Am. Family Ins. Co. v. Almassud
| Decision Date | 17 February 2021 |
| Docket Number | Civil Action No. 1:16-CV-4023-RWS |
| Citation | 522 F.Supp.3d 1263 |
| Court | U.S. District Court — Northern District of Georgia |
| Parties | AMERICAN FAMILY INSURANCE COMPANY, Plaintiff, v. Abdulmohsen ALMASSUD, Defendant. |
Edward B. Ruff, III, Pro Hac Vice, Heather Egan Plunkett, Michael P. Turiello, Pro Hac Vice, Robert Marc Chemers, Pro Hac Vice, Pretzel & Stouffer, Chicago, IL, Jessica F. Pardi, Ryan Chorkey Burke, Seslee S. Smith, Morris Manning & Martin, LLP, Atlanta, GA, for Plaintiff.
James N. Sadd, Slappey & Sadd, Richard Dolder, Jr, Slappey & Sadd, LLC, Atlanta, GA, for Defendant.
This case comes before the Court on Defendant Almassud's Motion to Dismiss Plaintiff American Family Insurance Company's Second Amended Complaint [Dkt. 366].
In this insurance dispute, what began as a declaratory judgment action has morphed into a case about recoupment. After American Family Insurance Company managed to overturn on appeal a large verdict against its insured, Mr. Almassud, but before a second trial really got underway, AmFam agreed to settle with the underlying claimant, and it paid the settlement amount. Now, the company wants its money back—from Mr. Almassud.
Mr. Almassud got into a car accident when his Jeep Wrangler crossed over the center line and struck another car, injuring the other driver. He filed the claim under his insurance, and AmFam agreed to defend him. Despite demands from the plaintiff, AmFam refused to settle, instead relying on the theory that a local repair shop was at fault because of a failure in the steering mechanism that had recently been replaced. Part of AmFam's reason for doing so was its apparent belief that Mr. Almassud had only been driving on normal roads.
That belief was wrong. In fact, Mr. Almassud had been off-roading just before the accident, and he had done so many times before. But he never told AmFam. Indeed, AmFam alleges that Mr. Almassud misrepresented the extent of his off-roading activity in his original insurance application as well as in depositions and in testimony in the underlying trial. AmFam did not learn about it until he was confronted by inculpatory evidence on cross-examination.
At that point, believing that Mr. Almassud had breached his duty to cooperate as required by the policy, AmFam issued a reservation of rights letter, explaining that it was continuing to defend Mr. Almassud subject to its right to deny coverage as well as its right to recoup any costs it expended. When the trial resumed after a short delay, and upon advice of a criminal defense attorney, Mr. Almassud pled the fifth. An unimpressed jury found him liable for $30 million.
Shortly thereafter, AmFam set out to overturn the state verdict on appeal. At the same time, it filed this declaratory action, seeking to deny coverage. AmFam was eventually successful in getting the verdict overturned, and, a retrial was set. Meanwhile, because no judgment was then pending, this Court held that the declaratory action concerning coverage was unripe.
Just as the retrial got underway, AmFam agreed to settle the underlying case with the claimant. It paid the (substantial, confidential) settlement amount.
Then, Mr. Almassud asked this Court to dismiss AmFam's declaratory claims as moot because he was no longer under threat of judgment. AmFam, however, sought leave to amend its complaint to add claims to recover damages for the amounts it spent defending Mr. Almassud and settling the case. The Court dismissed the declaratory judgment claim as moot but allowed AmFam to amend to the complaint. It did so.
Now, Mr. Almassud has moved to dismiss.
In his Motion, Defendant Almassud contends that Plaintiff AmFam's Second Amended Complaint must be dismissed because it fails to state any cognizable claim for relief. The Court begins by setting out the legal standard for a motion to dismiss before turning to the merits of the claims.
Rule 8 requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." While this standard does not require "detailed factual allegations," neither will mere "labels and conclusions" suffice. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Instead, the complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A claim to relief is "plausible on its face" when the facts support a "reasonable inference that the defendant is liable for the misconduct alleged." Id.; Gates v. Khokhar, 884 F.3d 1290, 1296 (11th Cir. 2018).
