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ACME BARRICADES L.C., Plaintiff, v. HARTFORD FIRE INSURANCE COMPANY, Defendant.
ORDER ON MOTION TO DISMISS
THIS CAUSE is before the Court upon Defendant's Motion to Dismiss Complaint, filed March 10, 2025. (DE 7). Plaintiff filed a Response on April 3, 2025. (DE 12). For the following reasons, the Motion is granted.
BACKGROUND
This matter concerns an insurance dispute involving a settlement of litigation. Because this cause comes before the Court on a Motion to Dismiss, I accept all facts in the Plaintiff's Amended Complaint as true and construe them in the light most favorable to the Plaintiff. See Jackson v. BellSouth Telecomms., 372 F.3d 1250, 1262 (11th Cir. 2004).
On July 1, 2020, Plaintiff—a corporation that provides construction and traffic services—entered into a commercial automobile insurance agreement with Defendant, extending through July 1, 2021 (the “Policy”). (DE 1 ¶¶ 7, 9). In relevant part, the Policy provided $1 million in coverage for all “covered autos,” including for sums paid due to “bodily injury” or “property damage.” (Id. ¶ 10). The Policy also contained a $500,000 per accident deductible. (Id. ¶ 11). During the Policy's effective period, a motor vehicle accident occurred between one of Plaintiff's covered vehicles and another automobile, being driven by Michael Preston (“Preston”). (Id. ¶ 13). Following the accident, Preston asserted a bodily injury claim against Plaintiff, sparking settlement negotiations between Preston, Plaintiff, and Defendant. (Id. ¶¶ 14, 16). Following an initial mediation, Defendant entered into settlement negotiations with Preston, without Plaintiff present. (Id. ¶ 25). Absent Plaintiff's input, and purportedly without further investigation into Preston's prior accident history, Defendant settled Preston's claim for $405,000.00, which was remitted to Plaintiff as a figure below the $500,000.00 deductible. (Id. ¶¶ 29-30).
Dissatisfied with Defendant's settlement and failure to further investigate Preston, Plaintiff filed a Civil Remedy Notice of Insurer Violation (“CRN”) with the Florida Department of Financial Services on September 18, 2024. (Id. ¶ 35). Defendant responded on November 30, 2024, after the statutory period of sixty days had lapsed. (Id. ¶¶ 36-37). Plaintiff then filed this action on February 2, 2025 asserting one count of bad faith, citing Defendant's failure to investigate Preston's claim. Defendant now moves to dismiss under Rule 12(b)(6).
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the allegations in a complaint. See Fed. R. Civ. P. 12(b)(6). In assessing legal sufficiency, the Court is bound to apply the pleading standard articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) and Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). That is, the complaint “must ․ contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face,’ ” Am. Dental Ass'n v. Cigna Corp., 605 F.3d 1283, 1289 (11th Cir. 2010) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “Dismissal is therefore permitted when on the basis of a dispositive issue of law, no construction of the factual allegations will support the cause of action.” Glover v. Liggett Grp., Inc., 459 F.3d 1304, 1308 (11th Cir. 2006) (internal quotations omitted) (citing Marshall Cty. Bd. of Educ. v. Marshall Cty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993)).
When reviewing a motion to dismiss, a court must construe the complaint in the light most favorable to the plaintiff and assume the truth of the plaintiff's factual allegations. See Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007); Christopher v. Harbury, 536 U.S. 403, 406, 122 S.Ct. 2179, 153 L.Ed.2d 413 (2002); Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1369 (11th Cir. 1997). However, pleadings that “are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations,” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937; see also Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (stating that an unwarranted deduction of fact is not considered true for purposes of determining whether a claim is legally sufficient). “[A] formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (citation omitted).
