Fourth Tee, LLC v. Axis Surplus Insurance Company et al

Filing 38

ORDER granting 14 motion to dismiss; granting in part and denying in part 15 motion to dismiss; denying as moot 25 Motion for Leave to File Reply.Defendant McIver is dismissed without prejudice from this case. The Motion to Dismiss of Defendant Axis Surplus Insurance Company is granted with prejudice as to Count I and denied as moot as to Count II. The Clerk of Court shall close this case. Signed by Judge Elizabeth A. Kovachevich on 2/15/2013. (JM)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

FOURTH TEE, LLC,
Plaintiff,
v.

CASE NO. 8:12-CV-1249-T-17TGW

AXIS SURPLUS INSURANCE

COMPANY, etal.,
Defendants.

ORDER

This cause is before the Court on:

Dkt.
Dkt.
Dkt.
Dkt.
Dkt.
Dkt.

14
15
23
24
25
31

Dkt. 32

Motion to Dismiss (Mclver)
Motion to Dismiss (Axis)
Response
Response
Motion for Leave to File Reply
Stipulation of Dismissal of Claims in Count II
Order

Defendants Axis Surplus Insurance Company and William Mclver move to
dismiss for failure to state a cause of action pursuant to Fed. R. Civ. P. 12(b)(6).

I. Standard of Review

"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." "[D]etailed

factual allegations" are not required, Bell Atlantic v. Twomblv. 550 U.S. 544, 555 (2007),
but the Rule does call for sufficient factual matter, accepted as true, to "state a claim to

relief that is plausible on its face," \_±, at 570. A claim has facial plausibility when the

Case No. 8:12-CV-1249-T-17TGW

pleaded factual content allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged. ]d., at 556. Two working principles

underlie Twombly. First, the tenet that a court must accept a complaint's allegations as
true is inapplicable to threadbare recitals of a cause of action's elements, supported by
mere conclusory statements. kL, at 555. Second, only a complaint that states a

plausible claim for relief survives a motion to dismiss. Determining whether a complaint
states a plausible claim is context-specific, requiring the reviewing court to draw on its
experience and common sense. kL, at 556. A court considering a motion to dismiss

may begin by identifying allegations that, because they are mere conclusions, are not
entitled to the assumption of truth. While legal conclusions can provide the complaint's

framework, they must be supported by factual allegations. When there are
well-pleaded factual allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement to relief. See Ash croft v.

Iqbal, 129 S.Ct. 1937, 1955-1956 (2009)(quoting Bell Atlantic v. Twomblv. 550 U.S. 544
(2007).

III. Discussion

Plaintiff Fourth Tee, LLC pursued claims against Axis Surplus Insurance
Company pursuant to a policy issued by Axis for the time period August 9, 2007 to

August 9, 2008 (2007 Policy) (Dkt. 10, Ex. B, pp. 68-91), and pursuant to a policy
issued by Axis for the time period August 9, 2009 to August 9, 2010 (2010 Policy)(Dkt.
10, Ex. A, pp. 15-64).

The Certificate Declarations for both policies state:

"This insurance is issued pursuant to the Florida Surplus Lines Law.
Persons insured by surplus lines carriers do not have the protection of the

Florida Insurance Guaranty Act to the extent of any right of recovery for
the obligation of an insolvent unlicensed insurer."
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Case No. 8:12-CV-1249-T-17TGW

(Dkt. 10, p. 15, p. 68).

The Florida Insurance Code defines "authorized insurers":

624.09. "Authorized," "unauthorized" insurer defined

(1) An "authorized" insurer is one duly authorized by a subsisting
certificate of authority issued by the office [Florida Office of Insurance
Regulation] to transact insurance in this state.
(2) An "unauthorized" insurer is one not so authorized.
Surplus lines insurers are considered to be unauthorized insurers, but are eligible to
transact surplus lines insurance as "eligible surplus insurers." See ss. 626.914,
626.918. Florida Statutes.

