Opinion
Case No. 6:18-cv-1639-Orl-40DCI
12-04-2020
RIVERSIDE APARTMENTS OF COCOA, LLC, Equity of America, Inc. and Equity Planning Corporation, Plaintiffs, v. LANDMARK AMERICAN INSURANCE COMPANY, Defendant.
Edward A. Proctor, Pro Hac Vice, Thomas J. Connick, Pro Hac Vice, Connick Law, LLC, Beachwood, OH, Joseph W. Janssen, III, Janssen, Siracusa & Keegan, P.A., West Palm Beach, FL, for Plaintiffs. David Joshua Maldoff, Maxwell Harrison Stape, Scott J. Frank, Troy J. Seibert, William Roderick Lewis, Butler Weihmuller Katz Craig LLP, Tampa, FL, for Defendant.
Edward A. Proctor, Pro Hac Vice, Thomas J. Connick, Pro Hac Vice, Connick Law, LLC, Beachwood, OH, Joseph W. Janssen, III, Janssen, Siracusa & Keegan, P.A., West Palm Beach, FL, for Plaintiffs.
David Joshua Maldoff, Maxwell Harrison Stape, Scott J. Frank, Troy J. Seibert, William Roderick Lewis, Butler Weihmuller Katz Craig LLP, Tampa, FL, for Defendant.
ORDER
PAUL G. BYRON, UNITED STATES DISTRICT JUDGE
This cause comes before the Court on Defendant's Omnibus Motion for Partial Summary Judgment (Doc. 63 (the "Motion ")). Plaintiffs responded in opposition (Doc. 85), and Defendant filed a reply (Doc. 90).
Unless otherwise noted, the following facts are undisputed. (Doc. 84).
This dispute arises out of a commercial insurance policy (the "Policy ") issued by Defendant to Plaintiff Riverside Apartments of Cocoa, LLC ("Riverside "). The insured property (the "Property ") consists of four buildings containing 52 total rental apartment units. Building A contains 18 rental units, Building B contains nine rental units, Building C contains 25 rental units, and Building D is a storage/laundry room with no rental units.
A. Surplus Lines Insurance
Defendant is a Florida surplus lines insurance carrier. At the outset, the Court believes an overview of surplus lines insurance may be helpful:
Insurers are fundamentally classified as either admitted or non-admitted. An admitted insurer is licensed to do business in the insured's home state, while a non-admitted insurer is not. Admitted insurers’ policy forms and the rates they intend to charge for coverage are approved by the admitting state's insurance department; that is not the case with non-admitted carriers. Non-admitted insurers generally are referred to as surplus lines insurers....
Surplus lines insurers benefit the insured public by accepting risks that admitted carriers decline for a variety of underwriting and market reasons. Were it not for surplus lines insurers, many commercial insureds would have to forego coverage. In this way, surplus lines insurers function as an industry safety valve.
Surplus lines carriers are able to offer coverage when admitted carriers will not because surplus lines insurers are not subject to the form and rate restrictions that are imposed on admitted insurers. That does not mean, however, that they are unregulated.... The most significant regulation of the surplus lines market comes in the form of state regulation of the brokers who place surplus lines coverage. States regulate the surplus
lines industry through the licensing process for insurance agents and brokers. A broker must be specially licensed as a surplus lines broker to be able to place coverage with a non-admitted carrier.
Douglas R. Richmond, Surplus Lines Insurance and Wholesale Brokers , 25 No. 8 INS. LITIG. REP. 261 (May 16, 2003) (internal citations omitted); see also FLA. STAT. § 626.913.
Frequently, policyholders and insurance companies negotiate and execute contracts through intermediaries. See MacLaren Europe Ltd. v. ACE Am. Ins., 908 F. Supp. 2d 417, 419–20 (S.D.N.Y. 2012). Such intermediaries typically fall into two general categories: agents and brokers. See Essex Ins. v. Zota , 985 So. 2d 1036, 1040 (Fla. 2008). "An insurance agent is captive to one insurance company and is bound to place coverage with that company [whereas an] insurance broker is an ‘independent middleman’ who is not tied to a particular company." Douglas R. Richmond, Surplus Lines Insurance and Wholesale Brokers , 25 No. 8 INS. LITIG. REP. 261 (May 16, 2003). In general, "[a]n insurance broker acts as an agent of the insured, not the insurer. " Essex , 985 So. 2d at 1046 ; see also Lima Delta Co. v. Glob. Aerospace, Inc. , 325 Ga.App. 76, 752 S.E. 2d. 135, 140 (2013).
Additionally, "[i]t is common in the insurance industry for one insurance broker to approach another broker in an attempt to secure specialized insurance for a client, or to secure insurance after several insurers have declined to accept the risk being shopped. This is particularly true in the surplus lines market." Douglas R. Richmond, Surplus Lines Insurance and Wholesale Brokers , 25 No. 8 INS. LITIG. REP. 261 (May 16, 2003). In such cases, brokers are subcategorized as either "retail brokers" or "wholesale brokers." Id. The policyholder interfaces with the retail broker, the retail broker interfaces with the wholesale broker, and the wholesale broker interfaces with insurance companies. Id.
B. Policy Formation
Discussions regarding the Policy began in the fall of 2015. Riverside employed Jeff Cohen ("Cohen "), a retail insurance broker, to seek insurance for the Property. In turn, Cohen asked T.C. Canterna ("Canterna "), a wholesale insurance broker, for assistance in procuring coverage.
On October 30, 2015, Canterna requested a policy quote for the Property from Defendant's underwriter, Zhanna Seglie ("Seglie "). Seglie and Jill Hartl ("Hartl "), another underwriter for Defendant, approved the final version of what would ultimately become Riverside's Policy. Seglie emailed Canterna the quote on November 2, 2015. On December 9, 2015, Canterna responded by requesting that Seglie "bind coverage per your most recent quote." Later that day, Seglie emailed Canterna the binder. On January 11, 2016, Hartl emailed Canterna a final copy of the Policy.
A binder is "[a]n insurer's memorandum giving the insured temporary coverage while the application for an insurance policy is being processed or while the formal policy is being prepared." Binder , Black's Law Dictionary (10th ed. 2014).
At all relevant times during this process, Cohen and Canterna were located in Ohio, and Defendant's underwriters were located in Georgia.
C. Hurricane Matthew
The loss at issue in this case involves wind and rain damage caused by Hurricane Matthew in October 2016. Plaintiffs estimate approximately $4,123,429.42 in damages. (Doc. 66-28). Defendant approved coverage and remitted payment for some—but not all—of Plaintiffs’ claims. Of particular relevance to the instant Motion is damage caused to the roof of Building C. Prior to the loss, Plaintiff contracted with G&G Roofing Construction, Inc. ("G&G Roofing "), to replace Building C's roof. According to Plaintiffs’ corporate representative and G&G Roofing's Chief Estimator, a portion of Building C's replacement roof had been completed when Hurricane Matthew reached the Property. The completed portion was unharmed, but Plaintiffs allege that the incomplete portion "was damaged and subject to wind uplift and, as a result, allowed water intrusion into [B]uilding C." (Doc. 85, p. 17). After Hurricane Matthew passed, G&G Roofing finished replacing Building C's roof. As part of its claim adjustment, Defendant approved coverage for a portion of the costs associated with Building C's roof replacement.
