The Zodiac Group, Inc. et al v. Axis Surplus Insurance Company
Filing
37
ORDER granting 20 Motion to Dismiss, filed by Defendant Axis Surplus Insurance Co. See attached ORDER for details. This case is CLOSED. Signed by Judge Robert N. Scola, Jr. on 12/13/2012. (jky)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 12-80299-Civ-SCOLA
THE ZODIAC GROUP, INC. et al.,
Plaintiffs,
vs.
AXIS SURPLUS INSURANCE CO.,
Defendant.
_____________________________________/
ORDER GRANTING MOTION TO DISMISS
THIS MATTER is before the Court upon the Motion to Dismiss [ECF No. 20],
filed by Defendant Axis Surplus Insurance Co. (“Axis”). For the reasons set forth below, the
Motion is granted.
Introduction
This is a declaratory judgment action concerning the extent of insurance coverage.
In 2001, Plaintiff Zodiac Group (“Zodiac”) entered into an agreement with GTC Enterprises for
the endorsement services of Linda Georgian (“Georgian”) relating to telephone psychic services
offered through Zodiac. This agreement ended in March 2007.
Thereafter, on April 25, 2008, Georgian sued Zodiac in state court for allegedly
continuing to use her name and likeness to promote its psychic services. The state court
complaint raised claims for unauthorized publication of image and name, invasion of privacy,
and injunctive relief to prevent Zodiac’s continued use of Georgian’s name and likeness. The
state court lawsuit was dismissed for lack of prosecution on November 13, 2009.
A few months later, on January 12, 2010, Georgian sued Zodiac and David and Daniel
Felger in Florida federal court. The federal complaint asserted claims for violation of the
Lanham Act, unauthorized publication of image and name, violation of Florida’s Deceptive and
Unfair Trade Practices Act, civil RICO, RICO conspiracy, and unjust enrichment. The federal
action, like the state court suit, was predicated on Zodiac’s allegedly unauthorized use of
Georgian’s name and its false claims that she continued to endorse its psychic services. The
federal lawsuit ultimately ended in partial dismissal and then settlement of the remaining claims.
On September 30, 2008, Zodiac applied for a professional liability insurance policy with
Axis. The application required Zodiac to disclose any pending or prior claims against it for the
previous five years, as well as “any actual or alleged fact, circumstance, situation, error or
omission, which may reasonably be expected to result in a claim being made against [it.]”
See Ins. Appl. ¶ 11 [ECF No. 20-3]. In response to the question about pending or prior claims,
Zodiac disclosed the Georgian state court suit as follows: “Former contract celebrity claimed
unauthorized use of her name after their [sic] relationship ended. Allegations of invasion of
privacy & injunctive relief.”
See Suppl. Claim Info. Form ¶ 8 [ECF No. 20-4].
Zodiac
responded “no” to the question about whether it knew of any facts or circumstances that might
reasonably result in a claim being made. See Ins. Appl. ¶ 11.
Based on the information disclosed in the application, Axis issued a claims-made
professional liability insurance policy to Zodiac, with a “Policy Period” inception date of
October 1, 2008 and a retroactive coverage date of March 6, 1998. The policy was renewed,
with an inception date of October 1, 2009 and retroactive coverage date of March 6, 1998. The
policy’s coverage for “Claims First Made” would apply “when a written Claim is first made
against any insured during the Policy Period,” so long as the claim “arise[s] from a Wrongful Act
committed during the Policy Period.” See Policy at 4 [ECF No. 1-3] (emphasis supplied). The
policy specified that “[t]he Company will consider a Claim to be first made against an Insured
when a written Claim is first received by any Insured.” See id. (emphasis supplied).
As to “Prior Wrongful Acts,” the policy provided coverage for any “written Claim first
made against any Insured arising from a Wrongful Act committed between the Retroactive Date
and the Inception Date of the policy,” but only if: 1) the claim is first made during the “Policy
Period”; 2) the insured did not know, before the policy’s earliest inception date, “of a
circumstance that could reasonably be expected to lead to the Claim”; and 3) the claim is not
covered by any “other valid and collectible insurance.” See id. at 4-5. The policy also specified
that “[a]ll Claims arising from the same Wrongful Act will be deemed to have been made
on the earlier of” either “[t]he date the first of those Claims is made against any Insured,” or
“[t]he first date the [insurance company] receives the Insured’s written notice of the Wrongful
Act.” See id. at 6.
