Hallmark Insurance Company v. Maxum Casualty Insurance Company
Filing
43
ORDER denying 15 Motion to dismiss and Motion to Strike. Signed by Judge Roy B. Dalton, Jr. on 3/20/2017. (VMF)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
HALLMARK INSURANCE
COMPANY,
Plaintiff,
v.
Case No. 6:16-cv-2063-Orl-37GJK
MAXUM CASUALTY INSURANCE
COMPANY,
Defendant.
ORDER
This matter is before the Court on the following: (1) Maxum Casualty Insurance
Company’s Motion to Dismiss Hallmark’s Amended Complaint, Alternatively Motion to
Strike, and Incorporated Memorandum of Law (Doc. 15), filed November 22, 2016;
(2) Hallmark Insurance Company’s Response to Maxum Casualty Insurance Company’s
Motion to Dismiss Hallmark’s Amended Complaint, Alternatively Motion to Strike
(Doc. 26), filed December 9, 2016; and (3) Maxum’s Reply in Support of Its Motion to
Dismiss (Doc. 36), filed December 30, 2016. For the reasons set forth below, the Court
finds that the motion filed by Defendant Maxum Casualty Insurance Company is due to
be denied.
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I.
BACKGROUND 1
The parties to this diversity action are two insurance companies who shared a
common insured—Southern Pride Transport, Inc. (“Insured”). (See Doc. 10.) Defendant
Maxum Casualty Insurance Company (“Maxum”) was the Insured’s primary insurer
under Policy Number TRK6020865-01 (“Primary Policy”), which provided one million
dollars of coverage (“Primary Limits”) (see Doc. 10, ¶6; Doc. 10-1), and Plaintiff Hallmark
Insurance Company (“Hallmark”) was the Insured’s excess insurer under Policy
Number 66HX121C45 (“Excess Policy”), which provided two million dollars of coverage
(“Excess Limits”). (See Doc. 10, ¶7; Doc. 10-2.)
On February 8, 2013, an accident occurred (“Accident”), which potentially
triggered both policies. (See Doc. 10, ¶¶9–25.) Specifically, a vehicle driven by Andrea
Salickram (“Injured Party”) collided with a tractor trailer (“Trailer”), which was owned
by the Insured and negligently operated by the Insured’s driver, Travis Crawford
(“Driver”). (See id.) When the Accident occurred, the Trailer had inoperable “reflective
lights” on top and defective rear defective reflective tape. (See id. ¶¶9, 10, 13, 14.) The
Insured promptly reported the Accident to Maxum, and Maxum hired an attorney to
represent the Insured (“Insured’s Attorney”). (See id. ¶¶11–12.)
The facts set forth in this Order are taken from the Amended Complaint and are
construed in the light most favorable to Hallmark. See Hill v. White, 321 F.3d 1334, 1335
(11th Cir. 2003). The true facts of the action may be entirely different. (See Doc. 15, p.7, n.7
(disputing “the accuracy and truthfulness” of Hallmark’s factual allegations, denying
causation, and contending that “Hallmark trampled over attorney client privilege, work
product, [and] confidentiality”).)
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Following the Accident, the Injured Party sought compensation from the Insured
and the Driver for her injuries (“Claim”) by: (1) providing documentation to Maxum
indicating that the Claim “had a value well in excess” of the Primary Limits; and
(2) demanding that Maxum tender the Primary Limits to her within twenty days. (See id.
¶17; Doc. 10-4 (“Pre-Suit Demand”).) Maxum did not comply with the Pre-Suit Demand,
and it failed to give Hallmark notice of the Claim and the Pre-Suit Demand. (See Doc. 10,
¶¶18, 19.)
After the Pre-Suit Demand expired, the Injured Party filed a personal injury action
against the Insured and the Driver (“PI Action”). (See id. ¶20; Doc. 10-5.) The Injured
Party also served two $750,000.00 proposals for settlement on the Insured and the Driver
respectively in August 2015 (“PFS Demands”). (See Doc. 10, ¶23; Doc. 10-7.) Again,
Maxum failed to settle and failed to notify Hallmark of the Claim or the PFS Demands.
(See Doc. 10, ¶¶24, 25.)
