Court Opinion

ID: 9957011
Source: CourtListenerOpinion
Date Created: 2024-04-03 15:05:02.440908+00
Date Added: 2024-06-11T08:18:02.736769
License: Public Domain

Third District Court of Appeal
                                  State of Florida

                             Opinion filed April 3, 2024.
          Not final until disposition of timely filed motion for rehearing.

                               ________________

                                No. 3D22-1290
                          Lower Tribunal No. 20-13123
                             ________________

                Seneca Specialty Insurance Company,
                                     Appellant,

                                        vs.

      Jade Beach Condominium Association, Inc., etc., et al.,
                                    Appellees.

       An Appeal from the Circuit Court for Miami-Dade County, David C.
Miller, Judge.

    Kennedys CMK LLP, and Josh Levy, Martin F. Harms, and Jedidiah
Vander Klok, for appellant.

     Boyle, Leonard, & Anderson, P.A., and Alexander Brockmeyer (Fort
Myers), for appellees.

Before LOGUE, C.J., and SCALES and GORDO, JJ.

        LOGUE, C.J.


    Judge Gordo did not participate in oral argument.
      Seneca Specialty Insurance Company appeals the trial court’s order

dismissing its breach of contract action against Seneca’s insured, Jade

Beach Condominium Association, Inc. In the operative complaint, Seneca

alleged the Association violated the policy provisions requiring the

Association to refrain from impairing Seneca’s subrogation rights when the

Association settled with, and released, tortfeasors responsible for claims that

had been brought by third parties against the Association, and which Seneca

had paid on the Association’s behalf. The narrow issue on appeal is whether

Seneca sufficiently stated a breach of contract claim by alleging the

Association’s releases barred its subrogation rights and attaching the policy

and releases. The trial court ruled that the complaint failed to state a claim

because, in these circumstances, an insurer must allege it first sued the

responsible tortfeasors and suffered a judgment finding that the insured’s

releases barred its subrogation rights. For the reasons stated below, we

conclude that Seneca sufficiently pled its claim. Thus, we reverse the trial

court’s dismissal of Seneca’s breach of contract claim.1

1
  We affirm the trial court’s dismissal with prejudice of Seneca’s remaining
claims.

                                      2
                               BACKGROUND

      Seneca issued a liability insurance policy to the Association that

required the Association to refrain from impairing Seneca’s subrogation

rights against responsible tortfeasors. The policy stated:

            If the insured has rights to recover all or part of any
            payment we have made under this Coverage Part,
            those rights are transferred to us. The insured must
            do nothing after loss to impair them. At our request,
            the insured will bring "suit" or transfer those rights to
            us and help us enforce them.

      On August 1, 2014, the owners of Unit 4701 at Jade Beach

Condominium (“Unit 4701”) sued the Association, the owner of Unit 4904

(“Unit 4904"), and two construction companies, among others. Unit 4701

alleged that water flowing down from Unit 4904’s balcony and from limited

common areas appurtenant to Unit 4904 caused damage to their balcony.

Unit 4701 contended the Association had a non-delegable responsibility to

maintain the structural and mechanical elements of the Unit 4904 balcony,

which was a limited common element. Based on these allegations, Unit 4701

alleged claims against the Association for breach of the declaration of

condominium, trespass, and nuisance.

      Unit 4904 then filed a crossclaim against the Association and alleged

claims for breach of the condominium’s declaration, contribution, common

law indemnification, and equitable subrogation (“Unit 4904’s Crossclaim”).

                                       3
Unit 4904 argued the Association had a duty to maintain the condominium’s

common elements and to remedy any structural defects. As such, they

contended, the Association had a duty to remedy the water run-off from Unit

4904’s balcony and to remedy water intrusion into Unit 4904 because these

issues arose from underlying structural issues with common and limited

common elements.

      When notified by the Association of the lawsuits, and as required by

the policy, Seneca provided the Association with a defense and ultimately

paid its liability policy limit of $1,000,000 on behalf of the Association to settle

Unit 4904’s Crossclaim.

