Constr. Consulting & Mgmt. Corp. v. Mid-continent Cas. Co.
| Decision Date | 07 January 2011 |
| Docket Number | CASE NO. 10-81220-CIV-MARRA/JOHNSON |
| Court | U.S. District Court — Southern District of Florida |
| Parties | CONSTRUCTION CONSULTING & MANAGEMENT CORP., a Florida corporation, Plaintiff, v. MID-CONTINENT CASUALTY COMPANY, a foreign corporation, Defendant. |
This cause is before the Court upon Defendant Mid-Continent Casualty Company's Motion to Dismiss (DE 4). The Court has carefully considered the motion and is otherwise fully advised in the premises.
On October 16, 2010, Defendant Mid-Continent Casualty Company ("Defendant") filed a Notice of Removal of a state court third-party complaint brought against it by Plaintiff Construction Consulting & Management Corp. ("Plaintiff"). Prior to removal, the state court judge granted Defendant's motion to sever the third-party action from the main action for discovery and trial. (Notice of Removal, DE 1.)
Plaintiff is a contractor who was sued as a third-party defendant for alleged grading defects at a construction project. (Compl., Ex. B, attached to DE 1-2.) Prior to suit having been filed against Plaintiff, the owner of the property filed suit against its surveyor and Plaintiff's subcontractor in 2007. (Compl. ¶ 8.) Plaintiff had previously entered into a contract with its sub-contractor in which the subcontractor would provide grading, paving and drainage plans for the property. (Compl. ¶ 6.)
On or about March 2006, Defendant issued a commercial general liability insurance policy to Plaintiff and, in February 2007, Plaintiff put Defendant on notice of a claim arising out of the grading problems with the project. (Compl. ¶ 8-9.) On May 4, 2007, Defendant denied coverage for the claim. (Compl. ¶ 10.) On or about May 16, 2007, the surveyor filed a third-party complaint against Plaintiff. (Compl. ¶ 11.) Plaintiff provided that complaint to Defendant and Defendant denied coverage for both defense and indemnity. (Compl. ¶ 111 On September 24, 2008, the owner of the property amended the state court complaint, adding its own claim against Plaintiff. (Compl. ¶ 13.) Plaintiff provided a copy of that amended complaint to Defendant who also denied coverage for both defense and indemnity. (Compl. ¶ 14.)
Plaintiff brings claims for declaratory relief (count one) and breach of fiduciary duty (count two). The declaratory judgment claim states that Plaintiff "contends that the policy provides for coverage of both a defense as well as indemnity for the aforesaid claims and this suit, and [Defendant] has both breached the policy of insurance, but also constitutes an abandonment of its insured." (Compl. ¶ 22.) The breach of fiduciary duty claim alleges that Defendant had a duty to defend and indemnify Plaintiff for the claims and suits against Plaintiff and Defendant breached its fiduciary duty by "abandoning [Plaintiff] to its own devices forcing it to pay for its own defense and being faced with a potential judgment against it without any insurance indemnity." (Compl. ¶¶ 24-26.)
Defendant moves to dismiss, claiming that the breach of fiduciary duty claim is barred by the economic loss rule. In addition, Defendant asserts that the breach of fiduciary duty claim is, in essence, a claim for bad faith and is therefore not ripe until there has been a determination of coverage.
Rule 8(a) of the Federal Rules of Civil Procedure requires "a short and plain statement of the claims" that "will give the defendant fair notice of what the plaintiff's claim is and the ground upon which it rests." Fed. R. Civ. P. 8(a). The Supreme Court has held that Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).
"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quotations and citations omitted). "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." Id.. Thus, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1950. When considering a motion to dismiss, the Court must accept all of the plaintiff's allegations as true in determining whether a plaintiff has stated a claim for which relief could be granted. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).
