Townhouses of Highland Beach Condominium Ass'n v. QBE Insurance

504 F. Supp. 2d 1307 (2007)

TOWNHOUSES OF HIGHLAND BEACH CONDOMINIUM ASSOCIATION, INC., Plaintiff,
v.
QBE INSURANCE CORP., Defendant.

No. 06-81132-CIV.

United States District Court, S.D. Florida.

June 22, 2007.

Cheryl Lynn Rosenbaum, Daniel S. Rosenbaum, John Marcus Siracusa, Becker & Poliakoff, P.A., West Palm Beach, FL, for Plaintiff.

Evelyn Maureen Merchant, William S. Berk, Berk Merchant & Sims PLC, Coral Gables, FL, for Defendant.

ORDER DENYING MOTION TO DISMISS

RYSKAMP, District Judge.

THIS CAUSE comes before the Court pursuant to Defendant QBE Insurance Corp.'s Motion to Dismiss, filed March 7, 2007 [DE 16]. Plaintiff Townhouses of Highland Beach Condominium Association, Inc. responded on March 21, 2007 [DE 20]. Defendant QBE Insurance Corp. did not reply. This motion is ripe for adjudication.

I. BACKGROUND

Plaintiff Townhouses of Highland Beach Condominium Association, Inc. ("Plaintiff'), a Florida corporation, is a 72 unit condominium located in Highland Beach, Palm Beach County, Florida. (Compl., 3.) Defendant QBE Insurance Corp. ("Defendant"), a foreign corporation, is an insurance carrier authorized by the State of Florida to transact insurance and is transacting insurance in Palm Beach County, Florida. (Compl., 4.) Defendant issued Insurance Policy Number QF3127-05 ("Policy"), which provided property coverage to Plaintiff for the 12 month period commencing February 8, 2005. (Compl., 5.)

On or about October 24, 2005, Hurricane Wilma struck Highland Beach, Florida. Plaintiff sustained significant wind and water damage to its roof, exterior and interior. Plaintiff sustained damages in excess of 1.5 million and timely reported its claim for damages to Defendant. (Compl., 7, 8.) Defendant has failed to advance any insurance proceeds or otherwise pay the claim. Plaintiff alleges that Defendant has otherwise failed to investigate promptly, adjust, pay and/or settle its claim for hurricane damages. (Compl., 8.)

Count I seeks a declaratory judgment that the Policy is valid and enforceable and that Plaintiff is entitled to property insurance coverage for its damage claim. Plaintiff further requests declaratory judgment that the co-insurance payments are void because the Policy fails to comply with Florida statutes section 627.701. Count II is a claim for breach of contract for failure to provide coverage. Count III is a claim for breach of contract for breach of implied warranty of good faith and fair dealing. Count IV is a claim for violation of Florida statutes section 627.701, alleging that the Policy fails to state in the appropriate size font that the policy contains a separate hurricane deductible, improperly uses the term "windstorm" instead of "hurricane losses," and fails to contain a separate statement that the Policy contains a co-pay provision that could potentially result in extra expenses for hurricane losses.

Defendant moves to dismiss Count I for failure to specify whether the request for declaratory relief is pursuant to 28 U.S.C. § 2201 or Fla. Stat. sec. 86.011. Defendant moves to dismiss Count III on the grounds that a claim for bad faith is premature. Finally, Defendant seeks to dismiss Count IV for failure to state a cause of action, maintaining that a policy that fails to contain a proper coinsurance clause is void and may not be the vehicle for a claim for damages.

II. LEGAL STANDARD

The Court will not dismiss this action for lack of jurisdiction simply because the Amended Complaint does not specify whether federal or state law underpins, the declaratory relief count. The jurisdiction of this Court is based upon 28 U.S.C. § 1332 because the amount in controversy exceeds $75,000 and because there is complete diversity of citizenship between the parties. The Declaratory Judgment Act is procedural in nature and is not an independent basis for federal jurisdiction. See Schilling v. Rogers, 363 U.S. 666, 677, 80 S. Ct. 1288, 1295, 4 L. Ed. 2d 1478 (1960) (Declaratory Judgment Act is not an independent source of federal jurisdiction); Aetna Life Insurance Co. v. Haworth, 300 U.S. 227, 240, 57 S. Ct. 461, 463, 81 L. Ed. 617 (1937) (Declaratory Judgment Act is only procedural). In diversity cases seeking declaratory relief, the federal court applies state law on the substantive issues presented in the declaratory judgment action. See State Farm Fire & Cas. Co. v. Sweat, 547 F. Supp. 233, 239 n. 14 (N.D.Ga.1982); Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S. Ct. 817, 822-23, 82 L. Ed. 1188 (1938). Yet federal law determines whether a federal court can and may properly render a declaratory judgment. See Cincinnati Ins. Co. v. Holbrook, 867 F.2d 1330, 1332-33 (11th Cir.1989), abrogated on other grounds by Wilton v. Seven Falls Co., 515 U.S. 277, 115 S. Ct. 2137, 132 L. Ed. 2d 214 (1995); State Farm Fire, 547 F.Supp. at 238-39. State law determines the substantive rights and duties of the parties to an insurance contract, the question of justiciability is a federal issue to be determined only by federal law. See Holbrook, 867 F.2d at 1333.