When a party challenges a complaint under Rule 12(b)(6) for failure to state a claim, the Court must "accept the facts alleged in the complaint as true, drawing all reasonable inferences in the plaintiff's favor." Gates, 884 F.3d at 1296. So construed, dismissal is proper when, "on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action." Allen v. USAA Cas. Ins. Co., 790 F.3d 1274, 1278 (11th Cir. 2015).
In Counts II, III, and IV, AmFam brings claims for Breach of Contract, Implied Contract, and Unjust Enrichment. The underlying factual basis for these claims is similar: that Mr. Almassud failed to cooperate in his defense as required by his policy. For this Motion, the Court takes that allegation as true. AmFam contends that because of Mr. Almassud's breach of his duty, it is relieved of its duty to defend or indemnify him, and, as such, it can recoup as damages the amount it spent defending him as well as the amount it paid to settle.
In his Motion, Mr. Almassud contends that AmFam cannot recover its costs because the Court previously ruled that AmFam had a duty to defend. He contends that AmFam cannot recover the settlement payment under the breach of contract theory because there was no express agreement allowing recoupment. And he contends that AmFam's other theories—implied contract and unjust enrichment—do not support a recovery of a settlement payment. Additionally, he contends that the voluntary payments doctrine precludes any recovery, regardless of the theory.
AmFam argues that the Court's decision at summary judgment concerning the duty to defend relied on the wrong standard and should not apply at this stage of the proceedings. It contends that Mr. Almassud's failure to cooperate creates a valid claim for recovery of both costs and settlement under any of the theories above. Finally, AmFam argues that even if it cannot recover the costs or the settlement amount, it can recover nominal damages, and so the claim survives.
The Court addresses these different possible recoveries in turn.
AmFam's claim for recoupment depends on a determination that it had no duty to defend. That is because, in cases where the insurer does have a duty to defend, regardless of the existence of a reservation of rights, it cannot recover its costs of defense. See Evanston Ins. Co. v. Sandersville R.R. Co., 2017 WL 3166730, at *5 (M.D. Ga. July 25, 2017) (); cf. also Georgia Interlocal Risk Mgmt. Agency v. City of Sandy Springs, 337 Ga.App. 340, 788 S.E.2d 74, 79 (2016) ().
The problem initially faced by AmFam, as this Court recently suggested, and which Mr. Almassud points out now, is that the Court previously ruled as a matter of law that AmFam was obligated to defend Mr. Almassud. [See Dkt. 302, Am. Family Ins. Co. v. Almassud, 413 F. Supp. 3d 1292, 1301–06 (N.D. Ga. 2019) ]. Having been apprised of this dilemma, AmFam asks the Court to revisit its prior ruling, arguing that the standard applied by the Court at summary judgment was contrary to Georgia law. As explained below, the Court agrees.
In its Order granting summary judgment to Mr. Almassud, the Court set out the legal standard as follows:
In deciding whether there is a duty to defend, the Court looks to "the language of the insurance contract and the allegations of the complaint asserted against the insured." City of Atlanta v. St. Paul Fire & Marine Ins. Co. , 498 S.E.2d 782, 784 (Ga. Ct. App. 1998). "If the facts as alleged in the complaint even arguably bring the occurrence within the policy's coverage, the insurer has a duty to defend the action." Id.
[ Id. at 1301 ]. But there was no dispute that the facts alleged in the underlying complaint fell within the policy. The real question—then and now—is whether Mr. Almassud failed to cooperate. The Court considered that question and determined that issues of fact precluded judgment as a matter of law. But then, the Court concluded that these issues of fact fell within the "even arguably" standard above:
Because a jury could find in Almassud's favor—i.e. , that he fulfilled his duty to cooperate and did not conceal material information—Almassud is arguably entitled to coverage. For purposes of this analysis, that is all that is required.
[ Id. at 1306 ]. Thus, the Court found that AmFam had a duty to defend him, and it granted Mr. Almassud's Motion on that point.
Upon further review, the Court agrees with AmFam that the "even arguably" standard does not apply to the non-cooperation determination. The question of coverage—whether the policy "even arguably" covered the facts alleged in the underlying complaint—is distinct from the question of cooperation—whether the insured failed to cooperate and thus breached the policy himself. The latter question, as the Court noted, rested on disputed facts, and...
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