Defendant argues that the breach of fiduciary duty claim is barred by the economic loss rule because Plaintiff and Defendant are in contractual privity and Plaintiff has failed to allege an independent tort unrelated to its contractual privity. (Mot. at 2-3.) In response, Plaintiff states that the economic loss rule generally applies to product liability actions. Moreover, Plaintiff claims that the economic loss rule does not apply because Defendant has neglected to provide professional services to the claims made against Plaintiff. (Resp. at 5-7.)
In Indemnity Insurance Co. of North America v. American Aviation, Inc., 891 So.2d 532, 536 (Fla. 2004), the Florida Supreme Court explained the two different circumstances to which the economic loss rule applies under Florida law: The first application, the "contractual privity economic loss rule" is when parties are in contractual privity and one party seeks to recover damages in tort for matters arising from the contract. The rule is designed to prevent the parties from "circumventing the allocation of losses set forth in the contract" by making a claim for economic loss in tort. Id.; see also Allen v. Stephan Co., 784 So. 2d 456, 457 (Fla. Dist. Ct. App. 2000) (). "[C]ommercial parties are more than capable of protecting themselves against defective products by bargaining for such protection in their contracts." Tyco Safety Products Canada, Ltd. v. Abracon Corp., No. 08-80604-CIV, 2008 WL 4753728, at * 4 n.5 (S.D. Fla. 2008) (citing Jarmco, Inc. v. Polygard, Inc., 668 So. 2d 300 (Fla. Dist. Ct. App.1996).
The second application, the "products liability economic loss rule, " applies when there is a defect in a product that causes damage to the product, but causes no personal injury or damage to other property. Indemnity Insurance, 891 So. 2d at 536-38. The "products liability economic loss rule" bars a tort cause of action where a product is involved, when the product damages only itself, and the losses are purely economic. See Abracon Corp., 2008 WL 4753728, at * 4 (citing Florida Power and Light Co. v. Westinghouse Electric Corp., 510 So.2d 899, 900 (Fla.1987)). The "other property" exception to the economic loss rule is limited to "property unrelated and unconnected to the product sold." Id. (citing Jarmco, Inc. v. Polygard, Inc., 668 So. 2d 300 (Fla. Dist. Ct. App.1996).
Here, there is no dispute that this case does not concern a product liability action. This case does, however, turn on the insurance contract entered into between the parties. Thus, the contractual privity economic loss rule is germane to this discussion. The economic loss rule HTP, Ltd. v. Lineas Aereas Costarricenses, S.A., 685 So. 2d 1238, 1239 (Fla.1996). The Court must therefore examine and compare the allegations of the breach of the fiduciary duty claim with the declaratory judgment claim.3
In asserting the breach of fiduciary duty claim, the Complaint states that Defendant had a duty to defend and indemnify Plaintiff for the claims and suits against Plaintiff, and Defendant breached its fiduciary duty by "abandoning [Plaintiff] to its own devices forcing it to pay for its own defense and being faced with a potential judgment against it without any insurance indemnity." (Compl. ¶¶ 24-26.) Significantly, these same allegations are pled in the declaratory judgment claim as evidenced by the allegations that Plaintiff "contends that the policy provides for coverage of both a defense as well as indemnity for the aforesaid claims and this suit, and [Defendant] has both breached the policy of insurance, but also constitutes an abandonment of its insured." (Compl. ¶ 22.) Thus, none of the acts complained of by Plaintiff in the breach of fiduciary duty claim are independent from the acts alleged in the declaratory judgment claim. See Royal Surplus Lines Ins. Co. v. Coachman Indus., Inc., 184 Fed. Appx. 894 (11th Cir. 2006) (citing Indemnity Ins. Co. of N. Am. v. Am. Aviation, Inc., 891 So. 2d 532 (Fla. 2004) (); Granat v. Axa Equitable Life Ins. Co., No. 06-21197-CIV, 2006 WL 3826785 (S.D. Fla. Dec. 27, 2006) (); Travelers Indem. Co. of Ill. v. Royal Oak Enterprises, Inc., 429 F. Supp. 2d 1265 (M.D. Fla. 2004) (). Given the similarities between the alleged...
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