Broughton v. Usher Insurance Co. , 139 F.3d 861 ( 1998 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 96-9112
________________________
D. C. Docket No. CV294-96-AAA
DANIEL BROUGHTON,
Plaintiff-Appellee,
versus
FLORIDA INTERNATIONAL UNDERWRITERS, INC.,
Defendant-Appellant.
________________________
No. 96-9139
________________________
D. C. Docket No. CV294-96-AAA
DANIEL BROUGHTON,
Plaintiff-Appellant,
versus
FLORIDA INTERNATIONAL UNDERWRITERS, INC.,
Defendant-Appellee.
________________________
Appeals from the United States District Court
for the Southern District of Georgia
_________________________
(April 24, 1998)
Before ANDERSON and BLACK, Circuit Judges, and HOEVELER*, Senior District
Judge.
BLACK, Circuit Judge:
*
Honorable William M. Hoeveler, Senior U.S. District Judge for
the Southern District of Florida, sitting by designation.
Daniel Broughton, a Georgia resident, brought this suit against Florida
International Underwriters, Inc. (FIU) for breach of its alleged statutory duty under
Georgia law to ensure the financial soundness of an insurer before placing insurance
with such insurer and its alleged duty to notify Broughton, as the insured, that the
insurer was financially unsound. Broughton sought to recover $50,000 in unpaid
insurance benefits and statutory penalties and attorney's fees. We hold that the district
court did not have subject matter jurisdiction. Accordingly, we vacate the judgment
entered by the district court and remand the case with instructions to dismiss for lack
of subject matter jurisdiction.
I. FACTS
Broughton is a Georgia resident who owned the shrimp trawler JOAN S.
Beginning in the late 1980's or early 1990's, Broughton obtained surplus line
insurance for the JOAN S. through Coastal Marine Insurance Agency (Coastal), an
insurance agency operating in Georgia and specializing in marine insurance.
In 1993, Coastal procured surplus line insurance for Broughton from Usher
Insurance Company (Usher), a surplus line insurer created under the laws of Antigua
and operating out of Florida, through FIU, a surplus line insurance broker doing
business in Florida and not licensed to act as an insurance agent or broker in Georgia.
2
Usher issued the insurance policy covering the JOAN S. on July 20, 1993, to be
effective May 6, 1993.
FIU and Coastal had a written producer agreement specifically providing that
FIU had no agency or fiduciary relationship with the insureds represented by Coastal.
All communications between Broughton and FIU were handled through Coastal.
Usher was placed in liquidation by a Florida Circuit Court on December 13,
1993; all insurance policies issued by Usher were to be canceled as of January 10,
1994. On December 17, 1993, FIU informed Coastal in writing of the liquidation and
told Coastal to notify Broughton of the policy cancellation. On December 22, 1993,
FIU notified Coastal of another insurer that was willing to offer replacement coverage.
Coastal did not inform Broughton of either communication.
The JOAN S. capsized on January 1, 1994, and was totally destroyed. Usher
has not paid Broughton's claim on its policy. Broughton filed suit against Usher on
the insurance policy and against FIU for breach of its alleged duty under Ga. Code
Ann. § 33-5-25 to ensure the financial soundness of Usher before placing insurance
with the company1 and breach of its alleged duty to inform Broughton that Usher was
1
Section 33-5-25 provides:
(a) The broker shall ascertain the financial condition of the unauthorized insurer
before placing insurance with the unauthorized insurer and shall not place surplus
line insurance with any insurer who does not meet, according to current available
reliable financial information, the requirements provided in subsection (b) of this
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financially unsound. In his complaint, Broughton demanded the $50,000 policy
amount and statutory penalties and attorney fees in the amounts of $12,500 and (at
least) $10,000, respectively. The district court dismissed the case against Usher for
failure to prosecute because Broughton failed to perfect service. Broughton's case
against FIU proceeded to trial. At the close of Broughton's case, FIU moved to
dismiss for lack of subject matter jurisdiction. The district court denied the motion.
The jury found in favor of Broughton and awarded him the policy amount of $50,000.
