T.D.S. Inc. v. Shelby Mutual Insurance , 760 F.2d 1520 ( 1985 )

FAY, Circuit Judge:

Defendant Shelby Mutual Insurance Company (Shelby) appeals from a judgment awarding its insured, T.D.S. Incorporated d/b/a Lord & Lady Restaurant (TDS), $2,620,000.00 in damages. TDS claimed that Shelby breached an insurance contract by refusing to pay on a fire loss • claim submitted by the corporation. TDS also sought punitive damages based on the tortious conduct of Shelby and its agents. Shelby, on the other hand, asserted the defenses of arson and material misrepresentation, and also counterclaimed for the amount it paid to another insured, Eugene Cohenour. The jury found in favor of plaintiff on all claims, and returned a verdict for $100,000.00, an amount equal to the insurance policy limit, plus special compensatory damages of $420,000.00, and $2,100,-000.00 in punitive damages.

On appeal, Shelby essentially argues that (1) the district court should have directed verdicts against TDS on the punitive and special compensatory damages claims; (2) the awards on these claims are excessive; and (3) the district court committed reversible error by not ordering separate trials on plaintiff’s contract and tort claims. We agree with Shelby that the award for special compensatory damages is excessive and therefore should be reduced. Our review of the record, however, convinces us that in all other respects the judgment appealed from should be affirmed.

I. FACTUAL BACKGROUND

In 1979, Thomas and Dorothy Starr formed TDS, a closely held corporation incorporated under Florida law, in order to open a restaurant in Bradenton, Florida. TDS purchased the business assets of the Lord & Lady Restaurant for $150,000.00 in July of that year. To finance the deal, TDS made a $40,000.00 cash down payment, assumed a promissory note owing to a local bank, and gave Belfrap, Inc., the seller of the business, a $55,000.00 promissory note. The accrual of interest and payments on this note were deferred for five years.

Contemporaneous with the purchase of the restaurant’s personal property, the restaurant’s lease was assigned to the Starrs individually. The lease contained an option to purchase the building in which the restaurant was located. To preserve the option, the Starrs, as lessees, were required to make an annual payment of $2,000.00 to Eugene Cohenour, the owner of the building.

TDS engaged the services of an independent insurance agent, and through him purchased from Shelby a multi-peril insurance policy. Shelby agreed in that policy to provide TDS with $100,000.00 in fire coverage for personal property including leasehold improvements.

The building which housed the restaurant also contained a warehouse, used for storage by the building’s owner, and a beauty salon. On January 13, 1980, at approximately 1:30 a.m., a fire began in the building. Although the restaurant had already closed for the day, customers and several TDS employees still occupied the lounge, as did the Royal Shaft, a band engaged by TDS to provide musical entertainment. Both Mr. & Mrs. Starr were also in the building at this time. After the fire was discovered, the fire department was summoned and everyone safely evacuated the building.

Shortly thereafter, the Westside Fire Department arrived and, with the help of two other volunteer fire departments, extinguished the blaze. The building and its contents sustained extensive damage.¹

Because the fire was of suspicious origin, the Westside Fire Department requested the assistance of the State Fire Marshall. Deputy State Fire Marshall Joseph Ladika arrived at the scene soon after the fire had been extinguished. After conducting a fire and site investigation, he concluded that the fire had only one point of origin — the locked office of the Lord & Lady Restaurant, to which only the Starrs had the keys. He also believed that the fire was of incendiary origin, fueled by some type of accellerant. In the early part of February, Mr. Ladika prepared an official State Fire Investigation Report outlining his findings.

Gene Spencer, claims manager for Shelby’s local office, visited the fire site on January 14, 1980. He examined the building and took some photographs.² Mr. Spencer concluded that two fires had been intentionally set in the building; one in the office of the restaurant, and one in the warehouse. He also suspected Mr. Starr as the arsonist. Mr. Spencer submitted a memorandum containing his conclusions to Shelby’s claims supervisor, William Brennan, on January 17.

A day or two after the fire, Mr. Spencer retained Equifax, Inc., to investigate the cause and origin of the fire. Equifax sent Gary Haun to conduct a site investigation on January 15, 1980. Contrary to Deputy State Fire Marshall Ladika and Mr. Spencer, Mr. Haun concluded that three separate fires had been intentionally set — one in the restaurant’s office, one in the warehouse, and one in the area above the restaurant’s kitchen. Mr. Haun also concluded that the Starrs had set the fire. Mr. Cohenour had immediately been dismissed as a serious suspect. Based in part on the erroneous assumption that TDS stood to collect $150,-000.00 from Shelby, Mr. Haun projected a clear motive for the Starrs to commit arson. He sent a report reflecting his views to Shelby on January 29, 1980.

On January 14th or 15th, Gene Spencer retained Richard Wilson, an experienced arson attorney. Mr. Spencer felt this was necessary because of his inexperience in adjusting arson claims of such complexity. Mr. Wilson, under Mr. Spencer’s direct and close supervision, coordinated Shelby’s fire investigation and was privy to all information given to Shelby by the fire investigators. By letter dated March 5, 1980, Mr. Wilson advised the Starrs that he was representing Shelby and was assisting in the investigation of TDS’s fire loss claim. The letter noted that Shelby had reason to believe that the fire was the product of arson, and requested, pursuant to a clause in the insurance policy, an examination of the Starrs under oath. The letter also asked the Starrs to bring with them to the examination numerous financial documents.

Two days after the Starrs received the letter, Arthur Vandroff, the Starrs’ business attorney, telephoned Mr. Wilson. Mr. Vandroff informed Mr. Wilson that he was not qualified to represent anyone in a case involving arson, and that he wished only to assist TDS in preparing its proof of loss. Mr. Vandroff also told Mr. Wilson that if Shelby had any information implicating his clients in arson, he wanted to know up front so he could refer the case to a qualified arson attorney. Mr. Wilson mollified Mr. Vandroff with the assurance that Shelby had no such information, and by stating that the examination under oath would involve only the proof of loss and some general questions concerning the Starrs. Mr. Vandroff was not informed at that time that Shelby had information suggesting that a fire had been set in the restaurant’s locked office.

