Gen. Star Nat'l Ins. Co. v. MDLV LLC

• Decision Date: 05 January 2023
• Docket Number: 21-24284-CIV-MORE/GOODMAN
• Citation: Gen. Star Nat'l Ins. Co. v. MDLV LLC, 21-24284-CIV-MORE/GOODMAN (S.D. Fla. Jan 05, 2023)
• Parties: GENERAL STAR NATIONAL INSURANCE COMPANY, Plaintiff, v. MDLV, LLC d/b/a ONE SOTHEBY'S INTERNATIONAL REALTY, et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

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GENERAL STAR NATIONAL INSURANCE COMPANY, Plaintiff, v. MDLV, LLC d/b/a ONE SOTHEBY'S INTERNATIONAL REALTY, et al., Defendants.

No. 21-24284-CIV-MORE/GOODMAN

United States District Court, S.D. Florida, Miami Division

January 5, 2023

AMENDED REPORT AND RECOMMENDATIONS ON DEFENDANT ONE SOTHEBY'S' MOTION FOR JUDGMENT ON THE PLEADINGS

JONATHAN GOODMAN UNITED STATES MAGISTRATE JUDGE.

In this declaratory judgment case, Defendant One Sotheby's International Realty (“One Sotheby's”) filed a Federal Rule of Civil Procedure 12(c) Motion for Judgment on the Pleadings. [ECF No. 74]. Plaintiff General Star National Insurance Company (“General Star” or “Plaintiff”) filed a response [ECF No. 79] and One Sotheby's filed a reply [ECF No. 80].

Senior United States District Judge Federico A. Moreno referred to the Undersigned all pretrial proceedings for an Order on non-dispositive motions and for a Report and Recommendations on dispositive motions. [ECF No. 14].

For the reasons discussed below, the Undersigned respectfully recommends that the District Court grant One Sotheby's' motion for judgment on the pleadings.

I. Background

General Star issued to One Sotheby's a Real Estate Errors and Omissions Liability Insurance Policy (the “Policy”). [ECF No. 47, ¶ 9]. While the Policy was in effect, One Sotheby's received a demand letter from Heliac, Inc. (“Heliac”), seeking the recovery of funds allegedly and unlawfully converted by Gleb Klioner, a One Sotheby's real estate associate, from Heliac following the sale of its property at 9701 Collins Avenue, Unit 502S, Bal Harbour, Florida (the “Property”). Id. at ¶ 15.

General Star received notice of the demand letter and agreed to provide a defense to One Sotheby's, pursuant to the terms of the Policy and subject to a reservation of rights. Id. at ¶¶ 19; 22. After an unsuccessful mediation, Heliac formally filed suit against One Sotheby's, Klioner and Citibank, N.A. in Miami-Dade County state civil court (the “Underlying Lawsuit”). [ECF Nos. 47, ¶ 24; 47-1]. General Star filed this lawsuit for declaratory judgment relief against One Sotheby's and Heliac. [ECF No. 1]. General Star's First and Second Amended Complaint (the current version of the complaint) adds Klioner as a defendant.

Following the denial of its motion to dismiss [ECF No. 50], One Sotheby's filed an Answer and Affirmative Defenses [ECF No. 57], which is the subject of a pending motion to strike [ECF No. 70].^[1] Although its Answer and Affirmative Defenses is still subject to challenge, One Sotheby's filed the instant motion, which contends that judgment on the pleadings is appropriate because certain claims in the Underlying Lawsuit fall outside the Policy's exclusionary provisions and that General Star therefore has a duty to defend the entire lawsuit. [ECF No. 74].

II. Legal Standard

“After the pleadings are closed -- but early enough not to delay trial -- a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Judgment on the pleadings is appropriate only “where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law. Cannon v. City of W. Palm Beach, 250 F.3d 1299, 1301 (11th Cir. 2001). The Court “must accept the facts alleged in the complaint as true and view them in the light most favorable to the nonmoving party.” Id.

“When a defendant moves for judgment on the pleadings pursuant to Rule 12(c), the motion ‘is governed by the same standard as a motion to dismiss for failure to state a claim on which relief may be granted' under Rule 12(b)(6).” Roman v. Spirit Airlines, Inc., 482 F.Supp.3d 1304, 1311 (S.D. Fla. 2020), aff'd, No. 20-13699, 2021 WL 4317318 (11th Cir. Sept. 23, 2021) (quoting Black v. Kerzner Int'l Holdings Ltd., 958 F.Supp.2d 1347, 1349 (S.D. Fla. 2013).

III. Analysis

“The interpretation of provisions in an insurance contract is a question of law.” Stephens v. Mid-Continent Cas. Co., 749 F.3d 1318, 1321 (11th Cir. 2014). In Florida, the court looks to the “eight corners” -- i.e., the four corners of the insurance policy and the four corners of the underlying complaint -- to determine whether the insurance policy's coverage or exclusionary provisions apply. Travelers Indem. Co. of Connecticut v. Richard Mckenzie & Sons, Inc., 10 F.4th 1255, 1261 (11th Cir. 2021) (“We determine whether an insurer has a duty to defend its insured based on only the eight corners of the complaint and the policy.” (internal quotations omitted)).