After trial, FIU again moved to dismiss on the grounds that the district court did
not have subject matter jurisdiction. FIU also moved in the alternative for judgment
as a matter of law or for a new trial. On the issue of subject matter jurisdiction, the
district court agreed with FIU that the statutory penalty and attorney's fees were not
recoverable against FIU and that the amount in controversy therefore did not exceed
$50,000 as required for diversity jurisdiction. The district court further concluded,
Code section.
(b) The broker shall so insure only:
....
(2) With an alien insurer which has been established for at least ten years and
which has at least $10 million in capital and surplus, unless the character,
trustworthiness, and financial integrity of an alien insurer is of such a nature that it
would be in the best interests of the policyholders and the general public to use such
insurer in accordance with standards prescribed by rules and regulations of the
Commissioner;
....
4
however, that it did have admiralty jurisdiction over the case and therefore denied
FIU's motion to dismiss. The district court also denied FIU's request for a directed
verdict or new trial.
FIU appeals the district court’s denial of its motion to dismiss for lack of
subject matter jurisdiction, or, in the alternative, for a directed verdict or new trial.
Broughton appeals the district court’s determination that he was not entitled to recover
the statutory penalty and attorney's fees and its resulting conclusion that it did not
have diversity jurisdiction.
II. ANALYSIS
Subject matter jurisdiction is a question of law that the Court reviews de novo.
Tapscott v. MS Dealer Serv. Corp., 77 F.3d 1353, 1356 (11th Cir. 1996) (citation
omitted).
A. Diversity Jurisdiction
At the time Broughton filed this case, federal courts had jurisdiction under 28
U.S.C. § 1332 over state law claims between citizens of different states where the
amount in controversy exceeded $50,000, exclusive of interest and costs.2 The parties
2
28 U.S.C. § 1332 has since been amended to require that the amount in controversy exceed
$75,000, exclusive of interest and costs.
5
do not dispute that they are citizens of different states. The only issue is whether the
amount in controversy exceeds $50,000.
We will not dismiss a case for lack of subject matter jurisdiction under the
diversity statute “unless it appears to a 'legal certainty' that plaintiff's claim is actually
for less than the jurisdictional amount.” Burns v. Windsor Ins. Co., 31 F.3d 1092,
1094 (11th Cir. 1994) (citation omitted). “The determination of whether the requisite
amount in controversy exists is a federal question; however, [s]tate law is relevant to
this determination insofar as it defines the nature and extent of the right plaintiff seeks
to enforce.” Duderwicz v. Sweetwater Sav. Ass'n, 595 F.2d 1008, 1012 (5th Cir. 1979)
(internal quotations and citation omitted).3
In his complaint and throughout the proceedings in this case, Broughton has
contended that he is entitled to recover not only the $50,000 in unpaid insurance
benefits, but also statutory penalties and attorney's fees in the amounts of $12,500 and
(at least) $10,000, respectively, under Ga. Code Ann. § 33-4-6. Section 33-4-6
provides that if an insurer in bad faith refuses to pay a valid claim under an insurance
policy, “the insurer shall be liable to pay [the policy] holder, in addition to the loss,
not more than 25 percent of the liability of the insurer for the loss and all reasonable
3
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this Court
adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to close
of business September 30, 1981.
6
attorney’s fees for the prosecution of the action against the insurer.” Ga. Code
Ann. § 33-4-6. Although section 33-4-6 provides for the recovery of the statutory
penalty and attorney’s fees against only the insurer, Broughton contends that Ga. Code
Ann. § 33-23-41 brings FIU within the section 33-4-6 liability provisions. In support
of his argument, Broughton specifically relies on the following language in section
33-23-41:
(a) Any person who in this state acts, purports to act, or holds himself or
herself out as an agent . . . for an insurer that has not obtained from the
Commissioner a certificate of authority then in effect to do business in
this state as required by this title or who has not obtained a certificate of
authority as required by this article . . . shall pay a sum equal to the state,
county, and municipal taxes . . . . Violators of this Code section shall
also be personally liable to the same extent as the insurer upon every
contract of insurance made by the insurer with reference to a risk having
a situs in this state, if the violator participated in the solicitation,
negotiation, or making of the contract or in any endorsement to the
contract, in any modification of the contract, or in the collection or
forwarding of any premium or portion of the premium relating to such
contract. This Code section shall have no application to a contract of
insurance entered into in accordance with Chapter 5 of this title.