D. Policy Nonrenewal
The Policy provides that, "If [Defendant] decide[s] not to renew this policy, [it] will mail or deliver to the first Named Insured written notice of nonrenewal, accompanied by the specific reason for nonrenewal, at least 45 days prior to the expiration of the policy." (Doc. 66-1, p. 23). On October 31, 2016, Hartl emailed Canterna to inform him that Defendant would not be renewing the Policy. Attached to the email was: (1) the Notice of Nonrenewal explaining that the reasons for nonrenewal were underwriting reasons; and (2) an endorsement extending the Policy to December 19, 2016, to ensure the correct number of days under the Policy for advance notice for the nonrenewal.
II. STANDARD OF REVIEW
To prevail on a summary judgment motion, the movant must show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a) ; see also Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The Court must "view the evidence and all factual inferences therefrom in the light most favorable to the non-moving party, and resolve all reasonable doubts about the facts in favor of the non-movant." Davila v. Gladden , 777 F.3d 1198, 1203 (11th Cir. 2015) (quoting Carter v. City of Melbourne , 731 F.3d 1161, 1166 (11th Cir. 2013) (per curiam)). "An issue of fact is ‘material’ if, under the applicable substantive law, it might affect the outcome of the case. An issue of fact is ‘genuine’ if the record taken as a whole could lead a rational trier of fact to find for the nonmoving party." Harrison v. Culliver , 746 F.3d 1288, 1298 (11th Cir. 2014). "A mere ‘scintilla’ of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party." Brooks v. Cnty. Comm'n of Jefferson Cnty. , 446 F.3d 1160, 1162 (11th Cir. 2006) (quoting Walker v. Darby , 911 F.2d 1573, 1577 (11th Cir. 1990) ).
III. DISCUSSION
A. Choice of Law
Before reaching Defendant's substantive arguments, the Court must first determine the source of applicable law. Defendant argues that Georgia law applies, whereas Plaintiffs argue for the application of Florida or, in the alternative, Ohio law. In a diversity action, a federal court must apply the choice-of-law rules of the forum state. Klaxon Co. v. Stentor Elec. Mfg. Co. , 313 U.S. 487, 497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Florida's choice-of-law rule, Georgia law applies.
1. Lex Loci Contractus
In Florida, insurance disputes are governed by contract law, because they arise out of insurance contracts. Lumbermens Mut. Cas. Co. v. August , 530 So. 2d 293, 295 (Fla. 1988). "With regard to insurance contracts, Florida follows the ‘lex loci contractus ’ choice-of-law rule, which ‘provides that the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage.’ " Rando v. Gov't Emps. Ins. , 556 F.3d 1173, 1176 (11th Cir. 2009) (quoting State Farm Mut. Auto. Ins. v. Roach , 945 So. 2d 1160, 1163 (Fla. 2006) ). "Lex loci contractus is, in general, an ‘inflexible,’ bright-line rule that exists to ‘ensure stability in contract arrangements.’ " Id. Nonetheless, Plaintiffs consider the doctrine inapplicable to the present case. Their arguments are unpersuasive.
Plaintiffs first argue that the Florida legislature nullified the default choice-of-law rule in disputes arising from surplus lines insurance contracts. The Policy at issue in this case states, "THIS INSURANCE IS ISSUED PURSUANT TO THE FLORIDA SURPLUS LINES LAW." (Doc. 85-7, p. 2). From here, Plaintiffs make a logical jump to conclude that, "As a creature of Florida statutory law, the doctrine of lex loci contractus does not apply to the subject policy." (Doc. 85, p. 7). They cite no authority in support of this broad proposition.
Common law doctrines—including lex loci contractus —can be modified or abrogated by statute. Brown v. Case , 80 Fla. 703, 86 So. 684, 685 (1920) ; Prime Ins. Syndicate, Inc. v. B.J. Handley Trucking, Inc. , 363 F.3d 1089, 1091 (11th Cir. 2004). However, "any legislative intent either to abolish or limit the common law must indicate such change clearly, or else the rule of common law stands." Wal-Mart Stores, Inc. v. McDonald , 676 So. 2d 12, 17 (Fla. 1st DCA 1996) (citing Carlile v. Game & Fresh Water Fish Comm'n , 354 So. 2d 362 (Fla. 1977) ); see also Brown , 86 So. at 685 (holding that a statute modified the prevailing choice-of-law rule, "but only to the extent expressly stated.").
The Court seriously doubts that the legislature's regulation of surplus lines insurers implies a desire for Florida's general contract law to govern all disputes arising from surplus lines policies. Moreover, an implication to that effect will not suffice. If the legislature intended to abandon lex loci contractus in cases involving surplus lines insurance contracts, it needed to "indicate such change clearly." Wal-Mart , 676 So. 2d at 17. In the absence of an express statement, the Court cannot assume that the surplus lines statute alters the common law choice-of-law rule. See Ady v. Am. Honda Fin. Corp. , 675 So. 2d 577, 581 (Fla. 1996).
Plaintiffs next maintain that Florida law governs the Policy because it contains Florida-specific language. (Doc. 85, p. 5). This argument fails for similar reasons. Lex loci contractus applies unless the parties agreed upon the applicable law prior to execution. See Pastor v. Union Central Life Ins. , 184 F. Supp. 2d 1301, 1304–05 (S.D. Fla. 2002). "When the parties have made such a choice, they will usually refer expressly to the state of the chosen law in their contract, and this is the best way of insuring that their desires will be given effect." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 cmt. a (1971). The Policy here does not have an express choice-of-law provision, and the Court cannot extrapolate one from a few casual references to Florida. Indeed, the presence of Florida-specific riders in an insurance contract is not "relevant to where [the contract] was executed, or where the last act necessary to complete it occurred." See CNL Hotels & Resorts, Inc. v. Houston Cas. Co. , 505 F. Supp. 2d 1317, 1320 (M.D. Fla. 2007). The Court finds nothing in the Policy itself that supplants lex loci contractus , so the doctrine remains in effect.
For example, the Policy provides an "IMPORTANT NOTICE" regarding "Important information for Florida Policyholders" and contains Florida-specific endorsements (i.e. , riders), such as "FLORIDA CHANGES – CANCELLATION AND NONRENEWAL." (Doc. 85-7).
Occasionally, contracts contain sufficient detail for courts to determine the parties’ wishes through process-of-elimination. "[W]hen the contract does not refer to any state ... the fact that the contract contains legal expressions, or makes reference to legal doctrines, that are peculiar to the local law of a particular state may provide persuasive evidence that the parties wished to have this law applied." Id. For example, when an otherwise-silent contract mentions a legal concept that is foreign to the state of formation and unique to the state of performance, a Court could conclude that the parties intended to apply the latter state's law. Id. However, the Policy here does not reference legal notions that are unique to Florida.
