Travelers Indem. Co. v. Royal Oak Enterprises

• Decision Date: 21 January 2004
• Docket Number: No. 5:02 CV 58 OC 10GRJ.,5:02 CV 58 OC 10GRJ.
• Citation: 429 F.Supp.2d 1265
• Parties: TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Plaintiff, v. ROYAL OAK ENTERPRISES, INC., a foreign corporation; Dan Swearingen, an individual; and John V. Tilton, Sr., as Personal Representative of the Estate of John V. Tilton Jr., deceased, Defendants.
• Court: U.S. District Court — Middle District of Florida

429 F.Supp.2d 1265

TRAVELERS INDEMNITY COMPANY OF ILLINOIS, Plaintiff, v. ROYAL OAK ENTERPRISES, INC., a foreign corporation; Dan Swearingen, an individual; and John V. Tilton, Sr., as Personal Representative of the Estate of John V. Tilton Jr., deceased, Defendants.

No. 5:02 CV 58 OC 10GRJ.

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

January 21, 2004.

Order Denying Reconsideration March 10, 2004.

COPYRIGHT MATERIAL OMITTED

Sina Bahadoran, Andrew Edward Grigsby, Hinshaw & Culbertson LLP, Miami, FL, for Plaintiff.

Daniel James King, Barry Goheen, King & Spalding, Atlanta, GA, Jona J. Miller, King & Spalding, Sarasota, FL, William Harper Phelan, Jr., Bond, Arnett, Phelan, Smith & Craggs, P.A., Ocala, FL, for Defendants.

ORDER

HODGES, District Judge.

This insurance contract coverage dispute is before the Court for consideration of Plaintiff Travelers Indemnity Company of Illinois' motion to dismiss Defendant Royal Oak Enterprises, Inc.'s amended counter-claim (Doc. 129), to which Royal Oak has responded (Doc. 137). The amended counter-claim (Doc. 120) contains numerous counts, including claims for declaratory relief, bad faith refusal to settle, breach of contract and breach of fiduciary duty. Upon due consideration, Travelers' motion is due to be granted in part and denied in part.

Background and Facts

This action arises out of a tragic incident that occurred in Ocala, Florida in 1998 at a processing plant owned and operated by Defendant Royal Oak, a manufacturer of charcoal briquettes. At that time, decedent John V. Tilton, Jr. was employed by Royal Oak as a furnace helper in its Ocala facility. As a furnace helper, Tilton's duties included working in and near the electrical panel of the facility's hammer mill, a machine that grinds charred wood into dust for the manufacture of charcoal briquettes. On August 30, 1998, John V. Tilton, Jr. inadvertently came into contact with the electrical panel of the hammer mill, which resulted in his electrocution and his death.

At the time of the incident causing Tilton's death, Royal Oak was insured by Travelers under three policies: (1) Commercial General Liability Policy; (2) Workers Compensation and Employers Liability Policy; and (3) Commercial Excess Liability Insurance Policy (Umbrella Policy). In July 2000, John V. Tilton, Sr., as personal representative of the estate of John V. Tilton, Jr., brought a wrongful death action in Circuit Court in Marion County, Florida against Royal Oak and Dan Swearingen, Royal Oak's Area Vice President. The wrongful death complaint was initially framed in one count alleging negligence. Pursuant to its obligations under the policies, Travelers undertook the defense of the wrongful death action and appointed the law firm of Weiner & Argo, P.A. as counsel for the defendants.

On November 1, 2000, the Tilton estate mailed Weiner & Argo a "Proposal for Settlement" in which it offered to settle its claims for $750,000.00, an amount within the limits of coverage under the Travelers policies. Royal Oak contends that Weiner & Argo and Travelers failed to notify Royal Oak's upper management or legal staff of the settlement offer. However, Royal Oak admits that Weiner & Argo sent Mr. Swearingen and another employee at the Ocala facility a copy of the offer. According to Royal Oak, in February of 2001, while the settlement offer was still pending, the Tilton estate notified Travelers of its intent to move for leave to amend its complaint to add claim for "Intentional Tortious Conduct" and punitive damages based on allegations that the defendants' conduct was "substantially certain to cause injury or death." Under Florida law, negligence actions brought by an employee (or his estate) against an employer for injuries sustained during the course of employment are barred by workers' compensation immunity.¹ However, intentional torts, including allegations that the employer engaged in conduct "substantially certain to result in injury or death," do not fall within workers' compensation immunity.² Travelers ultimately rejected the offer and, according to Royal Oak, never communicated its rejection to Royal Oak.

In August of 2001, the Tilton estate moved for leave to amend its complaint to assert the additional intentional tort count.³ At that time, Travelers sent Royal Oak and Mr. Swearingen a "Reservation of Rights Letter" informing the defendants that it would continue to defend the action under a reservation of its rights to later dispute coverage. Royal Oak retained its own counsel the following month.