Mr. Starr’s examination under oath was conducted by Mr. Wilson on March 26, 1980. Also present were Gene Spencer and Arthur Vandroff. Before the examination began, Mr. Wilson informed Mr. Vandroff that Shelby had reason to believe that four separate fires had been set — one in the office, and three in Eugene Cohenour’s warehouse. Mr. Wilson then asked Mr. Vandroff to inform the Starrs that this information concerning the fire’s points of origin was to be kept in the strictest confidence. Mr. Vandroff was not told, however, that Shelby had already paid Mr. Cohenour $125,000.00, his policy limits. Mr. Vandroff spoke with the Starrs, who indicated they were willing to proceed with the examination. He advised Mr. Wilson that because he was not an arson attorney, he would not allow Mr. Starr to testify if Shelby had any information or reports indicating that the Starrs had set the fires. Mr. Vandroff again was assured that Shelby had no such knowledge. The examination which followed lasted a- full day. A few days later, Mr. Wilson sent Mr. Vandroff a letter thanking him and the Starrs for their cooperation.

Mrs. Starr’s examination under oath was scheduled for April 10, 1980. Prior to that time, however, Mr. Starr received a letter from ASIC, the insurer which paid for the fire damage to the beauty salon. See infra note 1. The letter stated that ASIC was subrogated to the rights of its insured, and that an investigation indicated that Mr. Starr was legally liable for the fire loss. Mrs. Starr gave the letter to Mr. Vandroff the same day she was to be examined by Mr. Wilson.

Mr. Vandroff confronted Messrs. Wilson and Spencer with the letter and their prior assurances that Shelby had no information or reports implicating the Starrs in arson. Mr. Spencer stood by their earlier representations, and asked to use a phone in Mr. Vandroff’s office. After making a telephone call, Mr. Spencer told Mr. Vandroff that the letter should not have been sent. Mr. Spencer then reiterated his assurances concerning the Starrs and arson. The examination of Mrs. Starr proceeded as scheduled.

Mr. Starr later received a letter from ASIC informing him that the prior letter had been sent in error. Mr. Yandroff was now satisfied that Mr. Spencer had been telling him the truth.

After the April 10 examination, Mr. Wilson told Mr. Vandroff that Shelby was still investigating the cause and origin of the fire. Later, in response to a letter sent by Mr. Vandroff in late May, 1980, inquiring as to status of TDS’s claim, Mr. Wilson, also by letter, finally informed Mr. Vandroff that Shelby was denying TDS’s claim. The stated reasons for denial were willful and intentional misrepresentation and concealment of material facts regarding the cause of the fire and the nature and extent of TDS’s loss. Mr. Vandroff received the denial letter on April 23, 1980. Baffled by the denial, he immediately telephoned Mr. Wilson who stated that Shelby believed the Starrs committed the arson. Mr. Vandroff was livid considering the repeated assurances he had been given concerning Shelby’s lack of information tending to inculpate the Starrs in arson.

TDS brought suit against Shelby in state court in October, 1980. The law firm of Richard H. Wilson, Esquire, appeared on behalf of Shelby and removed the case to federal district court.

In Count I of its third amended complaint, TDS sought payment under the personal property fire insurance policy issued by Shelby and special damages. Count II of that complaint sought punitive damages for the tortious conduct of Shelby. In general terms, that count alleged fraud, tortious interference with property rights, and defamation. Shelby answered and asserted the defenses of arson and misrepresentation. Shelby also counterclaimed against TDS for $125,000.00, the amount it paid Eugene Cohenour for the fire damage to his building.

Because the trial court would not grant separate trials on the two counts, Richard Wilson moved the court to allow him to withdraw as Shelby’s counsel; it became clear that he might be called as a witness during the trial of the punitive damages count. The district court granted the motion, and substitute counsel tried the case in the district court, and represents Shelby on appeal.

A jury trial lasted nearly two and one-half weeks. TDS presented a considerable amount of evidence concerning the following: (1) the adequacy of the various cause and origin investigations; (2) Shelby’s single-minded pursuit of only that evidence reinforcing its conclusion that the Starrs were guilty of arson; (3) the financial solvency of the Starrs; (4) the fact that Lord & Lady Restaurant was approaching profitability; (5) the allegedly fraudulent conduct of Shelby, particularly the actions of Richard Wilson and Gene Spencer in dealing with Arthur Vandroff; and (6) the litigation conduct of Shelby. Shelby, on the other hand, focused at trial on its contention that only the Starrs had access to all of the areas found by its experts to be points of origin of the fire, the fact that the business had been consistently losing money, and the reasonableness of denying TDS’s claim in light of the reports submitted to it. The jury returned a verdict in favor of TDS on all claims. Shelby’s post-trial motions for relief were denied, and this appeal followed.

II. PUNITIVE DAMAGES

Shelby advances several theories in support of its argument that the district court should have directed a verdict in its favor on the plaintiff’s claim for punitive damages: (1) the plaintiff was allowed to introduce prejudicial evidence relevant only to a “bad faith refusal to pay” claim, a claim not recognized in Florida for first party³ insurance claims; (2) the submission of the defense of arson to the jury precluded the jury’s consideration of the punitive damages claim; and (3) there was no evidence that an independent tort caused Shelby to deny TDS’s claim. We address these arguments seriatim.

