Case Name: JoAnn HAZEN, individually and as Trustee of the JoAnn Hazen Revocable Trust, Appellant, v. ALLSTATE INSURANCE COMPANY, Appellee
Court: Florida District Court of Appeal
Jurisdiction: Florida
Decision Date: 2007-01-17
Citations: 952 So. 2d 531
Docket Number: No. 2D06-184
Parties: JoAnn HAZEN, individually and as Trustee of the JoAnn Hazen Revocable Trust, Appellant, v. ALLSTATE INSURANCE COMPANY, Appellee.
Judges: WHATLEY, J., Concurs.
Reporter: Southern Reporter, Second Series
Volume: 952
Pages: 531–546

Head Matter:
JoAnn HAZEN, individually and as Trustee of the JoAnn Hazen Revocable Trust, Appellant, v. ALLSTATE INSURANCE COMPANY, Appellee.
No. 2D06-184.
District Court of Appeal of Florida, Second District.
Jan. 17, 2007.
Rafael J. Nobo, III, and John Wesley Frost, II, of Frost Tamayo Sessums & Aranda, P.A., Bartow, for Appellant.
William B. Bracken, Jr. of Sidney M. Crawford, P.A., Lakeland, for Appellee.

Opinion:
WALLACE, Judge.
JoAnn Hazen, individually and as Trustee of the JoAnn Hazen Revocable Trust (Hazen), appeals the circuit court's final judgment that dismissed her action against Allstate Insurance Company (Allstate) with prejudice for noncompliance with section 627.4136, Florida Statutes (2002), commonly referred to as the "nonjoinder statute," and for lack of subject matter jurisdiction. Hazen sued Allstate for the breach of an alleged oral agreement to repair Hazen's vehicle. Hazen alleged that her vehicle was damaged as the result of the negligent operation of another vehicle that was insured by Allstate. Because Hazen failed to plead sufficient facts in her amended complaint to allege either compliance with the nonjoinder statute or that the statute was inapplicable, we affirm the circuit court's dismissal of Hazen's action.
I. FACTS AND PROCEDURAL HISTORY
Hazen sued Allstate in the Polk County Circuit Court. Allstate was the sole defendant named in Hazen's action. The circuit court granted Allstate's motion to dismiss Hazen's amended complaint without prejudice and gave Hazen ten days to amend. The order dismissing the amended complaint recited that Allstate's motion was granted "based upon Florida's Non-Join-der Statute and a lack of subject matter jurisdiction." After Hazen declined to amend, the circuit court entered a final judgment dismissing the action. This appeal followed.
The facts pertinent to our review of this case are alleged in Hazen's amended complaint. For purposes of our review, we must assume the factual allegations of the amended complaint to be true, and we construe them in the light most favorable to Hazen as the nonmoving party. See Williams v. Howard, 329 So.2d 277, 280 (Fla.1976); Hosp. Constructors Ltd. ex rel. Lifemark Hosps. of Fla., Inc. v. Lefor, 749 So.2d 546, 547 (Fla. 2d DCA 2000). We apply the de novo standard of review to our consideration of the final judgment dismissing Hazen's action with prejudice. See Smith v. City of Fort Myers, 898 So.2d 1177,1178 (Fla. 2d DCA 2005).
Hazen is a resident of Polk County, Florida. Allstate is a foreign insurance company that maintains an office or offices in Polk County. On March 9, 2003, Hazen's 2001 Cadillac DeVille was involved in an accident with another vehicle in Mississippi. The owner of the other vehicle was insured by Allstate. The permissive user who drove the other vehicle was negligent. Allstate agreed 'that its insured was liable for the accident and the resulting property damage.
After Hazen returned to Florida, Allstate contacted her. Allstate agreed to have the Cadillac repaired and to provide Hazen with a rental vehicle. Hazen agreed, and Allstate authorized and paid for the repair of the Cadillac in Louisiana. When the Cadillac was returned to Florida, Hazen discovered that the attempted repairs were inadequate and incomplete. Hazen alleged that the repair effort authorized and paid for by Allstate was so deficient that the Cadillac was not safe to drive and that it was significantly diminished in value. Hazen asked Allstate to reimburse her for the diminished value of the Cadillac, but Allstate refused. Hazen initially stored the Cadillac, asserting that it was not safe to drive. She ultimately sold the Cadillac at what she claimed was a substantial loss.
