The Hanover Insurance Company et al v. Anova Food, LLC et al

Filing 188

ORDER DENYING COUNTER-CLAIMANT ANOVA FOOD, LLC'S BAD FAITH CLAIM re 40 - Signed by JUDGE HELEN GILLMOR on 10/21/2016. (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifica tions received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
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Plaintiffs,
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vs.
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ANOVA FOOD, LLC,
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Defendant.
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_______________________________ )
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ANOVA FOOD, LLC,
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Counter)
Claimant,
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vs.
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THE HANOVER INSURANCE COMPANY; )
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MASSACHUSETTS BAY INSURANCE
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COMPANY,
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Counter)
Defendants.
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_______________________________ )
THE HANOVER INSURANCE COMPANY;
MASSACHUSETTS BAY INSURANCE
COMPANY,

Civ. No. 14-00281 HG-RLP

ORDER DENYING COUNTER-CLAIMANT ANOVA FOOD, LLC’S BAD FAITH CLAIM
Plaintiffs/Counter-Defendants The Hanover Insurance Company
and Massachusetts Bay Insurance Company (“Hanover Companies”)
filed a declaratory judgment relating to insurance policies
issued to Defendant/Counter-Claimant Anova Food, LLC (“Anova
LLC”).

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Anova LLC filed a Counterclaim against the Hanover Companies
relating to the insurance contracts at issue.
The Court has issued two orders on the Parties’ Motions for
Summary Judgment.
First, the Court ruled that the Hanover Companies owed Anova
LLC a duty to defend in the underlying litigation against it in
the United States District Court for the District of Hawaii,
Kowalski v. Anova Food, LLC, et al., Civ. No. 11-00795HG-RLP
(“Underlying Lawsuit”).
Second, the Court found that the Underlying Lawsuit
contained patent infringement claims that were not covered by the
insurance policies at issue.

The Court held that the Underlying

Lawsuit also contained personal and advertising injury claims
that were covered by the insurance policies.

The Court ruled

that neither party was able to recover the money they contributed
the settlement of the Underlying Lawsuit.
There are two remaining issues in this case.

First is Anova

Food, LLC’s Counterclaim against the Hanover Companies for bad
faith.

Second is the Parties’ dispute as to the attorneys’ fees

owed to the Zobrist law firm.

This Order addresses Anova Food,

LLC’s Counterclaim for bad faith.

The attorneys’ fees issue will

be addressed in a separate order.
Anova Food, LLC’s Counterclaim for bad faith is DENIED.

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PROCEDURAL HISTORY
On June 19, 2014, the Hanover Companies filed a Complaint.
(ECF No. 1).
On October 2, 2014, Anova LLC and Anova Food, Inc. filed an
Answer and Counterclaim.

(ECF No. 14).

On May 29, 2015, the Hanover Insurance Companies filed a
First Amended Complaint.

(ECF No. 39).

On June 12, 2015, Anova LLC filed a Counterclaim in Response
to the First Amended Complaint.

(ECF No. 40-1).

On March 24, 2016, the Court issued an ORDER GRANTING, IN
PART, AND DENYING, IN PART, DEFENDANT/COUNTERCLAIMANT ANOVA FOOD,
LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT.

(ECF No. 113).

On June 29, 2016, the Court issued an ORDER DISMISSING ALL
CLAIMS AGAINST DEFENDANT ANOVA FOOD, INC. AND DENYING PLAINTIFFS
THE HANOVER INSURANCE COMPANY AND MASSACHUSETTS BAY INSURANCE
COMPANY’S MOTION FOR SUMMARY JUDGMENT AND GRANTING, IN PART, AND
DENYING, IN PART, DEFENDANT ANOVA FOOD, LLC’S MOTION FOR PARTIAL
SUMMARY JUDGMENT.

(ECF No. 151).

On July 15, 2016, the Parties submitted a letter requesting
that they be allowed to file briefs regarding Counter-Claimant
Anova Food, LLC’s bad faith claim.

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(ECF No. 172).

On the same date, the Court issued a Minute Order granting
the Parties’ request to decide the bad faith claim on the briefs.
(ECF No. 173).
On July 28, 2016, Anova Food, LLC filed its brief regarding
its claim for bad faith.