Maxum did not notify Hallmark of the Claim until April 11, 2016, which was five
days after the Injured Party made another offer to settle the Claim for $2,500,000.00. (See
id. 10, ¶¶26–28; Doc. 10-8 (“April Demand”).) The April Demand “was set to expire on
April 20, 2016,” but that deadline was extended to May 20, 2016. (See id. ¶29.) Before the
extended deadline expired, the Claim finally settled during mediation for $2,400,000.00
(“Settlement”). (See id.) The Settlement was memorialized in a written agreement
(Doc. 15-2 (“Agreement”)) and a release (Doc. 15-1 (“Release”)), which provided that:
(1)
the Injured Party received $1,000,000.00 from Maxum
and $1,400,000.00 from Hallmark (“Hallmark
Payment”);
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(2)
the PI Action was dismissed with prejudice, and the
Injured Party “completely and fully” released the
Driver, the Insured, and the Insured’s insurers “from
any and all current or future claims, obligations,
liability claims or responsibility arising out of” the
Accident (see Doc. 15-1, pp. 1, 3); and
(3)
the Insured and Hallmark reserved “all rights and
remedies they may have against Maxum arising out of
[the PI Action,] including claims for bad faith” (see
Doc. 15-2, ¶13).
Neither the Release nor the Agreement included an assignment of any bad faith claim
from the Insured to Hallmark. (See Docs. 15-1, 15-2.)
In this action, Hallmark asserts a single “Common Law Bad Faith – Equitable
Subrogation” claim against Maxum under Florida law to recover the Hallmark Payment
(“BFES Claim”), pre-judgment interest, costs, and attorneys’ fees (“Fees Demand”). (See
Doc. 10.) Hallmark also requests a jury trial (“Jury Demand”). (See id.) Maxum moved to
dismiss Hallmark’s Amended Complaint (see Doc. 15, pp. 1–23 (“Motion to Dismiss”)),
and it alternatively requested that the Court strike the Fees and Jury Demands. (See id. at
24–25 (“Motion to Strike”).) Hallmark responded (Doc. 26), Maxum replied (Doc. 36),
and these matters are now ripe for adjudication.
II.
LEGAL STANDARDS
Complaints filed in this Court must comply with the minimum pleading
requirements set forth in Rule 8 by including “short and plain” statements of a claim
showing that the plaintiff “is entitled to relief” and “the grounds for the court’s
jurisdiction.” Fed. R. Civ. P. 8(a). Failure to comply with these pleading requirements
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provides grounds for dismissal under Federal Rules of Civil Procedure 12(b)(1) and
12(b)(6). The failure to join an “indispensable party” under Rule 19 is another ground for
dismissal under Rule 12(b)(7). Pursuant to Rule 12(f), courts may strike a matter from a
pleading if such matter is “redundant, immaterial, impertinent, or scandalous.”
III.
A.
DISCUSSION
Motion to Dismiss
Maxum argues that the Court should dismiss the Amended Complaint pursuant
to Rules 12(b)(1) and 12(b)(6) because: (1) Hallmark failed to obtain an assignment of
rights from the Insured before the Release “extinguished” the Claim and terminated the
PI Action (Doc. 15, pp. 1–20 (“Assignment Argument”)); and (2) the Insured suffered no
damages as a result of Maxum’s purported bad faith (id. at 21–22 (“Damages
Argument”)). These arguments turn on a discrete question of Florida law—whether an
excess insurer may sue a primary insurer for bad faith when: (1) the mutual insured has
not assigned its rights against the primary insurer to the excess insurer; and (2) due to the
execution of a complete release, all claims against the mutual insured have been
extinguished. (See Docs. 15, 26, 36). This question was answered in the affirmative in
Vigilant Insurance Company v. Continental Casualty Company. 33 So. 3d 734 (Fla. 4th
DCA 2010). Thus, the Court must reject Maxum’s Assignment and Damages Arguments
if Vigilant controls. (Compare Doc. 26, pp. 5–6, with Doc. 15, p. 10, n.8.)
In identifying controlling Florida law, the Court must first adhere to “case
precedent from the Florida Supreme Court.” See Composite Structures, Inc. v. Cont’l Ins.
Co., 560 F. App’x 861, 864 (11th Cir. 2014). Absent such precedent, the Court must apply
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decisions of Florida’s “intermediate appellate courts” unless a persuasive indication
exists that the Florida Supreme Court “would decide the issue otherwise.” Id.