In her amended complaint, Hazen alleged that Allstate had entered into an oral contract with her for the repair of the Cadillac and to pay such other benefits as were available under the Allstate policy. Hazen alleged further that Allstate had breached the oral contract. She claimed damages in excess of $15,000 for (1) the diminution in the value of the Cadillac, (2) loss of use/rental car costs, and (3) storage fees. Notably, Hazen did not allege that she had obtained a settlement or verdict against either Allstate's insured or the permissive user of the other vehicle.
II. DISCUSSION
A. The Issue
Under the nonjoinder statute, an injured third party may not file a direct action against a liability insurer for a cause of action covered by a liability insurance policy without first satisfying either one of two conditions precedent: (1) obtaining a settlement against the insured or (2) obtaining a verdict against the insured. In this regard, subsection (1) of the nonjoin-der statute provides:
It shall be a condition precedent to the accrual or maintenance of a cause of action against a liability insurer by a person not an insured under the terms of the liability insurance contract that such person shall first obtain a settlement or verdict against a person who is an insured under the terms of such policy for a cause of action which is covered by such policy.
§ 627.4136(1) (emphasis supplied). Hazen argues that her acceptance of Allstate's oral offer to provide her with a rental car and to repair her Cadillac was a "settlement" that satisfied one of the two alternative conditions precedent of the statute. Hazen also argues — somewhat inconsistently — that the settlement agreement with Allstate "ma[de] the Florida Non-joinder Statute inapplicable." In response, Allstate contends that Hazen did not meet either of the conditions precedent of the statute because Hazen has not obtained a settlement or a verdict against its insured. According to Allstate, the "settlement" referred to in the statute must be against the insured, not with the insurance company.
These arguments raise a question of apparent first impression in Florida concerning whether a presuit undertaking by an automobile insurance carrier with a third party for the repair of property damage and the payment of incidental costs caused by the negligence of the carrier's insured is sufficient either to satisfy one of the conditions precedent described in the subsection (1) of the nonjoinder statute or to render the statute itself inapplicable. To answer this question, we will begin with a brief look at the history of the nonjoinder statute.
B. A Brief History
Florida's first nonjoinder statute was enacted as section 627.7262 in 1976. See ch. 76-266, § 12, at 726, Laws of Fla. This statute was a legislative response to the decisions in Shingleton v. Bussey, 223 So.2d 713 (Fla.1969), and Beta Eta House Corp. of Tallahassee v. Gregory, 237 So.2d 163 (Fla.1970). In Shingleton, our supreme court approved the filing of direct actions by injured third parties against liability insurers in motor vehicle cases under a third-party beneficiary theory. 223 So.2d at 715. In Beta Eta House, the court declared that the principles announced in Shingleton applied "not only to automobile liability insurance but also to other forms of liability insurance." 237 So.2d at 165. This first nonjoinder statute was subsequently declared unconstitutional. See Markert v. Johnston, 367 So.2d 1003 (Fla.1978).
In 1982, the legislature enacted another version of the nonjoinder statute that was also numbered as section 627.7262, Florida Statutes. See ch. 82-243, § 542, at 1553, Laws of Fla. This version of the nonjoin-der statute survived a constitutional challenge. See VanBibber v. Hartford Accident & Indem. Ins. Co., 439 So.2d 880 (Fla.1983) Subsection (1) of the 1982 version of the nonjoinder statute provided:
It shall be a condition precedent to the accrual or maintenance of a cause of action against a liability insurer by a person not an insured under the terms of the liability insurance contract, that such person shall first obtain a judgment against a person who is an insured under the terms of such policy for a cause of action which is covered by such policy.
§ 627.7262 (emphasis supplied). Thus, under the 1982 version of the nonjoinder statute, the condition precedent to an injured third party's right to file a direct action against an insurer differed significantly from the version of the statute under review in this case. The 1982 version of the statute required the obtaining of a judgment against the- insured as the condition precedent for a direct action against the liability insurer.