Finally, Plaintiffs contend that Defendant waived its choice-of-law arguments. They correctly note that such arguments can be considered waived if not timely raised. See, e.g. , Lott v. Levitt , 556 F.3d 564, 568 (7th Cir. 2009). However, a review of Eleventh Circuit case law suggests that waiver determinations typically occur when a party raises a choice-of-law argument much later than the summary judgment stage. See, e.g. , Sun Life Assurance Co. of Can. v. Imperial Premium Fin., LLC , 904 F.3d 1197, 1208 (11th Cir. 2018) (choice-of-law argument first raised on appeal from dismissal and summary judgment); Stone v. Wall , 135 F.3d 1438, 1442 (11th Cir. 1998) (choice-of-law argument first raised in Rule 59(e) motion to alter or amend judgment); Bethell v. Peace , 441 F.2d 495, 497 (5th Cir. 1971) (choice-of-law argument first raised on appeal from summary judgment); Anderson v. McAllister Towing & Transp. Co., Inc. , 17 F. Supp. 2d 1280, 1285 n.6 (S.D. Ala. 1998) (choice-of-law argument first raised seven months after bench trial).
In Lott v. Levitt —a case cited by Plaintiffs—the court explained the rationale for the principle of waiver:
[The plaintiff, now arguing for the application of Virginia law,] explicitly submitted to Illinois law and relied solely on it, and having done so, the district court was right to apply it to the dispute. The principle of waiver is designed to prohibit this very type of gamesmanship—[the plaintiff] is not entitled to get a free peek at how his dispute will shake out under Illinois law and, when things don't go his way, ask for a mulligan under the laws of a different jurisdiction. In law (actually in love and most everything else in life), timing is often everything. The time for [the plaintiff] to ask for the application of Virginia law had passed—the train had left the station.
556 F.3d at 568. The Court finds these considerations inapplicable here. Plaintiffs point to no evidence of "gamesmanship" by Defendant, so this case does not implicate the fairness concerns addressed by the waiver doctrine.
Furthermore, the Court is unpersuaded by Plaintiffs’ conclusory argument that it would be "severely prejudiced" by the application of another state's contract law. (Doc. 85, p. 9). They argue that "all discovery and fact development in this matter has been conducted for the purpose of Plaintiffs’ establishing their breach of contract claims, only, [sic] under Florida law." (Id. ). However, they fail to discuss how their discovery would have progressed differently under another state's contract law. "[W]here, as here, the issue to be raised is purely legal, and where, as here, the party seeking to enforce waiver does not argue or show that it has been prejudiced by the late argument, the close of fact discovery loses its crucial importance." Reed Constr. Data , 49 F. Supp. 3d at 423 (emphasis added).
Plaintiffs point to no authority—either from within this circuit or without—supporting waiver based on circumstances analogous to the present case. Defendant has not "abdicated its responsibility to proffer the information necessary for [this Court's] choice-of-law analysis to take place." Sun Life , 904 F.3d at 1209. Accordingly, the Court rejects Plaintiffs’ waiver argument.
In sum, Plaintiffs’ objections to the application of lex loci contractus are overruled. Thus, the law of the jurisdiction where the Policy was executed will govern the rights and liabilities of the parties. Rando , 556 F.3d at 1176.
2. Georgia Law Applies
"Execution of an insurance contract occurs in the place where ‘the last act necessary to complete the contract is performed.’ " Scott, Blane, & Darren Recovery, LLC v. Auto-Owners Ins., 727 F. App'x 625, 631 (11th Cir. 2018) (quoting Colhoun v. Greyhound Lines, Inc., 265 So. 2d 18, 21 (Fla. 1972) ). In general, "[t]he last act necessary to complete a contract is the offeree's communication of acceptance to the offeror." Prime Ins. Syndicate , 363 F.3d at 1093. "In the context of insurance contracts, courts have concluded this act is an insurer's (or its agent's) communication of acceptance of the insured's (or its agent's) offer to purchase insurance, by issuing a temporary ‘binder.’ " Wausau Underwriters Ins. v. Danfoss, LLC , No. 2:14-CV-14420, 2015 WL 6456569, at *8 (S.D. Fla. Oct. 26, 2015) (internal quotations omitted); see also Prime Ins. Syndicate , 363 F.3d at 1093 (holding that the insurer's "communication of the oral binder to [the insured] constituted acceptance of [the insured's] offer to purchase insurance and, therefore, was the last act necessary to complete the contract"). Thus, a lex loci contractus inquiry seeks to identify the place where a binder (i.e. , acceptance) was "dispatched." Sun Cap. Partners, Inc. v. Twin City Fire Ins. , No. 12-CV-81397, 2015 WL 4648617, at *4 (S.D. Fla. Aug. 5, 2015).
"Unpublished opinions are not controlling authority and are persuasive only insofar as their legal analysis warrants." Bonilla v. Baker Concrete Const., Inc. , 487 F.3d 1340, 1345 (11th Cir. 2007).
Here, the parties do not dispute that Seglie (Defendant's underwriter) dispatched the binder to Canterna (the wholesale insurance broker) from Georgia. (Doc. 84, ¶ 4). The issue is whether a wholesale broker acts as an agent for the insured or the insurer. According to Defendant, Canterna acted as Riverside's agent. Under this view, the binder communicated Defendant's agent's acceptance of Riverside's agent's offer to purchase insurance—the last act necessary to complete the contract. Thus, the contract was executed in Georgia, and Georgia law applies.
Plaintiffs attempt to disclaim Canterna as Riverside's agent. According to Plaintiffs, "Canterna, as a wholesale broker, was working as an agent of [Defendant], not Riverside." (Doc. 85, p. 10). Instead, they explain that Cohen, the retail broker, was Riverside's sole agent during contract negotiations. (Id. ). Therefore, "the last act in the chain of procuring insurance for the Property was when Mr. Canterna relayed the quote of insurance to Mr. Cohen, which Mr. Cohen then accepted and approved on behalf of Riverside." (Id. ). "All of these communications took place in Ohio," so the contract was executed in Ohio, and Ohio law applies. (Id. ). This argument is unpersuasive.
To be more precise, Cohen's "acceptance" of Defendant's quote was more likely an offer to purchase insurance, and Cantera's relay of the binder from Seglie to Cohen would constitute Defendant's acceptance of that offer. See Prime Ins. Syndicate , 363 F.3d at 1093 (holding that the insurer's "communication of the oral binder to [the insured] constituted acceptance of [the insured's] offer to purchase insurance and, therefore, was the last act necessary to complete the contract"). Regardless, both of these events occurred in Ohio.
In general, "[a]n insurance broker acts as an agent of the insured, not the insurer. " Essex , 985 So. 2d at 1046. That said, courts recognize that the role of a broker is "sometimes amorphous." Almerico v. RLI Ins. , 716 So. 2d 774, 782 n.13 (Fla. 1998). Therefore, the presumption that a broker acts as an agent for the insured can be overcome where "special circumstances" indicate that the broker's arrangement with the insurer "was not a standard relationship." Essex , 985 So. 2d at 1046. Such "indicia of agency" exist where the insurer: (1) characterizes the broker as its representative; (2) furnishes the broker with applications and sales brochures to solicit business on its behalf; (3) uses a broker as an agent for a single purpose; or (4) has a written agency appointment agreement expressly authorizing the broker to transact business on its behalf. Id. at 1046–47.
