Wachovia Ins. Services, Inc. v. Toomey

• Decision Date: 29 September 2008
• Docket Number: No. SC06-1110.,SC06-1110.
• Citation: 994 So.2d 980
• Parties: WACHOVIA INSURANCE SERVICES, INC., et al., Appellants, v. Richard L. TOOMEY, etc., et al., Appellees.
• Court: Florida Supreme Court

994 So.2d 980

WACHOVIA INSURANCE SERVICES, INC., et al., Appellants, v. Richard L. TOOMEY, etc., et al., Appellees.

No. SC06-1110.

Supreme Court of Florida.

September 29, 2008.

John H. Pelzer, Donald A. Mihokovich, and Brigid F. Cech of Ruden, McClosky, Smith, Schuster, and Russell, P.A., Fort Lauderdale, FL, for Appellants.

Lisa K. Hsiao, Romeo S. Quinto, Jr., and James F. Hibey of Howrey, LLP, Washington, D.C., and Valeria Hendricks and Cody F. Davis of Davis and Harmon, P.A., Tampa, FL, for Appellees.

PER CURIAM.

This case is before the Court for review of a question of Florida law certified by the United States Court of Appeals for the Eleventh Circuit that is determinative of a cause pending in that court and for which there appears to be no controlling precedent. We have jurisdiction. See art. V, § 3(b)(6), Fla. Const. For the reasons explained below, we provide the following three answers to the issues raised by the certified questions: (1) a settlement agreement between two parties that explicitly contains both an assignment of causes of action against a third party insurer and an immediate release of the insured on the same causes of action is valid and not barred by our opinion in Fidelity & Casualty Co. of New York v. Cope, 462 So.2d 459 (Fla.1985); (2) the claim for breach of fiduciary duty arising from the relationship between the insurance broker and the insured involving allegations of failure to provide insurance coverage was also assignable as it is analogous to a cause of action for bad faith; (3) the claim for negligent failure to procure insurance coverage should not have been dismissed as a matter of law based on Moss v. Appel, 718 So.2d 199 (Fla. 4th DCA 1998), was assignable, and should have been submitted to the jury. As to Issue I, Chief Justice Quince, Justice Anstead, Justice Pariente, and Justice Bell agree that Cope does not control and that the agreement constituted a valid assignment. Accordingly, we answer the first certified question in a manner that demonstrates that a settlement agreement between two parties that simultaneously assigns causes of action against a third party insurer and releases the insured on the same causes of action is valid. Justice Lewis dissents on this issue because in his view, as elaborated in his separate opinion, Cope does control the outcome of this case. Senior Justice Cantero agrees with Justice Lewis on this issue. As to Issue II, Chief Justice Quince, Justice Anstead, Justice Pariente, and Justice Lewis agree that the cause of action for breach of fiduciary duty is assignable. Justice Anstead and Justice Lewis disagree with the reasoning employed. Justice Bell disagrees that the breach of fiduciary duty, as a personal tort, is assignable. Senior Justice Cantero agrees with Justice Bell on this point. As to Issue III, all participating justices agree that the district court erred as a matter of law in dismissing the negligence claim, which is assignable and which stated a cause of action for negligent failure to procure insurance coverage. Accordingly, we answer the first and second certified questions in the affirmative and further explain that the negligence claim arising out of the insurance broker relationship should not have been dismissed.

FACTS AND PROCEDURAL HISTORY

The instant action arises from the decision of the United States Court of Appeals for the Eleventh Circuit in Toomey v. Wachovia Insurance Services, Inc., 450 F.3d 1225 (11th Cir.2006), wherein the circuit court certified the following questions for determination under Florida law:

I. WHAT IS THE EFFECT OF A SETTLEMENT AGREEMENT BETWEEN TWO PARTIES THAT EXPLICITLY CONTAINS BOTH AN ASSIGNMENT OF CAUSES OF ACTION AGAINST A THIRD PARTY INSURER AND AN IMMEDIATE RELEASE OF THE INSURED ON THE SAME CAUSES OF ACTION?

II. CAN A CLAIM FOR BREACH OF FIDUCIARY DUTY AGAINST AN INSURANCE BROKER BE ASSIGNED?

Id. at 1231.

The facts of the underlying action, as summarized in the Eleventh Circuit's opinion, are as follows. Brian Holman and Richard Toomey were employees and officers of IMC, a mortgage business based in Tampa, Florida. Wachovia was the insurance broker for IMC. In 1997, IMC purchased Holman and Toomey's mortgage business, Central Money Mortgage (CMM), and Holman and Toomey were appointed officers and employees of IMC's subsidiary. Each man had a five-year employment contract with an annual salary of $300,000 and a severance clause requiring IMC to pay their full salary for the years remaining on the contract if IMC terminated Toomey or Holman without cause. Also in 1997, Joel Williams sold IMC an Employment Practices Liability Insurance Policy (the Policy) that covered claims for breaches of written employment contracts. Under financial pressure, IMC decided to cease operations of its subsidiary and notified Holman and Toomey that it planned to terminate their employment contracts.