S. 627.706(1), Florida Statutes (2007, 2010) provides:

627.706. Sinkhole insurance; catastrophic ground cover collapse;
definitions

(1) Every insurer authorized to transact property insurance in this state
shall provide coverage for a catastrophic ground cover collapse and shall
make available, for an appropriate additional premium, coverage for
sinkhole losses on any structure, including contents of personal property
contained therein, to the extent provided in the form to which the coverage
attaches

The 2007 Policy and the 2010 Policy contain the following exclusion:
SINKHOLE EXCLUSION - AX SE 1103
THIS ENDORSEMENT CHANGES THE POLICY.

PLEASE READ

CAREFULLY.

It is understood and agreed that the policy does not cover any claim or

Case No. 8:12-CV-1249-T-17TGW

suit for property damage, bodily injury or medical payments arising out of
or caused directly or indirectly by sinkhole. Such loss is excluded
regardless of any other clause or event contributing concurrently or in any
sequence to such loss. We will cover direct loss by fire or explosion
resulting from sinkhole is covered. All other provisions of this policy apply.
(Dkt. 10, p. 43, p. 90).

A. Dkt. 24

Motion to Dismiss (Axis)

Defendant Axis Surplus Lines Insurance Company moves to dismiss for failure to
state a cause of action on the basis that: 1) Axis, a surplus lines insurer, is not subject
to Florida's Sinkhole Statutes under s. 627, Florida Statutes, pursuant to s. 626.913(4),

Florida Statutes: and 2) sinkhole coverage is excluded under the terms of Axis's
policies, which are attached to the Amended Complaint.

Plaintiff Fourth Tee, LLC responds that, at the time that Defendant Axis issued

the 2007 policy to Plaintiff, Defendant Axis was authorized to transact property
insurance in Florida, and section 627.706, Fla^ Stat. (2007) provided that where a

property insurer issued a policy without coverage for sinkhole losses, the insurer must
inform the policyholder in the manner specified in section 627.706(4), but Defendant
Axis did not comply with the statutory requirement.

Plaintiff acknowledges that on June 11, 2009, ch. 2009-166 was enacted to
amend section 626.913, Fla. Stat., adding:

"(4) Except as may be specifically stated to apply to surplus
lines insurers, the provisions of chapter 627 do not apply to
surplus lines insurance authorized under ss. 626.913626.937, the Surplus Lines Law.
The amendments to s. 626.913, Florida Statutes, in this act
are remedial in nature and operate retroactively to the

Case No. 8:12-CV-1249-T-17TGW

regulation of surplus lines insurers from October 1, 1988,
except with respect to lawsuits that are filed on or before
May 15, 2009."
Plaintiff argues that the 2007 Policy was issued prior to the enactment of ch.
2009-166 and did not prominently notify Plaintiff Fourth Tee, LLC that sinkhole

coverage was excluded in compliance with S. 627.706(4)., Fla. Stat. (2007).

Plaintiff further argues that neither the 2007 Policy nor the 2010 Policy had the
words required by s. 626.924, in all capitals. Plaintiff further alleges that Seacoast

Brokers, LLC issued both the 2007 Policy and the 2010 Policy to Plaintiff Fourth Tee,
LLC pursuant to "the Binding Authority Agreement granted to Seacoast Brokers, LLC by
Axis Surplus Insurance Company." (Dkt. 10, Ex. A, Ex. B).

1. Count I. S. 627.706. Florida Statutes

In the Amended Company, Plaintiff alleges two dates of loss: April 1, 2007 and
June 26, 2010. Plaintiff is seeking a declaratory judgment as to the 2007 Policy and the
2010 Policy.

Plaintiff alleges that Defendant Axis had an affirmative duty to provide coverage
for sinkhole losses under s. 627.706, and had affirmative obligations under ss.
627.7072, 627.7073.

Defendant Axis argues that the Florida Legislature has determined that the
sinkhole statutes do not apply to surplus lines insurers. S. 626.913(4), Fla. Stat.
(2009). Defendant Axis further argues that s. 626.913 is remedial in nature, and
operates retroactively to the regulation of surplus lines insurers from October 1, 1998,

except with respect to lawsuits that were filed on or before May 15, 2009.

