Essex Builders Group, Inc. v. Amerisure Ins. Co.

• Decision Date: 13 December 2006
• Docket Number: No. 6:04-cv-1838-Orl-22JGG.,6:04-cv-1838-Orl-22JGG.
• Citation: 485 F.Supp.2d 1302
• Parties: ESSEX BUILDERS GROUP, INC., Plaintiff, v. AMERISURE INSURANCE COMPANY and Pennsylvania General Insurance Company,<SMALL><SUP>1</SUP></SMALL> Defendants.
• Court: U.S. District Court — Middle District of Florida

485 F.Supp.2d 1302

ESSEX BUILDERS GROUP, INC., Plaintiff, v. AMERISURE INSURANCE COMPANY and Pennsylvania General Insurance Company,¹ Defendants.

No. 6:04-cv-1838-Orl-22JGG.

United States District Court, M.D. Florida, Orlando Division.

December 13, 2006.

Order Denying Clarification or Reconsideration January 22, 2007.

COPYRIGHT MATERIAL OMITTED

Brenton Neil Ver Ploeg, Stephen A. Marino, Jr., Ver Ploeg & Lumpkin, P.A., Miami, FL, Robert Patrick Major, Winderweedle, Haines, Ward & Woodman, P.A., Orlando, FL, for Plaintiff.

John Bond Atkinson, Rebecca Ann Brownell, Atkinson & Brownell, P.A., Miami, FL, Jeffrey Russell Davis, Stuart J. Freeman, Brasfield, Fuller, Freeman, & O'Hern, PA, St. Petersburg, FL, for Defendants.

ORDER

CONWAY, District Judge.

I. INTRODUCTION

This cause comes before the Court for consideration of pending motions in this insurance coverage dispute. After carefully considering these motions and associated filings, the Court issues the rulings set forth herein.

II. BACKGROUND

In March 1999, Plaintiff Essex Builders Group, Inc. ("Essex") entered into an agreement to act as general contractor on an apartment construction project. Reliance Insurance Company, the predecessor to Travelers Casualty & Surety Company ("Travelers"), issued a performance bond on behalf of Essex. Following project completion, the owner discovered water damage to the apartment buildings. After incurring substantial costs to remedy the problem, the owner demanded reimbursement from Essex. The owner also made a claim against the bond. Essex's commercial general liability ("CGL") insurers, Defendants Pennsylvania General Insurance Company ("PGIC") and Amerisure Insurance Company ("Amerisure"), received notice of the claim against Essex, but did not pay it. Ultimately, Travelers paid the project owner $6.25 million to resolve the owner's claim.

In the present lawsuit, Essex sues PGIC and Amerisure for breach of the CGL insurance contracts. Essex maintains that Travelers' bond payment to the project owner rendered Essex unbondable and thereby "severely impaired and/or destroyed" its business. Joint Final Pretrial Statement ("PTS") (Doc. 336) at 3-4. Essex seeks "consequential damages for the injury to its business, as well as the damages, costs and attorney's fees associated with defending against the Claim and ... bringing this action." Id. at 4.

III. SUMMARY JUDGMENT STANDARD

A motion for summary judgment should be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "The party seeking summary judgment bears the initial burden of identifying for the district court those portions of the record `which it believes demonstrate the absence of a genuine issue of material fact.'" Cohen v. United Am. Bank of Cent. Fla., 83 F.3d 1347, 1349 (11th Cir.1996) (quoting Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386, 1396, modified on other grounds, 30 F.3d 1347 (11th Cir.1994)). "There is no genuine issue for trial unless the non-moving party establishes, through the record presented to the court, that it is able to prove evidence sufficient for a jury to return a verdict in its favor." Cohen, 83 F.3d at 1349. The Court considers the evidence and all inferences drawn therefrom in the light most favorable to the non-moving party. See Hairston v. Gainesville Sun Pub. Co., 9 F.3d 913, 918 (11th Cir.1993).

IV. PGIC'S MOTION FOR PARTIAL SUMMARY JUDGMENT²

At the outset, PGIC denies that Essex can prove it was forced out of business as a result of the CGL insurers' failure to pay the project owner's claim. PGIC further maintains that even if Essex can prove this injury, "it is not entitled, as a matter of law, in its Breach of Contract claim, to recover the consequential damages it is seeking as a result of its being forced to go out of business." Doc. 298 at 2.³ To support this argument, PGIC relies on two cases: Swamy v. Caduceus Self Ins. Fund, Inc., 648 So.2d 758 (Fla. 1 st DCA 1994), and Frenz Enters., Inc. v. Port Everglades, 746 So.2d 498 (Fla. 4th DCA 1999).

