Herc Rentals, Inc. v. Ace American Insurance Company

Filing 26

ORDER denying 15 Motion to Dismiss for Failure to State a Claim. Signed by Judge John E. Steele on 3/10/2025. (JGM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
HERC RENTALS, INC.,
Plaintiff,
v.

Case No:

2:24-cv-885-JES-NPM

ACE AMERICAN INSURANCE CO.,
Defendant.
OPINION AND ORDER
Herc Rentals, Inc. (Plaintiff or “Herc”) filed a two-count
Complaint (Doc. #1) against its insurance company, ACE American
Insurance Co. (Defendant or “ACE”). In Count I, Herc seeks certain
declaratory judgments, and in Count II, Herc asserts that ACE
settled a third-party’s claim against Herc in bad faith.

ACE’s

Motion to Dismiss (Doc. #15) seeks to dismiss only the bad faith
claim as premature under Florida law.

Herc filed a Response in

Opposition (Doc. #23), contending that Count II is properly before
the Court.
For the reasons set forth below, the motion is DENIED.
I.
When analyzing a Rule 12(b)(6) motion, a court must accept
all factual allegations in the complaint as true and take them in
the light most favorable to the 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. Berzain,
654 F.3d 1148, 1153 (11th Cir. 2011) (citations omitted).

The

Complaint (Doc. #1) alleges the following:
On February 27, 2020, Paul Robb, an employee of Herc, was
loading a SkyTrak Telehandler onto a flatbed trailer.

The trailer

was owned by Herc, but Ryder Truck Rental, Inc. (“Ryder”) was
required by contract to perform safety inspections and maintain
the trailer.

Ryder was allegedly negligent in performing those

duties, and the “flatbed trailer had holes in the wood and rotten
wood that would allow a load to shift or fall and fasteners were
missing.”

(Doc. #1-7, p. 5.)

The Telehandler tipped over and

severely injured Robb, who became a paraplegic.

(Id. at 2.)

Herc and Ryder had separate business auto liability insurance
policies with ACE, and Ryder had other excess policies with ACE.
The ACE–Herc Policy
ACE issued a business auto liability insurance policy to Herc
(“ACE–Herc Policy”). (Doc. #1-1, p. 49.)

The ACE–Herc Policy

provided coverage of up to $5 million for any one accident or loss.
(Id. at 37.)

Section II.A of the ACE-Herc Policy provided that

ACE had a “right and duty” to “defend” Herc against covered claims
for accidental “bodily injury or property damage.”

(Id. at 56.)

Section II.A also provided that ACE “may investigate and settle
any claim or ‘suit’ as [it] consider[s] appropriate.”

(Id.)

Endorsement No. 23 of the ACE-Herc Policy established a
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reimbursement
essentially

of

deductible

provided

that

requirement.
Herc

“must

(Id.

at

reimburse”

90).

ACE

It

“up

to

[$2,000,000] for any amounts [ACE] ha[s] paid under this policy.”
(Id.)

Thus, even though ACE had to “defend” Herc “and pay damages

within the policy limit,” ACE had the right to “seek reimbursement
from [Herc] for amounts within [Endorsement No. 23’s] deductible.”
(Doc. #1, ¶ 12.)

Endorsement No. 23 also required Herc to provide

ACE some form of collateral.

(Id. ¶ 13.)

At Herc’s behest, Bank

of America issued a letter of credit (“BOA Letter of Credit”) in
which ACE was the named beneficiary.
Under

the

ACE-Herc

Policy,

Herc

was

allowed

to

name

“additional insured[s]” under certain conditions.

Endorsements

Nos. 3, 7, 18, 36 (Doc. #1-1, pp. 51, 68, 83, 107).

Generally, an

additional “person or organization” would be covered so long as
Herc was “required [] to name” them or had “agreed to include”
them as an additional insured in a “written contract” “executed
prior to the date of loss.”

(Id.)

The ACE–Ryder Primary and Excess Policies
A

separate

business

auto

liability

insurance

policy

was

issued to Ryder System, Inc. by ACE (“ACE–Ryder Primary Policy”).
(Doc. #1, ¶ 27.)