      Unbeknownst to Seneca, however, while these unit owner actions

were pending, the Association filed a separate construction defect lawsuit

against    the   condominium       developer,        general    contractor,   design

professionals, and subcontractors, including the concrete formwork

subcontractor, the mechanical subcontractor, and the caulking and

waterproofing     subcontractor     (collectively,    “the     Construction   Defect

Defendants”). The Association’s lawsuit (the “Construction Defect Lawsuit”)

included allegations of defects in mechanical rooms causing leakage into

units below, defects in roofs, and defects in balcony slopes. In addition to

damages, the Association sought indemnification from the Construction

                                         4
Defect Defendants for all unit owner claims brought against the Association

arising from the defects.

      The Association resolved the Construction Defect Lawsuit through

various settlements totaling approximately $12,565,000. The settlement

amounts were not allocated to any particular claims. As part of the

settlement, the Association gave the Construction Defect Defendants

general releases of the Association’s claims. For example, one of the

releases provided:

            [T]he Association, for themselves and each of their
            respective . . . insurers hereby mutually release and
            forever discharge [the general contractor] and each
            of their respective . . . insurers, . . . and any person
            or entity that provided labor, materials or services
            under a direct contract with [the general contractor]
            related to the construction of the [condominium], from
            any and all manner of past, present and future
            claims, actions, causes and causes of action, suits,
            lawsuits, debts, dues, duties, sums of money,
            accounts, reckonings, bonds, bills, specialties,
            covenants, contracts, liabilities, statutory claims for
            damages, exemplary and/or punitive damages,
            claims for indemnity or contribution, controversies,
            expenses, assessments, penalties, charges, injuries,
            losses,     fees,    costs,     damages,       expenses,
            agreements, promises, variances, trespasses,
            judgments, executions, and demands whatsoever, in
            law or in equity, which they ever had, now have, will
            have, or may have in the future, against each other,
            both known and unknown, latent and patent,
            asserted      and    unasserted,       suspected     and
            unsuspected, discovered and undiscovered, whether
            now existing, or hereafter arising, that relate to, arise

                                       5
            out of, or are in any way connected with, the original
            construction of the [condominium], including but not
            limited to all claims which were or could have been
            asserted in the [Construction Defect Lawsuit].

(emphasis added).

      The Association allegedly did not inform Seneca of these settlements

at any time before Seneca paid its liability policy limit to settle Unit 4904’s

Crossclaim, and Seneca was not a party to the Construction Defect Lawsuit

or the settlement agreements.

      On June 22, 2020, Seneca filed the underlying action against the

Association. The operative complaint included a breach of contract claim

against the Association, arguing the Association impaired Seneca’s

subrogation rights by releasing the Construction Defect Defendants in the

Construction Defect Lawsuit. Attached to the complaint were copies of the

Association’s releases given to the Construction Defect Defendants. The

complaint alleged the Association’s releases barred Seneca’s subrogation

rights against the Construction Defect Defendants.

      The Association moved to dismiss and argued that Seneca’s breach of

contract claim was premature because Seneca failed to first sue the

Construction Defect Defendants and suffer a judgment that found Seneca’s

subrogation rights had been impaired by the Association. The Association

also argued that dismissal was warranted because Seneca’s liability

                                      6
payment in Unit 4904’s Crossclaim did not overlap with damage claims

asserted in the Construction Defect Lawsuit. The Association contended it

recovered for damages to the common elements, while Unit 4904’s

Crossclaim sought to recover different damages—damages to the interior of

an individual unit, for which the Association did not have standing to sue.

      In opposition, Seneca argued its breach of contract claim was not

premature because it was not required to first file an unsuccessful

subrogation action against the Construction Defect Defendants as a

condition precedent to filing its breach of contract action against the

Association. Seneca further maintained that, because there was overlap

between the damages sought in Unit 4904’s Crossclaim (for which Seneca,

on behalf of the Association, paid its policy limits to settle) and the claims

made by the Association in the Construction Defect Lawsuit (which resulted

in the $12,565,000 settlement proceeds recovered by the Association),

Seneca would have been subrogated to the Association’s rights against the

Construction Defect Defendants based on its payment to Unit 4904, but for

the Association giving general releases to the Construction Defect

Defendants of the Association’s claims.

      Following a hearing, the trial court granted the Association’s motion to

dismiss, ruling, as a matter of law, that Seneca’s breach of contract claim

                                      7
against the Association was premature and that the damages Seneca paid

in Unit 4904’s Crossclaim did not overlap with the damages sought in the

Construction Defect Lawsuit. This appeal timely followed.

