Contingent & Premature Claims Not Viable
There seems to be an unwritten rule that when filing suit in an insurance related issue to sue everyone in sight. It often happens to destroy diversity and keep the case in state courts. Just such a situation was before the District Court for the Southern District of Florida, in Pebb Cleveland, LLC v. Fireman’s Fund Ins. Co., Slip Copy, 2015 WL 328247 (S.D.Fla., 1/23/15) who was asked to remove insurance agents and brokers from the suit since they were fraudulently joined in the suit.
Plaintiff Pebb Cleveland LLC (“Pebb”), a Delaware corporation, originally filed this suit against defendants Fireman’s Fund, Halycon and CBIZ in the Circuit Court of the Fifteenth Judicial Circuit, in and for Palm Beach County, Florida. Count 1 asserted a claim of breach of contract against Fireman’s Fund, a California corporation. Counts 2 and 3 asserted negligence claims against CBIZ and Halycon, Pebb’s Florida-based insurance agent and broker, respectively.
Fireman’s Fund removed the case to the Southern District of Florida on December 1, 2014.
The following facts, drawn from the plaintiff’s complaint, were accepted as true by the court for the purpose of resolving the instant motion.
At a time prior to January 9, 2014, Pebb applied for and obtained an “all risk” business insurance policy from Fireman’s Fund which covered certain commercial property owned by it in Aurora, Ohio. Defendants CBIZ Insurance and Halycon Underwriters represented Pebb in the purchase of the policy, which was delivered to Pebb at its principal place of business in Boca Raton, Palm Beach County, Florida.
On January 9, 2014, a deep freeze caused a sprinkler pipe to burst at Pebb’s Ohio property, causing extensive water damage to the building. Pebb promptly submitted a property damage claim to Fireman’s Fund, which denied the claim on ground the building was allegedly vacant for more than sixty days and the building’s sprinkler system had not been protected from freezing.
Motion to Dismiss–Failure to State a Claim
Under Florida law, negligence claims against an insurance agent do not accrue until the existence of insurance has been completely resolved, that is, when the coverage proceedings against the insurer are final. The theory is that an insured claiming that he is entitled to insurance coverage is judicially estopped from simultaneously claiming a lack of coverage against the agent that procured the policy on his behalf.
Under Florida law Pebb’s failure to obtain appropriate insurance coverage claims against Halycon and CBIZ are contingent and premature, as the defendants’ liability for failure to procure, if any, becomes an issue for resolution only upon a final determination that no insurance coverage exists under the policy issued by Fireman’s Fund. If the Court determines that Fireman’s Fund is liable to Pebb under the policy, then Halycon and CBIZ caused no damage to Pebb because insurance was properly procured. On the other hand, if the court determines that Fireman’s Fund is not liable under the policy because it does not cover damage to unoccupied premises, then Halycon and CIBZ are potentially liable for failure to recommend and obtain adequate insurance coverage to meet the known needs of the insured.
There is no possibility that Pebb can state negligent failure to procure claims against Halcyon or CBIZ because the issue is still open and will remain open until the District Court rules on the obligation of Fireman’s Fund to pay or not pay the claim. Therefore, the District Court concluded that the insurance brokerage defendants have been fraudulently joined.
Pebb argues that a stay or abatement of its claims against Halycon and CBIZ is the appropriate remedy if the Court determines that the claims are premature. However, considering the circumstances of this case, and that fact that Pebb’s claims against Halycon and CBIZ may never mature if the court determines that Fireman’s Fund is liable to Pebb under the policy, the court dismissed Pebb’s claims against Halycon and CBIZ, without prejudice.
Pebb cannot properly state a claim against defendant Halcyon or CBIZ, as any negligence action against them is contingent and premature pending the result of the breach of contract claim against Fireman’s Fund. Without an actionable claim against Halcyon and CBIZ, the plaintiff is left with its breach of contract claim against Fireman’s Fund. As such, the two remaining parties to this action are completely diverse in citizenship and have been properly removed to this court.
Pebb has stated a cognizable breach of contract claim against Fireman’s Fund. However, any action against defendants Halycon or CBIZ is premature pending resolution of Pebb’s action against Fireman’s Fund. Because no cause of action has yet accrued against these defendants as a matter of law, they shall be dismissed. The court shall retain jurisdiction over the remaining claim against Fireman’s Fund under its diversity jurisdiction.
Insurance is a contract, nothing more. The plaintiff sued its insurance company seeking indemnity from its insurer. The issue of coverage, as a result of the suit, was up in the air. The court could rule that Fireman’s Fund owed the claim. If it did, there would be no claim against the agents and brokers. If they lose and the court rules there is no coverage at that point a cause of action would accrue against the agents and brokers and they could then file a separate case. To put the two different allegations together in one suit would be counterproductive and completely confusing to a trier of fact.
Barry Zalma, Esq., CFE, has practiced law in California for more than 42 years as an insurance coverage and claims handling lawyer. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.
He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary. The new books are Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide.
The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available.
Mr. Zalma e-book, “Zalma on California Claims Regulations – 2013″ explains in detail the reasons for the Regulations and how they are to be enforced; “Rescission of Insurance in California – 2013;” “Random Thoughts on Insurance” a collection of posts on this blog; “Zalma on Diminution in Value Damages – 2013,”“Zalma on Insurance,” “Heads I Win, Tails You Lose,” “Arson for Profit” and others that are available at www.zalma.com/zalmabooks.htm.