DISCUSSION
Defendant seeks dismissal on the grounds that Plaintiff's bad faith claim is barred as a matter of law. Citing the Parties’ Policy, Defendant asserts that it acted squarely within its contractual authority in settling Preston's claim, as the amount paid fell within Policy limits. Specifically, Defendant points to the Policy's Deductible-Reimbursement Endorsement, which provides that it “will pay any part or all of the deductible amount to effect settlement of any claim or suit,” after which Plaintiff “shall promptly reimburse [it] for such part of the deductible amount as has been paid.” (DE 1-1 at 36-37). Further, the Policy states that Defendant “may investigate and settle any claim or ‘suit’ as [it] consider[s] appropriate.” (Id. at 10). Defendant concludes that this language fully precludes Plaintiff's bad faith claim. I agree.
“It has long been the law of this State that an insurer owes a duty of good faith to its insured.” Berges v. Infinity Ins. Co., 896 So.2d 665, 672 (Fla. 2004). “[W]hen the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement,” the insurer “must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured.” Id. at 668 (quoting Boston Old Colony Ins. Co. v. Gutierrez, 386 So.2d 783, 785 (Fla. 1980)); see also Perera v. U.S. Fidelity and Guar. Co., 35 So. 3d 893, 898 (Fla. 2010). To satisfy its obligations, an insurer “must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so.” Boston Old Colony Ins. Co., 386 So.2d at 785. “Bad faith law was designed to protect insureds who have paid their premiums and who have fulfilled their contractual obligations by cooperating fully with the insurer in the resolution of claims.” Harvey v. Geico Gen. Ins. Co., 259 So. 3d 1, 6 (Fla. 2018) (quoting Berges, 896 So. 2d at 682).
Ordinarily, “in handling the defense of claims against its insured,” the insurer “has a duty to use the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business.” Boston Old Colony, 386 So. 2d at 785. However, “where the policy itself provide[s] that the insurer ha[s] the authority to investigate and settle” a claim, “an insurer may settle a claim within the policy limits even where the claim was frivolous and without consideration of the insured's interest.” Rogers v. Chicago Ins. Co., 964 So. 2d 280, 282-83 (Fla. 4th DCA 2007) (citing Shuster v. S. Broward Hosp. Dist. Physicians’ Prof'l Liab. Ins. Trust, 570 So. 2d 1362 (Fla. 4th DCA 1990)). As the Florida Supreme Court has explained, contract principles modify an insurer's duty to diligently investigate and settle claims in the interest of the insured. Where the “language of the provision is clear and the insured was put on notice that the agreement granted the insurer the exclusive authority to control settlement and to be guided by its own self-interest,” the provision “grant[s] the insurer the discretion to settle cases for amounts within the policy limits, regardless of whether the claim is frivolous or not.” Shuster v. S. Broward Hosp. Dist. Physicians’ Prof'l Liab. Ins. Trust, 591 So. 2d 174, 176-77 (Fla. 1992).
Here, Plaintiff does not dispute that the Policy's delegation of settlement authority to Defendant was proper and binding. (DE 12 at 2). It concedes that Defendant was empowered to settle Preston's claim as it “consider[s] appropriate.” Plaintiff instead contends the facts of this case are uniquely severe, and “this is just the kind of case that should qualify as one characterized by ‘unusual circumstances’ as contemplated by the Florida Supreme Court in Shuster.” (Id.). It is true that the Shuster court did not grant insurers absolute discretion in settling claims pursuant to an underlying policy. Rather, the Shuster court recognized that “[t]he extent of the discretion granted is determined by the intent and expectations of the parties in entering into the agreement.” Shuster 591 So. 2d at 177 (citing Rigel v. Nat'l Cas. Co., 76 So. 2d 285 (Fla. 1954); James v. Gulf Life Ins. Co., 66 So. 2d 62 (Fla. 1953)). For instance, where there “are multiple parties to a suit,” an insurer may not in bad faith “indiscriminately settle[ ] with one or more of the parties for the full policy limits, thus exposing the insured to an excess judgment from the remaining parties.” Id. Also, where an “insurer acts in bad faith and without regard to the insured's interests by settling a claim in a manner that bars the insured's counterclaim,” a bad faith claim may persist. Id.
