Allstate Ins. Co. v. American Southern Home Ins. Co.

• Decision Date: 11 October 1996
• Docket Number: No. 95-2724,95-2724
• Citation: Allstate Ins. Co. v. American Southern Home Ins. Co., 680 So.2d 1114 (Fla. App. 1996)
• Parties: 21 Fla. L. Weekly D2201 ALLSTATE INSURANCE COMPANY, Appellant/Petitioner, v. AMERICAN SOUTHERN HOME INSURANCE COMPANY, Appellee/Respondent.
• Court: Florida District Court of Appeals

Page 1114

680 So.2d 1114

21 Fla. L. Weekly D2201

ALLSTATE INSURANCE COMPANY, Appellant/Petitioner, v.AMERICAN SOUTHERN HOME INSURANCE COMPANY, Appellee/Respondent.

No. 95-2724.

District Court of Appeal of Florida First District.

Oct. 11, 1996.

Tammy deSoto Cicchetti of Callahan & Cicchetti, P.A., Tallahassee, for Appellant/Petitioner.

Michael D. West and Thomas J. Guilday of Huey, Guilday & Tucker, P.A., Tallahassee, for Appellee/Respondent.

VAN NORTWICK, Judge.

Allstate Insurance Company(Allstate) petitions this court for a writ of certiorari asking this court to quash a discovery order of the lower court, which had granted the motion of American Southern Home Insurance Company(American) to compel production of Allstate's claim and litigation files.¹American, the primary insurer, had sued Allstate, the excess insurer, seeking contribution to defense costs after it settled a negligence and wrongful death action brought against their common insured.American claims entitlement to discovery of Allstate's complete claim and litigation files on the grounds that Allstate breached its fiduciary duty owed to their common insured, whose shoes American steps into under the theory of equitable subrogation.However, we find that American's complaint fails to allege a cause of action for breach of fiduciary duty.Accordingly, we grant the petition for writ of certiorari, issue the writ, and quash the order compelling discovery.

I.

American was the primary insurer of a mobile home belonging to Ronald and Susan McKaye.American's mobile home policy provided $50,000 in liability coverage for bodily injury or death arising out of the ownership, maintenance or use of the mobile home, which the McKayes leased to Stewart and Teresa Wills.Allstate issued the McKayes a personal umbrella policy providing excess coverage with limits of $1,000,000 for personal injury caused by an occurrence on the property where the mobile home is located.Allstate required the McKayes to maintain underlying primary coverage in the amount of $50,000.The umbrella policy provided that Allstate would assume control of the settlement or defense of any claim or suit against the insured if the limits of any required underlying insurance or any other insurance "have been exhausted by payment."

On November 9, 1992, carbon monoxide leaked from a liquid propane furnace in the mobile home, causing the death of one of the Wills' children and bodily injury to the Wills and their other child.The Wills sued Ronald McKaye, the mobile home manufacturer, the furnace manufacturer, and the local natural gas delivery/service company for negligence and wrongful death.

According to the allegations of American's complaint, the Wills offered to settle their claim against McKaye for $1,050,000, the combined limits of the American and Allstate policies, but refused to settle their claims against McKaye for the $50,000 limits of the American policy alone.McKaye demanded that both insurance companies settle the case.In July 1993, American tendered its policy limits to the Wills.Allstate, however, refused to tender its policy limits or offer any amounts towards settlement.According to American, Allstate insisted that American continue defending McKaye, which American did.In mediation, the parties settled.On behalf of McKaye, American paid the limits of its insurance policy, or $50,000 and the remaining defendants contributed more than $1,000,000 to secure the settlement.Allstate paid nothing under its policy, and McKaye paid nothing personally to secure the settlement and release.

American then filed its complaint against Allstate, including a count based upon equitable subrogation, the claim at issue in the instant appeal.American alleges that Allstate owed a duty to assume the defense of McKaye beginning on or about July 30, 1993, when it became apparent that McKaye's potential liability exceeded American's $50,000 policy limits and American tendered its policy limits.American alleges further:

19.Allstate failed to tender its policy limits or assume the defense of the McKayes and obligated American Southern Home to continue defending the case solely to protect Allstate's self-interest in avoiding payment.As a result, American Southern Home was compelled to pay defense costs that in equity and good conscience ought to have been paid by Allstate.

20.Allstate's conduct benefitted only Allstate and unjustly enriched Allstate at the sole expense of American Southern Home.

21.American Southern Home is equitably subrogated to the rights of the McKayes against Allstate and is entitled to reimbursement of all defense costs incurred in the suit by the Willses after July 30, 1993.