In 1990, the legislature amended subsection (1) of the nonjoinder statute by deleting the word "judgment" and substituting in its place the words "settlement or verdict." See ch. 90-119, § 38, at 393, Laws of Fla. At the same time, the legislature further amended the nonjoinder statute by adding a new subsection (4) that addresses the procedure for the joinder of a liability insurer in existing litigation with the insured once either of the conditions precedent of subsection (1) has been satisfied. This new subsection (4) provides:
At the time a judgment is entered or a settlement is reached during the pen-dency of litigation, a liability insurer may be joined as a party defendant for the purposes of entering final judgment or enforcing the settlement by the motion of any party, unless the insurer denied coverage under the provisions of s. 627.426(2) or defended under a reservation of rights pursuant to s. 627.426(2). A copy of the motion to join the insurer shall be served on the insurer by certified mail. If a judgment is reversed or remanded on appeal, the insurer's presence shall not be disclosed to the jury in a subsequent trial.
Id. at 893-94. In 1992, section 627.7262 was transferred and renumbered as section 627.4136. See eh. 92-318, § 37, at 3110, Laws of Fla.
C. Two Lessons From History
At this point, we pause to note two lessons that we glean from this brief history of the nonjoinder statute. First, the 1982 version of the statute required the entry of a judgment against the insured as a condition precedent to joinder of the insurer in an action on a liability policy brought by a third party. Second, the 1990 amendment — changing the condition precedent to the joinder of the insurer as a party from a judgment to a settlement or verdict — was made in conjunction with the addition of a new subsection (4) to the statute. The new subsection (4) addressed the procedural aspects of joining the insurer as a party in the context of litigation that is already pending, not a new lawsuit. With these lessons in mind, we turn now to an examination of the procedural aspects of the joinder of the insurer under the 1982 version of the statute and the significance of the changes made by the 1990 amendments.
D. Joining the Insurer: Old and New
Under the 1982 version of the nonjoinder statute, the injured third party had no right of action against the insurer under a liability policy before obtaining a judgment against the insured. See Hett v. Madison Mut. Ins. Co., 621 So.2d 764, 766 (Fla. 2d DCA 1993); Home Ins. Co. of Ill. v. Sentry Ins., 461 So.2d 1038, 1038 (Fla. 4th DCA 1985), receded from on other grounds, Hartford Accident & Indem. Co. v. U.S.C.P. Co., 515 So.2d 998 (Fla. 4th DCA 1987). The procedural effect of the 1982 version of the statute was to require a two-step process for an injured third party to obtain a judgment against an insurer. The injured third party first had to obtain a judgment against the insured. In the second step of the process, the injured third party had to file an independent action against the insurer. See Pink Star Corp. v. U.S. Fire Ins. Co., 546 So.2d 1085, 1086-87 (Fla. 3d DCA 1989); Martin v. S. Broward Topeekeegeeyugnee Park Disk, 541 So.2d 172, 173 (Fla. 4th DCA 1989). This two-step process could be cumbersome, expensive, and inefficient.
In the 1990 amendment to the nonjoin-der statute, the legislature addressed these difficulties by adopting new procedures for the joinder of insurers in pending litigation. These new procedures eliminated the need for the two-step process that was required under the earlier legislation. With certain exceptions not material here, the new subsection (4) of the statute provides for the joinder of a liability insurer when a judgment is entered or a settlement is reached during the pendency of litigation. § 627.4136(4). The joinder of the liability insurer under these circum stances is for the purposes of entering final judgment or enforcing a settlement. Id. Joinder may be made on the motion of any party. Id. A copy of the motion to join the insurer must be served on the insurer by certified mail. Id. Thus, under the .streamlined procedure adopted in the 1990 amendments, an independent action against the insurer after the entry of judgment against the insured is no longer required.