It had a coverage limit of $1 million for any

one accident or loss, and an equivalent $1 million limit on its
reimbursement of deductible endorsement.

(Id. at ¶¶ 27–28.)

The Complaint further alleges that $9 million per accident in
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excess coverage was available to Ryder under multiple excess
policies issued by ACE (“ACE–Ryder Excess Policies”).
The Robb v. Ryder Lawsuit
On December 3, 2020, Robb’s attorney’s sent Ryder a demand
letter seeking the full $10 million available under the ACE–Ryder
Primary and Excess Policies. (Id. at ¶ 30.) ACE and Ryder rejected
that demand, taking the position that Ryder was not liable as Robb
was solely at fault for his injuries.

(Id. at ¶ 31.)

In letters sent to ACE on March 4, April 23, and October 5,
2021, Ryder sought coverage as an additional insured under the
$5 million ACE–Herc Policy.

(Id. at ¶ 32.)

On November 4, 2021,

ACE rejected Ryder’s demands for coverage under that policy.
at ¶ 33.)

(Id.

ACE stated that Ryder’s coverage as an additional

insured under the ACE–Herc Policy — even if available — would be
limited to $1 million pursuant to the TLSA’s terms. 1

(Id.)

Robb sued Ryder and three of its employees on November 12,
2021 (“Robb v. Ryder”).

(Doc. #1-7.)

Before mediation in March 2023, ACE’s relationship with Ryder
had begun to deteriorate.

(Doc. #1, ¶ 36.)

Ryder was dissatisfied

with the way that ACE had handled Robb’s claim, and had accused

Herc and Ryder had executed a Ryder SelectCare Preventative
Maintenance Agreement (“PMA”) on October 23, 2017 (Id. at ¶ 17)
and a Truck Lease and Service Agreement (“TLSA”) for the tractor
— owned by Ryder and leased to Herc — to which the flatbed trailer
was attached. (Id. at ¶ 19.)
1

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ACE of distributing attorney-client and work-product privileged
information and of engaging in a pattern of delay.

(Id.)

During

conferences with Herc, ACE suggested that it could not go into
mediation offering an amount below the deductible as that might
further fracture its relationship with Ryder.

(Id. at ¶ 37.)

Herc

demanded a written evaluation from ACE to justify a potential
early, seven-figure settlement. (Id. at ¶ 38.) ACE never provided
one, and merely responded that Robb was sympathetic and that
damages could be significant.

(Id.)

ACE was aware, however, that

Ryder had developed the following evidence prior to mediation:
•

Ryder did not have a duty to inspect or maintain the
trailer’s floorboards;

•

Robb’s injuries were caused by his failure to wear a
seatbelt; and

•

The holes in the trailer’s floorboards could not have
caused the Telehandler to get stuck, and so, could not
have contributed to the accident. (Id. at ¶ 39.)

The Settlement and ACE’s Post-Settlement Conduct
On March 23, 2023, the parties to the Robb v. Ryder suit as
well as ACE and Herc met to mediate the underlying claims.
at ¶ 35.)

(Id.

In post-mediation discussions, over Herc’s objections,

ACE settled with Robb for a confidential amount.

(Id. at ¶ 41.)

Despite ACE’s prior statements that Ryder’s potential coverage
under the ACE-Herc Policy was limited to $1 million as a putative
additional insured, ACE agreed to contribute $2 million from the
ACE–Herc

Policy

—

the

exact

amount

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of

Herc’s

reimbursable

deductible — towards the settlement.

(Id. at ¶ 42.)

Once the settlement was finalized, ACE demanded that Herc
reimburse it for $1,933,305.50.
represented

the

$2

million

(Id. at ¶ 43.)

deductible

after

That amount
subtracting

a

$66,694.50 allocated loss adjustment expense (“ALAE”) that ACE
calculated

unilaterally.

(Id.)

