Zurich Am. Ins. Co. v. Sunshine Freight Carriers, Inc.

• Decision Date: 20 January 2016
• Docket Number: Case No: 6:15-cv-83-Orl-22DAB
• Parties: ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. SUNSHINE FREIGHT CARRIERS, INC. and RAQUEL LIZAOLA, Defendants.
• Court: U.S. District Court — Middle District of Florida

ZURICH AMERICAN INSURANCE COMPANY, Plaintiff, v. SUNSHINE FREIGHT CARRIERS, INC.and RAQUEL LIZAOLA, Defendants.

Case No: 6:15-cv-83-Orl-22DAB

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA ORLANDO DIVISION

January 20, 2016

REPORT AND RECOMMENDATION

TO THE UNITED STATES DISTRICT COURT:

This cause came on for consideration with oral argument¹ on the following motions filed herein:

MOTION: MOTION FOR ATTORNEY'S FEES [ENTITLEMENT] (Doc. No. 40)

FILED: December 1, 2015

THEREON it is RECOMMENDED that the motion be GRANTED as to entitlement.

MOTION: MOTION TO DISMISS/LACK OF JURISDICTION (Doc. No. 39)

FILED: November 23, 2015

THEREON it is RECOMMENDED that the motion be GRANTED in part, with the Court retaining jurisdiction to determine attorney's fees on the counterclaim.

In this declaratory judgment case, the insurer seeks to dismiss the case now that the underlying tort action has been settled. The insured party argues that, even if the case is now moot as to the declaratory claim, it is entitled to recover its fees based on its counterclaim. Because the Court finds that the insured is entitled to attorney's fees, it is respectfully RECOMMENDED that the insured party, Sunshine Freight Carriers, Inc., be entitled to its reasonable attorney's fees.

Brief Factual Background and Procedural History

This matter arises out of an accident on September 10, 2014 which resulted in the death of Glenn Estien, who at the time of his death, was driving a truck owned by Defendant, Sunshine Freight Carriers, Inc. ("Sunshine Freight") Doc: 31, pp. 1-2, ¶ 7. Zurich issued policy number PRA 9479368-01 to Sunshine Freight Carriers, Inc. for the applicable policy period December 21, 2013 to December 21, 2014 with limits of liability of $1,000,000 per accident (the "Policy"). Doc. 1-1 at 8-128. The Policy provides coverage for bodily injury and property damage resulting from an accident with several exclusions, including an exclusion for coverage of employees of the insured party, in this case Sunshine Freight. Id. Sunshine Freight took the position that there was coverage because the Decedent was operating the truck as an independent contractor. Doc. 31 at 5.

As a result of the accident, Raquel Lizaola, as Personal Representative of the Estate of Glenn Estien, filed a Complaint in the Circuit Court for Osceola County, Florida, against Sunshine Freight, Inc. Id. Zurich provided a defense of the wrongful death lawsuit to Sunshine Freight under a reservation of rights to deny coverage. Doc. 29 ¶ 14.

On January 21, 2015, the insurer Zurich filed its Declaratory Judgment action in this Court seeking interpretation of the policy at issue, arguing that, pursuant to the Policy, it is not obligated to provide a defense or pay liability insurance proceeds on behalf of Sunshine Freight; the Personal Representative was also named as a Defendant. The Personal Representative's subsequently-filed amended complaint in state court-which the insurer Zurich filed in this Court as part of itsDeclaratory Judgment Action-alleged wrongful death and survival claims under a negligent entrustment theory, i.e., that Sunshine Freight should have known that Mr. Estien was not competent to drive the tractor-trailer, and that the trailer itself was not fit to transport the pilings, as well as negligent training and supervision claims. Doc. 29-1, Exhibit A. Zurich provided a qualified defense to Sunshine Freight in the Personal Representative's state court tort lawsuit under a reservation of rights and Zurich reserved the right to deny coverage for the defense of the tort lawsuit, and to withdraw from the defense of the tort lawsuit.

Following service of Zurich's Amended Complaint, on October 2, 2015, Sunshine Freight Carriers, Inc. filed its Answer and Affirmative Defenses as well as a Counterclaim against Zurich for Breach of Contract² for failing to provide an unqualified defense to the complaint in the tort lawsuit as required by the Policy; and disclaiming its obligation to indemnify Sunshine Freight in regard to the tort lawsuit, and sought attorney's fees pursuant to Florida Statute 627.428³. Doc. 31.

On November 16, 2015, Zurich advised the Court that the parties had settled the underlying lawsuit. See Doc. 35. On November 16, 2015, Sunshine Freight also filed a Notice of Partial Settlement. See Doc. 36. The Court terminated as moot Zurich's Motion for Summary Judgment on its declaratory judgment claim after the underlying matter had settled. See Doc: 38.