The addition of subsection (4) to the nonjoinder statute required a conforming amendment to subsection (1). Under the 1982 version of the statute, the condition precedent for joining the insurer in an action was the obtaining of a judgment against the insured. By the time an injured third party obtained a judgment against the insured, it was generally too late to add the insurer as a party in the existing action, and the filing of a new action against the insurer was required. Subsection (4) of the nonjoinder statute eliminates this procedural inefficiency. Under the provisions of subsection (4) in the 1990 version of the statute, the injured third party may move to add the insurer as a party before or at the time of the entry of judgment against the insured. C.A. Seguros Catatumbo v. Herrera, 812 So.2d 576, 577 (Fla. 3d DCA 2002). The amendment to subsection (1) made by the 1990 amendment that changes the condition precedent from obtaining a judgment to obtaining a settlement or verdict against the insured was designed to dovetail with the procedural innovation of subsection (4). The replacement of the requirement for obtaining a judgment against the insured with obtaining a settlement or a verdict against the insured in subsection (1) of the statute provides a workable method for obtaining a judgment against both the insured and the insurer in the same action. Thus the amendment to subsection (1) of the statute and the addition of subsection (4) by the 1990 amendments are not isolated pieces of legislation. Instead, they are part of a unitary procedural innovation that eliminated the two-step process for joining the insurer that was required under the 1982 version of the statute.
E. Analysis of Hazen's Claim that a "Settlement" Occurred
Our review of the history of the nonjoinder statute and the purpose of the 1990 amendments to it provides an appropriate background for the analysis of Hazen's argument that she satisfied one of the alternative conditions precedent of the statute when she reached a "settlement" with Allstate for the repair of her Cadillac. The flaw in Hazen's argument is that it reads the term "settlement" as it is used in subsection (1) of the statute in isolation from the use of the same term in subsection (4). The changes in the critical language describing the operative conditions precedent in subsection (1) and the addition of subsection (4) concerning the join-der of insurers address the same subject matter; they were, also enacted as part of a single legislative enactment. Accordingly, they must be read in pari materia. See Major v. State, 180 So.2d 335, 337 n. 1 (Fla.1965); McGraw v. R & R Invs., Ltd., 877 So.2d 886, 890 (Fla. 1st DCA 2004). Subsection (4) provides a context for the use of the term "settlement" that is lacking in subsection (1). Subsection (4) refers to a "settlement [that] is reached during the pendency of litigation." In such pending litigation, the insured would necessarily be a party before any settlement could be reached. In addition, subsection (4) speaks of "enforcing the settlement by the motion of any party." Here again, the statutory reference to "settlement" occurs against a backdrop of pending litigation. The references in subsection (4) to a "settlement" in the context of pending litigation and enforcement by motion inform our understanding of the use of the same term in subsection (1). Reading these terms in pari materia, a presuit undertaking or agreement between an injured third party and an insurer about the adjustment of a claim does not satisfy the alternative condition precedent of settlement described in subsection (1) of the statute. Such a pre-suit undertaking or agreement does not qualify as a "settlement" within the meaning of the nonjoinder statute because it does not occur within the course of pending litigation in which the insured is already a party.
For these reasons, Hazen's argument that she satisfied one of the alternative conditions precedent of the nonjoinder statute by reaching an oral agreement with Allstate for the repair of her Cadillac fails. Hazen did not allege that her "settlement" with Allstate occurred within the course of pending litigation in which the insured was already a party. Furthermore, Hazen did not allege that she had obtained a verdict against Allstate's insured. It follows that Hazen's amended complaint did not allege sufficient facts to satisfy either of the alternative conditions precedent of the nonjoinder statute.
However, our conclusion that Hazen did not satisfy either of the alternative conditions precedent of the nonjoinder statute that would allow her to file a direct action against Allstate does not end our analysis. There is another theory which could arguably support Hazen's attempt at a direct action against Allstate. We turn now to an examination of this other theory.
F. The Insurer's "Agreement" as a New and Independent Obligation
By its terms, the nonjoinder statute applies only to a cause of action which is covered by a liability insurance contract, i.e., a tort action. § 627.4136(1). It follows that the nonjoinder statute does not bar a direct action against an insurer by a third party on an obligation that is independent of the insurance contract. See, e.g., Cresci v. The Yacht, "Billfisher", 874 F.2d 1550, 1551 (11th Cir.1989) (holding that Florida's nonjoinder statute was not applicable to a salvor's action against a marine insurer for the value of the salvor's efforts to salvage a derelict vessel that was covered by a policy of insurance issued by the insurer). Although Hazen has argued that the non-joinder statute was inapplicable to bar her direct action against Allstate, she has not directed our attention to any authorities that have considered the applicability of a nonjoinder statute or a similar rule to an alleged breach of an insurer's agreement to settle a claim against its insured.