Case No. 8:12-CV-1249-T-17TGW

Plaintiff argues that, prior to the enactment of ch. 2009-166, surplus lines

insurers were exempt from Part I of ch. 627, ss. 627.011-627.381, Fla. Stat., but not
from ss. 626.706, 626.707 and 626.7072. Plaintiff further argues that retroactive

application of s. 7, ch. 2009-166 to the 2007 Policy is not constitutionally permissible
because the amendments are substantive rather than procedural. Menendez v.
Progressive Express Ins. Co.. 35 So.3d 873, 876 (Fla. 2010).

In determining whether a statute should apply retroactively, the Court

determines: 1) whether the Legislature intended for the statute to apply retroactively;
2) if such an intent is clearly expressed, the Court must determine whether retroactive
application would violate any constitutional principles. Menendez at 877. Even where
the expressed intent for retroactive application is present, the Court will reject
retroactive application where it impairs a vested right, creates a new obligation, or
imposes a new penalty. kL

Subsequent legislation which diminishes the value of a

contract is repugnant to [the Florida] Constitution. Dewberry v. Auto-Owners Ins. Co.,
363 So.2d 1077, 1080 (Fla. 1978).

Where an amendment to a statute is enacted soon after controversies as to the

interpretation of the original act arise, the Court may consider the amendment as a
legislative interpretation of the original law, and not as a substantive change thereof.
Lowrv v. Parole and Probation Comm'n. 473 So.2d 1248, 1250 (Fla. 1985). Plaintiff

acknowledges that the 2009 Amendment was enacted shortly after the Florida
Supreme Court's decision in Essex Insurance Co. v. Zota, 985 So.2d 1036 (Fla.
2008)(holding that surplus lines insurers were exempt from Part I of ch. 627). This
suggests that the Legislature intended the 2009 Amendment to clarify rather than make
a substantive change.

The Court notes that the Legislature clearly expressed an intent that the 2009
Amendment apply retroactively. In order to determine whether retroactive interpretation

Case No. 8:12-CV-1249-T-17TGW

is constitutionally permissible, the Court must compare the provisions of Ch. 627
involved in this case before and after the 2009 Amendment.

Plaintiff argues that, at the time the 2007 Policy was issued, s. 627.706, Fla.
Stat. (2007) required all insurers authorized to transact property insurance in Florida to
offer coverage for sinkhole losses, and, where excluded, requires the insurer to
prominently notify the insured of that fact. The Court notes that the definitional sections
of s. 627.706 are not at issue in this case. Plaintiff relies only on the alleged duty to
provide coverage in s. 627.706(1). S. 627.706(1) . Fla. Stat. (2007) provides:

(1) Every insurer authorized to transact property
insurance in this state shall provide coverage for a
catastrophic ground cover collapse and shall make
available, for an appropriate additional premium, coverage
for sinkhole losses on any structure, including contents of
personal property contained therein, to the extent provided
in the form to which the coverage attaches

The Court notes that the statutory scheme of the Florida Insurance Code
distinguished between "authorized" insurers and "unauthorized" insurers, s. 624.09, Fla.
Stat., ss. 626.901-9372, before and after the 2009 Amendment. Plaintiff recognizes
that Defendant Axis is an "unauthorized" insurer and is an "eligible surplus lines
insurer." As stated in s. 626.913(2), FJa, Stat.(2007). the purposes of the Surplus Lines
Law are:

"to provide orderly access for the insuring public of this state
to insurers not authorized to transact insurance in this

state, through only qualified, licensed, and supervised
surplus lines agents resident in this state, for insurance
coverages and to the extent thereof not procurable from
authorized insurers; to protect such authorized insurers, who
under the laws of this state must meet certain standards as

to policy forms and rates, from unwarranted competition by

Case No. 8:12-CV-1249-T-17TGW

unauthorized insurers who, in the absence of this law, would

not be subject to similar requirements; and for other
purposes as set forth in this Surplus Lines Law."
(Emphasis added).

Plaintiff reported a "date of loss" of April 1, 2007 as to Plaintiff's initial claim. At that
time, the Florida Statutes put surplus lines insurers in the category of "insurers not
authorized to transact insurance in this state."

Surplus lines insurance is an

alternative type of insurance that is offered by unauthorized insurers for consumers to
be able to purchase property liability insurance that is otherwise not offered in the open
market by unauthorized insurers. S. 626.915, Fjjl Stat.

