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holding that payment of policy limits constitutes admission of liability
Summary of this case from PLANTE v. USFG SPECIALTY INSURANCE COMPANYOpinion
CASE NO. 02-20896-CIV-HUCK/TURNOFF
September 30, 2003
CONSENT CASE ORDER
This Cause comes before the Court on Defendant's Motion to Dismiss Amended Complaint and Motion to Strike or Dismiss Punitive Damages Claim. (D.E. 49.) For the reasons stated below, Defendant's motions are DENIED.
FACTUAL BACKGROUND
On February 6, 2000, Plaintiff Philip Marraccini's house was damaged by fire. At the time of the fire, the house was insured for $200,000.00 with Defendant Clarendon National Insurance Company ("Defendant"). On March 27, 2000, Defendant issued a repair estimate of $122,798,81. (D.E. 46.) Plaintiffs disagreed with this estimate, and obtained two of their own. These estimates ranged between $198,000.00 and $208,000.00. (D.E. 46.)
On April 9, 2001, to preserve their rights, Plaintiffs filed a Civil Remedy Notice of Insurer Violation ("Notice") pursuant to Florida's "bad faith" Statute, Fla. Stat. § 624.155. Under the Florida Statute, the notice provided Defendant with 60 days to either pay the claim or correct the violations. However, the matter remained unresolved well beyond the expiration of the 60 day period. Consequently, on March 22, 2002, Plaintiffs filed the instant action. On May 13, 2002, the parties reached a settlement agreement on the insurance claim and four days later Defendant tendered payment of policy limits plus the applicable prejudgment interest. Also, as part of the settlement, Defendant agreed to pay for Plaintiffs' attorney's fees, subject to the Court's future determination as to reasonable amount. However, the settlement did not address Plaintiffs bad faith claim.
On December 17, 2002, Plaintiffs filed a motion seeking leave to amend their Complaint to add a bad faith claim against Defendant. (D.E. 44.) On December 20, 2002, the Court granted Plaintiffs motion. (D.E. 45.) On January 17, 2003, Defendant filed the instant Motion to Dismiss Amended Complaint and Motion to Strike or Dismiss Punitive Damages Claim. (D.E. 49.) In its motion, Defendant asserted that (1) Plaintiffs' Amended Complaint failed to state a claim upon which relief can be granted; (2) the Court lacked subject matter jurisdiction; and (3) the "bad faith" claim was premature as the underlying contract action had not yet been fully resolved. In the alternative, Defendant sought to strike or dismiss Plaintiffs' punitive damages claim from the Amended Complaint.
STANDARD
In deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b), a court must view the allegations in the light most favorable to the plaintiff. See Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). The Court however, need not accept conclusory allegations or legal conclusions masquerading as factual allegations. See id. Additionally, the Court must accept all well pled allegations as true to the extent that they are uncontroverted by an affidavit submitted by the Defendant. See Madara v. Hall, 916 F.2d 1510, 1514 (11th Cir. 1990). Dismissal is appropriate only if no relief could be granted under any set of facts consistent with the allegations.See Hishon v. King Scalding, 467 U.S. 69, 73 (1984).
ANALYSIS
I. Payment after expiration of 60 day notice does not extinguish "bad faith" claim
Defendant argues that Plaintiffs have failed to plead recoverable damages and as such the Amended Complaint should be dismissed for failure to state a claim upon which relief can be granted. Defendant bases its argument on the fact that it has already paid the policy limits and pre-judgment interest owed to Plaintiff pursuant to the settlement of the insurance contract claim. Additionally, Defendant already agreed to Plaintiffs' entitlement to attorneys fees arising from the insurance claim.
Contrary to Defendant's allegations, payment of policy limits and agreement to pay attorney's fees does not discharge its entire obligation to Plaintiffs. Howell-Demarest v. State Farm Mut. Auto. Ins. Co., 673 So.2d 526 (Fla. 4th DCA 1996). The fact that the legislature has specifically authorized first parties to recover damages in bad faith actions suggests that it may have contemplated more than the recovery of the same damages already available in a breach of insurance contract claim. Time Ins. Co. v. Burger, 712 So.2d 389, 392 (Fla. 1998). In a bad faith claim, recovery of damages may include punitive damages, additional attorney's fees, and court costs. Dunn v. National Sec. Fire Cas. Co., 631 So.2d 1103, 1106 (Fla. 5th DCA 1994). In this action, none of these damages were contemplated by the parties when they entered into the settlement of the underlying insurance claim.