In this case, Riverside (the insured) directed Cohen (a retail broker) to seek insurance; Cohen asked Canterna (a wholesale broker) for assistance in procuring coverage; and Canterna negotiated and secured coverage from Defendant. These relationships between parties reflect a classic independent insurance broker arrangement. Canterna acted as an intermediary between Riverside and Defendant, he was "the only person" who communicated with Defendant on Riverside's behalf, and he alone negotiated coverage and price with Defendant's underwriter. (Doc. 77-1, 109:14–15, 108:24–25; Doc. 85-2, ¶¶ 8–9). These facts support a presumption that Canterna acted as Riverside's agent. Cf. Essex , 985 So. 2d at 1046.
Plaintiffs’ attempts to rebut this presumption are meritless. First, Plaintiffs argue that Canterna received a commission from Defendant, not Riverside. (Doc. 85, p. 10). However, the general rule that insurance brokers are agents of policyholders is "not altered simply because [a] broker receives his compensation out of the premium." Auto-Owners Ins. v. Yates , 368 So. 2d 634, 636 (Fla. 2d DCA 1979). "[T]he mere fact that the insurance broker receives his compensation from the insurer, such as by a retention of all or part of the commissions paid from premiums received from the insured, cannot change his relation from that of agent for the policyholder to that of an agent for the insurance company." Id. at 637.
Second, Plaintiffs note that Defendant described Canterna as a "producer" on its Notice of Nonrenewal. (Doc. 85-11, p. 2). Plaintiffs do not elaborate on this point, but presumably, they mean to suggest that "insurance producer" is synonymous with "insurance agent." However, the term "insurance producer" is used interchangeably with both "insurance agent" and "insurance broker." See Producer , BLACK'S LAW DICTIONARY (10th ed. 2014). More specifically, in Georgia—where Defendant is located and where the Notice of Nonrenewal originated—an "insurance producer" is defined simply as "a person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance." GA. CODE § 33-23-1(10). This definition is consistent with either an insurance agent (who acts on the insurer's behalf) or an insurance broker (who acts on the insured's behalf). Therefore, Defendant's reference to Canterna as a "producer" cannot rebut the presumption that Canterna acted as Riverside's agent.
The Notice of Nonrenewal does not name Canterna specifically, but instead refers to Partners Specialty Insurance Services, Inc. (Id. ).
Third, Plaintiffs submit a declaration by Cohen stating that "Canterna was working as agent for [Defendant] in his role as wholesale broker related to the insurance procured for the Property," and "The last act in the chain of procuring insurance for the Property was when Mr. Canterna relayed the quote of insurance to me which I approved and accepted on behalf of Riverside." (Doc. 85-2, ¶¶ 5, 9). These are legal conclusions, not admissible evidence. A party opposing summary judgment cannot meet its burden "simply by relying on legal conclusions or evidence which would be inadmissible at trial." Avirgan v. Hull , 932 F.2d 1572, 1577 (11th Cir. 1991) ; see also FED. R. CIV. P. 56(c)(4) (providing that declarations must "set out facts that would be admissible in evidence"). Therefore, the legal conclusions in Cohen's declaration are insufficient to establish a genuine dispute of material fact.
Finally, Plaintiffs emphasize that Canterna was a wholesale broker rather than a retail broker. However, this appears to be a distinction without a difference. Courts within this circuit have explicitly applied the Essex framework to analyze the agency of wholesale brokers. See, e.g. , Landmark Am. Ins. v. Moulton Props., Inc. , 440 F. App'x 788, 793 (11th Cir. 2011) ("[W]e begin with the presumption that [the wholesale retailer] was [the insureds’] agent."); Great Lakes Reinsurance PLC v. Barrios , No. 08-20281-CIV, 2008 WL 6032919, at *6 (S.D. Fla. Dec. 10, 2008) (holding that the insureds "offered no ‘indicia of agency’ that would overcome the presumption that [the wholesale broker] acted as [their] agent."). Accordingly, Canterna's status as a wholesale broker does not affect the Essex analysis or its applicability to the issue at hand.
To summarize, Canterna, a wholesale insurance broker, is presumptively "an agent of the insured, not the insurer. " Essex , 985 So. 2d at 1046. Plaintiffs failed to rebut that presumption by demonstrating "special circumstances" sufficient to suggest that Canterna actually acted as Defendant's agent. Id. Therefore, the Court holds that Canterna acted as Riverside's agent in negotiating and executing the Policy.
Defendant's agent (Seglie) performed the last act necessary to complete the contract when she issued the binder to Riverside's agent (Canterna). This act occurred in Georgia, so the contract was executed in Georgia. Thus, under the doctrine of lex loci contractus , Georgia law applies.
B. Interpretation of the Policy
Under Georgia law, "[a]n insurance policy is simply a contract, the provisions of which should be construed as any other type of contract." Hunnicutt v. S. Farm. Bureau Life Ins. , 256 Ga. 611, 351 S.E.2d 638, 640 (1987). In general, this task is a matter of law to be decided by the court. Evanston Ins. v. Xytex Tissue Servs., LLC , 378 F. Supp. 3d 1267, 1284 (S.D. Ga. 2019) ; Am. Empire Surplus Lines Ins. v. Hathaway Dev. Co. , 288 Ga. 749, 707 S.E.2d 369, 371 (2011). Georgia courts apply a three-step process:
First, the trial court must decide whether the language is clear and unambiguous. If it is, the court simply enforces the contract according to its clear terms; the contract alone is looked to for its meaning. Next, if the contract is ambiguous in some respect, the court must apply the rules of contract construction to resolve the ambiguity. Finally, if the ambiguity remains after applying the rules of construction, the issue of what the ambiguous language means and
what the parties intended must be resolved by a jury.
Woody's Steaks, LLC v. Pastoria , 261 Ga.App. 815, 584 S.E.2d 41, 43 (2003). Thus, interpretation of the Policy is amenable to summary judgment unless the relevant provisions are so ambiguous that they cannot be resolved under the traditional canons of construction.
A policy provision is ambiguous when it is "subject to more than one reasonable interpretation." State Farm Auto Ins. v. Stanton , 286 Ga. 23, 685 S.E.2d 263, 265 (2009). In such cases, the ambiguity must be "construed strictly against the insurer/drafter and in favor of the insured." Hurst v. Grange Mut. Cas. Co. , 266 Ga. 712, 470 S.E.2d 659, 663 (1996). Courts should "consider the insurance policy as a whole" and seek a construction that "will give effect to each provision, attempt to harmonize the provisions with each other, and not render any of the policy provisions meaningless or mere surplusage." Nat'l Cas. Co. v. Ga. Sch. Bds. Ass'n–Risk Mgmt. Fund , 304 Ga. 224, 818 S.E.2d 250, 253 (2018).