Herc

disputed

that

it

owed

anything to ACE, asserting that: (1) the settlement funds drawn
from the ACE–Herc Policy did not constitute a “payment” within the
meaning of Endorsement No. 23, and (2) ACE’s unilateral ALAE
calculation
$166,235.

was

incorrect

—

the

correct

amount

was

at

least

(Id. at ¶¶ 44–45.)

Herc offered to pay $1,000,000 under its policy, which ACE
had previously stated was the most that Ryder could have received
as an additional insured under the ACE–Herc Policy. (Id. at ¶ 46.)
ACE rejected that offer, and threatened to draw on the BOA Letter
of Credit.

(Id. at ¶ 47.)

Herc paid the $1,000,000 to secure

more time to discuss the matter with ACE.
Then,

through

documentation
$168,351.50.

to

a

third-party

show

that

(Id. at ¶ 48.)

the

(Id.)

administrator,
ALAE

Herc

calculation

provided

should

be

ACE seemed to agree that any further

reimbursement of Herc’s deductible should be discounted by that
amount.

(Id. at ¶ 49.)

However, on January 26, 2023, ACE

unilaterally withdrew $933,305.50 from the BOA Letter of Credit.
(Id. at ¶ 50.)

After fees, Herc was charged $935,683.76, (id.)
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which Herc asserts does not account for what ACE had previously
agreed was the correct ALAE calculation.
To date, despite numerous requests, ACE has allegedly not
provided Herc with analysis or updated analysis of:

(1) Ryder’s

potential liability to support the amount of the confidential
settlement with Robb; (2) Ryder’s entitlement to coverage as an
additional

insured

under

the

ACE–Herc

Policy;

(3)

Ryder’s

entitlement to coverage for up to the $5 million limit of the ACE–
Herc Policy; or (4) the allocation of settlement funds between the
ACE–Herc and ACE–Ryder policies (id. at ¶¶ 51–53.)
Accordingly, Herc asserts that:

(1) ACE’s decision to pay

the $2 million deductible from the ACE–Herc Policy was wholly
unsupported by any reasonable view of Ryder’s potential liability
to Robb and potential coverage available under the ACE–Herc Policy
(id. at ¶ 54); (2) while ACE had a contractual and discretionary
right to settle the Robb v. Ryder suit, ACE’s right to seek
reimbursement under Endorsement No. 23 is narrower, and does not
include settlements obtained without Herc’s consent and without a
threshold determination that ACE is “legally obligated to pay”
(id. at ¶ 55); (3) even if Endorsement No. 23 could apply, ACE did
not fulfill its duties to act in good faith and with due regard
for

the

interests

of

its

insured

(Herc)

in

exercising

its

discretion to settle the Robb v. Ryder suit (id. at ¶ 56); (4) ACE
breached

its

duties

by

agreeing,
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over

Herc’s

objection,

to

contribute

the

full

amount

of

Herc’s

deductible

to

fund

the

settlement (id. at ¶ 57); and (5) Herc breached its duties by
settling indiscriminately and with the improper purposes of (a)
limiting its own exposure under the ACE–Ryder Primary and Excess
policies, and (b) appeasing Ryder, its preferred customer (id.)
Herc’s Complaint Against ACE
Herc’s Complaint (Doc. #1) sets forth two counts. In Count I,
Herc seeks declaratory relief under 28 U.S.C. § 2201, on: (1)
whether Endorsement No. 23 applies to the Robb v. Ryder settlement;
(2) if it applies, whether Ryder’s coverage and ACE’s right to
seek reimbursement is limited to $1,000,000; and (3) whether the
correct ALAE calculation includes $168,351.50 in legal fees (id.
at 18–20.)

In Count II, an action for common-law bad faith, Herc

seeks compensatory and punitive damages, including the amounts
that Herc paid ACE under protest and that ACE withdrew through the
BOA Letter of Credit (plus fees), pre- and post-judgment interest,
attorney’s fees, costs, and other damages proximately caused by
ACE’s bad-faith conduct (id. at 25–26.)
II.
ACE asserts that Herc’s bad faith claim in Count II should be
dismissed as premature because Herc has not prevailed on the
threshold issue of “coverage.” 2

(Doc. #15.)

