Venn v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 20 November 1996
• Docket Number: Nos. 94-3423,95-2000,s. 94-3423
• Citation: 99 F.3d 1058
• Parties: 10 Fla. L. Weekly Fed. C 546 John E. VENN, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee. John E. VENN, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1058

99 F.3d 1058

10 Fla. L. Weekly Fed. C 546

John E. VENN, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiff-Appellant, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.

John E. VENN, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiff-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellant.

Nos. 94-3423, 95-2000.

United States Court of Appeals, Eleventh Circuit.

Nov. 20, 1996.

Lefferts L. Mabie, Jr., Louis K. Rosenbloum, Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, Pensacola, FL, George W. Estess, Kerrigan, Estess, Rankin & McLeod, Pensacola, FL, Talbot D'Alemberte, Florida State University, Tallahassee, FL, for John E. Venn.

Elmo R. Hoffman, Orlando, FL, Mark S. Marani, Atlanta, GA, J. Dixon Bridgers, III, Carlton, Fields, P.A., Pensacola, FL, Edward Clay Parker, H. Joseph McGuire, Orlando, FL, Gus H. Small, Karen Fagin White, Small, White & Marani, P.C., Atlanta, GA, Pamela Mark Burke, Orlando, FL, for St. Paul Fire and Marine Ins. Co. in No. 94-3423.

Gus Small, Karen F. White, Mark S. Marani, Small White & Marani, Atlanta, GA, Edward Clay Parker, H. Joseph McGuire, Orlando, FL, Pamela Mark Burke, Orlando, FL, for St. Paul Fire and Marine Ins. Co. in No. 95-2000.

Appeals from the United States District Court for the Northern District of Florida.

Before BIRCH, Circuit Judge, GODBOLD, Senior Circuit Judge, and O'KELLEY ^*, Senior District Judge.

BIRCH, Circuit Judge:

This diversity medical malpractice insurance case has spanned twelve years and involved the participation of twenty-seven judges. It is now before us for the second time. The issues presented on appeal are: (1) whether a Chapter 7 bankruptcy trustee can assert a bad faith claim against an insurer when the underlying cause of action accrued after the named insured was discharged in bankruptcy; (2) if such a claim is found to be cognizable, what is the measure of recovery; and (3) whether the bankruptcy trustee is entitled to prejudgment interest. The district court ruled that the trustee can assert such a claim, the measure of recovery is the amount of the judgment in excess of policy limits, and the trustee is not entitled to prejudgment interest. We AFFIRM in part, REVERSE in part, and REMAND for further proceedings consistent with this opinion.

I. BACKGROUND

The general factual background for this case is described in detail in Camp v. St. Paul Fire and Marine Ins. Co., 958 F.2d 340, 344 (11th Cir.1992) (Camp I ). We therefore summarize briefly the facts and rulings pertinent to the issues before us. Defendant, St. Paul Fire and Marine Insurance Company ("St. Paul"), is the insurer of Dr. Fariss Kimbell, a neurosurgeon who became bankrupt in 1986. Two years prior to the filing of Kimbell's bankruptcy petition, St. Paul assumed Kimbell's defense in a medical malpractice suit filed by Anna Rue Camp ("Camp") in Florida state court. Camp offered to settle the medical malpractice suit for policy limits, $250,000, on several occasions both before and after Kimbell's petition was filed. St. Paul rejected these offers and the case proceeded to trial after the bankruptcy court lifted the automatic stay mandated by 11 U.S.C. § 362. The jury returned a verdict of more than three million dollars against Kimbell. The bankruptcy court ordered that the excess judgment obtained by Camp be classified as a general, non-priority, unsecured claim against Kimbell's bankruptcy estate but specified that the judgment could not be enforced against Kimbell personally.

Camp and Kimbell's bankruptcy trustee, John E. Venn ("Venn" or "trustee"), next commenced a bad faith action against St. Paul in Florida state court. St. Paul removed the case to the United States District Court for the Northern District of Florida. On cross-motions for summary judgment, the district court dismissed the case and held that St. Paul could not be liable for bad faith refusal to settle because its insured--Kimbell--was bankrupt and could not be held personally liable for the excess judgment. On appeal, we certified the following question to the Florida Supreme Court:

Whether, as a matter of law, a named insured's bankruptcy and discharge from liability prior to exposure to an excess judgment, such that the named insured was never personally liable for any amount of the judgment, precludes an injured party's or bankruptcy trustee's subsequent bad faith cause of action against an insurance company.