Vigilant was decided by the Fourth District Court of Appeal of Florida, and the
Florida Supreme Court relied on Vigilant in part when answering questions certified by
the U.S. Circuit Court of Appeals for the Eleventh Circuit in Perera v. United States Fidelity
and Guaranty Company, 35 So. 3d 893, 900–01 (Fla. 2010). Perera summarized the
circumstances “in which an insured or the third-party claimant, either on its own behalf or
as the insured’s assignee, may bring a common law third-party bad-faith claim against an
insurer for damages sustained as a result of the insurer’s bad faith.” Id. at 899 (emphasis
added). One such circumstance “involves a claim not of the insured or the third-party
claimant, but of the excess carrier, which may bring a bad-faith claim against a primary
insurer by virtue of equitable subrogation.” Id. at 900 (emphasis added). Noting that the
position of an excess insurer “is analogous to that of the insured when only one insurer
is involved,” Perera recognized an excess insurer’s “right to ‘maintain a cause of action . .
. for damages resulting from the primary [insurer’s] bad faith refusal to settle [a] claim
against their common insured.’” See id. (quoting U.S. Fire Ins. Co. v. Morrison Assurance
Co., 600 So.2d 1147, 1151 (Fla. 1st DCA 1992); see also Ranger Ins. Co. v. Travelers Indem. Co.,
389 So. 2d 272, 275 (Fla. 1st DCA 1980) (noting that the insured “in effect substitutes an
excess insurer for himself”). 2
The Ranger Insurance Company decision—which was also cited in Perera—held
that a primary insurer’s duty of good faith to its insured in the settlement negotiation
process includes an obligation to an excess insured “to view the situation as if there were
no policy limits applicable to the claim, and to give equal consideration to the financial
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Despite Perera and Vigilant, Maxum vehemently argues that Florida law
precluding bad faith claims by excess insurers has been settled for “over three decades”
(see Doc. 15, p.7), and the Court should simply disregard Vigilant as “an outlier decision
that is irreconcilable” with Fidelity & Casualty Insurance Company of New York v. Cope,
462 So. 2d 459 (Fla. 1985) and two decisions from the Eleventh Circuit—Federal Insurance
Company v. National Union Fire, 298 F. App’x 845 (11th Cir. 2008) and Auto-Owners
Insurance Company v. American Yachts, Limited, 271 F. App’x 888 (11th Cir. 2008)). (See
Doc. 15, pp. 9–10; Doc. 36, pp. 2–4.) The Court disagrees.
Far from an outlier, Vigilant is consistent with other decisions from Florida’s
intermediate appellate courts. See Morrison, 600 So. 2d at 1151; Ranger Ins., 389 So. 2d
at 275; Gen. Acc. Fire & Life Assurance Corp. v. Am. Cas. Co. of Reading, Pa., 390 So. 2d 761,
765 (Fla. 3d DCA 1980) (affirming judgment for excess insurer against primary insurer in
claim for bad faith refusal to negotiate and settle a claim asserted against a mutual
insured). 3 Further, Cope is not controlling here because it did not concern a claim brought
by an excess insurer and it did not even mention the doctrine of equitable subrogation.
exposure to the insured.” See Ranger Ins. Co., 389 So. 2d at 275.
3 See also Progressive Am. Ins. Co. v. Nationwide Ins. Co., 949 So. 2d 293, 294 (Fla. 1st
DCA 2007) (explaining that primary insurers owe excess insurers a duty of good faith
that “stems from equitable subrogation principles, in that, in the event of an award over
the primary insurer’s policy limits, the excess insurer incurs the same duty to pay that
the insured would have in the absence of an excess insurer, and correspondingly the
excess insurer has the same right to sue the primary insurer for bad faith as the insured”);
RLI Ins. Co. v. Scottsdale Ins. Co., 691 So. 2d 1095, 1096 (Fla. 1st DCA 1997) (“[A]n excess
insurer is entitled to maintain a common law bad faith action against a primary insurer.”);
Phoenix Ins. Co. v. Fla. Farm Bureau Mut. Ins. Co., 558 So .2d 1048, 1050 (Fla. 2d DCA 1990)
(“Equitable subrogation is an appropriate form of relief in a dispute between a primary
and excess insurer arising from the payment of a claim by the excess insurer.”).