A. Florida Law and “Bad Faith Refusal to Pay”

Florida law is clear “that a suit for punitive damages will not lie against an insurance company for bad faith in failing to pay a first party claim.” Smith v. Standard Guaranty Insurance Co., 435 So.2d 848, 849 (Fla.Dist.Ct.App.), petition for review denied, 441 So.2d 633 (Fla.1983); see Kent Insurance Co. v. Hassan, M.D., 447 So.2d 323 (Fla.Dist.Ct.App.1984). This view is premised in part on the notion that in a first party claim situation, the insurer “and its insured occupy the status of debt- or and creditor.” Smith, 435 So.2d at 849 (citing Baxter v. Royal Indemnity Co., 285 So.2d 652 (Fla.Dist.Ct.App.1973), cert. discharged, 317 So.2d 725 (Fla.1975)). To recover punitive damages, the plaintiff must show more than generalized “bad faith;” the plaintiff must show that the conduct of the insurer rose to the level of “deliberate, overt and dishonest dealings,” Smith, 435 So.2d at 849, constituting an independent tort. See Kent Insurance Co., 447 So.2d at 324; Industrial Fire & Casualty Co. v. Romer, 432 So.2d 66 (Fla.Dist.Ct.App.), petition for review denied, 441 So.2d 633 (Fla.1983). Neither Shelby nor TDS dispute the applicable Florida law or the district court’s charge to the jury on this issue.⁴ Shelby, however, does argue that the trial court erroneously allowed TDS to try a “bad faith” claim, to Shelby’s prejudice. We disagree.

The gist of Shelby’s complaint is that TDS was allowed, over objection, to attack the accuracy and adequacy of the fire investigation which Shelby asserted resulted in the denial of TDS’s claim. According to Shelby, the assessment of punitive damages was based not on any evidence of an independent tort, but rather on Shelby’s decision to raise an arson defense. From this reasoning, it follows that evidence of Shelby’s litigation conduct and the evidence concerning the adequacy of the basis upon which Shelby denied the claim was irrelevant to the independent tort claim. The straw man erected by Shelby, however, is easily dismantled.

Relevant evidence is defined as “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” Fed.R.Evid. 401. True, the allegedly objectionable evidence is relevant to a claim not countenanced by the Florida courts; it does not ineluctibly follow, however, that this evidence also is irrelevant to claims which are properly entertained. Certainly the litigation conduct of Shelby was relevant to the claim that Shelby or those acting on its behalf dealt dishonestly with TDS. Although this conduct occurred after the denial of TDS’s claim, it did corroborate TDS’s contention that Shelby deliberately deceived it while Shelby was investigating the fire. Additionally, much of the evidence concerning the recklessness of the investigation and the poor quality of the investigative reports Shelby stated it relied upon to deny TDS’s claim is relevant to the issue of whether in fact the fire was the result of arson and, if so, the identity of the arsonist. Surely these are matters of consequence in an insurance suit where arson is raised as a defense.

B. Shelby’s Prima Facie Arson Defense

Shelby next asserts that the district court’s refusal to strike Shelby’s defense of arson at the conclusion of the evidence in defense precluded submission of the punitive damages claim to the jury.⁵ In support of this position, Shelby refers us to cases from jurisdictions, which, unlike Florida, do sanction first party “bad faith refusal to pay” claims. Shelby’s reliance on these cases, however, is misplaced.

This court, in Winningham v. Centennial Insurance Co., 708 F.2d 658, 659 (11th Cir.1983), a diversity case in which Georgia law provided the rule of decision, concluded that an insurance company is not liable for punitive damages for refusing to pay on a claim by its insured when the insurer has a reasonable basis for litigating, rather than paying, the claim. Similarly, in Dempsey v. Auto Owners Insurance Co., 717 F.2d 556 (11th Cir.1983), we had occasion to apply Alabama “bad faith refusal to pay” law in a first party claim situation. We noted that in Alabama, an insurer may subject itself to punitive damages when it has no legal or factual defense to a claim, yet nonetheless refuses to pay it. Id. at 561. Put another way, “[w]hen a [first party] claim is ‘fairly debatable,’ the insurer is entitled to debate it whether it concerns a matter of fact or law.” Id. at 560. More recently, the Alabama Supreme Court held in a first party claim case that when a jury question is presented on the insurance contract claim, the jury is precluded from also considering the tort claim of “bad faith refusal to pay.” National Security Fire & Casualty Co. v. Vintson, 454 So.2d 942 (Ala.1984). Shelby argues that the policy behind these decisions compels a similar conclusion here. Shelby again, however, skews the distinction between a true “bad faith refusal to pay” claim and the one actually tried and submitted to the jury in the district court.

We need only compare the elements of a first party refusal to pay claim and its Florida cousin to realize that, although superficially similar, these theories of recovery are materially different. The Alabama Supreme Court defined the tort of “bad faith refusal to pay” a first party insurance claim as follows:

[A]n actionable tort arises for an insurer’s intentional refusal to settle a direct claim where there is either “(1) no lawful basis for the refusal coupled with actual knowledge of that fact or (2) intentional failure to determine whether or not there was any lawful basis for such refusal.”

Id. at 944 (quoting Chavers v. National Security Fire & Casualty Co., 405 So.2d 1, 7 (Ala.1981)) (emphasis deleted). That court fleshed out the contours of the fledgling tort in National Security Fire & Casualty Co. v. Bowen, 417 So.2d 179 (Ala. 1982), where it stated that a plaintiff in a “bad faith refusal to pay” case has the burden of proving:

(a) an insurance contract between the parties and a breach thereof by the defendant;

(b) an intentional refusal to pay the insured’s claim;

(c) the absence of any reasonably legitimate or arguable reason for that refusal (the absence of a debatable reason);

(d) the insurer’s actual knowledge of the absence of any legitimate or arguable reason;

(e) if the intentional failure to determine the existence of a lawful basis is relied upon, the plaintiff must prove the insurer’s intentional failure to determine whether there is a legitimate or arguable reason to refuse to pay the claim.

Id. at 183 (quoted in Vintson, 454 So.2d at 944).