Our independent research disclosed one case that allowed an injured third party's direct action against an insurer to go forward based on the insurer's presuit efforts to negotiate the settlement of claims against its insured. In Howton v. State Farm Mutual Automobile Insurance Co., 507 So.2d 448 (Ala.1987), the plaintiffs sued an insurance carrier in Alabama for breach of contract and the tort of outrage. Id. at 448-49. The basis of the plaintiffs' claims was the breach of an alleged agreement by the insurance carrier to pay for the repairs of damages to the plaintiffs' automobile caused by the carrier's insured. Id. at 448. The trial court granted a summary judgment in favor of the insurer on the basis of a prior Alabama decision. Id. at 449. On appeal, the Supreme Court of Alabama rejected the application of a rule prohibiting direct actions by an injured third party against an insurer prior to the entry of a judgment against the insured under the facts of the case before it. Id. at 450. In explaining its decision, the Alabama court noted that "contracts entered into between a third party and an insurer are mutually enforceable without regard to which of the parties committed the breach." Id. at 450. The court went on to state:
[T]he rule prohibiting direct actions against the insurer has no application where the insurer undertakes a new and independent obligation directly with a nonparty to the insurance contract in its efforts to negotiate a settlement of the third party's claim. Indeed, an insurance carrier is no less liable under the law for the breach of it own contract obligations or for its own tortious conduct than is any other party.
Id. at 450-51. The Alabama court concluded by overruling its prior decision on which the trial court had relied and by reversing the summary judgment in favor of the insurer. Id. at 451. In a later decision, the Alabama court quoted from its opinion in Howton to explain that "[a] 'new and independent obligation' exists when 'the insurer, acting independently of its insured, enters into a contract with, or commits a tort against, a third-party claimant.' " Williams v. State Farm Mut. Auto. Ins. Co., 886 So.2d 72, 75 (Ala.2003) (quoting Hoioton, 507 So.2d at 450).
In Hazen's case, as in Howton, the basis of the claim is the breach by an insurer of an alleged agreement for the repair of a motor vehicle. Upon an initial reading, the Howton decision might appear to support a direct action by Hazen on a "new and independent obligation"- — the alleged agreement with Allstate. We have already noted that the principles barring direct actions by injured third parties against insurers do not apply to actions against insurers that are not based on liability insurance contracts. Nevertheless, we think the reasoning on this point in How-ton is unsound. As another court has observed, the Howton opinion does not explain the source of the "new and independent obligation" to which the Alabama court refers. See McWhirter v. Fire Ins. Exch., Inc., 878 P.2d 1056, 1059 (Okla.1994). Furthermore, in Howton, the existence of the insurance contract was the only reason the insurer had to deal with the third party. McWhirter, 878 P.2d at 1059. Thus there was no legal ground upon which the insurer could be deemed to have acted "independently" of its insured. Viewed another way, a "new and independent obligation" by the insurer could not arise in Howton because there was no consideration for the alleged agreement by the insurer to assume an obligation to the plaintiffs. For these reasons, we conclude that Hazen's amended complaint did not allege sufficient facts to plead that Allstate had assumed an obligation to Hazen that was independent of the liability insurance contract. It follows that the alternative theory based on a new and independent obligation assumed by Allstate will not support Hazen's action either.
G. Two Additional Considerations
Two additional considerations add weight to our conclusion that Hazen's arguments are based on a misreading of the nonjoinder statute. First, the intent of the nonjoinder statute "is to ensure that the availability of insurance has no influence on the jury's determination of . damages." Gen. Star Indem. Co. v. Boran Craig Barber Engel Constr. Co., 895 So.2d 1136, 1138 (Fla. 2d DCA 2005) (citing State Farm Fire & Cas. Co. v. Nail, 516 So.2d 1022, 1022 (Fla. 5th DCA 1987)). The adoption of Hazen's argument that a pre-suit settlement with an insurer in the context of adjusting a claim satisfies one of the conditions precedent of the nonjoinder statute or renders the statute inapplicable would permit — if not encourage. — consideration of insurance issues together with the determination of liability and damages. Such a result would be inconsistent with the original legislative policy that led to the enactment of the statute. We are unwilling to conclude that the legislature intended to create a loophole allowing direct actions against insurers based on informal undertakings for the repair of damage to motor vehicles when it amended subsection (1) of the nonjoinder statute to delete the word "judgment" and to substitute the words "settlement or verdict."
