Rosen v. Florida Ins. Guar. Ass'n

• Decision Date: 20 September 2001
• Docket Number: No. SC95889.,SC95889.
• Citation: 802 So.2d 291
• Parties: Bonnie ROSEN, Petitioner, v. FLORIDA INSURANCE GUARANTY ASSOCIATION, Respondent.
• Court: Florida Supreme Court

802 So.2d 291

Bonnie ROSEN, Petitioner, v. FLORIDA INSURANCE GUARANTY ASSOCIATION, Respondent.

No. SC95889.

Supreme Court of Florida.

September 20, 2001.

Rehearing Denied December 11, 2001.

Lauri Waldman Ross of Lauri Waldman Ross, P.A., Miami, FL, for Petitioner.

Helen Ann Hauser of Dittmar & Hauser, Coconut Grove, FL, for Respondent.

PARIENTE, J.

We have for review Rosen v. Florida Insurance Guaranty Ass'n, 734 So.2d 491 (Fla. 1st DCA 1999), a decision from the First District Court of Appeal that misapplies this Court's decision in Fidelity & Casualty Co. v. Cope, 462 So.2d 459 (Fla. 1985). Based on the conflict created by this misapplication, we have jurisdiction under article V, section 3(b)(3), Florida Constitution. See Vest v. Travelers Ins. Co., 753 So.2d 1270, 1272 (Fla.2000)

; Arab Termite & Pest Control, Inc. v. Jenkins, 409 So.2d 1039, 1040 (Fla.1982).

BACKGROUND

Bonnie Rosen sued a Dade County law firm (known by the pseudonym of "the AB Law Firm"),¹ its principal, and one employee for breach of contract, fraud, breach of fiduciary duty, negligent supervision, conversion, and intentional infliction of emotional distress that arose out of representation of Rosen on several matters. See Rosen, 734 So.2d at 491

. Rosen alleged that the firm grossly overcharged her by double-billing and churning, that it would not surrender files to new counsel and that one member of the firm threatened to reveal confidences to a party opponent. See id. Although the bills for AB Law Firm's services totaled nearly $340,000, Rosen paid AB Law Firm $269,000.

AB Law Firm had a $1,000,000 liability insurance policy with Manatee Insurance Company ("Manatee"),² and the insurer initially provided the firm with legal representation. See id. The insurance policy contained a "declining balance" feature, meaning that defense costs reduced the amount of money available to pay damages. See id. at 491-92.

During the litigation, Manatee was declared insolvent and pursuant to chapter 631, Florida Statutes, Respondent Florida Insurance Guaranty Association ("FIGA") assumed the defense as receiver. See id. at 492. Before declaring insolvency, Manatee had spent just under $200,000 on defense costs. Thus, under the original $1,000,000 declining balance policy, $800,000 remained available for indemnification. FIGA took the position that its $300,000 per claim liability limit pursuant to section 631.57(1)(a)2, Florida Statutes (1997), applied to the Rumger-Manatee policy's declining balance provision, meaning that only $300,000 was available for both indemnification and all costs, including attorneys' fees. See id.

As the matter neared trial, all but $39,000 of FIGA's statutory $300,000 limit had been consumed in defense costs. See id. Soon after FIGA notified the parties of this fact, Rosen and AB Law Firm entered into a settlement agreement on the following terms: "AB Law Firm would consent to a judgment of $261,000 against it,³ but the judgment would never be recorded, would create no liens and could not be executed." Id. The agreement provided, in pertinent part: "The foregoing is not intended, nor should it be construed, to prejudice the potential claim, whether valid or invalid, that Bonnie Rosen may decide to pursue against FIGA." Moreover, with respect to dismissal of the underlying suit, the agreement provided that it "does not impair the judgment referenced in paragraph no. 2 ... and thus shall not impair Bonnie Rosen's right to pursue a lawsuit, inclusive of a claim for attorneys' fees if proper, against FIGA."

In return for not recording the judgment or creating any liens, Rosen would accept $39,000 from FIGA, would attempt to collect the balance of the $300,000 from FIGA, and upon conclusion of that litigation would release AB Law Firm or file a notice of satisfaction of judgment. See id.

After the agreement was signed, FIGA paid the sum of $39,000, without obtaining a release from Rosen. Although the First District concluded that "[i]t appears that other than to agree to pay the remaining $39,000, FIGA in no way participated in the negotiations," Id. at 492, FIGA did review the settlement documents exchanged between the parties at least three times before the parties finalized and signed the agreement. Rosen then filed a declaratory judgment action seeking a determination that FIGA was not entitled to deduct the $261,000 paid out in defense costs from the per-claim limit and an order requiring FIGA to pay her $261,000 in satisfaction of the judgment against AB Law Firm. See id. Rosen based her claim on the legal position that the declining balance should be computed from the $1,000,000 limits of the Rumger-Manatee policy, rather than from the $300,000 statutory limit for claims. See id.