Camp I, 958 F.2d at 344. ¹ In response, the Florida Supreme Court held that "an action for bad faith may be claimed by the trustee of Kimbell's bankruptcy estate against St. Paul." Camp v. St. Paul Fire and Marine Ins. Co., 616 So.2d 12, 15 (Fla.1993) (Camp II ). The court reasoned that the bankruptcy estate held Kimbell's insurance policy as an asset at the time he filed for bankruptcy. Therefore, St. Paul's duty of good faith extended to the estate which "stood in the shoes of the debtor and, in effect, ... became the insured." Id. The court explained further that the excess judgment against the bankrupt insured harmed the estate by increasing its debt to the detriment of its creditors and concluded that "Mr. Venn acted properly in filing a bad faith action to recoup the excess judgment for which the estate remains liable." Id.

Accordingly, we reversed the district court's dismissal of Venn's bad faith action and affirmed the dismissal of Camp's action. Camp v. St. Paul Fire and Marine Ins. Co., 989 F.2d 428 (11th Cir.) (Camp III ), cert. denied, 510 U.S. 964, 114 S.Ct. 441, 126 L.Ed.2d 375 (1993). On remand, the case was set for trial. Before trial, the district court heard arguments on the measure of compensatory damages. It ruled that the Florida Supreme Court had answered this question by implication in its opinion and fixed the amount of excess judgment as the measure of compensatory damages. Venn v. St. Paul Fire and Marine Ins. Co., 169 B.R. 735, 737 (N.D.Fla.1994) ("Venn I "). The court held, however, that Venn would not be entitled to prejudgment interest ² on these damages because the estate did not suffer any "out-of-pocket" expenses. Id. at 742. Trial commenced on July 18, 1994. The jury returned a verdict finding St. Paul acted in bad faith and, as instructed, awarded as compensatory damages the amount of the excess judgment ($2,784,942.66). The court, however, granted from the bench judgment as a matter of law in favor of St. Paul on the issue of punitive damages. ³ St. Paul also timely filed motions for judgment as a matter of law or, in the alternative, for a new trial or to alter or amend the judgment on the issue of liability. The court denied these motions and entered judgment in favor of Venn. Venn v. St. Paul Fire and Marine Ins. Co., 173 B.R. 759, 769 (N.D.Fla.1994) ("Venn II ").

St. Paul appeals the denial of its post-trial motions. Venn cross-appeals on the grounds that the court erred in concluding that Venn is not entitled to prejudgment interest and in granting St. Paul judgment as a matter of law on the issue of punitive damages. Based on our independent review of the record, we conclude that Venn's challenge to the court's ruling with respect to punitive damages is meritless. Accordingly, we affirm the judgment of the district court as to that issue. The remaining issues raised in these consolidated appeals are discussed below.

II. DISCUSSION

A. St. Paul's Post-Trial Motions

St. Paul raises numerous contentions on appeal. Two of these contentions warrant some discussion. ⁴ First, St. Paul asserts that the district court should not have applied the Camp II decision of the Florida Supreme Court to this case because it is based on an erroneous interpretation of federal bankruptcy law. Second, St. Paul submits that the district court erred further by misinterpreting the Florida Supreme Court's holding in Camp II. St. Paul's contentions raise questions of both federal and state law. "The district court's conclusion[s] of [federal] law [are] subject to complete and independent review by this court." In re Sure-Snap Corp., 983 F.2d 1015, 1017 (11th Cir.1993). We also review the district court's determinations of state law de novo. Salve Regina College v. Russell, 499 U.S. 225, 231, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991); Insurance Co. of N. Am. v. Lexow, 937 F.2d 569, 571 (11th Cir.1991).

1. The Camp II Decision

The district court correctly rejected St. Paul's invitation not to follow the Florida Supreme Court's Camp II decision. The district court was required to do so for two reasons. First, the court was acting under our mandate to conduct "further proceedings consistent with this opinion and that of the Florida Supreme Court." Camp III, 989 F.2d at 429 (emphasis added).

A district court when acting under an appellate court's mandate, "cannot vary it, or examine it for any other purpose than execution; or give any other or further relief; or review it, even for apparent error, upon a matter decided on appeal; or intermeddle ... further than to settle so much as has been remanded."

Litman v. Massachusetts Mut. Life Ins. Co., 825 F.2d 1506, 1510-11 (11th Cir.1987) (en banc) (quoting In re Sanford Fork & Tool Co., 160 U.S. 247, 255, 16 S.Ct. 291, 293, 40 L.Ed. 414 (1895)), cert. denied, 484 U.S. 1006, 108 S.Ct. 700, 98 L.Ed.2d 652 (1988). ⁵ Second as discussed below, the district court is required to follow the Florida Supreme Court's decision on an issue of Florida law under the principles of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

St. Paul argues, however, that we should revisit the Camp decisions because the Florida Supreme Court misinterpreted federal bankruptcy law by reasoning that Kimbell's potential bad faith claim became a part of his estate by operation of 11 U.S.C. § 541(a)(1). ⁶ See Camp II, 616 So.2d at 15 (citing Palmer v. Travelers Ins. Co., 319 F.2d 296, 299-300 (5th Cir.1963)). Under the law of the case...