                                 ANALYSIS

     An order granting a motion to dismiss is reviewed de novo. Williams

Island Ventures, LLC v. de la Mora, 246 So. 3d 471, 475 (Fla. 3d DCA 2018).

     To determine whether the trial court erred in concluding that Seneca’s

claim for breach of contract failed to state a cause of action, we must answer

two questions. First, whether Seneca’s breach of contract claim was

premature because Seneca was first required to sue the Construction Defect

Defendants and suffer a judgment finding that the Association’s releases

barred Seneca’s subrogation rights. Second, whether Seneca’s claimed

damages, namely those it paid to settle Unit 4904’s Crossclaim, overlapped

with the damages claimed and recovered by the Association in the

Construction Defect Lawsuit. We address each below.

     I.     Premature Filing

     At the outset we note that the parties do not dispute that where (1) an

insurer honored a claim under an insurance policy; (2) the insurer became

subrogated to its insured’s rights pursuant to the terms of the policy as a

result of honoring the claim; and (3) the insured settled with or released the

                                      8
tortfeasor, then the subrogated insurer may have a remedy against the

insured under a breach of contract theory. See generally Annotation, Rights

and Remedies of Insurer Paying Loss As Against Insured Who Has

Released or Settled with Third Person Responsible for Loss, 51 A.L.R.2d

697 (1957) (noting that “the right of a property insurer who has honored a

claim under the policy to recover back from the insured the payments made,

where the insured has settled with or released a third person allegedly

responsible for his loss, are discernible in the cases” including cases that

have found “that the action of the insured in settling with or releasing the

alleged wrongdoer constitutes a breach of the express contract between the

insured and the insurer contained in either the original policy or in some

collateral undertaking, such as a subrogation agreement, an assignment, or

a loan receipt executed by the insured in connection with the payment of the

policy claim”); Allied Mut. Ins. Co. v. Heiken, 675 N.W.2d 820, 826 (Iowa

2004) (“Thus, an insurer who has lost subrogation rights due to the release

of the responsible tortfeasor by the insured has a means to seek

reimbursement from the insured for its loss based on breach of contract . . .

.”).

       Instead, the issue before us is whether, as the trial court concluded,

Seneca was first required to unsuccessfully sue the Construction Defect

                                      9
Defendants as a condition precedent to suing its insured for breach of the

policy’s transfer of rights provision, which prohibited the insured from

impairing the rights transferred to the insurer for recovery of indemnification

payments from tortfeasors. Cf. Arch Ins. Co. v. Kubicki Draper, LLP, 318 So.

3d 1249, 1255 (Fla. 2021) (“[S]ubrogation exists to hold premium rates down

by allowing the insurers to recover indemnification payments from the

tortfeasor who caused the injury.”).

      Seneca contends its claim was not premature because at the time it

filed suit all the elements of a breach of contract claim existed. Specifically,

Seneca maintains that (1) the insurance policy was a valid contract that

required the Association not to impair Seneca’s recovery rights after a loss;

(2) the Association breached the insurance policy by entering into

settlements with the Construction Defect Defendants and releasing them

from any further liability; and (3) Seneca was damaged by this breach

because it could no longer pursue claims against the Construction Defect

Defendants on the released claims and thus could not recover the amounts

it paid on the Association’s behalf to settle Unit 4904’s Crossclaim. See

Grove Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081, 1094–

95 (Fla. 3d DCA 2014) (“The elements of a breach of contract action are: (1)

                                       10
a valid contract; (2) a material breach; and (3) damages.” (quoting Schiffman

v. Schiffman, 47 So. 3d 925, 927 (Fla. 3d DCA 2010))).

      The Association, in turn, contends that Seneca’s claim failed because

it did not, prior to filing suit against the Association, take the “required” step

of first unsuccessfully suing the Construction Defect Defendants. The

Association argues that absent such a failed attempt, Seneca could not plead

that the Association had breached the insurance policy by impairing its

recovery rights or that it suffered damages. The Association argues that,

since no court had entered a judgment finding that the releases the

Association gave to the Construction Defect Defendants barred Seneca’s

subrogation claims against those Defendants, Seneca could not allege that

the Association breached the policy.