Second, we believe that the adoption of the view of the nonjoinder statute proposed by Hazen would discourage insurers from undertaking the prompt adjustment and settlement of meritorious claims. Under Hazen's interpretation of the statute, an injured third party could file a direct action against an insurer simply by alleging the breach of a presuit "settlement" arising from an insurer's undertaking to have a vehicle repaired or from some other effort to adjust a claim. Granted, it might be convenient for Hazen and other claimants to be able to sue the insurer directly on a claim of this type without having to join and serve the insured. However, we think that insurers would be reluctant to attempt to settle property damage claims such as Hazen's claim if a mere allegation of the insurer's breach of an oral "agreement" to adjust a claim could lead to a direct action against the insurer. The general reluctance or refusal of insurers to adjust and settle meritorious claims before suit that would likely result from such a procedure would ultimately be detrimental to the motoring public. Although this factor is by no means determinative, it does constitute an additional reason for rejecting as unsound Hazen's interpretation of the nonjoinder statute.
III. CONCLUSION
For these reasons, Allstate's undertaking to repair the property damage to Hazen's Cadillac and to pay incidental costs for which its insured was liable was not sufficient either to satisfy one of the alternative conditions precedent of the nonjoin-der statute or to render the statute inapplicable. Accordingly, the circuit court properly dismissed Hazen's action with prejudice after she declined to amend her complaint, and we affirm the final judgment entered by the circuit court.
Affirmed.
WHATLEY, J., Concurs.
CANADY, J., Dissents with opinion.
. Our affirmance of the circuit court's dismissal of Hazen's action on the basis of the nonjoinder statute makes it unnecessary to address the circuit court's conclusion that it lacked jurisdiction of the subject matter of Hazen's action.
. Subsection (3) of the nonjoinder statute specifically authorizes liability insurers to insert in their policies provisions that preclude injured third parties "from joining a liability insurer as a party defendant with its insured prior to the rendition of a verdict." § 627.4136(3). Such provisions are generally referred to as "no-action" clauses. See 7 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 105:4 (1997). The statute declares that such provisions "shall be fully enforceable." § 627.4136(3). Hazen did not attach to her amended complaint a copy of the liability policy issued by Allstate to its insured. Since our consideration of this case is limited by the allegations of Hazen's amended complaint, we need not consider the effect of any no-action clause in Allstate's policy on Hazen's action against Allstate. See Blue Cross & Blue Shield of Michigan v. Halifax Ins. Plan, Inc., 961 F.Supp. 271, 274 (M.D.Fla.1997).
. For additional information on the history of the nonjoinder statute in Florida, see generally The Florida Bar. In re Rules of Civil Procedure (Deletion of Rule 1.450(e)), 429 So.2d 311 (Fla. 1983); Russel Lazega, Motor Vehicle No-Fault Law Personal Injury Protection. (PIP), § 3:10 (West 2006).
. The rule adopted in the nonjoinder statute was consistent with the rule that prevailed in Florida before this state's relatively short-lived experiment with direct actions against insurers under Shingleton and Beta Eta House. See Artille v. Davidson, 126 Fla. 219, 170 So. 707, 708 (1936) (stating the rule of nonjoinder in the context of litigation involving an indemnity policy rather than a liability policy), overruled in part by Shingleton, 223 So.2d 713. For a general discussion of an injured third party's right of direct action against an insurer in the absence of statute or contract provisions, see generally 7 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 104:l-:6 (1997).
. Adding the insurer after the entry of final judgment might have been possible — at least theoretically — if a motion to add the insurer as a party had been filed within the time for filing a motion for rehearing under Florida Rule of Civil Procedure 1.530. Cf. C.A. Seguros Catatumbo v. Herrera, 812 So.2d 576, 577 (Fla. 3d DCA 2002) (considering the 1990 version of the statute and suggesting that a motion to add the insurer could be entertained if made within the time for a motion for rehearing). However, the case law under the 1982 version of the statute called for the filing of an independent action. See Pink Star Corp., 546 So.2d at 1086-87; Martin, 541 So.2d at 173.