Furthermore, this Court notes that an insurer cannot escape liability under Florida's bad faith statute by belatedly paying policy limits after the 60-day cure period has expired. Talat Enterprises, Inc. v. Aetna Casualty and Surety Co., 753 So.2d 1278, 1282 (Fla. 2000). To hold otherwise would render the portion of the statute requiring damages to be paid within 60 days meaningless. Paz v. Fidelity National Insurance Co., 712 So.2d 807 (Fla. 3d DC A 1998). It is neither reasonable nor just that an insurer can avoid its statutory liability by the simple expedient of paying the insurance proceeds to the insured or beneficiary at some point after suit is filed but before the Court enters final judgment. Id.
II. Court has subject matter jurisdiction over Amended Complaint
Defendant also contends that the Amended Complaint fails to show that Plaintiffs' damages exceed the required $75,000 limit for the Court to retain subject matter jurisdiction over this action. Defendant contends that tendering the policy limits, paying the prejudgment interest and agreeing to attorneys fees diminishes Plaintiffs' damages to below the amount in controversy required to sustain a diversity case in federal court.
Contrary to Defendant's contentions, federal courts have diversity jurisdiction over an action where the claims satisfy the amount in controversy requirement at the time that the complaint was filed. 28 U.S.C.A. § 1332(a); Klepper v. First American Bank, 916 F.2d 337, 341 (6th Cir. 1990) (emphasis added). In the case at hand, Plaintiff sought in his original claim damages clearly in excess of $75,000. Defendant does not contest the fact that the Court had jurisdiction at the time that the original complaint was filed. As such, even assuming arguendo that the subsequent amendment to the complaint brings the amount in controversy below the required $75,000, such event does not oust the federal court's jurisdiction. Poore v. American-Amicable Life Insurance Company of Texas, 218 F.3d 1287, 1291 (11th Cir. 2000).
II. Ripeness
Defendant argues that Plaintiffs' bad faith claim is premature, as there has been no final determination on the attorney's fees issue. Defendant points out that under Florida law, a first-party bad faith claimant cannot state a cause of action until he can allege that there has been a determination of the insured's damages. Vest v. Travelers Insurance Co., 753 So.2d 1270, 1275 (Fla. 2000). However, Defendant's arguments are misplaced since a bad faith action accrues when the insured has demonstrated a breach on the part of the insurer.Lane v. Provident Life and Accident Ins. Co., 71 F. Supp.2d 1255, 1256 (S.D. Fla. 1999). Moreover, insurer's payment of policy limits through settlement establishes that the insured had a valid claim and acts as a verdict in favor of the insured. Central Magnetic Imaging v. State Farm Mut. Auto. Ins. Co., 745 So.2d 405, 407 (Fla. 3d DCA1999). Therefore, in the instant case, Plaintiffs' bad faith claim became ripe when the parties settled the underlying breach of insurance contract claim. Brookins, 740 So.2d 110.
III. Punitive Damages were properly pled
Finally, Defendant contends that Plaintiffs failed to properly plead punitive damages in their Amended Complaint and as such, their claim for punitive damages should be dismissed. However, the record does not support Defendant's argument. Section 624.155(4) of the Florida Statutes permits the recovery of punitive damages where the acts giving rise to the violation occur with such frequency as to indicate a general business practice and these acts are: (a) willful, wanton, and malicious; or (b) in reckless disregard for the rights of the insured. Fla. Stat. § 624.155(4).
Here, Plaintiff states in its Amended Complaint that the acts complained therein constitute Defendant's general business practices and procedures occurring with such frequency as to indicate general business practices. (D.E. 46 at 8-9.) Plaintiff further alleges in its Amended Complaint that Defendant's actions and conduct "were in reckless disregard for the rights of its insured." (D.E. 46 at 9.) These allegations are in conformity with the requirements listed in § 624.155(4) and is thus sufficient to state a claim for punitive damages in federal court.Geisinger v. Armstrong World Industries Inc., 1990 WL 120749 (S.D.Fla. Aug. 10, 1990). Accordingly it is hereby
ORDERED AND ADJUDGED that Defendant's Motion to Dismiss Amended Complaint and Motion to Strike or Dismiss Punitive Damages Claim (D.E. 49), are DENIED.
DONE AND ORDERED.