From these authorities, it is clear that an essential element of a first party bad faith claim is the indisputable nature of the claim denied by the insurer. If a fact question exists concerning an insurer’s defense, i.e., the plaintiff is not entitled to a directed verdict on the contract claim, the plaintiff, by definition, has failed to carry the initial burden of proof. By contrast, Florida law, the law applied by the district court, requires a plaintiff to establish that the insurer engaged in dishonest conduct constituting a tort separate and distinct from the insurance contract sued upon. For example, in this case, evidence was presented and the jury was instructed on the independent tort of fraud. The presence of a fact question on the defense of arson does not negative TDS’s claim that Shelby engaged in deliberate, overt, and dishonest dealings. The bad faith refusal to pay cases simply are not controlling in the facts before us.

C. Punitive Damages and Fraud

To comply with Florida’s independent tort requirement, the district court provided the jury with standard fraud instructions. Specifically, the court instructed the jury on four allegedly fraudulent statements which supposedly occurred between the day of the fire and the day TDS’s claim was denied.⁶ Shelby argues that since there is no evidence that these statements resulted in denial of the claim, the district court erred in even submitting the punitive damage claim to the jury. We disagree.

Contrary to Shelby’s suggestion, TDS has never argued that these statements caused the denial of the claim submitted by the plaintiff. TDS instead maintained throughout these proceedings that Shelby’s tortious conduct, inter alia, (1) impaired TDS’s ability to timely prove that its agents did not set the fire; (2) exposed TDS to unnecessary collateral lawsuits; (3) impaired TDS’s ability to discover who set the fire so as to recover from that person its uninsured loss; and (4) made it impossible to reestablish the restaurant business. Shelby has not directed our attention to, nor have we found, any Florida case holding that, to be actionable, the independent tort sued upon must have caused the breach of the insurance contract or the actual denial of a first party claim. We accordingly discern no sound reason for disturbing the district court’s decision to submit the punitive damage claim to the jury.

We conclude, therefore, that (1) plaintiff was not erroneously allowed to try a “bad faith refusal to pay” claim, in contravention of Florida law; (2) the fact that a jury question existed on the arson defense did not preclude submission of the punitive damages claim to the jury; and (3) the absence of evidence that the fraudulent statements caused the denial of TDS’s claim does not counsel holding that the punitive damage claim should not have been submitted to the jury. Viewing all the evidence, along with all logical inferences flowing from the evidence, in the light most favorable to TDS, we hold that there was sufficient conflict in substantial evidence to warrant submission of the punitive damage claim to the jury. See Neff v. Kehoe, 708 F.2d 639, 641-42 (11th Cir. 1983). After carefully reviewing the record, we also hold that reasonable jurors could have concluded that Shelby engaged in deliberate, overt and dishonest dealings with TDS. See infra pp. 1530-1531. The assessment of punitive damages was justified.

D. The Amount of Punitive Damages

Shelby next argues that the district court erred in denying its post-judgment motions for remittitur, or, in the alternative, for a new trial. We disagree, finding that the district court acted well within its discretion in leaving intact the $2,100,-000.00 punitive damage award.⁷

The Florida courts are chary of disturbing punitive damages verdicts returned by juries.⁸ The Florida Supreme Court stated the law as follows:

Although the verdict may be for considerably more or less than in the judgment of the court it ought to have been, still the court should decline to interfere, unless the amount is so great or small as to indicate that the jury must have found it while under the influence of passion, prejudice, or gross mistake. In order to shock the sense of justice of the judicial mind the verdict must be so excessive or so inadequate so as at least to imply an inference that the verdict evinces or carries an implication of passion or prejudice, corruption, partiality, improper influences, or the like.

Lassitter v. International Union of Operating Engineers, 349 So.2d 622, 627 (Fla. 1976) (citation omitted). To determine whether a punitive damage award is excessive, the court may consider the relationship between the amount awarded and (1) the degree of misconduct involved, as well as (2) the defendant’s ability to pay the judgment. Arab Termite and Pest Control, Inc. v. Jenkins, 409 So.2d 1039, 1042-43 (Fla.1982); see Louisville and Nashville Railroad v. Hickman, 445 So.2d 1023 (Fla. Dist.Ct.App.1983), petition for review dismissed, 447 So.2d 887 (Fla.1984). More specifically, a court may:

order a new trial or remittitur when the manifest weight of the evidence shows that the amount of punitive damages assessed is out of all reasonable proportion to the malice, outrage, or wantonness of the tortious conduct____ [Tjhis finding must be affirmatively supported by the record or the judge must find that the jury was influenced by matters outside the record.

Arab Termite, 409 So.2d at 1042. Additionally, a punitive damage award may be deemed excessive if it not only “smarts,” but also is out of all proportion to the defendant’s financial position. Hickman, 445 So.2d at 1028; see also Arab Termite, 409 So.2d at 1043 (“Punitive damages should be painful enough to provide some retribution and deterrence, but should not be allowed to destroy the defendant.”).

With these principles in mind, we conclude that the district court properly denied Shelby’s motions for post-trial relief. As we have seen, Florida law allows recovery of punitive damages in a first party refusal to pay case when the plaintiff demonstrates that the insurer engaged in “deliberate, overt and dishonest dealings.” Smith, 435 So.2d at 849. In this case, the jury so found⁹ and the district judge who presided over the lengthy and bitterly fought trial refused to disturb their considered judgment. Moreover, the plaintiff introduced considerable evidence showing that Shelby, from as soon as a day after the fire, had decided not to pay TDS’s claim, regardless of any evidence tending to exonerate TDS from the charge of arson. The record also reflects that Richard Wilson and Gene Spencer deliberately deceived TDS throughout the period that Shelby had been solidifying an arson defense, to TDS’s detriment. Post-denial conduct of Shelby corroborated TDS’s essential contention that what it purchased from Shelby was not insurance against various hazards but rather years of contentious, costly litigation fueled initially by fraud. In these circumstances, we cannot hold that the manifest weight of the evidence shows that the $2,100,000.00 punitive damage award is out of all proportion to the deliberate, overt and dishonest dealings which reasonable jurors could have found. Similarly, the record indicates that the award will not inflict undue financial hardship on Shelby. Indeed, Shelby has never argued that the amount awarded is disproportionate to its ability to pay.¹⁰ We therefore conclude that the award does not exceed “ ‘the maximum limit of a reasonable range within which the jury may properly operate.’ ” Warren v. Ford Motor Credit Co., 693 F.2d 1373, 1380 (11th Cir.1982) (quoting Keyes v. Lauga, 635 F.2d 330, 336 (5th Cir.1981)); accord, Lassitter, 349 So.2d at 627. That part of the judgment awarding TDS $2,100,000.00 in punitive damages is accordingly affirmed.