II.

An excess insurer, like any liability insurer, owes a duty to its insured to defend and to negotiate or settle in good faith.Ranger Ins. Co. v. Travelers Indem. Co., 389 So.2d 272, 275(Fla. 1st DCA1980).This duty is fiduciary in nature, requiring the exercise of good faith.Florida Farm Bureau Mut. Ins. Co. v. Rice, 393 So.2d 552, 555(Fla. 1st DCA1980), pet. for rev. denied, 399 So.2d 1142(Fla.1981).It is much broader than the duty to indemnify and requires the excess insurer to act with due regard for the interests of the insured.Id., 393 So.2d at 555 n. 5.This fiduciary obligation is imposed on an insurer because the insured surrenders to the insurer all control over handling a claim, including all decisions with regard to the litigation and settlement.In return, the insurer assumes a duty to exercise control of the claim and to make decisions with due regard for the interests of the insured.

Turning to the discovery order at issue in the instant case, it has generally been held that claims and litigation files constitute work product and are protected from production to opposing parties pursuant to section 90.502, Florida Statutes, andRule 1.280(b)(3),Florida Rules of Civil Procedure.American States Ins. Co. v. Kransco, 641 So.2d 175(Fla. 5th DCA1994);General Acc. Ins. Co. v. American Mut. Ins. Co., 562 So.2d 414(Fla. 5th DCA1990);Fla. Min. & Materials Corp. v. Continental Cas. Co., 556 So.2d 518(Fla. 2d DCA1990);Utica Mut. Ins. Co. v. Croft, 432 So.2d 196(Fla. 1st DCA1983);U.S. Fire Ins. Co. v. Clearwater Oaks Bank, 421 So.2d 783(Fla. 2d DCA1982);Agri-Business, Inc. v. Bridges, 397 So.2d 394(Fla. 1st DCA), rev. denied, 407 So.2d 1102(Fla.1981).However, where there exists a fiduciary relationship between the party seeking the materials and the party who has them, the courts will compel their production.Dunn v. National Sec. Fire and Cas. Co., 631 So.2d 1103(Fla. 5th DCA1993);Continental Cas. Co. v. Aqua Jet Filter Systems, Inc., 620 So.2d 1141(Fla. 3d DCA1993);Aaron v. Allstate Ins. Co., 559 So.2d 275(Fla. 4th DCA), rev. denied, 569 So.2d 1278(Fla.1990);Koken v. American Service Mut. Ins. Co., Inc., 330 So.2d 805(Fla. 3d DCA1976).

It is Allstate's position that American has not demonstrated the necessary fiduciary relationship which would allow the compelled disclosure of work product or privileged materials.Allstate contends that there is no fiduciary duty between an excess insurer and a primary insurer when each is acting according to the terms of their respective contracts with the insured.Continental Cas. Co. v. United Pacific Ins. Co., 637 So.2d 270(Fla. 5th DCA), rev. denied, 645 So.2d 451(Fla.1994);Argonaut Ins. Co. v. Maryland Cas. Co., 372 So.2d 960(Fla. 3d DCA1979).Allstate distinguishes cases like Dunn, supra, andAqua Jet, supra, on the grounds that in those cases, a fiduciary relationship was found to exist between the party seeking the materials and the party who had them.In each of the cases relied upon by American an excess judgment had been obtained against an insured person, who was suing his own insurance company for bad faith or who had assigned his own right to sue his insurer to a third party.None of these cases found a fiduciary relationship to exist between two insurers under these same facts.

American responds that it is not basing its claim upon a fiduciary duty between the excess insurer and the primary insurer.Instead, American asserts that the fiduciary duty that underlies the basis for its equitable subrogation claim is a duty that runs from each of the insurers to their mutual insured, not between the insurers.Thus, according to American, the issue is not whether Allstate breached a fiduciary duty owed to American, but whether Allstate breached a fiduciary duty owed to its insured, whose shoes American steps into under the theory of equitable subrogation.See, Ranger Ins. Co. v. Travelers Indem. Company, 389 So.2d 272(Fla. 1st DCA1980).American argues that the claim and litigation files sought by it will show that Allstate inequitably shifted its responsibility to American to defend the insured because it believed that, regardless of its exposure and what it might pay, it could force American to defend the insured.American argues this conduct is inherently unfair and does not serve or protect the interests of the insured.

III.

Both parties have agreed that, to determine whether the petition for certiorari should be granted and the order quashed, this court should examine the nature of the cause of action between these two insurance companies to determine whether a fiduciary relationship has been alleged....