(ECF No. 177).

On August 10, 2016, the Hanover Insurance Companies filed
their brief regarding the bad faith claim.

(ECF No. 185).

On August 31, 2016, the Court issued a Minute Order Denying
the Hanover Companies’ Motion for Reconsideration of the Court’s
June 29, 2016 Order.

(ECF No. 187).
BACKGROUND

Defendant/Counter-Claimant Anova Food, LLC (“Anova LLC”) was
covered by Plaintiffs/Counter-Defendants the Hanover Insurance
Company and Massachusetts Bay Insurance Company’s (“the Hanover
Companies”) four commercial liability insurance policies that
were in effect between July 1, 2010 and July 11, 2014.

(See

Insurance Policies attached as Exs. B, C, D to Pla.’s First
Amended Complaint, ECF Nos. 39-2—6).

THE UNDERLYING LAWSUIT
On December 29, 2011, the Underlying Lawsuit, William R.
Kowalski; Hawaii International Seafood, Inc. v. Anova Food, LLC;

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Anova Food, Inc., et al., Civ. No. 11-00795HG-RLP, was filed
against Anova LLC.
The Hanover Companies provided Anova LLC with a defense in
the Underlying Lawsuit.
On March 3, 2015, a settlement of the Underlying Lawsuit was
held on the record.

(Kowalski v. Anova Food, LLC, et al., 11-cv-

00795HG-RLP, Minutes of Settlement on the Record dated March 3,
2015, ECF No. 633).

Anova LLC and the Kowalski Plaintiffs

entered into a written Settlement Agreement and Release.

(March

2015 Settlement Agreement and Release, attached as Ex. 9 to
Zobrist Decl., ECF No. 75-9).
The Hanover Companies and Anova LLC agreed to contribute
equally to the settlement amount contained in the March 2015
Settlement Agreement and Release.

(Letter from the Hanover

Companies to Anova LLC dated April 1, 2015, Re: March 2015
Settlement, attached as Ex. 1 to Declaration of Skyler Cruz
(“Cruz Decl.), ECF No. 98-1).
On April 23, 2015, the District Court issued a Stipulation
and Order for Dismissal with Prejudice as to all claims and
parties in the Underlying Lawsuit.

(Kowalski v. Anova Food, LLC,

et al., 11-cv-00795HG-RLP, Stipulation For Dismissal With
Prejudice as to All Claims and Parties, ECF No. 635).

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Anova LLC claims that the Hanover Companies engaged in bad
faith by refusing to pay for the entire settlement of the
Underlying Lawsuit.

STANDARD OF REVIEW
Summary judgment is appropriate when there is no genuine
issue as to any material fact and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c). To defeat
summary judgment there must be sufficient evidence that a
reasonable jury could return a verdict for the nonmoving party.
Nidds v. Schindler Elevator Corp., 113 F.3d 912, 916 (9th Cir.
1997).
The moving party has the initial burden of "identifying for
the court the portions of the materials on file that it believes
demonstrate the absence of any genuine issue of material fact."
T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809
F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986)). The moving party, however, has no
burden to negate or disprove matters on which the opponent will
have the burden of proof at trial.

The moving party need not

produce any evidence at all on matters for which it does not have
the burden of proof. Celotex, 477 U.S. at 325. The moving party
must show, however, that there is no genuine issue of material
fact and that he or she is entitled to judgment as a matter of

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law.

That burden is met by pointing out to the district court

that there is an absence of evidence to support the non-moving
party’s case. Id.
If the moving party meets its burden, then the opposing
party may not defeat a motion for summary judgment in the absence
of probative evidence tending to support its legal theory.
Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270, 282
(9th Cir. 1979). The opposing party must present admissible
evidence showing that there is a genuine issue for trial. Fed. R.
Civ. P. 56(e); Brinson v. Linda Rose Joint Venture, 53 F.3d 1044,
1049 (9th Cir. 1995). “If the evidence is merely colorable, or is
not significantly probative, summary judgment may be granted.”
Nidds, 113 F.3d at 916 (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986)).
The court views the facts in the light most favorable to the
non-moving party.

State Farm Fire & Casualty Co. v. Martin, 872

F.2d 319, 320 (9th Cir. 1989). Opposition evidence may consist of
declarations, admissions, evidence obtained through discovery,
and matters judicially noticed.