      In what appears to be a case of first impression, we are reluctant to

conclude that, for an insurer to successfully plead a claim against its insured

for breach of contract based on the impairment of recovery rights, the insurer

must first unsuccessfully sue the parties to whom the insured granted

releases. Such a condition precedent to suit is not contained in the insurance

policy at issue. Nor has the Association pointed us to any case setting forth

such a requirement in this context.

                                       11
      The Association invites us to establish a rule based on an analogy to

the professional malpractice cases of Blumberg v. USAA Casualty Insurance

Company, 790 So. 2d 1061 (Fla. 2001) and Peat, Marwick, Mitchell & Co. v.

Lane, 565 So. 2d 1323 (Fla. 1990). It asserts that a broad rule can be

fashioned from these cases, namely that “before a plaintiff can file suit, the

plaintiff must first receive an adverse determination on the underlying claim.”

We do not read these professional malpractice cases as supporting such a

broad rule. Rather, we read Blumberg and Peat, Marwick as addressing, in

the professional malpractice context, the effect of a collateral legal

proceeding on the calculation of when the statute of limitations begins to run.

      In Blumberg, the Florida Supreme Court evaluated when the date of

accrual was for negligence and malpractice causes of action against an

insurance agent based on the agent promising coverage that was ultimately

unavailable to the insured. 790 So. 2d at 1062-63. The Court concluded the

cause of action accrued when the insured incurred damages at the

conclusion of a judicial proceeding where it was found that there was no

coverage or when the client’s right to sue expired. Id. at 1065. The Court

further explained that, when a party asserts that collateral legal proceedings

will determine the amount, if any, of a plaintiff’s damages, that party should

seek an abatement of the main action. Id.

                                      12
      In Peat, Marwick, the Court was called on to determine when a cause

of action accrued for accounting malpractice relating to income tax

preparations. 565 So. 2d at 1325. The Court, analogizing the case to one of

legal malpractice, held that the cause of action did not accrue until the United

States Tax Court made a final determination regarding the IRS’s deficiency

determination. Id. at 1327.

      While each of these cases involved collateral legal proceedings, the

Court’s focus was not on whether the plaintiff was required to initiate the

collateral proceeding to successively plead the elements of the cause of

action. Indeed, in each of these cases, the Court’s rationale centered on the

statute of limitations issue of “when the redressable harm or injury occurred.”

In both cases, the Court ultimately concluded that the statute of limitations

did not begin to run until the resolution of the related or underlying judicial

proceeding. Id. at 1325. This is because only then could it be determined

that there was actionable error by the professional. Id. at 1325-27; Blumberg,

790 So. 2d at 1065. In neither case did the Court hold, as the Association

suggests, that, to successfully plead its case, the plaintiff must first file the

collateral legal action.

      Our own review of Florida law also did not yield any such “sue and lose

first” rule, but we note that on at least two prior occasions this Court did rule

                                       13
on the merits of an insurer’s breach of contract claim against its insured

without a prior adverse determination of the underlying subrogated claims.

See, e.g., Russak v. State Farm Mut. Auto. Ins. Co., 281 So. 2d 541 (Fla. 3d

DCA 1973) (appeal of final summary judgment in favor of insurer in action

against insured for breach of contract following insurer’s voluntary dismissal

of subrogation action upon discovering insured settled with tortfeasor and

executed a general release); Ortega v. Motors Ins. Corp., 552 So. 2d 1127

(Fla. 3d DCA 1989) (appeal of final summary judgment in favor of insurer on

insurer’s claim for breach of contract against insured, which was brought as

an alternative claim in insurer’s subrogation action against tortfeasor after

tortfeasor raised affirmative defense that a release executed by insured

barred subrogation action). Both cases therefore call into question the

Association’s contention that “before a plaintiff can file suit, the plaintiff must

first receive an adverse determination on the underlying claim.”