ACE also contends

It is not entirely clear what ACE means by “coverage.”
Initially, ACE asserted that this issue related to “whether Herc
2

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that Herc must plead that the insurer’s conduct resulted in an
“excess judgment” against it, but has failed to do so.
7.)

(Id. at

ACE thus concludes that “[a]s a matter of law, the claim for

common law bad faith is premature,”
of Count II.

(Id. at 7–8.)

which requires the dismissal

Finally, ACE contends that Herc’s

request for punitive damages should be dismissed or stricken
because the dismissal of the bad faith claim would render that
request moot and, in any event, Herc’s allegations are insufficient
to support its punitive damages request.

(Id. at 8-11.)

Herc responds that its bad faith claim is ripe because it has
alleged a “resolution of some kind in favor of the insured”

and

a “causal connection” between the damages claimed and ACE’s bad
faith, which does not always require an excess judgment.

Herc

also asserts that its allegations suffice to establish a plausible
entitlement to punitive damages.
Florida law on bad faith actions in connection with the
handling of insurance claims has evolved over the years.

See

Fridman v. Safeco Ins. Co. of Illinois, 185 So. 3d 1214, 1219-24
(Fla. 2016).

It has long been true that “a determination of

liability and the full extent of damages is a prerequisite to a

was obligated to reimburse ACE $1.9 million under” Endorsement No.
23. (Doc. #15, pp. 2-3.) Later, ACE argued there has been no
underlying “determination of coverage in favor of Herc,” referring
to the Count I allegation that ACE was not “legally obligated to
pay” the claim against Ryder. (Id. at 6.)
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bad faith cause of action.”
dispute

over

insurance

Id. at 1216.

benefits

must

before a bad faith action may proceed.

Stated differently, a

be

“resolved

favorably”

Blanchard v. State Farm

Mut. Auto. Ins. Co., 575 So. 2d 1289, 1291 (Fla. 1991).

However,

“the insured is not obligated to obtain the determination of
liability and the full extent of his or her damages through a trial
and may utilize other means of doing so, such as an agreed
settlement, arbitration, or stipulation before initiating a bad
faith cause of action.”

Fridman, 185 So. 3d at 1224.

Here, liability and the full extent of damages were determined
when ACE settled the Robb v. Ryder suit.

While ACE contends that

“there [] has been no determination of coverage in favor of Herc”
(Doc. #15, p. 6), Blanchard’s favorable resolution requirement is
satisfied by an insurer’s settlement with an insured or a thirdparty claimant.

Vest v. Travelers Ins. Co., 753 So.2d 1270, 1275

(Fla.2000) (“clarify[ing]” Blanchard’s “broadly stated” rule and
explaining that, “upon [] settlement, [a] claim for bad-faith
damages . . . ripened because at that time the final element of
the cause of action occurred”); Cammarata v. State Farm Fla. Ins.
Co., 152 So. 3d 606, 612 (Fla. 4th DCA 2014). 3
ACE’s reliance on Grey Oaks Country Club v. Zurich Am. Ins.,
No. 2:18cv639, 2019 WL 1359604 (M.D. Fla. Mar. 26, 2019) (Steele,
J.), Navix Imaging, Inc. v. Lexington Ins. Co., No. 2:05cv-469,
2006 WL 2536782 (M.D. Fla. Aug. 31, 2006) (Steele, J.), and Choi
v. Ace Am. Ins. Co., No. 21-10020, 2022 WL 1199645 (S.D. Fla. Feb.
17, 2022) is misplaced.
Those cases involved first-party, not
3

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ACE also asserts that Herc’s bad faith action is unripe
because Herc “seeks a declaration that it is not obligated to
reimburse

[ACE]

the

full

amount

of

the

deductible

under

[Endorsement No. 23] because [ACE] was not ‘legally obligated to
pay’ the claim against Ryder.”

(Doc. #15, p. 6.)

The Court

rejects that assertion as well.