III. SPECIAL COMPENSATORY DAMAGES

In addition to punitive damages, the jury also returned a verdict of $88,000.00 for damaged business personal property, $12,-000.00 for damages to leasehold improvements, and $420,000.00 in special compensatory damages. Shelby contests on appeal only the special damage award, contending that the district court erred in not directing a verdict in Shelby’s favor on TDS’s claim to these damages. In the alternative, Shelby argues that the special damage award is excessive. After reviewing the record, we conclude that the district court did not err in submitting the claim of special damages to the jury; the award, however, is excessive and will be reduced to comport with the evidence adduced at trial.

The district court instructed the jury that TDS could be awarded special damages for (1) loss of a valuable business opportunity, or (2) loss of a business or credit reputation, due to Shelby’s failure to pay amounts due under the insurance policy. T. 13:323. The jury was further instructed that an award could be returned for these special elements of damages if TDS had shown that “special circumstances” allowing for these damages had been in the contemplation of the parties at the time the insurance policy was entered into. Id. at 13:319. The district court’s charge also stated that special damages could be awarded if Shelby had committed fraud upon TDS. Id. at 13:320. Neither party objects to the content of these instructions.¹¹ Shelby, however, argues that the district court should never have given these instructions because the evidence could not support an award of special damages, under either a contract or tort theory.

TDS presented a considerable amount of evidence on the issue of special damages.¹² For example, Mr. Alario and Mrs. Starr gave their opinion on the value of the restaurant and lounge. Mrs. Starr and Attorney Vandroff also testified that several collateral lawsuits were filed against either TDS or the Starrs as a result of Shelby’s failure to pay on the fire claim. Additionally, TDS contended throughout the trial that Shelby’s misrepresentations concerning the arson investigation and the part TDS played in it deprived it of the ability to conduct its own timely investigation of the fire so as to prove its innocence and insist on payment from Shelby. In this regard, TDS maintained that Shelby’s fraudulent statements hampered efforts to discover the identity of a blonde boy seen in the warehouse shortly before the fire occurred, as well as the whereabouts of a waitress the Starrs had fired an hour before the fire began. Id. at 9:322. TDS also presented evidence that, absent Shelby’s fraud, TDS would have secured the debris which had been removed from the office and later discarded. Arthur Vandroff, TDS’s business attorney, testified that he advised the Starrs that once a settlement was reached with Shelby concerning the fire loss, they should, pursuant to the lease, instruct Eugene Cohenour to rebuild ¹³ the building so that the restaurant and lounge could be reopened. Id. at 9:90. The Starrs indicated that they were anxious to follow this advice. Id. Attorney Vandroff further testified that had he known during the period he was dealing with Mr. Wilson of the one-dimensional approach of Shelby’s investigation, its singular focus on TDS and its agents as suspects, its decision early on that TDS was responsible for the fire, and the information which implicated his client in arson, he would have promptly called in an arson expert to investigate the cause of the fire. Id. at 9:95-96. He also testified that had he realized the true nature of Shelby’s investigation, he would have referred his client to an attorney experienced in handling a case involving an arson defense. Id. at 8:321.

We are unable to hold that these facts and the logical inferences to be drawn from them “point so strongly and overwhelmingly in favor of” Shelby that we believe “that reasonable men could not arrive at a contrary verdict.” Neff v. Kehoe, 708 F.2d 639, 641 (11th Cir.1983). Reasonable and fair-minded jurors certainly could have concluded that but for Shelby’s deception, TDS would more likely than not have been able to reestablish the valuable restaurant and lounge business. The district court therefore properly denied Shelby’s motion for a directed verdict on TDS’s claim to special damages.

A. The Amount of Special Damages

Shelby argues that even if the special damage claim was properly submitted to the jury, the amount awarded, $420,000.00, is clearly excessive. We agree.

As we have seen, the jury was instructed that special damages, under either a tort or contract theory, could be awarded only if TDS demonstrated a loss of a valuable business opportunity or a loss of a business or credit reputation. Shelby correctly notes that TDS did not show any entitlement to lost profits; indeed, the district court refused to give the jury an instruction on lost profits.¹⁴ We also agree with Shelby that the special damage award could not properly be predicated on the option to purchase the Cohenour building, even though there was much testimony concerning the value of the option itself as well as the value of the real estate which it secured. The option was owned by the Starrs individually, not by TDS, the only party-plaintiff in this action.¹⁵ We thus cannot hold that the Starrs’ loss of the ability to exercise the option is equivalent to TDS’s loss of a valuable business opportunity. Additionally, though sufficient evidence concerning damage to TDS’s credit reputation may have been presented to avoid a directed verdict, TDS does not suggest on appeal that these injuries approach the amount awarded by the jury. TDS does not even offer a figure for these damages, and we accordingly can only conclude that they do not support a $420,000.00 award.

