIC seeks a declaratory judgment that Trakhtenberg’s claim

against Titleworks is not covered by the Liability Policy because
Titleworks became aware of the claim before the Liability Policy’s
inception date.
insurer

to

Florida’s1 Declaratory Judgment Act permits an

“pursue

a

declaratory

action

which

requires

a

determination of the existence or nonexistence of a fact upon which
the

insurer's

obligations

under

an

insurance

policy

depend.”

Higgins v. State Farm Fire & Cas. Co., 894 So. 2d 5, 12 (Fla.
2004).

That is precisely what HSIC requests here.

HSIC seeks to

prove the date Titleworks became aware of Trakhtenberg’s claims
and requests a declaration of its obligations under the Liability
Policy in light of that factual determination.
Titleworks
because

HSIC

argues
has

not

that

the

alleged

Complaint
that

must

be

Titleworks

dismissed
made

any

misrepresentations when applying for the Liability Policy or that
HSIC

issued

the

misrepresentations.
misrepresentations

Liability

Policy

in

reliance

on

such

If HSIC was alleging that Titleworks made
that

induced

HSIC

to

issue

the

Liability

Policy, Titleworks would be correct that HSIC’s failure to plead

1

The substantive law of Florida applies in this diversity case.
Lundgren v. McDaniel, 814 F. 2d 600, 605 (11th Cir. 1999).

5

the content of the misrepresentations or allege that it relied
upon them would be fatal to its claim.

See Miguel v. Metro. Life

Ins. Co., 200 F. App'x 961, 965 (11th Cir. 2006) (a claim for
rescission of an insurance policy requires insurer to prove that
insured

made

a

material

misrepresentation

in

the

insurance

application). However, that is not the case here. HSIC is seeking
a declaration of its duties under the Liability Policy, and the
sole issue is whether the Liability Policy, when enforced according
to its terms, covers Trakhtenberg’s claims.
misrepresentations

is

irrelevant

to

that

The existence of
determination

and,

accordingly, Titleworks’s motion is denied.
B.

Westcor’s Motion to Dismiss
As

explained

above,

HSIC

seeks

obligations under the Liability Policy.

a

determination

of

its

Westcor is not a party to

the Liability Policy, and HSIC does not allege that Westcor’s
obligations under the Title Insurance Policy will impact the
coverage determination at issue here.
prayer

for

relief

does

not

request

Indeed, the Complaint’s
that

the

Court

make

any

determination at all regarding Westcor or the Title Insurance
Policy.

Instead, HSIC alleges that Westcor’s presence in this

lawsuit is required because Westcor “does or may” have a duty to
clear title to the property purchased by Trakhtenberg “and thus
does or may have an interest in the outcome of this action.”

6

(Doc.

#1, ¶ 16.)

Westcor argues that these allegations are insufficient

to require its presence.
Rule 19 requires a person to be joined in an action if, “that
person claims an interest relating to the subject of the action
and is so situated that disposing of the action in the person's
absence may . . . leave an existing party subject to a substantial
risk of incurring double, multiple, or otherwise inconsistent
obligations

because

19(a)(1)(B)(ii).

of

the

interest.”

Fed.

R.

Civ.

P.

In the context of a dispute regarding insurance

coverage for a lawsuit against an insured, Rule 19 requires joinder
of the plaintiff in the underlying lawsuit because that plaintiff’s
ability to recover against the insured would be impacted by the
presence or absence of insurance coverage.

Am. Safety Cas. Ins.

Co. v. Condor Assocs., 129 F. App’x 540, 542 (11th Cir. 2005).
Thus, to ensure that the coverage dispute will be litigated only
once,

the

underlying

tort

plaintiff

must

be

joined

in

the

declaratory action.
Here, under Condor, Trakhtenberg is an indispensable party
because

his

ability

to

recover

damages

in

his

suit

against

Titleworks is impacted by the availability of HSIC’s insurance
coverage.
is

no

Accordingly, Trakhtenberg must be present so that there

need

Trakhtenberg’s

to

relitigate

lawsuit

HSIC’s

against

coverage

Titleworks.

obligations
HSIC

argues

in
that

Westcor is similarly indispensable because it has the potential to

7

subrogate to Trakhtenberg’s rights against Titleworks should it
clear title to Trakhtenberg’s property or otherwise compensate
Trakhtenberg pursuant to the Title Insurance Policy.

As a result,

HSIC argues that Westcor and Trakhtenberg are one and the same for
the purposes of this lawsuit.

Thus, HSIC asserts that because

Trakhtenberg is an indispensable party, so too is Westcor.
The Court disagrees.

The Complaint alleges only that Westcor

“does or may” have an obligation to compensate Trakhtenberg.

It

does not allege that any compensation has been made or that Westcor
possesses any rights against Titleworks.

The Court concludes that

the mere potential for Westcor to acquire such rights in the future
is too speculative to render Westcor a necessary party here.

See

Fla. Dep't of Ins. v. Guarantee Trust Life Ins. Co., 812 So. 2d
459, 460–61 (Fla. 1st DCA 2002) (“Florida courts will not render,
in the form of a declaratory judgment, what amounts to an advisory
opinion at the instance of parties who show merely the possibility
of legal injury on the basis of a hypothetical state of facts which
have not arisen and are only contingent, uncertain, and rest in
the future.”) (citations and quotations omitted).
Westcor’s motion is granted.

Accordingly,

HSIC will be given leave to amend.

Accordingly, it is now
ORDERED:
1.

Defendant Titleworks of Southwest Florida, Inc.’s Motion

to Dismiss (Doc. #5) is DENIED.

8

2.

Defendant Westcor Land Title Insurance Company’s Motion

to Dismiss (Doc. #8) is GRANTED.

As to Defendant Westcor Land

Title Insurance Company only, the Complaint is dismissed without
prejudice to filing an Amended Complaint within FOURTEEN (14) DAYS
of this Opinion and Order.
DONE AND ORDERED at Fort Myers, Florida, this
June, 2015.

Copies: Counsel of record

9

22nd

day of