According to the statute's

plain language, only insurers authorized to transact property insurance in Florida have
the duty to provide coverage for a catastrophic ground cover collapse and coverage for
sinkhole losses for an additional premium.

Defendant Axis cannot be an "unauthorized

insurer" and simultaneously be put in the category of "insurers authorized to transact

property insurance in this state" subject to the duties enumerated in s. 627.706. To
accept Plaintiffs argument, the Court would have to ignore the many statutory
provisions which refer to surplus lines insurers as "unauthorized insurers."

The notice provision, s. 627.706(4), contains the same requirement before the
2009 Amendment and after the 2009 Amendment:

(4) Insurers offering policies that exclude coverage for
sinkhole losses shall inform policyholders in bold type of not
less than 14 points as follows: "YOUR POLICY PROVIDES
COVERAGE FOR A CATASTROPHIC GROUND COVER
COLLAPSE THAT RESULTS IN THE PROPERTY BEING

CONDEMNED AND UNINHABITABLE. OTHERWISE,
YOUR POLICY DOES NOT PROVIDE COVERAGE FOR

SINKHOLE LOSSES. YOU MAY PURCHASE ADDITIONAL
COVERAGE FOR SINKHOLE LOSSES FOR AN
ADDITIONAL PREMIUM."

Case No. 8:12-CV-1249-T-17TGW

The Court has determined that the duty to provide coverage applies to every insurer
authorized to transact property insurance in Florida, and not to unauthorized insurers;

therefore the duty to notify of coverage and of the availability of additional coverage for
an additional premium in the specific manner spelled out in s. 627.706(4) does not
come into play as to Defendant Axis.

This case does not involve depriving Plaintiff of a vested right to coverage by the

retroactive application of the definitions within the statute. Retroactive application of the
statute attaches no new legal consequences to events which occurred before the
enactment of the statute in 2009 as to s. 627.706(1). As an "eligible" surplus lines
insurer, i.e. an insurer not authorized to transact property insurance in the State of
Florida, Defendant Axis was not required to provide coverage for sinkhole losses in
2007 and 2010. After consideration, the Court grants Defendant's Motion to Dismiss
as to this issue.

2) Count I, S. 626.924(1)

Defendant Axis argues that the 2007 Policy and the 2010 Policy contain the
language required by the above statute. Defendant Axis further argues that s.
626.924(1) does not require that Defendant include the specified words in capital
letters, and, even if the statute did so require, Defendant has substantially complied.

Defendant argues that Plaintiff is seeking a remedy not provided by the Legislature.
See QBE Insurance Corporation v. Chalfonte Condominium Apartment Association.
ina, 94So.3d541, 553 (Fla. 2012).

Plaintiff Fourth Tee responds that the 2007 Policy and the 2010 Policy did not
contain the stamped or written statement in all capital letters as required by s.
626.924(1), and therefore were not issued pursuant to the Surplus Lines law.

Case No. 8:12-CV-1249-T-17TGW

The Court has determined that the duty to provide coverage applies to every insurer
authorized to transact property insurance in Florida, and not to unauthorized insurers;
therefore the duty to notify of coverage and of the availability of additional coverage for
an additional premium in the specific manner spelled out in s. 627.706(4) does not
come into play as to Defendant Axis.

This case does not involve depriving Plaintiff of a vested right to coverage by the

retroactive application of the definitions within the statute. Retroactive application of the
statute attaches no new legal consequences to events which occurred before the
enactment of the statute in 2009 as to s. 627.706(1). As an "eligible" surplus lines

insurer, i.e. an insurer not authorized to transact property insurance in the State of

Florida, Defendant Axis was not required to provide coverage for sinkhole losses in
2007 and 2010. After consideration, the Court grants Defendant's Motion to Dismiss
as to this issue.

2) Count I, S. 626.924(1)

Defendant Axis argues that the 2007 Policy and the 2010 Policy contain the

language required by the above statute. Defendant Axis further argues that s.
626.924(1) does not require that Defendant include the specified words in capital
letters, and, even if the statute did so require, Defendant has substantially complied.