III. DISCUSSION

Here, both federal and Florida law provides for resolution of insurance coverage disputes seeking declaratory judgments. Accordingly, Defendant is on notice of Plaintiffs claims for relief because this Court must apply state law to determine the substantive rights and duties of the parties to the contract.

Defendant's cases to the contrary are inapposite. De Sisto College v. Line, 888 F.2d 755 (11th Cir.1989) does not address the pleading requirements of declaratory judgment actions, but merely states in a footnote the counts of the complaint at issue. Similarly, Field v. Nat'l Life Insurance Co., 2001 WL 77101, 2001 U.S. Dist. LEXIS (M.D.Fla.2001), fails to mention the pleading requirements for a declaratory judgment action, but points out that application of state substantive law warranted the same result, albeit for different reasons, as application of federal law regarding the computation of the amount in controversy for diversity jurisdictional issues. These cases do not require a party to plead a statutory basis for declaratory relief.

Count III alleges a claim for breach of contract for breach, of the implied warranty of good faith and fair dealing and does not assert a claim for statutory bad faith. Under Florida law, the covenant of good faith and fair dealing is implied in every contract, requiring the parties to follow standards of good faith and fair dealing designed to protect the parties' reasonable contractual expectations. See Centurion Air Cargo, Inc. v. United Parcel Service Co., 420 F.3d 1146, 1151 (11th Cir.2005); Cibran v. BP Products North America, Inc., 375 F. Supp. 2d 1355, 1359 (S.D.Fla.2005). A claim for breach of the implied covenant of good faith and fair dealing cannot be maintained in the absence of a breach of an express term of the contract. See Centurion Air Cargo, 420, F.3d at 1152. The implied covenant of good faith and fair dealing is usually an issue when the question is not resolved by the terms of the contract or when one party may make a discretionary decision without defined standards. See Publix Super Markets, Inc. v. Wilder Corp. Of Delaware, 876 So. 2d 652, 654 (Fla. 2d DCA 2004). Where there are no standards for exercising discretion, the implied covenant protects contracting parties' reasonable commercial expectations. See id. at 655. In contrast, an action for first party bad faith consists of an insurer's wrongful refusal to settle a claim accruing directly to its own insured. See Brookins v. Goodson, 640 So. 2d 110, 114 (Fla. 4th DCA 1994), disapproved on other grounds by State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So. 2d 55 (Fla.1995). Furthermore, an action for bad faith is extra contractual in nature and relates to the duties of an insurer as defined by statute, not the express terms of the contract. See Pastor v. Union Central Life Ins. Co., 184 F. Supp. 2d 1301, 1306 (S.D.Fla.2002). An action for implied warranty of good faith and fair dealing on the other hand, relates to the express contractual provision breached and does not contemplate the parties' wrongful conduct, only whether a contractual term was breached and whether the parties' reasonable contractual expectations have been thwarted. See Cibran, 375 F.Supp.2d at 1359-60. Furthermore, statutory bad faith may only be established after a breach of the insurance contract, whereas the implied covenant of good faith and fair dealing exists in every contract in Florida. See id.

Here, Plaintiff has alleged a claim for breach of the implied warranty of good faith and fair dealing by alleging a breach of an express term of the insurance policy. Other. Florida and federal courts have permitted actions for breach of the implied warranty of good faith and fair dealing in insurance coverage cases involving property damage loss due to a hurricane. See Langhorne v. Fireman's Fund Ins. Co., 432 F. Supp. 2d 1274 (N.D.Fla.2006) (insured brought action against insurer for breach of contract, breach of implied warranty of good faith and fair dealing and declaratory judgment to recover under homeowners' insurance policy for damages resulting from Hurricane Ivan). Plaintiff has properly alleged that an express term of the contract has been breached, and the Policy, which is attached to be Amended Complaint, states the mechanism by which the insured is to adjust, investigate and pay claims. For example, the Policy states that Defendant will determine the value of the lost or damaged property or the cost of repair and replacement, but there is no time frame for these determinations or other specific conditions about how valuations will be made or replacement cost will be determined, all of which are implied terms.

Count IV is an action for violation Fla. Stat. 627.701 for failure to designate properly the coinsurance provision in the Policy. Defendant argues that this Count fails to state a cause of action because any coinsurance provision failing to comply with the statutory requirements is void. While courts have found that coinsurance provisions failing to comply with the statutory requirements are void, see U.S. Fire Ins. Co. v. Roberts, 541 So. 2d 1297, 1299 (Fla. 1st DCA 1989), Defendant has cited no case law stating that such is necessarily the only remedy. Significantly, the Policy contains a separate hurricane deductible. Whether the deductible will be applied in the amount of the deductible will have a significant impact on the amount of damages awarded to Plaintiff should it prevail.

IV. CONCLUSION

THE COURT, being fully advised and having considered the pertinent portions of the record, hereby

ORDERS AND ADJUDGES that Defendant QBE Insurance Corp.'s Motion to Dismiss, filed March 7, 2007 [DE 16], is DENIED.