Because the duty to defend is a broad one, “[t]he merits of the underlying suit are irrelevant.” Mid-Continent Cas. Co. v. Royal Crane, LLC, 169 So.3d 174, 181 (Fla. 4th DCA 2015). An insurer has a duty to defend when the “fairly read” allegations in the underlying complaint bring the matter within the coverage of the insured's policy. Fun Spree Vacations, Inc. v. Orion Ins. Co., 659 So.2d 419, 422 (Fla. 3d DCA 1995). The insurer must defend the entire suit even “where a complaint alleges facts that are partially within and partially outside the coverage of an insured's policy.” Sunshine Birds & Supplies, Inc. v. U.S. Fid. & Guar. Co., 696 So.2d 907, 910 (Fla. 3d DCA 1997).

“However, if the pleadings show the applicability of a policy exclusion, [then] the insurer has no duty to defend.” State Farm Fire & Cas. Co. v. Tippett, 864 So.2d 31, 35 (Fla. 4th DCA 2003). The mere existence of “buzz words” or artful pleading will not create a duty to defend, see Amerisure Ins. Co. v. Gold Coast Marine Distribs., Inc., 771 So.2d 579, 582 (Fla. 4th DCA 2000); the allegations within the complaint must seek recovery for a matter not prohibited by a policy exclusion, Grissom v. Commercial Union Ins. Co., 610 So.2d 1299, 1306-07 (Fla. 1st DCA 1992).

“Once the insured shows coverage, the burden shifts to the insurer to prove an exclusion applies to the coverage.” Borges v. Citizens Prop. Ins. Corp., No. 3D21-0216, 2022 WL 4587418, at *1 (Fla. 3d DCA Sept. 30, 2022). To meet this burden, the insurer must “demonstrat[e] that the allegations of the complaint are cast solely and entirely within the policy exclusion and are subject to no other reasonable interpretation.” Deshazior v. Safepoint Ins. Co., 305 So.3d 752, 755 (Fla. 3d DCA 2020) (emphasis added).

General Star raises procedural and merits-based arguments in opposition to One Sotheby's' motion.

In its procedural challenge, General Star argues that One Sotheby's' motion should be denied because it is premature. General Star notes that One Sotheby's' Answer is still the subject of a pending motion to strike. [ECF Nos. 57; 70]. Because the motion to strike is still pending, General Star says that the pleadings are not “closed,” as is required by Rule 12(c). [ECF No. 79]. One Sotheby's argues in its reply that it had to file the instant motion to timely comply with the dispositive motions deadline and that the disposition of General Star's motion to strike will have no impact on this motion because the Court need look to only the eight corners of the Policy and the Underlying Lawsuit. [ECF No. 80].

The Undersigned has recommended that General Star's Motion to Strike be denied. [ECF No. 85]. If that recommendation is adopted^[2], then One Sotheby's' Answer will be final, and this procedural argument will be mooted. If the Report and Recommendations is not adopted, then One Sotheby's will likely file a new Answer and then refile the exact same motion (or seek leave to file one after the motions deadline expired). In either circumstance, the Undersigned will presumably be required to tackle the merits of One Sotheby's' motion. Accordingly, the Undersigned rejects General Star's procedural arguments and elects to address the merits of the parties' positions.

General Star's Second Amended Complaint contains four counts for declaratory judgment: (1) Declaration that Coverage is Precluded for Klioner by Operation of Exclusion A(1) of the Policy; (2) Declaration that Coverage is Precluded by Operation of Exclusion A(2) of the Policy; (3) Declaration that Coverage is Precluded by Operation of Exclusion A(16) of the Policy; and (4) Declaratory Judgment that One Sotheby's Must Reimburse Damages and Claims Expenses. [ECF No. 47]. Because Count I concerns only Klioner, who has not joined One Sotheby's' motion, the Undersigned will not discuss it any further.

In Count II of the Second Amended Complaint, General Star alleges that it has no duty to defend One Sotheby's in the Underlying Lawsuit based on Exclusion A(2), which provides, in relevant part:

The Company has no obligation under this Policy to pay Damages or Claims Expenses or to provide a defense, in connection with any Claim(s):

B. Under any part of this Policy if based on or arising out of the following: . . .

2. Any disputes involving any Insured's fees, commissions or charges, the failure to pay or collect premium, escrow or tax money, or the conversion, misappropriation, commingling or embezzlement of funds or other property. However, in the event a Claim is made against an Insured seeking both the return of escrow money and alleging an act, error, omission or Personal Injury in the performance of Professional Services covered under this Policy, the Company will defend such Claim without any obligation to reimburse the Insured for the payment of monies held as escrow.

[ECF No. 47, ¶ 35] (emphasis supplied) (the “Conversion Exclusion”).

In Count III of the Second Amended Complaint, General Star alleges that it has no duty to defend One Sotheby's in the Underlying Lawsuit based on Exclusion A(16), which provides, in relevant part:

The Company has no obligation under this Policy to pay Damages or Claims Expenses or to provide a defense, in connection with any Claim(s):

A. Under any part of this Policy if based

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