Omega Forensic Eng'g Inc v. Rli Ins. Co.

• Decision Date: 08 February 2010
• Docket Number: Case No. 09-60582-CIV.
• Citation: 682 F.Supp.2d 1336
• Parties: OMEGA FORENSIC ENGINEERING, INC., Plaintiff, v. RLI INSURANCE COMPANY, Fireman's Fund Insurance Company, and Rheem Manufacturing Company, Defendants.
• Court: U.S. District Court — Southern District of Florida

682 F.Supp.2d 1336

OMEGA FORENSIC ENGINEERING, INC., Plaintiff,

v.RLI INSURANCE COMPANY, Fireman's Fund Insurance Company, and Rheem Manufacturing Company, Defendants.

Case No. 09-60582-CIV.

United States District Court, S.D. Florida.

Decided: Feb. 8, 2010.

James Michael Fishman, Miami, FL, for Plaintiff.

Sina Bahadoran, Eric Hiller, Hinshaw & Culbertson, Holly S. Harvey, Matthew C. Henning, Thornton Davis & Fein, Miami, FL, Michael J. Slevin, Richard S. Feldman, Rivkin Radler LLP, Uniondale, NY, for Defendants.

ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE

WILLIAM P. DIMITROULEAS, District Judge.

THIS CAUSE is before the Court upon the Defendant RLI Insurance Company's Motion to Dismiss [DE 3], filed herein on April 24, 2009. The Court has carefully considered the Motion, Plaintiff Omega Forensic Engineering, Inc.'s Response [DE 9], Defendant RLI Insurance Company's Reply [DE 13], and is otherwise fully advised in the premises.

I. BACKGROUND

A water heater, manufactured by Defendant Rheem Manufacturing Company ("Rheem"), failed and damaged the home of James Miller. Defendant Fireman's Fund Insurance Company¹ ("FFIC") issued an insurance policy, presumably a homeowners policy, to James Miller which was in effect at the time of the hot water heater failure. FFIC hired Plaintiff Omega Forensic Engineering, Inc. ("Omega") to inspect the faulty water heater that damaged James Miller's property. Omega inspected the water heater and then disposed of it. FFIC sought subrogation from Rheem, which requested a reinspec-tion of the water heater. As a result of Omega's disposal of the water heater, it could not be reinspected. FFIC filed suit against Omega in the Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida alleging the disposal of the water heater ruined its product liability subrogation claim against Rheem. RLI Insurance Company ("RLI") issued a "Businessowners" Policy of insurance for liability coverage in connection with Omega's operations, which was in effect at all times material to this action. RLI denied coverage by stating that FFIC was damaged in their inability to bring their subrogation claim, but that such damage was not "bodily injury" or "property damage."

Omega filed suit against RLI in the Circuit Court of the Seventeenth Judicial Circuit in and for Broward County, Florida on March 31, 2009 claiming that RLI has a duty to defend and indemnify Omega in FFIC's lawsuit against it. On April 20, 2009, Plaintiff Omega filed a Notice of Removal [DE 1], removing this action to federal court on jurisdictional grounds of diversity of citizenship pursuant to 28 U.S.C. § 1332 and 28 U.S.C. § 1441.

II. DISCUSSION

On April 24, 2009, Defendant RLI filed its Motion to Dismiss [DE 3]. Defendant RLI argues that Plaintiff has failed to state a claim upon which relief can be granted for the following reasons: (1) Florida Courts have summarily ruled that the spoliation of evidence is not property damage; (2) RLI's policy covers damages to tangible property, not an intangible interest in the preservation of evidence; and (3) coverage is excluded by the policy's "care, custody, or control" exclusion.

Plaintiff counters that FFIC's complaint does not allege "spoliation of evidence," only general negligence, thus there is coverage. Plaintiff also claims that RLI's Motion to Dismiss does not address whether Plaintiffs Petition for Declaratory Judgment states a cause of action, but instead goes to the issue of coverage which Plaintiff claims cannot be determined yet. Plaintiff also attempts to distinguish the case law from the instant case arguing that in the instant case there is a loss of tangible property. The Court notes that Plaintiff does not address RLI's contention that coverage is excluded by the policy's "care, custody, or control" exclusion.

A. Motion to Dismiss Standard

To adequately plead a claim for relief, Federal Rule of Civil Procedure 8(a)(2) requires "a short and plain statement of the claim showing that the pleader is enti tled to relief," in order to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d SO (1957). Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss should be granted only if the plaintiff is unable to articulate "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 78 S.Ct, 99, 2 L.Ed.2d 80 (1957)). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, -U.S.--, 129 S.Ct. 1937, 1949 173 L.Ed.2d 868 (2009) (citing Twombly, 550 U.S. at 55(5, 127 S.Ct. 1955).