On November 23, 2015, Zurich filed a Motion to Dismiss the case as moot (Doc. 39), to which Sunshine Freight filed a Response on December 2, 2015. Doc. 41. On December 1, 2015,Sunshine Freight filed a Motion for Order Determining Entitlement to Award of Costs and Attorney's Fees Pursuant to Fla. Stat. § 627.428⁴. Zurich filed its Response to the Motion for Fees on December 4, 2015. Doc. 42. The District Judge referred the Motions to the undersigned for issuance of a Report and Recommendation on December 8, 2015. Doc. 43. The Court heard oral argument on both Motions on January 8, 2016⁵.

Analysis

Zurich contends the entire case—including Sunshine Freight's counterclaim—should be dismissed as "unquestionably moot" because Sunshine Freight's "counterclaim merely sought to recover for Zurich's alleged breach of its duty to defend Sunshine Freight and/or indemnify it for any liability which might be imposed against it in the underlying action. As both parties recognize, Zurich fully defended Sunshine Freight in the underlying action and paid sufficient indemnity to obtain a release of all claims against Sunshine Freight. Therefore, the Counterclaim is also entirely moot." Doc. 39 at 3.

Sunshine Freight concedes that the coverage issue presented by Zurich's request for declaratory relief and Sunshine Freight's counterclaim against Zurich for breach of contract is now resolved in Sunshine Freight's favor, since Zurich's settlement with the Decedent's Personal Representative, but argues that the settlement constitutes a "confession of judgment" by Zurich infavor of Sunshine Freight with respect to those issues. Sunshine Freight contends that a "live controversy" remains for this Court's determination over which the Court has subject matter jurisdiction, i.e., its entitlement to an award of the costs and reasonable attorney's fees pursuant to Fla. Stat. § 627.428 that it has incurred in this action.

Sunshine Freight argues that the Eleventh Circuit's decision in Canal Insurance Company v. SP Transport, Inc., 272 Fed.Appx. 825 (11th Cir. 2008) is controlling and this Court is bound by the Florida Supreme Court's decision in Wollard and the Florida appellate courts' extension of the holding to third-party suits. See Mercury Insurance Co. of Florida v. Cooper, 919 So.2d 491 (Fla. 3d Dist.Ct.App.2005); Unterlack v. Westport Insurance Co, 901 So.2d 387 (Fla. 4th Dist.Ct.App.2005); O'Malley v. Nationwide Mutual Fire Insurance Co, 890 So.2d 1163 (Fla. 4th Dist.Ct.App.2004), Canal Insurance is directly on point and persuasive authority which applied the Florida Supreme Court's Wollard decision and its progeny.

The insurer in Canal Insurance, filed suit seeking a declaratory judgment that it was not required to defend or indemnify the insured in an underlying wrongful death action, exactly as Zurich did here. 272 Fed. Appx. At 826. The insurer initially provided a defense of the insured in the tort action under a reservation of rights, but the insurer later settled the wrong death claim against its insured. Id. The district court subsequently dismissed the declaratory judgment action as moot and, when the insured moved for attorney's fees under the Florida insurance statutes, denied the motion. Id.

As the Eleventh Circuit explained, under Florida law⁶, the settlement of a third-party claim and dismissal of a related declaratory judgment action as moot constitutes a confession of judgment. Id at 827.

A Florida statute entitles an insured to an award of attorney's fees when judgment is entered against an insurer and in favor of an insured, Fla. Stat. § 627.428(1), and the Florida Supreme Court has held that this rule also applies when the insured and the insurer settle an action. Wollard v. Lloyd's & Cos. of Lloyd's, 439 So.2d 217, 218-19 (Fla.1983). Under Florida law, the settlement is the equivalent of a confession of judgment and entitles the insured to attorney's fees because the insurer has "declined to defend its position in the pending suit." Id. at 218. We must consider whether this confession of judgment rule applies to this controversy.

The intermediate appellate courts of Florida uniformly have extended the confession of judgment rule beyond the situation in Wollard, which involved the settlement of a first-party suit between the insured and the insurer, to the settlement of a third-party suit and the voluntary dismissal of a related complaint for declaratory relief filed by an insurer against an insured, which occurred here. In Mercury Insurance Co. of Florida v. Cooper, 919 So.2d 491 (Fla. 3d Dist.Ct.App. 2005), Unterlack v. Westport Insurance Co, 901 So.2d 387 (Fla. 4th Dist.Ct.App. 2005), and O'Malley v. Nationwide Mutual Fire Insurance Co, 890 So.2d 1163 (Fla. 4th Dist.Ct.App. 2004), the insurer settled on behalf of the insured a suit brought against the insured by a third party and voluntarily dismissed a complaint for a declaratory judgment filed by the insurer against the insured. Mercury Ins. Co., 919 So.2d at 492; Unterlack, 901 So.2d at 388; O'Malley, 890 So.2d at 1164. The Florida courts reasoned that the settlement of the third-party claim and voluntary dismissal of the declaratory judgment action constituted a confession of judgment in the declaratory judgment action and entitled the insured to an award of attorney's fees. Mercury Ins. Co, 919 So.2d at 492-93; Unterlack, 901 So.2d at 389; O'Malley, 890 So.2d at 1164-65. . . . Canal sought two declarations: 1) that it did not have a duty to defend SP

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