Defendant argues that Plaintiff is seeking a remedy not provided by the Legislature.
See QBE Insurance Corporation v. Chalfonte Condominium Apartment Association.
inc., 94 So.3d 541, 553 (Fla. 2012).

Plaintiff Fourth Tee responds that the 2007 Policy and the 2010 Policy did not
contain the stamped or written statement in all capital letters as required by s.

626.924(1), and therefore were not issued pursuant to the Surplus Lines law.

Case No. 8:12-CV-1249-T-17TGW

The primary factor In determining whether a private right of action arises from the
violation of statutory requirements is legislative intent. See Murthv v. N. Sinha Corp..
644 So.2d 983 (Fla. 1994). "Legislative intent in this context 'is a shorthand reference

to the ordinary tools for discerning statutory meaning: text, context and purpose.'" QBE,
94 So.3d at 551. The primary guide is the language of the statute, considering both the

meaning of the words and the context. kL

At the outset, the Court notes that the 2007 Policy and the 2010 Policy contain
the words required by s. 626.924(1) on the declarations page; those words convey the
message that is intended to alert the public to a risk associated with a surplus lines

policy. Therefore, Defendant Axis is in substantial compliance. The requirements of
capital letters, or a particular font are requirements that are designed for the protection
of the public. The Legislature did not specify any penalty for noncompliance in the
statute. The Florida Insurance Code, s. 627.418(1), Fla. Stat., supports a finding that
the absence of capital letters or a particular font does not void the policy.

The Court relies on the discussion in QBE Insurance Corp. v. Chalfonte

Condominium Association, 94 So.3d 541, 552-553 (Fla. 2012). After consideration, the
Court grants the Motion to Dismiss as to this issue.

3. Count II - Breach of Contract

The parties stipulated to the dismissal of Count II without prejudice. The Court
has dismissed Count II without prejudice.

After consideration, the Court denies the Motion to Dismiss as to Count II as
moot.

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Case No. 8:12-CV-1249-T-17TGW

Defendant Mclver moves for dismissal without prejudice. Defendant argues that
the Amended Complaint does not seek affirmative relief against him, that Plaintiff has
not properly plead negligent procurement, and that an action for negligent procurement
against him is premature.

Plaintiff Fourth Tee, LLC argues that Defendant Mclver does not address
Plaintiff's claim for declaratory judgment, and whether Defendant's inclusion as a party

to the action is proper, and therefore does not dispute that Plaintiff has alleged a cause
of action for declaratory judgment against Defendant Mclver.

Plaintiff argues that, as

an employee of an incorporated surplus lines insurance agency, pursuant to Ch.
626.9295, Florida Statutes, Defendant Mclver is personally liable for any wrongful acts,
misconduct, or violations of any provisions of the [Florida Insurance] code.

Plaintiff

argues that Plaintiff has alleged that the policies at issue were not placed pursuant to
Surplus Lines Law, and that the relief sought against Defendant Mclver is found in the
prayer for relief, declaring Plaintiff's rights under the policy.

Under Florida law, an action for negligent procurement against an insurance

agent does not accrue until the conclusion of the related proceeding, and the proper
action by the court is dismissal. Blumberq v. USAA Casualty Insurance Co., 790 So.2d
1061, 1065 (Fla. 2001). In the Amended Complaint, Plaintiff recognizes that Plaintiff's
rights against Defendant Mclver, as Plaintiff's broker, are dependent on the coverage
determination made as to Defendant Axis. After consideration, the Court dismissed

Plaintiff's Amended Complaint as to Defendant Mclver without prejudice. Accordingly, it
is

ORDERED that Defendant Axis's Motion to Dismiss (Dkt. 15) is granted with

prejudice as to Count I and denied as moot as to Count II; it is further

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Case No. 8:12-CV-1249-T-17TGW

ORDERED that Defendant Mclver's Motion to Dismiss (Dkt. 14) is granted, and
Defendant Mclver is dismissed without prejudice; it is further

ORDERED that the Motion for Leave to File Reply (Dkt. 25) is denied as moot.

DONE and ORDERED in Chambers, in Tampa, Florida on this
15th day of February, 2013.

r

Copies to:
All parties and counsel of record

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