The Court will address each of Defendant's arguments in turn.
1. Business Income/ Rental Value
Defendant first moves for partial summary judgment on Plaintiffs’ claim for business income/rental value because the claim exceeds the limit of coverage.
The Policy provides that in the event of a covered loss, "[Defendant] will pay for the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.’ " (Doc. 66-1, p. 53). The Policy defines Business Income—in a roundabout way —as Rental Value. In turn, the Policy defines "Rental Value" as:
Under the Policy, "Coverage is provided ... for one or more of the following options for which a Limit of Insurance is shown in the Declarations: (1) Business Income Including ‘Rental Value’[;] (2) Business Income Other Than ‘Rental Value’ [; and] (3) ‘Rental Value.’ " (Id. ). "If Option (3) above is selected, the term Business Income will mean ‘Rental Value’ only." (Id. ). Here, the Policy's Declarations provide a Limit of Insurance for "Rental Value" (i.e. , option 3). (Id. at p. 11).
a. Net Income (Net Profit or Loss before income taxes) that would have been earned or incurred as rental income from tenant occupancy of the premises described in the Declarations as furnished and equipped by you, including fair rental value of any portion of the described premises which is occupied by you; and
b. Continuing normal operating expenses incurred in connection with that premises, including:
(1) Payroll; and
(2) The amount of charges which are the legal obligation of the tenant(s) but would otherwise be your obligations.
(Id. at pp. 60–61). Finally, "The most [Defendant] will pay for loss in any one occurrence is the applicable Limit of Insurance shown in the Declarations." (Id. at p. 56).
Plaintiffs’ claim for lost business income arises from hurricane damage to apartments within Building C. The Declarations identify the following Coverages and Limits of Insurance for Building C: Building Damage ($709,000); Personal Property Damage ($37,500); and Rental Value ($162, 600). (Id. at p. 11).
The parties alternate between referring to the buildings alphabetically (A–D) and numerically (1–4). For consistency, the Court will use only alphabetical designations.
Defendant argues that "The [P]olicy limits business income/rental value losses on [Building C] to $162,600.00. It is undisputed that [Defendant] has already paid $46,305.00 towards [Plaintiffs’] business income/rental value claim, thereby leaving $116,295.00 in coverage left." (Doc. 63, p. 13). The Court agrees. The Policy provides an explicit coverage ceiling of $162,600. "Where the language fixing the extent of coverage is unambiguous ... [courts] must enforce the contract as written." Donaldson v. Pilot Life Ins. , 177 Ga.App. 748, 341 S.E.2d 279, 280 (1986). Courts have no right to increase the amount of coverage. Id.
Plaintiffs respond that the Policy's Declarations also identify Rental Value Coverage and Limits for Building A ($122,700) and Building B ($61,300). (Doc. 66-1, p. 11). They argue that the separate Limits of Insurance for Buildings A, B, and C should be considered together, such that "the potential Limit of Insurance for loss of business/rental income at the subject property is $346,600." (Doc. 85, p. 11). According to Plaintiffs, "the business income/rental loss for Buildings [A, B, and C] is, collectively, is [sic] $336,816, which is below the collective Limit of Liability." (Id. ). This reading cannot be harmonized with the text of the Policy.
"[T]he plain meaning of the terms must be given full effect without straining to extend coverage where none was contracted or intended." State Farm Fire & Cas. Co. v. Bauman , 313 Ga.App. 771, 723 S.E.2d 1, 3 (2012). The Policy does not provide a Limit of Insurance for the Property as a whole, but rather provides distinct Limits of Insurance for each building. Plaintiffs’ suggested reading would render these delineations superfluous. See Nat'l Cas. Co. , 818 S.E.2d at 253 (judicial constructions should not "render any of the policy provisions meaningless or mere surplusage"). Accordingly, the Court declines to ignore the clear terms of the Policy and insert ambiguity where none exists.
Plaintiffs’ Response also devotes several pages towards discussing the Policy's twelve-month extended period of indemnity for business income. (Doc. 85, pp. 11–13). However, this discussion is irrelevant to the Policy's Limit of Insurance.
In sum, Plaintiffs claim lost rental value for damaged units in Building C. The Policy limits coverage for lost rental value from Building C to $162,600. Defendant has already paid $46,305. Thus, Plaintiffs’ remaining coverage for lost business income from Building C is $116,295.
2. Lost Business Opportunity
Defendant next argues that Plaintiffs cannot assert a claim for a lost business opportunity—in the form of profits from a hypothetical sale of the Property—because such claims are not recoverable under the Policy. This is correct, but the issue requires further parsing.
The Policy provides coverage for building damage, personal property damage, and Business Income. (See Doc. 66-1, p. 11). According to Defendant, a lost business opportunity is not Business Income as contemplated by the Policy. (Doc. 63, p. 14). Indeed, as discussed above, the Policy defines Business Income to mean " ‘Rental Value’ only." (Doc. 66-1, p. 53). Defendant also argues that lost business opportunities are consequential losses, which are explicitly excluded from the Policy's Business Income coverage. (See id. at pp. 95–96) ("[Defendant] will not pay for ... [a]ny other consequential loss."). On these points, Plaintiffs agree—they concede that " ‘[b]usiness opportunity loss’ and business income (interruption) loss are separate and do not overlap." (Doc. 85, p. 15). Accordingly, the Court holds that lost business opportunities are not covered by the Policy.
This is not the end of the discussion. Plaintiffs may be able to recover consequential damages flowing from a breach of the Policy even where the Policy itself does not provide coverage for consequential losses. However, proving consequential damages in the form of a lost business opportunity is no small task. "Ordinarily, anticipated profits are too speculative to be recovered." Grossberg v. Judson Gilmore Assocs., Inc. , 196 Ga.App. 107, 395 S.E.2d 592, 594 (1990). In a breach of contract action, damages must: (1) "arise naturally and according to the usual course of things from [the defendant's] breach"; and (2) have been contemplated by the parties as a "probable result" of the breach. GA. CODE § 13-6-2. Furthermore:
Remote or consequential damages are not recoverable unless they can be traced solely to the breach of the contract or unless they are capable of exact computation, such as the profits which are the immediate fruit of the contract, and are independent of any collateral enterprise entered into in contemplation of the contract.
Id. § 13-6-8. Thus, an injured party cannot recover profits that are remote, speculative, contingent, or uncertain. Ga. Grain Growers Ass'n v. Craven , 95 Ga.App. 741, 98 S.E.2d 633, 638 (1957).
Here, Plaintiffs fail to produce sufficient evidence to demonstrate a lost business opportunity warranting the recovery of consequential damages. Essentially, Plaintiffs argue that Defendant's alleged breach prevented them from selling the Property at its greatest possible value. The extent of Plaintiffs’ evidence on this issue is a declaration from their corporate representative that, "Between June 2016 and November 2019, I was approached by two real estate brokers and one principal regarding my interest in selling the subject [P]roperty." (Doc. 85-1, p. 1). In broad strokes, the corporate representative declared that, "had [Defendant] properly paid the claim in this matter," the Property's value in a hypothetical sale would have been $1,000,000 higher. (Doc. 85-1, p. 2).