Here, while Plaintiff may be correct in observing that Shuster did not grant insurers absolute discretion, the facts of this case do not warrant deviation from Shuster’s core holding. In the main, Plaintiff's Complaint alleges that Defendant failed to investigate Preston's injuries, and settled without consideration of Plaintiff's interests. This is plainly the factual pattern the Shuster court contemplated, as Defendant was “guided by its own self-interest.” Shuster, 591 So. 2d at 176. Although Plaintiff attempts to analogize this case to the particular exceptions recognized in Shuster, its bad faith claim stems from boilerplate dissatisfaction with Defendant's settlement, even though it ceded complete settlement authority to Defendant. As recorded in the Policy's plain language, the Parties expected and were put on notice that Defendant had authority to settle claims as it considered appropriate. Defendant thereafter exercised its authority to settle within the Policy limits, without falling into the pitfalls identified by Shuster. Under Shuster, Defendant's conduct does not give rise to a claim of bad faith. See Shuster, 570 So. 2d at 1368 (“[W]here an insurance policy gives the insurer the right to make such settlement ․ and the insurer settles the claim within the policy limits ․ there is no cause of action for bad faith in effecting the settlement.”).
Plaintiff also argues that because Defendant was untimely in its response to Plaintiff's CRN, it has raised a rebuttable presumption of bad faith. This is unpersuasive. It is true that an insurer must respond to a CRN within sixty days under Florida law. See Talat Enters. v. Aetna Cas. & Sur. Co., 753 So.2d 1278, 1282 (Fla. 2000). However, Defendant's failure to follow this procedural norm cannot rescue Plaintiff's bad faith action, which is substantively barred as a matter of law. At most, the “burden of proof” has now shifted to Defendant. Imhof v. Nationwide Mut. Ins. Co., 643 So.2d 617, 619 (Fla. 1994) (“An insurer's failure to respond within the sixty-day period will create a presumption of bad faith sufficient to shift the burden to the insurer to show why it did not respond.”). As Defendant has demonstrated that it did not act in bad faith under the plain terms of the Policy, it has carried its explanatory burden, warranting dismissal.
Finally, Plaintiff requests leave to amend its Complaint to support its request for punitive damages. Leave to amend shall be granted where “justice so requires.” Fed. R. Civ. P. 15(a)(2). “Despite the rule that leave to amend should be given freely, the court may deny leave to amend on numerous grounds, including the futility of the amendment.” Patel v. Georgia Dep't BHDD, 485 F. App'x 982, 982 (11th Cir. 2012) (citing Maynard v. Bd. of Regents of Div. of Univs. of Florida Dept. of Educ. ex rel. Univ. of S. Florida, 342 F.3d 1281, 1287 (11th Cir. 2003)). Futility “justifies the denial of leave to amend where the complaint, as amended, would still be subject to dismissal.” Id. (citing Burger King Corp. v. Weaver, 169 F.3d 1310, 1320 (11th Cir. 1999)). Here, there is no reason to think that further amendment would alter the outcome of this matter, as Plaintiff's claims of bad faith are foreclosed by the plain text of the Parties’ Policy. Its claim is dismissed for legal, not factual, deficiency, and thus any further amendment would be futile.
CONCLUSION
Defendant acted within the scope of its contractual authority in settling Preston's claims against Plaintiff, even though it failed to diligently investigate the viability of the claim and acted without concern for Plaintiff's interests. Accordingly, it is ORDERED and ADJUDGED:
1. Defendant's Motion (DE 7) is GRANTED.
2. Plaintiff's Complaint (DE 1) is DISMISSED WITH PREJUDICE.
3. Plaintiff's request for leave to amend is DENIED.
4. The Clerk of Court shall CLOSE this case and DENY all pending motions as moot.
SIGNED in Chambers at West Palm Beach, Florida this 8th day of April, 2025.
Donald M. Middlebrooks, United States District Judge
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Docket No: CASE NO. 25-80168-CV-MIDDLEBROOKS
Decided: April 09, 2025
Court: United States District Court, S.D. Florida.
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