On March 1, 2002, Travelers initiated this action for declaratory judgment against Royal Oak, Dan Swearingen and the Tilton estate. In its amended complaint (Doc. 32) Travelers seeks a declaration that no covered claims are alleged in the underlying state litigation and that no coverage exists for punitive damages as a matter of law. Travelers' position in this suit is that the allegation of intentional tortious conduct in the state court action places the claim outside the coverage definition of an "occurrence" because an intentional tort is not an accident and is therefore subject to exclusion under the insurance policies. Travelers further maintains that coverage for intentional tortious conduct is excluded as injury "intentionally caused or aggravated" by the insured and that the negligence claim falls within workers' compensation immunity and is excluded by the insurance policies for that reason as well. In July of 2002, during the pendency of this action, the parties agreed to settle the claims in the Tilton litigation for $750,000.00. Travelers paid the settlement,⁴ and the Tilton litigation was dismissed in September of 2002.

On October 22, 2003, Royal Oak filed its amended counterclaim (Doc. 120), which contains the following thirteen counts: (1) Declaration as to Right to Coverage Under Workers' Compensation Insurance Potion of Workers Comp Policy; (2) Declaration as to Right to Coverage under Employers Liability Insurance Portion of Workers Comp Policy; (3) Declaration as to Right to Royal Oak's Coverage Under Umbrella Policy; (4) Declaration as to Royal Oak's Right to Coverage Under the Policies for any Punitive Damages Assessed Against Royal Oak in the Tilton Litigation; (5) Declaration as to Royal Oak's Right to Payment of Fees of its Separate Independent Counsel in the Tilton Litigation Due to Royal Oak's and Travelers' Conflicting Interest; (6) Negligent Refusal to Settle; (7) Common Law Bad Faith Refusal to Settle; (8) Statutory Bad Faith Refusal to Settle; (9) Breach of Duty to Obtain Mutually Agreeable Counsel; (10) Breach of Contract: Breach of Duty to Defend by Failing to Obtain Mutually Agreeable Counsel; (11) Breach of Contract: Breach of Duty to Defend by Providing Inadequate Defense; (12) Tortious Breach of Contract: Breach of Implied Duty of Good Faith and Fair Dealing; and (13) Breach of Fiduciary Duty.

Motion to Dismiss Standard

In passing on a motion to dismiss under Rule 12(b)(6), the Court is mindful that "[d]ismissal of a claim on the basis of barebones pleadings is a precarious disposition with a high mortality rate."⁵ Thus, if a Complaint "shows that the Plaintiff is entitled to any relief that the Court can grant, regardless of whether it asks for the proper relief," it is sufficiently plead.⁶ As the Supreme Court declared in Conley v. Gibson, a complaint should not be dismissed for failure to state a claim unless it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief."⁷ The Federal Rules of Civil Procedure "do not require a claimant to set out in detail the facts upon which he bases his claim."⁸ Instead, all that is required is that the claimant set forth a "short and plain statement of the claim" sufficient to give the defendant "fair notice of what the plaintiff s claim is and the grounds upon which it rests."⁹ However, "while notice pleading may not require that the pleader allege a `specific fact' to cover each element of a claim, it is still necessary that a complaint contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory."¹⁰ Merely labeling claims will not be sufficient to survive a motion to dismiss.¹¹

Discussion

A. Choice of Law

A court which sits in diversity jurisdiction must apply the choice of law rules of the forum state.¹² The Eleventh Circuit has held that the Florida Supreme Court would probably follow the "significant relationship" approach of § 193 of the Restatement Second of Conflicts of Law¹³ in cases, such as this, involving insurance on real property where the policy is silent as to choice of law.¹⁴ Section 193 "encourages application of the local law of the state in which the insured risk is located."¹⁵ In this case, the insured risk—i.e., the Ocala facility—is located in Florida. Accordingly, this Court finds that the law of Florida governs.

B. Motion to Dismiss

The claims asserted by Royal Oak in its amended counterclaim (Doc. 120) fail into four categories. Counts one through five are claims seeking a declaration of various rights under the insurance policies. Counts six through eight relate to Travelers' refusal to settle when the first proposal of settlement was offered. Counts nine through eleven are breach of contract claims. Counts twelve and thirteen are tort claims. The Plaintiff moves to dismiss each of the thirteen counts. The Court will consider each claim in turn.

1. Declaratory Actions

The motion is due to be denied with respect to the dismissal of counts one, two and three. That these counts duplicate Travelers' request for declaratory relief does not warrant their dismissal. Count four appears to state a controversy between the parties concerning whether the Tilton settlement consisted in part of punitive damages. Royal Oak believes that Travelers intends to argue that a...