Zodiac filed this lawsuit seeking declaratory and injunctive relief against Axis as to the
extent of insurance coverage. The central question is whether the insurance policy in question
provides coverage relating to Georgian’s federal lawsuit and, if so, whether Zodiac is entitled to
damages for breach of contract against Axis in the form of legal fees and expenses. Axis denied
coverage for defense and indemnification because the allegations in the federal lawsuit stem
from her 2008 state court action, meaning that the claim was made prior to the “Policy Period.”
Compl. ¶¶ 21, 23. Coverage was also denied in part on the ground that the allegations relating to
fraud and unlawful gain are excluded under the policy. See id.
Legal Standard
When considering a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6),
the district court must accept all of the complaint’s allegations as true, construing them in
the light most favorable to the plaintiff. See Pielage v. McConnell, 516 F.3d 1282, 1284
(11th Cir. 2008). While the scope of review is generally limited to the four corners of the
complaint, the court is permitted to consider any exhibits attached to the pleadings. See Thaeter
v. Palm Beach Cnty. Sheriff’s Office, 449 F.3d 1342, 1352 (11th Cir. 2006). The court may also
consider any documents attached to the defendant’s motion to dismiss, so long as they are central
to the plaintiff’s claims and undisputed. See Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir.
2005). In addition, the court may take judicial notice of certain public records (such as records
of prior legal proceedings), so long as their accuracy and authenticity is not reasonably subject to
dispute. See Horne v. Potter, 392 F. App’x 800, 802 (11th Cir. 2010).
To survive a motion to dismiss, the 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). The plaintiff
must articulate “enough facts to state a claim to relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “Threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. Similarly, a pleading that offers mere “labels and conclusions” or “a formulaic
recitation of the elements of a cause of action” will not do. Id.
Legal Analysis
Under Florida law,1 “insurance contracts are construed in accordance with the plain
language of the policies as bargained for by the parties.” Auto-Owners Ins. Co. v. Anderson, 756
So. 2d 29, 34 (Fla. 2000). “Where the policy language is plain and unambiguous, no special rule
of construction or interpretation applies, and the court should give the plain language in the
contract the meaning it clearly expresses.” N. Pointe Cas. Ins. Co. v. M & S Tractor Servs., Inc.,
62 So. 3d 1281, 1282 (Fla. 2d DCA 2011). “Courts are not free to rewrite an insurance policy or
to add terms or meaning to it.” Royal Ins. Co. v. Latin Am. Aviation Servs., Inc., 210 F.3d 1348,
1351 (11th Cir. 2000); see also Heritage Ins. Co. of Am. v. Cilano, 433 So. 2d 1334, 1335
(Fla. 4th DCA 1983) (“When the terms of an insurance policy are clear and unambiguous the
terms must be applied as written, the court not being free to reshape the agreement of the
parties.”).
In this case, Axis is entitled to dismissal because the plain language of the insurance
policy affords no coverage here. In April 2008, Georgian sued Zodiac for unauthorized use of
her name and likeness. The subsequent federal lawsuit filed in January 2010 was predicated on
the same alleged misconduct, even though some additional and different causes of action were
asserted. The first insurance policy went into effect in October 2008 and provided coverage for
“Prior Wrongful Acts” arising as far back as March 1998, but only if the claim was first made
during the “Policy Period” and the insured did not know, prior to the policy’s inception date, “of
a circumstance that could reasonably be expected to lead to the Claim.” See Policy at 4-5.
Here, those conditions are not satisfied. The claim was not first made during the “Policy
Period.”2 Under the policy, all claims arising from the same “Wrongful Act”3 are deemed to
have been made on the earlier of “[t]he date the first of those Claims is made against any
Insured,” or “[t]he first date the Company receives the Insured’s written notice of the Wrongful
Act.” See Policy at 6. Because Georgian’s federal lawsuit was premised on the same facts and
1
Because this Court sits in diversity in this case, it must apply the law of the forum state, which is Florida. See
Living Legends Ret. Ctr., Inc. v. Lexington Ins. Co., 208 F. App’x 805, 807 (11th Cir. 2006) (“The district court
ruling in this case turned on the interpretation of an insurance contract. Since the court was sitting in diversity, it
applied the law of the forum state, Florida.”).
