Opinion ID: 1645406
Heading Depth: 1
Heading Rank: 3

Heading: ISSUE I: Simultaneous Release of IMC and Assignment of IMC's Causes of Action against Wachovia to Holman and Toomey

Text: The Eleventh Circuit's first certified question asks how to treat a settlement agreement that includes both a release of the insured company by the injured third party on a cause of action and an assignment by the insured company in favor of the injured party to permit the injured party to sue the insurer on the same cause of action. Wachovia contends IMC had no valuable rights left to assign to Holman because Holman and Toomey released IMC from all liability in their settlement agreement, IMC paid no portion of the $1.8 million judgment entered against it, and IMC suffered no damage from any breach of fiduciary duty by Wachovia. On the other hand, Holman and Toomey assert that the same settlement agreement, by simultaneously reserving their rights to pursue Wachovia and others for their unpaid judgment against IMC, expressly did not release Wachovia from suit. The settlement agreement in question was entered into in April 2001. Subsequently, in August 2001, Holman and Toomey and IMC executed the assignment pursuant to the provisions of the settlement agreement. Further, in August 2001, the United States District Court for the District of Maryland entered an order, which included both a $1.8 million judgment in favor of Holman and Toomey and a dismissal with prejudice of all other claims against IMC. After reviewing the settlement agreement, we find that although Holman and Toomey released IMC from liability in the agreement, the agreement also simultaneously assigned IMC's claims against Wachovia to Holman and Toomey. [2] The inclusion of the assignment in the settlement agreement permits Holman and Toomey to bring suit against Wachovia for any assigned claims that IMC had against Wachovia. The Eleventh Circuit certified this question regarding the settlement agreement after finding no precedential authority in Florida law. The Eleventh Circuit stated that even though both Wachovia and Holman and Toomey cited to relevant Florida case law, none of the cases addressed the question of whether a settlement agreement between two parties that explicitly contains both an assignment of causes of action against a third party (from IMC to Holman and Toomey) and an immediate release (by Holman and Toomey of IMC) allows the assignee to bring a cause of action for breach of fiduciary duty against the third party. Toomey, 450 F.3d at 1230. Wachovia contends that this case is analogous to Fidelity & Casualty Co. of New York v. Cope, 462 So.2d 459 (Fla. 1985). We do not agree. In Cope, the personal representative of a third party killed in a car accident brought an excess judgment action against the driver's insurer, alleging that the insurer negligently and in bad faith refused to negotiate a settlement of a previous wrongful death claim. However, prior to filing suit, the personal representative executed a release and satisfaction of judgment in favor of the insured. The release was not preceded or accompanied by an assignment to the injured party of any bad faith claim then existing in favor of the insured. In this circumstance, we found that the personal representative could not bring action against the insurer of the driver because the excess judgment had been satisfied prior to filing suit. In addition, the cause of action had not been assigned prior to satisfaction of judgment. Id. at 461. In making this ruling, we held that absent a prior assignment of the cause of action, once an injured party has released the tortfeasor from all liability, or has satisfied the underlying judgment, no such action may be maintained. Id. at 459. We find that our decision in Cope does not apply in the instant case. Cope did not involve an assignment, much less a settlement agreement containing both a simultaneous assignment and release. In fact, we specifically noted in our decision in Cope that the insured never assigned his claim against the insurer to the injured party. Id. at 459 n. 1. Because Cope did not involve any assignment of an insured's claim against an insurer, Cope cannot directly answer the instant certified question regarding the effect of a settlement agreement between two parties that explicitly contains both an assignment of causes of action against a third party insurer and an immediate release of the insured on the same causes of action. It seems that our use of the term prior in our decision in Cope may have been misunderstood to mean that an assignment of a claim cannot occur simultaneously with a release or satisfaction. Because an injured party's claim is derivative of the insured's claim against its insurer, our decision in Cope was meant to demonstrate that an injured party cannot maintain a claim against an insurer without an assignment from the insured if the injured party has released the insured from liability or if the injured party's judgment against the insured has been satisfied. Thus, an assignment of a claim against the insurer cannot occur after the release or satisfaction of the insured's claim because once the breach of duty is released or satisfied, the elements of the cause of action no longer exist. However, there is nothing in the language of the Cope decision that prohibits a simultaneous assignment of a claim with a release or satisfaction of the judgment. Furthermore, the parties to the settlement agreement, Holman and Toomey and IMC, clearly intended to assign IMC's claims against Wachovia to Holman and Toomey. The parties did not intend to release Wachovia from liability. The appellate courts in Florida have recognized the deeply rooted principle of Florida law that the intent of the parties controls interpretations of their releases. Rosen v. Fla. Ins. Guar. Ass'n, 802 So.2d 291, 295 (Fla.2001) (quoting Auto-Owners Ins. Co. v. St. Paul Fire & Marine Ins. Co., 547 So.2d 148, 150 (Fla. 2d DCA 1989)); see also Steil v. Fla. Physicians' Ins. Reciprocal, 448 So.2d 589 (Fla. 2d DCA 1984). This Court further stated in Stephen Bodzo Realty, Inc. v. Willits International Corp., 428 So.2d 225, 227 (Fla.1983), a case involving a written agreement releasing one of two joint and several obligors but not the other on the same obligation, that [t]o allow these respondents to escape this obligation by relying on a document executed by others who had no intention of releasing them is the epitome of manifest injustice. This statement is equally applicable in the case now before us. In the same paragraph where Holman and Toomey released IMC from its liability, they emphasized that nothing contained herein shall operate to release or waive any claims the Releasors might have or herein acquire against the insurance companies specified in Sections 3(d) and (e) below. Thus, we find that the intent of the parties to the settlement agreement, Holman and Toomey and IMC, was not to release Wachovia from liability. Wachovia should not be allowed to escape liability by relying on a document executed by others when those parties did not intend to release Wachovia from liability. Accordingly, we hold that a settlement agreement between two parties that explicitly contains both an assignment of causes of action against a third party (from IMC to Holman and Toomey) and an immediate release (by Holman and Toomey of IMC) allows Holman and Toomey to bring the assigned causes of action against Wachovia.