In Swamy, a liability insurer failed to settle a medical malpractice claim against a physician, resulting in a judgment that greatly exceeded policy limits. This prompted Dr. Swamy to sue his insurer for bad faith. In that suit, the doctor "sought damages to compensate [him] for the excess judgment, a loss of profits due to reduced referrals, and damage to professional reputation." 648 So.2d at 759. Thereafter, the insurer paid the tort plaintiff the $1 million policy limit, and later agreed to pay her "an additional $2 million in return for a satisfaction of the judgment and [the tort plaintiffs] unconditional release of Dr. Swamy and [the insurer]." Id. The insurer then "moved for summary judgment in Dr. Swamy's suit, arguing that its satisfaction of the excess judgment precluded further recovery by Dr. Swamy and, in essence, extinguished Swamy's cause of action for bad faith." Id. The lower court agreed and granted summary judgment in the insurer's favor.

On appeal, Florida's First District first determined that an insured tortfeasor's damages are not necessarily limited to the amount of an excess judgment; and that "additional damages may be recovered." Id. at 759-760. The appellate court then confronted the question "whether the damages actually pled by Dr. Swamy were recoverable in his action for bad faith at common law or pursuant to section 624.155, Florida Statutes." Id. at 760 (footnote omitted).

The First DCA noted that in Florida, an insured's bad faith claim against its insurer for failure to settle a third party's claim sounds in contract, rather than in tort. Id. Consequently, the recoverable damages "are limited to those that can be said to have been contemplated by the parties at the time of the formation of the insurance contract." Id. Applying this legal principle to the facts in Swamy, the appellate court stated:

In the instant case, once the excess judgment was satisfied, Dr. Swamy's remaining damage claims consisted of alleged lost profits due to reduced referrals, and damage to his professional reputation. In essence, Dr. Swamy sought to recover for losses resulting from the attendant negative publicity of the large excess judgment. Such damages are, at best, an indirect consequence of Caduceus' failure to settle, More importantly, the loss of reputation and referral cannot be said to have been within the contemplation of the parties to the insurance contract.

Presumably, Dr. Swamy procured insurance to protect himself from the serious risks involved in practicing medicine. Insured and insurer must have contemplated that the insurer's bad faith in failing to settle a claim could jeopardize the insured's security by exposing him to an excess judgment. In such an event, the carrier could be liable for the amount of the excess judgment or damages resulting from execution. The possibility that negative publicity would be generated, which would then result in a loss of reputation and business, cannot be deemed the natural or contemplated result of the carrier's breach. In short, the damages claimed by Dr. Swamy were not recoverable in Florida, and the trial court properly entered summary judgment for [the insurer].

Id. at 760-761 (alteration added).

In Frenz Enterprises, the plaintiff ("Frenz") appealed a final judgment awarding it damages on its breach of contract claim against Port Everglades and Broward County for dredging work. Among other things, Frenz argued that the trial court committed error when it denied Frenz's proposed jury instructions regarding lost profits. On that point, Florida's Fourth District stated:

The trial court ruled Frenz's claim seeking lost profits based on an alleged inability to obtain a bond as a result of its dealings with the Port was inappropriate because such damages were not foreseeable. We agree. To recover damages for lost profits in a breach of contract action, a party must prove a breach of contract, that the party actually sustained a loss as a proximate result of that breach, that the loss was or should have been within the reasonable contemplation of the parties, and that the loss alleged was not remote, contingent, or conjectural and the damages were reasonably certain. See Crain Automotive Group[, Inc.] v. J & M Graphics [Inc.], 427 So.2d 300, 301 (Fla. 3d DCA 1983) (reciting the elements of a claim for damages for lost profits as a result of the late placement of an advertisement). Here, the evidence did not establish that Frenz's drop in revenues from $6,000,000 to zero was proximately caused by the Port's failure to pay Frenz the amount it expected under the contract and the Port's filing of a counterclaim seeking liquidated damages. Frenz failed to establish that such a large loss was or should have been within the reasonable contemplation of the parties, or that the Port should have known Frenz would lose his bond line. To the contrary, it would have been reasonable to expect Frenz's business to continue to some extent. Frenz has failed to establish an abuse of discretion under this point.

746 So.2d at 504 (alterations added).

PGIC essentially argues that Swamy and Frenz Enterprises establish that the types of damages Essex seeks here are not recoverable as a matter of law, on the ground that they cannot be considered to have been within the contemplation of the parties at the time of contract formation, i.e., the date on which the CGL policies were issued. However, PGIC places undue importance on these decisions. They do stand for the proposition that contract damages are limited to those within the contemplation of the parties at the time of contract formation, and, also, that a litigant who fails to establish such a connection cannot recover consequential...