Both sides moved for summary judgment and the trial court granted FIGA's motion. See id. The trial court characterized the agreement between Rosen and AB Law Firm as a release, and reasoned that because Rosen had agreed to release AB Law Firm at the conclusion of the litigation with FIGA, the release had extinguished any liability that FIGA had as an insurer. See id. Thus, the trial court ruled that by agreeing to release AB Law firm, Rosen thereby released FIGA.⁴

The First District affirmed the granting of summary judgment, holding that the trial court correctly decided the case "in light of two cases that present similar factual scenarios," citing to Kelly v. Williams, 411 So.2d 902 (Fla. 5th DCA 1982), and Cope, 462 So.2d at 459. See Rosen, 734 So.2d at 492

. The First District explained that Kelly and Cope both stood for the proposition that the release of a tortfeasor relieves the insurer of its legal obligation to pay damages, absent an assignment of claims. See Rosen, 734 So.2d at 492. Therefore, the First District held that Rosen could not bring an action against FIGA because she had released AB Law Firm from all liability without obtaining an assignment of rights.⁵

DISCUSSION

The issue presented is whether our decision in Cope controls the outcome of this case. Cope involved a bad-faith action brought by an injured party against an insurance company after the injured party had released the insured tortfeasor from all liability—including liability in excess of the policy limits. 462 So.2d at 459. In that case, we acknowledged that the essence of a bad-faith cause of action is to remedy a situation in which an insured is exposed to an excess judgment because of the insurer's failure to properly or promptly defend the claim. See id. at 460.

Our holding in Cope was a narrow one— "if an excess judgment has been satisfied, absent an assignment of that cause of action prior to satisfaction, a third party cannot maintain action for a breach of duty between an insurer and its insured." Id. at 461. Significantly, however, in that case the underlying claim no longer existed after the release and satisfaction of judgment.

The other case upon which the First District relied, Kelly, also focused on whether a bad-faith cause of action was preserved by the stipulation of the parties. 411 So.2d at 902. In Kelly, the Fifth District observed that, although the stipulation clearly contemplated a future third-party action against the insurer for bad faith, because the stipulation in that case limited the insurer and the insured's liability to the $50,000 policy amount, no cause of action for bad faith could exist. 411 So.2d at 904.

Accordingly, the dispositive question in this case is whether the settlement agreement between Rosen and AB Law Firm constituted a release of the insured and FIGA from all further liability.⁶ Appellate courts have recognized the "deeply rooted principle of Florida law that the intent of the parties controls interpretations of their releases." Auto-Owners Ins. Co. v. St. Paul Fire & Marine Ins. Co., 547 So.2d 148, 150 (Fla. 2d DCA 1989) (citing Atlantic Coast Line R.R. v. Boone, 85 So.2d 834, 842 (Fla.1956)); see also Steil v. Florida Physicians' Ins. Reciprocal, 448 So.2d 589, 591 (Fla. 2d DCA 1984)

. As we stated in Stephen Bodzo Realty, Inc. v. Willits International Corp., 428 So.2d 225, 227 (Fla.1983): "To allow these respondents to escape this obligation by relying on a document executed by others who had no intention of releasing them is the epitome of manifest injustice."

In Atlantic Coast Line, this Court distinguished between a release and a covenant not to sue, explaining:

A release is an outright cancellation or discharge of the entire obligation as to one or all of the alleged joint wrongdoers. A covenant not to sue recognizes that the obligation or liability continues but the injured party agrees not to assert any rights grounded thereon against a particular covenantee.

85 So.2d at 843. In Atlantic Coast Line, the plaintiff sued both the driver of an automobile in which he was a passenger and the train that hit the car as joint tortfeasors. The plaintiff subsequently signed an agreement with the automobile driver promising: "to forever refrain from instituting, pressing or in any way aiding any claim, demand, action or causes of action, for damages, cost, loss of service, expenses or compensation for, on account of, or in any way growing out of, or hereafter to grow out of an accident." Id. at 842. The Court concluded that the agreement constituted a release rather than a covenant not to sue because the covenant was comprehensive and contemplated refraining from suing both the driver and the railroad. See id.

The Court explained that in the situations in which it had found a covenant not to sue instead of a release, the individual executing the covenant expressly reserved his or her rights against parties other than those specifically named in the covenant. See id. at 843. Therefore, because the Court concluded that the plaintiff in Atlantic Coast Line made no such reservation and the language of the covenant did not indicate an intent to reserve her rights to sue the railroad, the agreement...