Holman and Toomey sued IMC in the United States District Court for the District of Maryland, alleging that they had been formally terminated without cause. This litigation resulted in a judgment of $1.8 million in favor of Holman and Toomey against IMC. IMC was unable to satisfy the judgment and initiated settlement negotiations. During these negotiations, IMC discovered that it had lost the Policy's coverage for breach of employment contract claims. Because the Policy had been due to expire during litigation, IMC had extended its coverage with Wachovia for several months to cover any potential claims, such as Holman and Toomey's breach of employment contract claims. However, in extending the Policy, Wachovia is alleged to have summarily removed coverage for breach of written employment contract claims without IMC's knowledge. To satisfy the outstanding $1.8 million judgment, IMC executed a settlement agreement with Holman and Toomey. Under the terms of the agreement, Holman and Toomey, for consideration of $1.5 million, dismissed all their causes of action against IMC except the counts for breach of their employment contracts. Holman and Toomey, however, expressly reserved their claims against Wachovia. Additionally, IMC agreed to assign Holman and Toomey "all its rights, including its causes of action, which rights IMC may have under or because of the existence of [the Policy] ... to secure indemnification sufficient to satisfy" the $1.8 million judgment. Id. at 1228.

Subsequently, Holman and Toomey brought suit against Wachovia in the United States District Court for the Middle District of Florida in August 2003. Pursuant to IMC's assignment of the potential claims, Holman and Toomey alleged that: (1) Wachovia breached fiduciary duties owed to IMC; and (2) Wachovia was negligent in its dealings with IMC. Holman and Toomey also alleged two direct claims against Wachovia: (1) the intentional interference with their rights under their employment contracts; and (2) the breach of fiduciary duties allegedly owed by Wachovia directly to them. Specifically, under Count 2 of the first amended complaint entitled "Breach of Fiduciary Duties Owed Plaintiffs," Holman and Toomey alleged that Wachovia "breached [its] obligation[] of loyalty to Plaintiffs and duty to carefully manage their claims under the Policy when, with actual knowledge of an existing claim of Plaintiffs, [it] failed to notify or advise IMC to notify the insurance company of the claim, but instead, in conspiracy with other IMC officers and employees, designed the Subject Endorsement to exclude claims for breach of written employment contracts from the Policy." Under Count 3, which is entitled "Breach of Fiduciary Duty Owed IMC—Rights Assigned to Plaintiffs," Holman and Toomey alleged that Wachovia "negligently or intentionally or maliciously failed to advise or consult IMC about the Subject Endorsement, failed to make inquiries of IMC to determine the impact of the Subject Endorsement on current or future litigation IMC faced, and failed to maintain coverage for Plaintiffs' breach of employment contract claims in the Maryland Litigation." Finally, under Count 4, which is the negligence claim, Holman and Toomey alleged that Wachovia, as insurance broker for IMC and them, "owed duties of care and loyalty to IMC and Plaintiffs that obligated [Wachovia] to advise and consult with them on insurance coverage issues, the filing of claims under the Policy, and the obtaining and maintenance of the coverage afforded by the Policy," but failed to follow through with that duty.

The district court granted Wachovia judgment as a matter of law on all claims except the assigned claim for breach of fiduciary duties owed by Wachovia to IMC, which was submitted to the jury. The district court ruled that based on the Fourth District's decision in Moss, 718 So.2d at 199, the negligence claim was moot, and only the breach of fiduciary duty claim could be presented to the jury because there was a fiduciary relationship between Wachovia and IMC.¹

With regard to the breach of fiduciary duty claims, the district court instructed the jury that they were to consider whether Wachovia breached its fiduciary duty owed to IMC and Holman and Toomey as assignees of IMC. The district court explained when a fiduciary obligation exists, and further explained that when a person undertakes the responsibility to act for another in a fiduciary relationship, "the law forbids the fiduciary from acting in any manner adverse or contrary to the interests of the client, or from acting for the fiduciary's own benefit in relation to the subject matter of their relationship." The district court also laid out the three elements that Holman and Toomey were required to prove to recover on the claim, which included: (1) the existence of a fiduciary relationship between IMC and Wachovia; (2) a violation of that fiduciary obligation by Wachovia; and (3) damages suffered by Holman and Toomey as a proximate result of one or more of these violations of the fiduciary obligation....