After carefully reviewing the record before us, the only lost business opportunity shown by TDS with the requisite degree of certainty is the value of the restaurant and lounge.¹⁶ Charles Alario, the real estate broker who handled the sale of the Lord & Lady Restaurant from Belfrap, Inc. to TDS, valued the business in the spring of 1978 to be $240,000.00. T.l:115. Mrs. Starr, an experienced businessperson, valued the business in January, 1980, without consideration of the value of the option to purchase the building and the land, at $225,000.00. Id. at 9:279-80. Shelby presented no evidence to the contrary. We therefore perceive no sound reason not to accept her estimate of the business’ value as the proper measure of damages for TDS’s loss of a valuable business opportunity. Cf. Neff, 708 F.2d at 644 (though self-serving and uncorroborated, owner’s testimony concerning value of property is admissible; proper manner in which to refute owner’s valuation is by cross-examination or independent evidence). For this reason, we conditionally remit the special compensatory damages award to $225,000.00. If plaintiff refuses the remittitur, the district court shall grant a new trial solely on the issue of special compensatory damages. See Warren, 693 F.2d at 1380; see also Stewart & Stevenson Services v. Pickard, 749 F.2d 635, 650 n. 18 (11th Cir.1984) (ordinary practice is to direct district court on remand to order remittitur, or to grant new trial on damages issue at option of plaintiff); Quality Foods, Inc. v. U.S. Fire Insurance Co., 715 F.2d 539, 543 n. 3 (11th Cir.1983) (court of appeals has authority to reduce a judgment).

IV. RULE 42

Shelby’s final argument on appeal is that the district court erred in not ordering separate trials on Shelby’s defense of arson and TDS’s claim for punitive damages. Shelby maintains that it was unfairly prejudiced since the jury simultaneously heard evidence of Shelby’s arson defense and TDS’s “bad faith” punitive damages claim, a claim which Shelby regards as based solely on its decision to raise an arson defense. In support of this position, Shelby likens TDS’s punitive damages claim to one for malicious prosecution.

We acknowledge that an essential element of a malicious prosecution action is the bona fide termination of the prosecution in the plaintiff’s favor. See, e.g., DeMarie v. Jefferson Stores, Inc., 442 So.2d 1014, 1016 n. 1 (Fla.Dist.Ct.App.1983); Waite v. Ward, 413 So.2d 830 (Fla.Dist.Ct. App.1982). We thus concede that if in fact TDS’s claim for punitive damages was predicated on Shelby’s arson defense, the malicious prosecution analogy might be persuasive and militate against allowing both to be tried in the same action.¹⁷ Shelby, however, again confuses a first party bad faith claim with the one involved in this case. TDS presented evidence of an independent tort involving deliberate, overt and dishonest dealings, i.e., fraud. TDS did not allege, nor was the jury instructed, that a finding of dishonest dealings could be premised on Shelby’s decision to raise an arson defense; rather, the gravamen of TDS’s quarrel with Shelby stems from the latter’s deception and concealment concerning the arson investigation and the facts derived from it. It is clear, therefore, that the punitive damages claim does not rise or fall with the decision to raise the arson defense, or; for that matter, the legal sufficiency of that defense. See infra Part II. B. Shelby’s reliance on malicious prosecution cases is accordingly misplaced.¹⁸

Rule 42 provides that the district court may order separate trials of any claims or issues “in furtherance of convenience or to avoid prejudice, or when separate trial will be conducive to expedition and economy.” Fed.R.Civ.P. 42(b). We will not disturb a district court’s decision not to order separate trials absent an abuse of discretion. See Itel Corp. v. Cups Coal Co., 707 F.2d 1253,’ 1260 (11th Cir.1983). We have reviewed the record, and discern no such abuse.

In summary, we affirm the judgment appealed from in all respects except the award of special damages. We find $225,-000.00 to be the maximum possible recovery for these damages and order a conditional remittitur to that amount. If TDS refuses the remittitur, the district court shall grant a new trial solely on the special damages issue.

AFFIRMED in part, REVERSED in part, and REMANDED for proceedings consistent with this opinion.¹⁹

1 . In addition to the loss of inventory, equipment, supplies, and cash incurred by TDS as a result of the fire, the corporate owner of the beauty salon was paid $26,000.00 for its fire loss by American States Insurance Co. (ASIC). ASIC also paid on a claim submitted by Faye Cohen-our, the brother of Eugene, for the destruction of carpet rolls he had stored in the warehouse. Eugene Cohenour was eventually paid $125,-000.00, the policy limits, by Shelby for damage to the building: he also received payment from ASIC for damage to furniture he had stored in the warehouse.

2 . At the time of trial Shelby was unable to produce these photographs, some of which probably were of the restaurant's office.

3 . When we refer to a "first party claim”, we mean "a suit by an insured against his insurance company because of its failure to settle his claim.” Indus. Fire & Casualty Ins. Co. v. Romer, 432 So.2d 66, 69 (Fla.Dist.Ct.App.1983) (Hurley, J., concurring) (emphasis in original), as opposed to a suit based on the insurer’s failure to settle a third party tort claim for a reasonable sum. Id.

4 . The jury was instructed that Shelby owed no fiduciary duty towards TDS. They also were told that before punitive damages could be awarded, they must find that Shelby engaged in deliberate, overt and dishonest dealings. Finally, the trial court gave a standard fraud instruction to fulfill the independent tort requirement of Florida law.

5 . In its brief, TDS contends that the district court should have stricken Shelby's defense of arson at the conclusion of the evidence in defense. TDS also argues that Shelby was estopped by its conduct from presenting to the jury its arson defense. Quite apart from the lack of merit in these arguments, the plaintiff has failed to file a cross-appeal from any ruling of the district court. It therefore has failed to preserve any issue for appeal.

6 . The jury was instructed that the following statements comprised TDS’s fraud claim:

One, that the insurance company falsely represented that it was conducting an investigation into the cause and origin of the fire. Two, that the insurance company falsely represented to the Plaintiff that it would share in investigative information or reports with it on the cause and origin of the fire loss.

Three, that the insurance company falsely represented that it had no information or reports implicating the corporation in arson. Four, that the Defendant falsely represented that it would confront the insured with any alleged evidence in its involvement of arson and fraud.