It is well-established “that an

insurer’s liability for coverage and the extent of damages, and
not

an

insurer’s

liability

for

breach

of

contract,

determined before a bad faith action becomes ripe.”

must

be

Cammarata,

152 So. 3d at 610 (emphasis added).
It is undisputed that ACE finalized a settlement in Robb v.
Ryder and drew upon $2 million in coverage from under the ACE–Herc
Policy

to

fund

that

settlement.

That

conduct

amounts

to

a

concession by ACE as to the “existence of liability” under the
Policy, and also establishes the “extent of” compensatory damages
that Herc may be owed. 4 Because those two elements have effectively

third-party, bad-faith claims.
The insurance claimant in Grey
Oaks received only “partial payment” under the policy, so there
had not yet been a “determination as to the extent of [Grey Oak’s]
damages.”
2019 WL 1359604, at *2–3.
The plaintiffs in Navix
Imaging “agree[d]” that “a cause of action for bad faith ha[d] not
yet accrued.”
2006 WL 2536782, at *3.
The plaintiffs in Choi
also “seem[ed] to agree” that there was “no final determination”
of the defendant’s liability. 2022 WL 1199645, at *2.
4 To the extent that Herc is entitled to any consequential
damages, such as “interest, court costs, and reasonable attorney’s
fees,” Imhof, 643 So. 2d at 619, for obvious, practical reasons,
the extent of those damages can only be established after a bad
faith claim has been litigated.
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been pled, there is “no impediment as a matter of law to a recovery
of damages.”

Vest, 753 So.2d at 1275.

In other words, a claim

for bad-faith damages caused by ACE’s pre- and post-settlement
conduct appears to have ripened.

Id.

Whether ACE also breached

the contract after the settlement by improperly coercing Herc into
paying it $1 million and by drawing almost another $1 million from
the BOA Letter of Credit does not affect the ripeness of Herc’s
bad faith claim.

Cammarata, 152 So. at 610.

ACE next asserts that “in the third-party liability context,
the pleading must allege that the insurer’s breach ‘results in an
excess judgment being entered against its insured.’”
p. 7) (emphasis added).

(Doc. #15,

That categorical assertion is wrong. 5

Imhof v. Nationwide Mut. Ins. Co., 643 So. 2d 617, 618 (Fla. 1994)
(“there is no need to allege an award exceeding the policy limits
to bring an action for insurer bad faith”); Perera, 35 So. 3d at
899–902; Brookins v. Goodson, 640 So. 2d 110, 114 (Fla. 4th DCA
1994), overruled on other grounds, State Farm Mut. Auto. Ins. Co.
v. Laforet, 658 So.2d 55, 62 (Fla.1995).
Rather, as Herc correctly notes, the standard is that “there
must be a causal connection between the damages claimed and the
Indeed, ACE cites Perera v. U.S. Fid. & Guar. Co., 35 So. 3d
893 (Fla. 2010) for a proposition — “bad faith cannot be maintained
when an insured does not face exposure to an excess judgment,”
(Doc. #15, p. 7) — that Perera clearly rejected, see id., 35 So.
3d at 902 (“an excess judgment is not always a prerequisite before
a bad-faith case can be brought against the insurer”).
5

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insurer’s bad faith.”

Perera, 35 So. 3d at 903–04; Harvey v. GEICO

Gen. Ins. Co., 259 So. 3d 1, 7 (Fla. 2018) (“The damages claimed
by an insured in a bad faith case ‘must be caused by the insurer’s
bad faith.’”). ACE does not challenge Herc’s complaint for failing
to allege a causal connection between the damages claimed and ACE’s
purported bad faith.
Thus, ACE’s motion to dismiss on these grounds is DENIED.
ACE summarily asserts that “the complaint does not contain
any facts whatsoever in support of Herc’s request for punitive
damages . . . as required by Fla. Stat. § 768.72(2).”
p. 10.)

(Doc. #15,

With the bad faith claim surviving the present motion,

the punitive damages relief also remains.
Accordingly, it is now
ORDERED:
Defendant ACE American Insurance Co.’s Motion to Dismiss
(Doc. #15) is DENIED.
DONE AND ORDERED at Fort Myers, Florida, this
March 2025.

Copies: Parties of record

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10th

day of