ORDER DENYING MOTION FOR RECONSIDERATION

THIS CAUSE comes before the Court pursuant to Defendant's Motion for Reconsideration, filed July 2, 2007 [DE 26]. Plaintiff responded on July 10, 2007 [DE 27]. Defendant did not reply. This motion is ripe for adjudication.

Reconsideration of an order is appropriate in cases of "(1) an intervening change in controlling law; (2) the availability of new evidence; (3) the need to correct clear error or prevent manifest injustice." Sussman v. Salem, Saxon & Nielsen, P.A., 153 F.R.D. 689, 694 (M.D.Fla.1994). See also Mincey v. Head, 206 F.3d 1106, 1137 n. 69 (11th Cir.2000) (quoting In re Halko, 203 B.R. 668, 671-72 (Bankr.N.D.Ill.1996)) ("The function of a motion to alter or amend a judgment is not to serve as a vehicle to relitigate old matters or present the case under a new legal theory . . . [or] to give the moving party another ``bite at the apple' by permitting the arguing of issues and procedures that could and should have been raised prior to judgment."). Defendant moves for reconsideration "to correct clear error and prevent manifest injustice" and to avoid inconsistent decisions in the Southern District of Florida. (Motion for Reconsideration, 4.)

The Court has already set forth the facts of this dispute in its Order Denying Defendant's Motion to Dismiss, dated June 21, 2007 [DE 16]. In its motion to dismiss, Defendant requested dismissal of Count I of the Amended Complaint by alleging that Plaintiff failed to plead a claim for declaratory judgment due to its failure to "cite the statutory basis for such an invocation of jurisdiction." (Motion to Dismiss, 1.) In its Motion for Reconsideration, Defendant argues an, entirely different legal theory, that "there is no case or controversy, or obligation or right in question, with regard to coinsurance in the matter presently before the Court." (Motion for Reconsideration, 8.) This argument was obviously available to Defendant at the time it filed its Motion to Dismiss, as it raised the same argument in other suits dealing with similar issues. (Motion for Reconsideration, 7.) Since Defendant did not raise this argument in its Motion to Dismiss, the argument has been waived and Defendant may not raise it in a motion for reconsideration. See Mincey, 206 F.3d at 1137 n. 69 (quoting Halko, 203 B.R. at 671-72).

Defendant also requests reconsideration of the Court's treatment of Count III, a claim for breach of the implied covenant of good faith and fair dealing. The Court previously ruled that a cause of action for breach of the implied warranty of good faith and fair dealing is separate and distinct from cause of action for first party bad faith. Plaintiff alleged the prerequisite for a claim for breach of the implied warranty of good faith and fair dealing by alleging a breach of an express term of the insurance policy in that Defendant supposedly failed to pay for covered losses. The Amended Complaint subsequently alleged that Defendant failed to act in good faith by failing to investigate the damages claim fairly and promptly. The claim is thus one for breach of the implied warranty of good faith and fair dealing, not a claim for bad faith. See Chalfonte Condominium Apartment Association, Inc. v. QBE Ins. Corp., Case No. 06-81046-CIV-Middlebrooks/Johnson, at 4 (ruling that claim for breach of the implied covenant of good faith and fair dealing for failing to investigate damages claim fairly and promptly is distinct from a claim for bad faith).

The instant case is distinguishable from Trief v. American General Life Ins. Co., 444 F. Supp. 2d 1268 (S.D.Fla.2006), in which the policy at issue did not specify the process for adjusting, investigating or paying claims. "Nor did the plaintiff therein allege that an express term of the contract had been breached. Here, the policy does mention how Defendant must adjust, investigate, settle and pay claims, and Plaintiff has alleged a claim for breach of contract. Accordingly, the Court declines to follow the reasoning in Quadomain Condominium Association, Inc. v. QBE Insurance Corp., Case No. 07-60003-CIV-MORENO, which followed the Trief decision.

The Quadomain decision is not even properly before the Court, as it was issued on May 14, 2007, prior to the Court's ruling on the Motion to Dismiss. Defendant failed to file a notice of supplemental authority to notify the Court of this decision and instead waited until after the Court issued its ruling. As previously noted, a motion to reconsider is not a vehicle to litigate an issue a party failed to raise on initial briefing. Furthermore, that another Judge in this district reached a different conclusion on the same issue is not binding authority on the undersigned. See Williams v. Cruise Ships Catering and Service International, N.V., 320 F. Supp. 2d 1347, 1349 (S.D.Fla.2004) (denying motion for reconsideration even though other judges in the Southern District of Florida reached different conclusions on same issue).

Burger King Corp. v. Weaver, 169 F.3d 1310, 1318 (11th Cir.1999) is also unhelpful to Defendant. Defendant cites this case merely for the proposition that pleading a claim for breach of the implied covenant of good faith and fair dealing requires a party first to allege breach of an express term of the contract. Plaintiff has so alleged here. Accordingly, it is hereby

ORDERED AND ADJUDGED that Defendant's Motion for Reconsideration, filed July 2, 2007 [DE 26], is DENIED.