Fed. R. Civ. P. 56(c); Celotex,

477 U.S. at 324. The opposing party cannot, however, stand on its
pleadings or simply assert that it will be able to discredit the
movant's evidence at trial. Fed. R. Civ. P. 56(e); T.W. Elec.
Serv., 809 F.2d at 630.

The opposing party cannot rest on mere

allegations or denials. Fed. R. Civ. P. 56(e); Gasaway v.

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Northwestern Mut. Life Ins. Co., 26 F.3d 957, 959-60 (9th Cir.
1994).

When the non-moving party relies only on its own

affidavits to oppose summary judgment, it cannot rely on
conclusory allegations unsupported by factual data to create an
issue of material fact.

Hansen v. United States, 7 F.3d 137, 138

(9th Cir. 1993); see also National Steel Corp. v. Golden Eagle
Ins. Co., 121 F.3d 496, 502 (9th Cir. 1997).

ANALYSIS
Bad Faith is asserted by Anova LLC in its Counterclaim
against the Hanover Companies.

The Parties agreed to determine

Anova LLC’s bad faith claim on the briefs as there are no
disputed facts.
I.

Bad Faith Pursuant to Florida Insurance Law
The Supreme Court of Florida has explained that a bad faith

claim exists in Florida insurance law.

An insurer handling

claims against its insured has a duty to use the same degree of
care and diligence as a person of ordinary care and prudence
would exercise in the management of his own business.

Berges v.

Infinity Ins. Co., 896 So.2d 665, 672-73 (Fla. 2004).
The duty of care includes an obligation to settle where a
reasonably prudent person, faced with the prospect of paying the
total recovery, would do so.

Boston Old Colony Ins. Co. v.
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Gutierrez, 386 So.2d 783, 785 (Fla. 1980).

Breach of this duty

may give rise to a cause of action for bad faith against the
insurer.

Id.

The insured who undertakes the defense of a claim

pursuant to an indemnity policy has the same obligations
regarding settlement.

Perera v. U.S. Fidelity and Guar. Co., 35

So.3d 893, 899 (Fla. 2010).
Pursuant to Florida law, there are two types of bad faith
claims brought against an insurer: a first-party bad faith claim
and a third-party bad faith claim.

A first-party bad faith claim

is brought by an insured against its insurer for alleged bad
faith in settlement of its own claim.

Opperman v. Nationwide

Mut. Fire Ins. Co., 515 So.2d 263, 266 (Fla. Dist. Ct. App.
1987).

A first-party bad faith claim is not found at common law

and is permitted pursuant to Florida statute, Fla. Stat. §
624.155(1)(b). Id.
Anova LLC concedes that it did not bring a first-party bad
faith claim as it did not comply with the required Florida
statute for bringing such a claim.

Talat Enters., Inc. v. Aetna

Cas. And Sur. Co., 753 So.2d 1278, 1283-84 (Fla. 2000) (finding
Fla. Stat. § 624.155 is the exclusive remedy for first-party bad
faith claims, but such claims are barred unless written notice is
provided to the Florida Department of Insurance and to the
insurer as conditions precedent to filing an action, Fla. Stat. §
624.155(3)).

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II.

THIRD-PARTY BAD FAITH CLAIM
Anova LLC asserts that it has brought a third-party bad

faith cause of action.
A typical third-party bad faith claim seeks to remedy a
situation where a third-party sued the insured and the insured is
exposed to an excess judgment because of the insurer’s failure to
properly or promptly defend the claim.

Marcola v. Gov’t Emps.

Ins. Co., 953 So.2d 451, 455 (Fla. 2006).
An excess judgment, however, is not necessarily a
prerequisite to a third-party bad faith action.

The Florida

Supreme Court explained in Perera that there are three situations
where an excess judgment is not required:
(1)

“Cunningham agreements” in which an insurer and a
third-party claimant stipulate that bad faith issues
will be resolved before a settlement is reached;

(2)

Settlement agreements entered into between the insured
and the third-party claimant where the insurer refused
to defend the insured, leaving the insured “to its own
devices”; and,

(3)

Claims brought by an excess carrier against a primary
insurer by virtue of equitable subrogation where the
primary insurer has not acted in good faith.

