Katchmore Luhrs, LLC v. Allianz Global & Corporate Specialty

Filing 228

ORDER granting 182 Defendants' Motion to Abate, or Stay, Counts III & IV of the Amended Complaint. Signed by Magistrate Judge Jonathan Goodman on 12/19/2016. (jf00)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
CASE NO. 15-23420-CIV-GOODMAN
[CONSENT CASE]
KATCHMORE LUHRS, LLC,
Plaintiff,
v.
ALLIANZ GLOBAL & CORPORATE
SPECIALTY, et al.,
Defendants.
__________________________________/
ORDER GRANTING MOTION TO ABATE, OR STAY,
COUNTS III & IV OF THE AMENDED COMPLAINT
Plaintiff Katchmore Luhrs, LLC originally filed this lawsuit to enforce a marine
insurance contract in state court (i.e., the Eleventh Judicial Circuit in Miami-Dade
County). [ECF No. 1-1]. Defendant Allianz Global & Corporate Specialty (“Allianz”)
removed this action from state court on the basis of both admiralty and diversity
jurisdiction. [ECF No. 1]. Plaintiff amended the original complaint to add a second
Defendant, AGCS Marine Insurance Company (“AGCS”). [ECF No. 67]. Defendants
each filed motions to dismiss [ECF Nos. 71; 72], but the Court denied both motions [ECF
No. 135].
Both Defendants later filed a motion to abate [ECF No. 182] Counts III and IV of
the Amended Complaint, arguing that they are bad faith claims which were

prematurely filed because the underlying, threshold claim for breach of the insurance
contract has not yet been resolved. Plaintiff filed a response in opposition [ECF No. 207]
and Defendants filed a reply [ECF No. 208].
The issue is ripe, and the Undersigned grants the motion for the reasons outlined
below.
Relevant Background
Count I of the Amended Complaint is for breach of contract. The contract at issue
is the insurance policy issued to Plaintiff. Count III is entitled “failure to settle claim in
good faith,” and it is based on Florida Statute § 626.9541(1)(i)(3)(a), which Plaintiff
alleges Defendants violated. Count IV, labeled “Violation of § 624.155 of Florida
Statutes,” alleges that Defendants violated that statute by “not attempting in good faith
to settle claims.” It further alleges that Defendants’ conduct is “unconscionable, unfair
and deceptive as well as willful[.]”
Applicable Legal Principles and Analysis
A cause of action for an insurer’s bad faith refusal to settle does not accrue until
the insured has demonstrated a breach on the insurer’s part. See Blanchard v. State Farm
Mut. Auto. Ins. Co., 575 So. 2d 1289, 1291 (Fla. 1991). In Blanchard, the Supreme Court of
Florida answered questions of law certified by the Eleventh Circuit Court of Appeals
and held that a first-party bad faith action by an insured against an insurer does not

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accrue until it is established that the insurer breached its duties under the insurance
contract. Id. at 1291. The Court stated, in pertinent part:
[A]n insured’s underlying first-party action for insurance benefits against
the insurer necessarily must be resolved favorably to the insured before
the cause of action for bad faith in settlement negotiations can accrue.
Id. at 1291.
The same logic has also been applied to bad faith claims arising from improper
actions in the course of dealing and investigating claims. See Lane v. Provident Life & Acc.
Ins. Co., 71 F. Supp. 2d 1255, 1256-57 (S.D. Fla. 1999) (abating claim arising under Fla.
Stat. § 626.954(1)(i)).
Florida law requires that a final determination as to coverage and the actual
extent of the insured’s loss be determined before a statutory bad faith claim can
proceed. See, e.g., Progressive Select Ins. Co. v. Shockley, 951 So. 2d 20, 20-21 (Fla. 4th DCA
2007) (finding that the trial court should have dismissed or abated the bad faith claim
while suit was pending for uninsured motorist benefits); see also Vest v. Travelers Ins. Co.,
753 So. 2d 1270, 1276 (Fla. 2000) (following Blanchard and noting that a bad faith claim
brought prematurely should be dismissed as premature, not subject to summary
judgment).

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No such determination has been made in this case. In fact, that is what Count I is
about. 1
It is true that the Court found that “Plaintiff’s claim in Count III is separate and
distinct from Count IV in that it deals with § 626.9541, which regulates unfair methods
of competition and unfair or deceptive acts or practices, not ‘bad faith,’ as is alleged in
Count IV.” [ECF No. 135, p. 8]. But that Order did not discuss abatement and did not
discuss whether a statutory bad faith claim could go forward before liability on the
insurance contract was established.
Florida Statute § 626.9541 “is a regulatory statute . . . which is designed to protect
the public welfare from unscrupulous insurance practices[;] . . . it cannot be construed
to establish civil liability.” Buell v. Direct General Ins. Agency, Inc., 488 F. Supp. 2d 1215,
1217 (M.D. Fla. 2007), aff’d 267 F. App’x 907, 909 (11th Cir. 2008) (citing Murthy v. N.
Sinha Corp., 644 So. 2d 983, 986 (Fla. 1994) (observing that a statute that does not purport
to establish civil liability but merely makes provision to secure the safety or welfare of
the public as an entity will not be construed as establishing civil liability).
As the Buell Court explained, the statute authorizing a private right of action for
violation of this section of the Florida Statutes is Florida Statute § 624.155(1)(a)1-5.

Although this Court ultimately denied the Defendants’ motion to dismiss,
without prejudice, the Court’s Order does not make reference to the abatement issue.
As noted above, Florida law requires that a final determination as to coverage and the
actual extent of the insured’s loss be determined before a statutory bad faith claim can
proceed.
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Specifically, “[s]ection 624.155(1)(a)1—5 provides in pertinent part that ‘[a]ny person
may bring a civil action against an insurer when such person is damaged: By a violation
of any of the following provisions by the insurer: Section 626.9541(1)(i), (o), or (x);
Section 626.9551; Section 626.9705; Section 626.9706; Section 626.9707.’” Id. Therefore,
the only way Plaintiff can properly sue either Defendant for alleged violations of
Florida Statutes §§ 626.9541(1)(o)(1), 626.9541(1)(i)(3)(a), and 626.9541(1)(i)(3)(d) is
through the civil action established by Florida Statute § 624.155. Buell, 488 F. Supp. 2d at
1217.
Thus, the same prerequisites to suit which apply to Count IV also apply to
Plaintiff’s Count III. Plaintiff needs to first establish liability and the extent of its
damages on the contract before its claims under Count III (or Count IV) are ripe. As a
result, Count III is premature and is also subject to abatement.
DONE and ORDERED in Chambers, in Miami, Florida, December 19, 2016.

Copies furnished to:
All Counsel of Record

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