T. 13:320-21.

7 . TDS contends that this court is without jurisdiction to address the remittitur issue because the motion in the district court was untimely filed. Although the record reflects that a document specifically styled "Verdict for Punitive Damages was Excessive” was filed one day out of time, apparently due to a clerical error, the papers which were timely filed gave the trial judge the opportunity to exercise her discretion concerning a new tr:al or remittitur on the special and punitive damages awards. See R. 956 & 969. Under these circumstances, we conclude that Shelby has preserved the remittitur issue for appellate review. See Carlton v. H.C. Price Co., 640 F.2d 573, 577 (5th Cir.1981).

8 . Since this is a diversity case, the issue of whether the jury’s verdict is excessive is determined by reference to state substantive law. See Quality Foods, Inc. v. U.S. Fire Ins. Co., 715 F.2d 539, 542 & n. 2 (11th Cir.1983). If the verdict is excessive under state law, federal law then determines whether a new trial should be granted. See id. at 542 n. 2.

9 . The jury answered in the affirmative the following question submitted to it:

Do you find from a preponderance of the evidence that the facts involving the refusal of the defendant to pay the Plaintiff’s claim amounted to deliberate, overt and dishonest dealings?

R. at 944.

10 . At the time of trial, Shelby had assets in excess of $200,000,000.00.

11 . Florida follows the general rule that to be recoverable, damages for breach of contract "must arise naturally from the breach, or have been in the contemplation of both parties at the time they made the contract, as the probable result of a breach.” Hobbley v. Sears, Roebuck and Co., 450 So.2d 332, 333 (Fla.Dist.Ct.App. 1984) (citing Hadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145 (1854)). Moreover, concerning foreseeability, Florida law does not require that the parties have contemplated the precise injuries which occurred; rather, damages are recoverable so long as the actual consequences of breach of the contract could have reasonably been expected to flow from the breach. Natural Kitchen, Inc. v. American Transworld Corp., 449 So.2d 855, 860 (Fla.Dist.Ct.App.1984): see 5 A. Corbin, Corbin on Contracts § 1010, at 79 (1964). Although generally an insurer's liability under an insurance contract will not exceed the contractual limits of liability, the Florida courts have extended the Hadley special damages rule to allow recovery of these damages if they were in the contemplation of the parties at the time of the creation of the insurance contract. See Life Investors Ins. Co. v. Johnson, 422 So.2d 32 (Fla.Dist.Ct.App.1982). Additionally, an insurer exposes itself to liability greater than the policy limits if its conduct also amounts to a separate tort. See MacDonald v. Penn Mutual Life Ins. Co., 276 So.2d 232 (Fla.Dist.Ct.App. 1973).

12 . Since we conclude that a jury question did exist on the fraud claim to special damages, we find it unnecessary to examine Shelby’s arguments concerning the permissibility of these damages under a contractual theory.

13 . The lease provided that in the event of a fire, the Starrs were obliged to pay monthly rent to Eugene Cohenour. Mr. Cohenour, however, was required to rebuild and recognize the continued validity of the lease if TDS so desired, and the construction could be accomplished within six months.

14 . In support of the special damage award, TDS contends that "[t]he jury was entitled to believe that all of the hard work and efforts of the Starrs were about to come to fruition.” Brief of Appellee at 44. TDS further argues that ”[t]he jury was entitled to believe the testimony of growing crowds, a changed atmosphere, honest effort, efficient cost control, and a season in which even inefficient businesses make money in Florida.” Id. Be that as it may, the fact remains that TDS is attempting to sustain the award on the basis of lost future profits. Notwithstanding TDS’s failure to cross-appeal the district court’s refusal to instruct the jury on lost profits, to recover anticipated lost profits in Florida, the plaintiff must show such a loss with reasonable certainty by competent proof. Polyglycoat Corp. v. Hirsch Distribs., Inc., 442 So.2d 958, 959 (Fla.Dist.Ct.App.), petition for review dismissed, 451 So.2d 848 (Fla. 1984); Wash-Bowl, Inc. v. Wroton, 432 So.2d 766, 767 (Fla. Dist.Ct.App.1983). To carry this burden, it is incumbent upon the plaintiff to show a history of profitability for a reasonable time anterior to the breach of the contract sued upon. Polyglycoat Corp., 442 So.2d at 959; Wash-Bowl, Inc., 432 So.2d at 767; A & P Bakery Supply & Equip. Co. v. Hawatmeh, 388 So.2d 1071, 1072 (Fla. Dist.Ct.App.1980). It is undisputed that TDS had no history of past profits, and, therefore, any award for loss of future profits would be "too remote, contingent, and speculative to meet the legal standards of reasonable certainty.” Polyglycoat Corp., 442 So.2d at 959; Wash-Bowl, Inc., 432 So.2d at 767; A & P, 388 So.2d at 1072.

15 . The district court overruled TDS’s motion to add the Starrs as parties-plaintiff. R. at 809-12. No appeal has been taken from that ruling.

16 . Shelby asserts that the value of the restaurant and lounge "would appear to be merely an improper attempt to obtain lost future profits.” Initial Brief of Appellant at 38-39. This assertion is belied by recent Florida case law. In Polyglycoat Corp., 442 So.2d 959, the court stated that lost profits may not be recovered by a new business with no history of profits. See supra note 14. The court went on to note, however, that if a new business is completely destroyed as a result of a breach of contract, "the proper total measure of damages is market value on date of loss." Polyglycoat Corp., 442 So.2d at 960. We consider this measure of damages to be appropriate in the facts of this action.