Plaintiff also submitted an expert report attempting to quantify the value of a potential sale. (Doc. 66-30). The Court dismissed this testimony as unreliable under the standard articulated in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). (Doc. 98).
The Court notes that the corporate representative made no mention of her interest in selling the Property or any offers for purchase in her October 2019 deposition (see Doc. 66-2), nor does the Third Amended Complaint mention a lost business opportunity (Doc. 39). Plaintiffs did not raise such arguments until they filed their expert report in November 2019. (Doc. 66-30).
This type of conjecture falls squarely within the prohibition against remote, speculative, or uncertain damages. The profits from a lost business opportunity must be probable, not merely possible. See Craven , 98 S.E.2d at 638. Even viewing the admissible evidence in the light most favorable to Plaintiffs, there is no way for a reasonable jury to conclude that Plaintiffs would have sold the Property if Defendant paid for the requested repairs. Plaintiffs present no evidence that they listed or marketed the Property for sale, and a post hoc assertion that they would have done so but for Defendant's breach is an impermissible counterfactual. Likewise, a declaration that "there was interest shown to potentially buy" the Property fails to establish a prospective buyer—the same can be said about virtually any property on Earth. (Doc. 85-1, ¶ 7).
Hence the requirement that consequential damages be within the parties’ contemplation at the time of contract formation. Otherwise, every insured in every breach of insurance contract action would claim lost profits from a hypothetical sale.
"The cardinal rule in assessing the damages for a breach of contract is to attempt to place the non-breaching party, in so far as is possible, in the same position it would have been if the contract had not been breached." Eastgate Assocs., Ltd. v. Piggly Wiggly S., Inc. , 200 Ga.App. 872, 410 S.E.2d 129, 132 (1991). To the extent that Plaintiffs seek consequential damages from a lost business opportunity, there is no way for a factfinder to divine Plaintiff's position in the absence of the alleged breach without resorting to guesswork. Thus, Defendant is entitled to summary judgment on this issue.
3. Replacement Cost
The Policy provides that, in the event of loss or damage, Plaintiffs may recover either the "actual cash value" or the "replacement cost" of covered property. Actual cash value is calculated as the replacement cost of damaged property minus the property's depreciation. Yarbrough v. Shelby Ins. , 991 F. Supp. 1476, 1477 n.2 (M.D. Ga. 1998). The Policy establishes actual cash value as the default valuation, but Plaintiffs may recover "Replacement Cost (without deduction for depreciation)" if certain conditions are met. (Doc. 66-1, pp. 48, 51). Specifically:
[Defendant] will not pay on a replacement cost basis for any loss or damage:
(1) Until the lost or damaged property is actually repaired or replaced; and
(2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.
(Id. ). Defendant argues that Plaintiffs’ claim for replacement costs must fail because they have not repaired or replaced the allegedly damaged property. The Court agrees.
The Policy's valuation provisions are clear and unambiguous. To recover replacement costs, Plaintiff was required to repair or replace the damaged property as soon as reasonably possible after Hurricane Matthew. "When a plaintiff's right to recover on a contract depends upon a condition precedent to be performed by him, he must allege and prove the performance of such condition precedent, or allege a sufficient legal excuse for its nonperformance." Marchman v. Grange Mut. Ins. , 232 Ga.App. 481, 500 S.E.2d 659, 661 (1998). It is undisputed that Plaintiffs now seek to recover replacement costs for property that has not yet been repaired or replaced. The failure to satisfy this condition precedent is fatal to Plaintiffs’ claim. Id. (holding same); see also Oriole Gardens Condo. Ass'n I v. Aspen Specialty Ins. , 875 F. Supp. 2d 1379, 1384–85 (S.D. Fla. 2012) (applying Florida law and holding same).
Plaintiffs’ Response focuses entirely upon FLA. STAT. § 627.7011, which requires homeowner's insurance policies to offer replacement cost coverage regardless of whether the damaged structure is replaced or repaired. See Trinidad v. Fla. Peninsula Ins. , 121 So. 3d 433, 442 (Fla. 2013). As discussed above, Georgia law—not Florida law—governs this case. However, even assuming Florida law applied generally, § 627.7011 does not apply "to policies not considered to be ‘homeowners’ policies,’ as that term is commonly understood in the insurance industry." FLA. STAT. § 627.7011(5)(a). The Policy at issue here is not a homeowner's policy, and therefore falls outside the ambit of § 627.7011. Moreover, surplus lines insurers—such as Defendant—are specifically exempt from "the provisions of chapter 627." Id. § 626.913(4) ; see also The Jacqueline Norris Huggett v. Ironshore Specialty Ins. , No. 18-21467, 2018 WL 8359643, at *5 (S.D. Fla. July 18, 2018). Accordingly, Plaintiffs’ reliance on § 627.7011(5)(a) is misplaced.
Defendant is therefore entitled to partial summary judgment on Plaintiffs’ replacement costs claim. Any recovery by Plaintiffs for repairs not yet performed must be limited to actual cash value.
But see Section II.B.5, infra.
4. Increased Costs of Construction
Defendant raises a similar argument regarding the Policy's Increased Cost of Construction provision. In the event of loss or damage, Plaintiffs may recover "the increased cost incurred to comply with enforcement of an ordinance or law in the course of repair, rebuilding or replacement of damaged parts of [the Property]." (Doc. 66-1, p. 41). However:
[Defendant] will not pay for the Increased Cost of Construction:
(1) Until the property is actually repaired or replaced, at the same or another premises; and
(2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage, not to exceed two years. We may extend this period in writing during the two years.
(Id. at p. 42). Defendant argues that Plaintiffs cannot claim an entitlement to increased costs of construction for repairs that have not been performed.
Georgia courts have not addressed this particular issue, but the Court finds the caselaw regarding replacement cost riders to be directly analogous. Once again, "[w]hen a plaintiff's right to recover on a contract depends upon a condition precedent to be performed by him, he must allege and prove the performance of such condition precedent, or allege a sufficient legal excuse for its nonperformance." Marchman , 500 S.E.2d at 661. It is undisputed that Plaintiffs now seek reimbursement for increased costs of construction for property that has not yet been repaired. Thus, Plaintiffs have not performed the condition precedent to their right to recover. Defendant is entitled to partial summary judgment on Plaintiffs’ increased costs of construction claim.
But see Section II.B.5, infra.
5. Prevention of Performance
Notwithstanding the previous two sections, Plaintiffs argue that Defendant should not be permitted "to deny coverage, not pay any (or all required) insurance benefits and then seek to limit [Plaintiffs] at trial from presenting evidence of all the damages resulting from [Defendant's] breach." (Doc. 85, p. 17). In other words, Plaintiffs contend that they were unable to repair the damaged property because Defendant wrongfully withheld payments due under the Policy—thus, Defendant's breach prevented Plaintiffs from satisfying the condition precedent to their recovery of replacement costs. The Court construes this assertion as an implicit argument to apply the prevention of performance doctrine. (See Doc. 90, p. 7 n. 26).