2
3
The term “Policy Period” means the period of time from the policy’s inception date to the policy’s expiration date.
The policy makes clear that all “Wrongful Acts” taking place between the retroactive date and the end of the
“Policy Period” and which are related by common facts and circumstance “will be treated as one Wrongful Act.”
alleged misconduct as the state court action, “[t]he date the first of those Claims [was] made
against any Insured” is April 2008, when Georgian filed the state court lawsuit. Because the
policy did not take effect until October 2008, the claim was not first made during the “Policy
Period.”
Nor is it true that Zodiac had no knowledge, prior to the policy’s inception date, “of a
circumstance that could reasonably be expected to lead to the Claim.” See id. That is plainly
false because Zodiac in fact disclosed on its application for insurance the underlying dispute with
Georgian that later materialized into the federal lawsuit. In response to the question about
pending or prior claims, Zodiac wrote that a “[f]ormer contract celebrity claimed unauthorized
use of her name after their relationship ended,” and that the suit involved “[a]llegations of
invasion of privacy & injunctive relief.” See Suppl. Claim Info. Form ¶ 8. Although Zodiac
responded “no” to the question about whether it knew of any facts or circumstances that might
reasonably result in a future claim being made, that obviously does not lessen its knowledge
about the April 2008 state court lawsuit and the circumstances and facts underlying it. Zodiac
does not argue otherwise.4
As Axis correctly notes, “[t]he State Court Complaint and the claims in the [federal
lawsuit] are unquestionably ‘related by common facts, circumstances, transactions, events and/or
decisions,’ i.e., the use of [Georgian’s] name and likeness, such that the activities must be treated
as one wrongful act excluding coverage under the Policy.” See Mot. at 15. This is true even
though the causes of action and claims for relief were not exactly parallel in both cases, because
all of the claims in both cases shared the same common factual underpinning: Zodiac’s allegedly
unauthorized use of Georgian’s name and likeness after their agreement ended. There clearly is
no coverage under the policy for the federal lawsuit.5
4
Zodiac does not argue that the facts underlying the state court suit could not reasonably be expected to lead to
another claim given that the state court suit was actually pending at the time it applied for insurance. Even if that
argument were made and even if it had merit (a conclusion that the Court does not reach), it would make little
difference because, as noted above, the claim was not first made during the “Policy Period.” For coverage to exist,
both conditions must be satisfied – which is not the case here.
5
Because the federal lawsuit does not fall within the scope of coverage, there is no occasion to consider whether any
policy exclusions might apply to bar such coverage. Only when coverage exists is it necessary to address the
application of policy exclusions. See Amerisure Mut. Ins. Co. v. Auchter Co., 673 F.3d 1294, 1309 (11th Cir. 2012)
(where claim was not covered, “we need not determine whether any policy exclusions or exceptions apply”); see
also Coleman v. Valley Forge Ins. Co., 432 So. 2d 1368, 1370-71 (Fla. 2d DCA 1983) (“An exclusion, by its nature,
serves to limit or diminish the scope of coverage otherwise provided in the policy.”). Therefore, the Court declines
to address the parties’ arguments concerning policy exclusions.
Conclusion
This Court is obliged to enforce the plain policy language as written. See Prudential
Prop. & Cas. Ins. Co. v. Swindal, 622 So. 2d 467, 473 (Fla. 1993) (court cannot “judicially
rewrite an insured’s policy,” as “contracts of insurance must be construed by resorting to the
plain language of the policies as freely bargained for by the parties”). Here, there is no coverage
under the plain language of the policy because Zodiac’s claim was first made in 2008, not during
the policy’s provided-for claims period. The federal lawsuit arises out of the prior claim because
the two are related by “common facts, circumstances, transactions, events and/or decisions,” and
coverage cannot now be revived. As such, the instant case must be dismissed.
Accordingly, for the reasons explained above, Axis’s Motion to Dismiss [ECF No. 20]
is hereby GRANTED and this case is DISMISSED with prejudice. The Clerk shall CLOSE
this matter. To the extent there are any remaining pending motions on the docket, they are all
DENIED AS MOOT.
DONE and ORDERED in chambers at Miami, Florida, on December 13, 2012.
________________________________
ROBERT N. SCOLA, JR.
UNITED STATES DISTRICT JUDGE
Copies to:
U.S. Magistrate Judge
Counsel of record
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