      “Florida case law consistently holds that a cause of action for breach

of contract accrues and the limitations period commences at the time of the

breach.” Grove Isle Ass'n, Inc., 137 So. 3d at 1095 (quoting Clark v. Estate

of Elrod, 61 So. 3d 416, 418 (Fla. 2d DCA 2011)). Seneca pled that the

Association breached the insurance policy when it entered into settlements

with the Construction Defect Defendants and released them from any further

                                        14
liability. Seneca alleged this breach caused it damages because it could no

longer recover the amounts it paid on behalf of the Association through

subrogation. While the fact that Seneca did not first unsuccessfully sue the

Construction Defect Defendants may ultimately result in a proof problem for

Seneca, at this stage of the proceedings, it does not defeat Seneca’s

otherwise well pled breach of contract action. Raney v. Jimmie Diesel Corp.,

362 So. 2d 997, 998 (Fla. 3d DCA 1978) (“[T]he function of a motion to

dismiss a complaint is to raise as a question of law the sufficiency of the facts

alleged to state a cause of action. A court is not permitted to speculate as to

whether a plaintiff will be able to prove the allegations, rather a court is

required to accept all well pleaded allegations contained in the complaint as

true.”).

      Accordingly, we conclude Seneca sufficiently pled a cause of action for

breach of contract against the Association. Because the Association has

failed to identify any authority requiring Seneca to first obtain an adverse

determination in an action against the Construction Defect Defendants

before bringing the action, we reverse the trial court’s ruling that Seneca’s

breach of contract claim was premature.

                                       15
     II.   Overlapping Damages

     The trial court also concluded Seneca failed to state a cause of action

for breach of contract because “the damages Seneca paid in [Unit 4904’s

Crossclaim] did not overlap with damages in the Construction Defect

Lawsuit.” Indeed, if the damages sought by the Association (and, therefore

the settlement proceeds the Association received from the Construction

Defect Defendants) in the Construction Defect Lawsuit were different from

the damages paid by Seneca to settle Unit 4904’s Crossclaim, then, the

Association’s release of the Construction Defect Defendants would not have

impaired Seneca’s recovery rights.

     In its operative complaint, Seneca alleged that, because of its liability

payment on behalf of the Association (to settle Unit 4904’s Crossclaim) it

was subrogated to the Association’s right to recover from the Construction

Defect Defendants. Seneca further alleged that the Association’s release of

the Construction Defect Defendants in the Construction Defect Lawsuit

impaired Seneca’s ability to recover from these parties, resulting in Seneca

suffering damages, i.e. those damages against the Construction Defect

Defendants that it would have recovered but for the Association’s release of

the Construction Defect Defendants.

                                      16
      The Association contends that the facts alleged do not establish that

the Association actually impaired Seneca’s rights because the facts do not

show that Seneca’s liability settlement payments overlapped with the

damages the Association sought or recovered in the Construction Defect

Lawsuit. In other words, the Association argues its Construction Defect

Lawsuit alleged damages distinct from those paid by Seneca to settle Unit

4904’s Crossclaim.

      Again, while Seneca may encounter hurdles to ultimately proving its

claim, Seneca adequately alleged that at least a portion of the $1,000,000 it

paid to settle Unit 4904’s Crossclaim was recovered by the Association as

part of the Association’s $12,565,000 settlement of the Construction Defect

Lawsuit. For purposes of a motion to dismiss, the trial court was, and we are,

required to accept this allegation as true. See Town of Miami Lakes v. Miami-

Dade Cnty., 337 So. 3d 868, 870–71 (Fla. 3d DCA 2022) (“A motion to

dismiss is designed to test the legal sufficiency of the complaint, not to

determine factual issues[.] When ruling on a motion to dismiss, a trial court

must accept all factual allegations as true.” (internal citations omitted)). The

trial court erred by concluding, as a matter of law, to the contrary and we

reverse on these grounds as well.

                                      17
                              CONCLUSION

     Regardless of whether Seneca will ultimately be successful in proving

that (a) the releases are fatal to its right to recover from the Construction

Defect Defendants, and (b) overlap exists between the settlement monies it

paid and the damages it would have sought in an action against the

Construction Defect Defendants, Seneca has met the burden of pleading

these issues. We therefore hold that Seneca sufficiently pled a breach of

contract claim against the Association. Seneca pled facts establishing all

elements of a breach of contract claim, including damages arising from the

Association’s alleged breach of the insurance policy, and the Association

failed to set forth any legally cognizable basis for why such a claim should

be deemed premature.

     Reversed.

                                     18