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See Cope, 462 So. 2d at 461; see also Vigilant, 33 So.3d at 738–39 (distinguishing Cope). The
two Eleventh Circuit cases cited by Maxum also do not control here because both were
unpublished decisions. 4
Because Maxum has not persuaded the Court that the Florida Supreme Court
would reject Vigilant based on Cope or any other bad faith case brought by a third party
other than an excess insurer, the Court must adhere to the Vigilant holding and the Perera
dicta, both of which plainly support Hallmark’s BFES Claim. 5 See Vigilant, 33 So. 3d at 739
(reversing trial court’s dismissal of excess insurer’s bad faith claim); see also Perera,
35 So. 3d at 900–01); Nova Cas. Co. v. OneBeacon Am. Ins. Co., 603 F. App'x 898, 901
(11th Cir. 2015) (quoting Perera). Accordingly, the Court rejects Maxum’s Assignment and
Damages Arguments.
The Court also rejects Maxum’s remaining argument that the Amended Complaint
should be dismissed pursuant to Rule 12(b)(7) because Hallmark failed join the Insured
and the Insured’s Attorney (“Third Parties”) under Rule 19. (See Doc. 15, pp. 22–23.)
“Unpublished opinions are not controlling authority and are persuasive only
insofar as their legal analysis warrants.” Bonilla v. Baker Concrete Const., Inc., 487 F.3d 1340,
1345, n.7 (11th Cir. 2007). Here, American Yachts and Auto-Owners are not persuasive
because both are inconsistent with and were decided two years before Vigilant and Perera.
See Fed. Ins. Co., 298 F. App’x at 849; American Yachts, 271 F. App’x at 889.
5 Further, the Court finds that the Amended Complaint sets forth a plausible BFES
Claim based on the factual allegations that: (1) Maxum knew about the Excess Policy “by
as early as January of 2015” (see Doc. 10, ¶22); (2) Maxum also knew that the Claim
exposed the Insured to liability in excess of the Primary Limits and within the Excess
Limits (see id. ¶¶23–25); (3) despite its knowledge concerning the Claim and the Excess
Policy, Maxum delayed in notifying Hallmark of the Claim while rejecting the Pre-Suit
and PFS Demands (see id.); and (4) Maxum’s bad faith in handling the Claim and
responding to the Pre-Suit and the PFS Demands unnecessarily caused Hallmark to make
the Hallmark Payment (see id. ¶¶29–33).
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According to Maxum, the Third Parties are “necessary” to this action and for “judicial
efficiency and economy, it was erroneous for Hallmark to omit” them. (See id. at 23.)
Hallmark counters that the Third Parties are not “necessary” parties, and even if they
were necessary, “nothing prevents Maxum from utilizing third party practice to join
[them] as permitted by [Rule 14(a)].” (Doc. 26, p. 15.)
Under Rule 19, dismissal is permitted for non-joinder only when “a person who is
required to be joined if feasible cannot be joined,” and “in equity and good conscience,
the action should [not] proceed among the existing parties.” Fed. R. Civ. P. 19(b). Here,
Maxum has not argued that the Third Parties cannot be joined and it has not addressed
the equitable factors which must be considered by the Court under Rule 19(b). As such,
its argument under Rules 12(b)(7) and 19 fail, and the Motion to Dismiss is due to be
denied.
B.
Motion to Strike
The proper grounds to strike matter from a Complaint is identified in Rule 12(f)—
redundancy, immateriality, impertinence, or scandal. Without mentioning any of these
grounds, and in just three paragraphs of its 25-page Motion to Dismiss, Maxum contends
that the Court must strike: (1) the Fees Demand because “Hallmark is not an assignee of”
the Insured (Doc. 15, p. 24 (citing Cont’l Cas. v. Ryan Inc. Eastern, 974 So. 2d 368, 377
(Fla. 2008)); and (2) the Jury Demand because the BFES Claim is an equitable claim (see
id. at 24–25). In a similarly abbreviated fashion, Hallmark counters that: (1) Florida
recognizes an “implied assignment” of attorneys’ fees claims (Doc. 26, p. 15); and (2) it is
entitled to a jury trial because it seeks a legal remedy in this action (id. at 16). Because the
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parties’ briefing is insufficient and ignores the requirements of Rule 12(f), the Court finds
that the Motion to Strike is due to be denied. 6
IV.
CONCLUSION
Accordingly, it is ORDERED AND ADJUDGED that Maxum Casualty Insurance
Company’s Motion to Dismiss Hallmark’s Amended Complaint, Alternatively Motion to
Strike, and Incorporated Memorandum of Law (Doc. 15) is DENIED.
DONE AND ORDERED in Orlando, Florida, this 20th day of March, 2017.
Copies to:
Counsel of Record
The Court will address the jury question and attorney’s fees disputes if and when they
are raised in an appropriate procedural posture.
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