This discussion applies equally to increased costs of construction.
The prevention of performance doctrine provides that, "where a promisor prevents, hinders, or renders impossible the occurrence of a condition precedent to his or her promise to perform, the promisor is not relieved of the obligation to perform and may not invoke the other party's nonperformance as a defense when sued upon the contract." D & S Realty, Inc. v. Markel Ins. , 284 Neb. 1, 816 N.W.2d 1, 13 (2012) (citing 13 SAMUEL WILLISTON , A TREATISE ON THE LAW OF CONTRACTS § 39.3 (Richard A. Lord ed., 4th Ed. 2000)). Courts have applied the prevention of performance doctrine to allow insureds to "recover replacement cost[s] despite noncompliance with a replacement requirement where the insurer's denial of liability and failure to pay actual cash value prevents the insured from replacing the property." Utica Mut. Ins. v. Cincinnati Ins. , 362 F. Supp. 3d 265, 270 (E.D. Pa. 2019). As discussed, Georgia courts apply the rule that "When a plaintiff's right to recover on a contract depends upon a condition precedent to be performed by him, he must allege and prove the performance of such condition precedent, or allege a sufficient legal excuse for its nonperformance. " Marchman , 500 S.E.2d at 661. The issue, then, is whether a plaintiff's inability to repair or replace damaged property due to an insurer's wrongful refusal to pay actual cash value constitutes a sufficient legal excuse for nonperformance. This issue has not yet been litigated in Georgia, so the Court must attempt to predict how the Georgia Supreme Court would rule. See Fidelity Union Trust Co. v. Field , 311 U.S. 169, 178, 61 S.Ct. 176, 85 L.Ed. 109 (1940) ("[I]t is still the duty of the federal courts, where the state law supplies the rule of decision, to ascertain and apply that law even though it has not been expounded by the highest court of the State.").
See also Zaitchick v. Am. Motorists Ins. , 554 F. Supp. 209, 217 (S.D.N. Y 1982) (holding that the defendant's failure to pay actual cash value "made it impossible for plaintiffs to fulfill the condition precedent, and therefore, excuses plaintiffs from performance of the replacement condition"); Pollock v. Fire Ins. Exch. , 167 Mich.App. 415, 423 N.W.2d 234, 237 (1988) ("[D]efendant did not work with plaintiff to promptly pay the claim and enable her to repair or replace the building; rather, it did as much as possible to hinder plaintiff and delay or prevent the payment of the claim. We will not now allow defendant to raise as a defense plaintiff's failure to perform an act which defendant itself greatly hindered plaintiff from performing.").
Georgia's Supreme Court appears to embrace the prevention of performance doctrine as a general proposition: "Where a party to a contract for an agreed exchange of performances knowingly prevents, hinders, or makes more costly the other's performance, such conduct is a breach of contract for which an action will lie. The breach is of an implied promise against prevention." Farmers Warehouse of Pelham, Inc. v. Collins , 220 Ga. 141, 137 S.E.2d 619, 623 (1964). Georgia's lower courts agree. See, e.g. , S. Bus. Machs. of Savannah, Inc. v. Norwest Fin. Leasing, Inc. , 194 Ga.App. 253, 390 S.E.2d 402, 405 (1990) ("[W]henever the co-operation of the promisee is necessary for the performance of the promise, there is a condition implied that the co-operation will be given."); Physician Specialists in Anesthesia v. MacNeill , 246 Ga.App. 398, 539 S.E.2d 216, 224 (2000) (suggesting an implied duty for "both parties to a contract to perform their promises and provide such cooperation as is required for the other party's performance"). In keeping with these cases, the Court believes that a replacement cost rider contains an express requirement for the insured to repair damaged property and an implied requirement for the insurer to cooperate by fulfilling its contractual obligation to remit the property's actual cash value, thereby facilitating repairs.
Defendant cites Buckley Towers Condo., Inc. v. QBE Ins. Corp. , 395 F. App'x. 659, 664 (11th Cir. 2010), an unpublished opinion holding, "[A]s we read Florida law, the doctrine of prevention of performance may not be wielded as a sword in a case like this one where the insured is required first to meet its obligations to repair under the policy provision." Because this opinion is both nonbinding and premised upon the application of non-Georgia law, the Court is free to respectfully disagree. As this Court sees the issue, an insurer's breach of contract may not be wielded as a shield against its corollary obligations. Any other holding would allow insurers to profit from their own wrongdoing. Cf. Harpe v. Stone , 212 Ga. 341, 92 S.E.2d 522, 523 (1956) ("He who would have equity must do equity."). This Court predicts that the Georgia Supreme Court would consider it inequitable for an insurer to withhold payment of actual cash value, thereby preventing the insured from replacing or repairing damaged property, and later deny replacement cost coverage because the insured did not comply with a replacement requirement. Thus, if an insurer's breach of contract prevents an insured from performing a condition precedent to the recovery of replacement costs, then the insured's nonperformance of that condition precedent may be excused.
That said, the Court emphasizes the narrowness of this holding. Georgia courts make clear that courts have no right, "by a strained construction, to make an insurance policy more beneficial by extending coverage not contracted for." Donaldson , 341 S.E.2d at 280. The prevention of performance doctrine cannot be used to make an end-run around the strict application of a policy's replacement requirement. Therefore, the Court adds the following caveats.
First, an insured may only invoke the doctrine where the insurer did in fact breach the insurance policy by wrongfully refusing to remit payments for a covered loss. If the insured has no right to actual cash value, then there can be no right to replacement costs. Cf. Marathon U.S. Realties, Inc. v. Kalb , 244 Ga. 390, 260 S.E.2d 85, 87 (1979) ("There can be no breach of an implied covenant of good faith where a party to a contract has done what the provisions of the contract expressly give him the right to do."). Second, the insured must show that it was unable to repair the damaged property without the funds denied by the insurer—that is, the insurer's breach must actually "prevent" the insured from performing the condition precedent. Third, the insured has the burden to demonstrate that, but for the insurer's denial of payment, it would have replaced or repaired the property as required by the policy. Cf. Farmers Warehouse , 137 S.E.2d at 623 (noting an exception to the implied promise against prevention where the promisee "would not have performed his promise anyway").
In sum, Plaintiffs may recover replacement cost coverage and increased cost of construction coverage as part of their damages if they can prove that: (1) Defendant breached the contract by failing to remit the full actual cash value due under the Policy, (2) Plaintiffs were unable to perform because Defendant's breach denied them the funds necessary to repair the damaged property, and (3) Plaintiffs would have repaired the damaged property but for Defendant's breach.