Perera, 35 So.3d at 899-901.
Here, the Underlying Lawsuit was settled and there was no
excess judgment entered against Anova LLC that would form the
basis of a typical third-party bad faith claim.
at 904; Marcola, 953 So.2d at 458.

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Perera, 35 So.3d

None of the three exceptions to the requirement that the
insured incur an excess judgment apply in this case.
First, the Parties did not agree to have the bad faith
claims decided before they entered into the March 2015 Settlement
Agreement and Release in the Underlying Lawsuit.
Second, the Hanover Companies did not refuse to defend Anova
LLC, but they provided counsel following Anova LLC’s request for
the Hanover Companies to tender a defense.
Third, this case does not involve an excess carrier bringing
a claim against the primary insurer.
Anova LLC relies on North American Van Lines, Inc. v.
Lexington Ins. Co., 678 So.2d 1325, 1327 (Fla. Dist. Ct. App.
1996) in its brief.

North American Van Lines involved an insured

who was forced to fund its own defense because of the terms of
the policies issued by both its primary and excess insurers.

Id.

The insured repeatedly requested that its insurance carriers
settle the claims against it.

The primary insurer delayed

causing increased attorneys’ fees, and the excess insurance
company refused to settle.

Id. at 1328.

The insured settled the

underlying litigation in an amount in excess of its primary
insurance policy while incurring additional attorneys’ fees.
at 1328.

Id.

The insured filed suit against both its insurers for

failing to settle on its behalf in bad faith.

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Id. at 1332-33.

The facts here are almost entirely inapposite.
Companies provided a defense to Anova LLC.

The Hanover

The Hanover Companies

negotiated with Anova LLC during attempts to settle the
Underlying Lawsuit.

Both the Hanover Companies and Anova LLC

agreed to each contribute half of the amount to the settlement.
The case did not settle in excess of the Hanover Companies’
insurance policies.

Anova LLC’s reliance on North American Van

Lines is misplaced.
Anova LLC has not demonstrated that the Hanover Companies’
acted in bad faith when the Parties each agreed to pay for half
of the settlement of the Underlying Lawsuit.

Anova LLC has not

provided any evidence that it was “forced” to contribute to the
settlement as a result of the Hanover Companies’ bad faith.

To

the contrary, the undisputed evidence demonstrates that in March
2015, the Hanover Companies and Anova LLC each agreed to
contribute the same amount of money to settle the claims against
Anova LLC.

(Letter from the Hanover Companies to Anova LLC dated

April 1, 2015, Re: March 2015 Settlement, attached as Ex. 1 to
Cruz Decl., ECF No. 98-1).

The Parties agreed that their

contributions were subject to a reservation of their rights to
seek reimbursement.

(Id.)

Anova LLC has not demonstrated that the Hanover Companies
acted in bad faith in contributing half of the settlement amount.
The Court ruled that the Underlying Lawsuit contained both

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covered and non-covered claims against Anova LLC.

The patent

infringement claims made in the Underlying Lawsuit were not
covered by the policies.

The personal and advertising injury

claims were covered pursuant to the policies’ definition of
“personal and advertising injury.”
Anova LLC has not demonstrated any causal connection between
the actions of the Hanover Companies and any damages it incurred
in the settlement of the Underlying Lawsuit.

Messinese v. USAA

Cas. Inc. Co., 622 Fed. Appx. 835, 838-840 (11th Cir. 2015) (a
valid bad-faith claim must show a causal connection between the
damages claimed and the insurer’s purported bad faith).
CONCLUSION

Anova Food, LLC’s Counterclaim for bad faith is DENIED.
IT IS SO ORDERED.
DATED: October 21, 2016, Honolulu, Hawaii.

___________________________________
Helen Gillmor
United States District Judge

The Hanover Insurance Company; Massachusetts Bay Insurance
Company v. Anova Food, LLC; Counterclaimant Anova Food, LLC v.
Counter-Defendants The Hanover Insurance Company; Massachusetts
Bay Insurance Company; Civ. No. 14-00281HG-RLP; ORDER DENYING
COUNTER-CLAIMANT ANOVA FOOD, LLC’S BAD FAITH CLAIM
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