17 . Shelby categorically asserts that "a court would never consolidate a liability case and a typical ‘bad faith' claim," citing as authority Boston Old Colony Ins. Co. v. Gutierrez, 386 So.2d 783 (Fla.1980), cert. denied, 450 U.S. 922, 101 S.Ct. 1372, 67 L.Ed.2d 350 (1981). Initial Brief of Appellant at 48 n. 21. Two aspects of that case which distinguish it from the one at bar bear mentioning. First, Gutierrez is an excess judgment case; any claim of bad faith, therefore, necessarily would not even exist in such a case until the insured-tortfeasor was adjudged liable for an amount in excess of the insurance policy limits. Second, the plaintiff in Gutierrez was an injured third party suing the tortfeasor’s insurance company for its alleged bad faith in failing to settle the claim against its insured. Gutierrez, therefore, is clearly inapposite.

Shelby also ignores the fact that courts routinely allow tandem contract and first party bad faith claims to be tried together. See e.g., Riverside Ins. Co. v. Pedigo, 430 N.E.2d 796 (Ind.Ct.App.1982); see also Nat'l Sec. Fire & Casualty Co. v. Vintson, 454 So.2d 942 (Ala.1984) (court reversed general jury verdict awarding damages for breach of contract, fraud, and bad faith refusal to pay a direct claim since there was a jury question on the contract claim, yet assumed all claims were properly joined and tried). In fact, res judicata principles have been held to require the joinder of a contract and a bad faith refusal to pay claim. For example, in Stone v. Beneficial Standard Life Ins. Co., 273 Or. 594, 542 P.2d 892 (1975) (en banc), the court held that a named beneficiary of a life insurance policy who successfully sued the insurer for the amount of the policy was barred from maintaining a subsequent action against the insurer for its alleged bad faith refusal to pay the initial claim. The court reasoned that:

[T]he same parties litigated the first action in which Stone recovered the amount of the policy. Stone is now bringing an action against defendant for its alleged bad faith in the breach of the same contract and for alleged actual damages incurred as the result of having to bring the first lawsuit. It is evident that the present action is based on the same set of operative facts as the first action for the relief for which recovery is now sought, (citation omitted).

Id., 542 P.2d at 894; see also Christian v. Home Ins. Co., 577 P.2d 899 (Okla.1978) (insurer not allowed to rely on prior judgment as bar to bad faith refusal to pay action where insurer is estopped from doing so by its own conduct). It is clear that Shelby’s claim that jurisdictions which recognize bad faith refusal to pay claims will not allow the consolidation of the contract and bad faith claims is simply not supported by the case law.

18 . Arguably, an analogy more appropriate than the malicious prosecution cases can be found in the law of abuse of process. In Blue v. Weinstein, 381 So.2d 308, 311 (Fla.Dist.Ct.App.1980), the court distinguished a malicious prosecution claim from an abuse of process claim, noting that an essential element of the former but not the latter tort is the termination of the action in favor of the plaintiff. The court accordingly held that "[a]n abuse of process claim may henceforth be brought as a counterclaim when directed against process served in the pending main action.” Id. at 311-12. We note, however, that the Blue court was mindful of the possible necessity of severing the main claim from the abuse of process counterclaim in the event that a joint trial would unduly complicate the case. See id. at 312 n. 2.

19 . The dissent includes the following statements:

1. Starr answered all the questions ... and made no patently incriminating statements. Page 1540.

2. Mrs. Starr ... [l]ike her husband, she made no patently incriminating statements. Page 1540.

3. Berry knew that his count two bad faith claim could not withstand scrutiny in the light of Florida precedent and that his prayer for punitive damages might be stricken from the case. Page 1542.

4. Attorney Berry apparently read the district court’s order directing him to replead his case ... as a license to disregard these rules. Page 1543.

5. During that conference, the court did a complete about-face with respect to the plaintiffs bad faith claim. Page 1546.

6. Had the district court’s bad faith instruction expressed the law of Florida at the time of the fire in this case, Shelby Mutual would have settled this case long before it got to the courthouse. Page 1549.

7. Shelby would have settled for another reason____ Page 1549.

8. It also punishes society. In time, the jury verdict here and in the cases that inevitably will follow, especially in the federal district courts in Florida, will be reflected in the fire insurance rates. Page 1550.

9. The public will bear an additional burden as well: some insurance companies will cease underwriting fire risks and many law-abiding citizens will go without coverage. Page 1550.

10. Second, Mrs. Starr’s testimony that the Lord & Lady was worth $225,000 on the eve of the fire was not worthy of belief. Page 1553.

11. For example, it could have sold its goodwill, and the name "Lord & Lady,” to someone else. Page 1554.

These and other statements criticize the plaintiff's attorney and the trial judge for their handling of the case, weigh the testimony of the witnesses (credibility), predict what the actions of various individuals and Shelby Mutual Insurance Company would have been under other circumstances, forecasts future insurance rates for the citizens of Florida and suggests that many "law-abiding” citizens will be unable to obtain any insurance. Judge Tjoflat’s crystal ball is better than mine!

Most respectfully, such evaluations, innuendos, predictions and baseless assumptions hardly seem appropriate for those of us serving as appellate judges. The jury believed the Starrs. The jury concluded that they were law-abiding citizens (not guilty of arson). The trial judge did the best she could to give the parties a fair trial. No one suggests that any evidence was not received or considered because of time constraints. No one suggests that the trial judge was not totally impartial in her conduct of the trial.

It does appear that Judge Tjoflat and the majority have a difference of opinion as to whether or not the facts of this case support a claim for the tort of fraud and deceit based upon “deliberate, overt and dishonest dealings” in accordance with Florida law. Smith, 435 So.2d at 849. Reasonable judges often disagree.

Judge Tjoflat criticizes, at great length, the trial court’s charges covering this independent tort and the relationship between the parties. Strangely, counsel do not.

It is the majority’s position that Florida law sets forth this sound proposition. While insurance companies may be in a debtor-creditor relationship with their assureds making a claim, this does not give them the right to lie, to deceive, to make false statements or to engage in deliberate, overt and dishonest dealings to the detriment and damage of the assured. Such hardly seems shocking or contrary to common sense. Nor does the majority feel that such a rule of law will result in any hardship to law-abiding insurance companies.