The allegations of the claim must be taken as true and must be read to include any theory on which the plaintiff may recover. See linder v. Portocarrero, 963 F.2d 332, 334-36 (11th Cir.1992) (citing Robertson v. Johnston, 376 F.2d 43 (5th Cir.1967)). However, this is inapplicable if the allegations are merely "threadbare recitals of a cause of action's elements, supported by mere conciusory statements Iqbal, 129 S.Ct. at 1949. Once a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint, and "a district court weighing a motion to dismiss asks not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.'" Twombly, 550 U.S. at 563 n. 8, 127 S.Ct, 1955 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183, 104 S.Ct, 3012, 82 I, Ed.2d 139 (1984)).

B. Duty to Defend Standard

As the court in Lime Tree Village Community Club Ass'n Inc. v. State Farm Gen, Ins. Co., 980 F.2d 1402, 1405 (11th Cir.1993), has stated, "[t]he principles governing [a duty to defend]" case are well-established in Florida and this circuit:

An insurer's "duty to defend is distinct from and broader than the duty to indemnify... and if the [underlying] complaint alleges facts showing two or more grounds for liability, one being within the insurance coverage and the other not, the insurer is obligated to defend the entire suit." Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., 470 So.2d 810, 813-14 (Fla. 1st DCA 1985) (citations omitted) (emphasis added). The duty to defend is determined by examining the allegations in the complaint filed against the insured. National Union Fire Insurance Co. v. Lenox Liquors Inc., 358 So.2d 533, 536 (Fla.1978). The insurer must defend when the complaint alleges facts which fairly and potentially bring the suit within policy coverage. Trizec Properties Inc. v. Biltmore Const, Co., 767 F.2d 810, 811-12 (11th Cir. 1985); Baron Oil, 470 So.2d at 815. If the allegations of the complaint leave any doubt as to the duty to defend, the question must be resolved in favor of the insured. Trizec Properties, 767 F.2d at 812; Baron Oil, 470 So.2d at 814.

Lime Tree Village Community Club Ass'n, Inc. v. State Farm Gen. Ins. Co., 980 F.2d 1402, 1405 (11th Cir.1993); see also Latv-yers Title Ins. Corp. v. JDC (America) Corp., 52 F.3d 1575 (11th Cir.1995). Further, "the duty to defend is broader than the duty to indemnify in the sense that the insurer must defend even if facts alleged are actually untrue or legal theories unsound." Lawyers Title, 52 F.3d at 1580. Therefore, the threshold question for the Court is whether the pleadings filed against the plaintiff in the underlying lawsuits allege facts and legal theories within the coverage provisions of the policy. Id, at 1581.

C. Spoliation of Evidence is Not Property Damage

RLI moves to dismiss Plaintiffs Petition for Declaratory Judgment that there is coverage and a duty to defend, arguing that as a matter of Florida law, the spoliation of evidence does not constitute property damage.

In essence, the question is whether and to what extent an action for spoliation of evidence constitutes "property damage" under a commercial general liability policy, thus covered under the policy. While at least one Florida case found coverage exists, the majority of Florida cases have held that it does not. Specifically, these courts have held spoliation claims do not constitute "physical damage to tangible property." Rather, these courts have found that spoliation claims amount to a loss of causes of action or legal claims, which constitute intangible property and are therefore not covered.

Under Florida law, the first case that addressed whether there was coverage for a spoliation claim was Norris v. Colony Ins. Co., 760 So.2d 1010 (Fla. 4th DCA 2000). In Norris, the plaintiff was physically attacked and robbed at a gas station by an unidentified assailant. Id. at 1011. The gas station had a security camera that possibly recorded the incident but the security videotape containing the footage was erased. Id. She brought suit against the gas station, alleging negligent spoliation of evidence for erasing the videotape. Id, Plaintiff alleged that had the videotape not been erased, she could have identified the assailant and recovered damages from him. Id. The gas station's commercial general liability insurer, Colony Insurance Company, refused to defend because the damages arose from assault and battery, which were excluded under the policy. Id. The plaintiff eventually settled with the gas station, which assigned its rights against insurer to the plaintiff. Id. The plaintiff, as assignee of the insured gas station, sought damages for wrongful refusal to defend and also asserted coverage. Id. The trial court ruled in favor of Colony Insurance Company on summary judgment based on the assault and battery exclusion and plaintiff appealed. Id.

On appeal, plaintiff argued, among...