Although this section can act to bring entities other than insurers within the section
33-4-6 liability, Ga. Code Ann. § 33-23-1(b)(3) excludes representatives of ocean
marine insurers from the definition of agent. Under the facts alleged in this case, FIU
acted as a representative of an ocean marine insurer. Section 33-23-41 does not,
therefore, bring FIU within the statutory liability provisions of section 33-4-6.
7
Broughton presents no meritorious argument under which FIU could be
subjected to the provisions of section 33-4-6. As section 33-4-6 was the sole basis
alleged in the complaint under which Broughton contended he could recover in excess
of $50,000, and because Broughton has not presented any viable alternative theory
under which he could recover in excess of $50,000, we hold that it is clear to a legal
certainty that Broughton's claim against FIU did not meet the § 1332 amount in
controversy requirement.4
B. Admiralty Jurisdiction
The test for determining the existence of admiralty jurisdiction under 28 U.S.C.
§ 1333(1) varies depending on the nature of the claim asserted. Broughton's claim
plainly is constructed on tort principles. In the complaint, Broughton alleged that FIU
was “under a duty not to place coverage with a surplus lines company unless said
company was in good financial condition, and had the financial capability to pay its
claims;” FIU “breached its duty to [Broughton] by placing [Broughton's] coverage
with [Usher], when said insurance company was unsound financially;” and because
FIU “breached its duty to the Plaintiff, [FIU] is liable to the Plaintiff for the amount
that the Plaintiff was and is entitled to recover from [Usher].” Broughton's subsequent
4
The Court notes that Ga. Code Ann. § 33-5-58, and not Ga. Code Ann. § 33-4-6, appears to be
the applicable penalty provision due to Usher's status as an alien insurer. Our resolution of the
issues in this case would, however, be the same regardless of which penalty section Broughton cited.
8
filings also indicate that his claim against FIU sounds in tort. For example, the pretrial
order submitted by the parties and entered by the district court states that Broughton
“contends that the Defendant, Florida International Underwriters, Inc., failed to fulfill
its statutory obligation to ascertain that Usher Insurance Company was financially
sound, and also failed to notify the Plaintiff that Usher Insurance Company was
unsound financially.”
“[F]or a tort claim to be cognizable under admiralty jurisdiction, the activity
from which the claim arises must satisfy a location test and it must have sufficient
connection with maritime activity.” Alderman v. Pac. N. Victor, Inc., 95 F.3d 1061,
1064 (11th Cir. 1996) (citing Jerome B. Grubart, Inc. v. Great Lakes Dredge & Dock
Co., 513 U.S. 527, 534, 115 S. Ct. 1043, 1048 (1995)). To satisfy the location test,
the tort must have occurred on navigable water or the injury suffered on land must
have been caused by a vessel on navigable water. Jerome B. Grubart, Inc., 513 U.S.
at 534, 115 S. Ct. at 1048. With respect to the connection test, two issues must be
considered: (1) whether, upon assessment of the general features of the type of
accident involved, the “incident has a potentially disruptive impact on maritime
commerce;” and (2) “whether the general character of the activity giving rise to the
incident shows a substantial relationship to traditional maritime activity.” Jerome B.
9
Grubart, Inc., 513 U.S. at 534, 115 S. Ct. at 1048 (internal quotations and citation
omitted).
In this case, the alleged tort did not occur on navigable water; nor is this a case
where an injury on land was caused by a vessel on navigable water. Although there
may be some connection between the alleged tort and traditional maritime activity, the
location test for admiralty jurisdiction is not satisfied in this case. On this basis, we
hold that the district court did not have admiralty jurisdiction.
III. CONCLUSION
Under the foregoing analysis, we conclude that the district court did not have
subject matter jurisdiction to adjudicate Broughton's claims against FIU. We vacate
the judgment entered by the district court and remand with instructions to dismiss for
lack of subject matter jurisdiction.
VACATED AND REMANDED.
10