6. Building C Roof Replacement
Defendant next argues that Plaintiffs are precluded from recovering any costs associated with replacing Building C's damaged roof. (Doc. 63, p. 20). Before Hurricane Matthew, Plaintiffs determined that Building C's roof needed to be replaced due to "leaking issues." (Doc. 85, p. 17). Plaintiffs contracted with G&G Roofing to replace the roof, and approximately 40% of the roof had been replaced when Hurricane Matthew reached the Property. (Id. ). The completed portion was unharmed, but the incomplete portion "was damaged and subject to wind uplift and, as a result, allowed water intrusion into [B]uilding C." (Id. ). G&G Roofing subsequently completed the roof replacement. (Doc. 84, ¶ 9).
According to Defendant, "granting even a penny for such roof replacement would result in a windfall to Plaintiffs since they had already determined that the roof had no value and, thus, had become contractually liable for replacing the roof." (Doc. 63, p. 20). The Court disagrees. The value of Building C's roof at the time of loss is a question of fact. Defendant points to no authority suggesting that Plaintiffs’ decision to replace the roof rendered it worthless as a matter of law.
Defendant's sole citation on this point is Aetna State Bank v. Md. Cas. Co. , 345 F. Supp. 903 (N.D. Ill. 1972). In that case, the insured contracted to demolish the subject property, with all salvage from the demolition belonging to the wrecking company. After workers had entered the property and began demolition work, a fire occurred. The court held that the insured could not recover the property's actual cash value (defined, as here, as replacement cost minus depreciation) because "there is no value to buildings in the process of demolition." Id. at 909. "It would indeed be ludicrous to apply a principle which includes a replacement value to a case where the insured was himself already in the process of paying a wrecker to do what the fire did for him for nothing." Id. at 908.
The Court finds this case inapposite to the present facts. The Aetna court "highlight[ed] the narrow grounds for [its] decision," explaining:
We are fully cognizant of the Pandora Box that can be opened by allowing the amount of loss to be determined by the relative value to the insured at the time of loss and we are completely aware that the injection of such considerations may open a field of speculation and conjecture that would cloud the issue of actual loss in a maze of collateral issues.
Id. at 908–09. The court's opinion emphasized the fact that the insured property was in the process of being demolished , not replaced. This distinction matters. A leaking, partially replaced roof cannot be said to have the same value as a building "whose duration of existence was governed solely by the rapidity of the swing of the wrecker's ball." Id. Surely the original roof's value was diminished, but the Court cannot conclude that it was "valueless." Id. Indeed, even a damaged roof provides some utility—the question of how much is best left for a factfinder.
Furthermore, under the Policy's plain language, the value of Building C's original roof has no bearing on Defendant's liability for its replacement. If Plaintiffs "actually repair[ ] or replace[ ]" damaged property "as soon as reasonably possible after the loss," then they are entitled to such property's "Replacement Cost (without deduction for depreciation )." (Doc. 66-1, p. 51 (emphasis added)). Building C's roof was damaged during Hurricane Matthew, and the parties stipulate that the "[t]he roof replacement to Building C was completed after the date of loss." (Doc. 84, ¶ 9). As long as the original roof can be considered "Covered Property" and its replacement occurred "as soon as reasonably possible" after Hurricane Matthew, the extent of the original roof's depreciation is irrelevant. The parties bargained for the replacement cost rider, and both parties are entitled to the benefit of that bargain.
The Court notes that "Covered Property" includes "Additions under construction, alterations and repairs to the building or structure." (Doc. 66-1, p. 38).
Thus, Plaintiffs are not precluded from recovering the cost associated with replacing Building C's roof.
7. Nonrenewal of the Policy
Plaintiff's Third Amended Complaint states that Defendant "wrongfully and/or improperly canceled and/or non-renewed Plaintiffs’ Policy in breach of both applicable Florida Statutes, as well as the terms and condition [sic] of the Policy, thereby breaching same." (Doc. 39, ¶ 49). The Policy provides that, "If [Defendant] decide[s] not to renew this policy, [it] will mail or deliver to the first Named Insured written notice of nonrenewal, accompanied by the specific reason for nonrenewal, at least 45 days prior to the expiration of the policy." (Doc. 66-1, p. 23). On October 31, 2016, Defendant delivered: (1) the Notice of Nonrenewal explaining that the reasons for nonrenewal were "underwriting reasons"; and (2) an endorsement "extending the Policy to December 19, 2016, to ensure the correct number of days under the Policy for advance notice for the nonrenewal." (Doc. 84, ¶ 6). Thus, Defendant's nonrenewal did not violate the Policy on its face.
The Court notes that this allegation is a single paragraph within Plaintiffs’ statement of facts. Plaintiffs do not assert a separate cause of action for breach of contract based on nonrenewal of the Policy.
Plaintiffs do not dispute that Defendant's nonrenewal complied with the Policy's express terms, but they argue that Florida statutes regulating insurance contracts are incorporated into the Policy and a failure to comply with such statutes constitutes a breach of contract. (Doc. 85, p. 20). Even assuming Plaintiffs are correct, they cannot establish that Defendant violated a provision of Florida law.
Plaintiffs cite testimony to this effect from Defendant's corporate representative. (Doc. 85-8, 130:4–19). The Court notes that this is a legal conclusion.
Plaintiffs base their argument on FLA. STAT. § 627.4133, which provides that:
Upon a declaration of an emergency pursuant to [ FLA. STAT. § 252.36 ] and the filing of an order by the Commissioner of Insurance Regulation, an insurer may not cancel or nonrenew a personal residential or commercial residential property insurance policy covering a dwelling or residential property located in this state which has been damaged as a result of a hurricane or wind loss that is the subject of the declaration of emergency for a period of 90 days after the dwelling or residential property has been repaired. A structure is deemed to be repaired when substantially completed and restored to the extent that it is insurable by another authorized insurer that is writing policies in this state.
FLA. STAT. § 627.4133(d)(1). Due to Hurricane Matthew, Florida's governor declared a state of emergency lasting from October 3, 2016, to January 31, 2017. Accordingly, Plaintiffs argue that Defendant violated § 627.4133 by issuing a Notice of Nonrenewal on October 31, 2016. The Court disagrees.
Defendant is a surplus lines insurer. As discussed, "Except as may be specifically stated to apply to surplus lines insurers, the provisions of chapter 627 do not apply to surplus lines insurance." FLA. STAT. § 626.913(4). Nothing in the language of § 627.4133 suggests its applicability to surplus lines insurers. Furthermore, the Surplus Lines Law's analog to § 627.4133 has no corresponding provision for emergency declarations. See FLA. STAT. § 626.9201 (governing notices of cancellation or renewal). Statutes that relate to the same or closely related subjects should be read in pari materia. State v. Fuchs , 769 So. 2d 1006, 1010 (Fla. 2000). The inclusion of an emergency declaration provision in § 627.4133 and its omission from § 626.9201 suggests that the omission was deliberate. Cf. Heine v. Lee Cnty. , 221 So. 3d 1254, 1258 (Fla. 2d DCA 1017) (explaining "the general principle of statutory construction, expressio unius est exclusio alterius , which means that ‘express mention of one thing is the exclusion of another.’ "). Accordingly, the Court holds that § 627.4133 does not apply to Defendant, so Defendant's notice of nonrenewal did not violate Florida law.
In the avoidance of doubt, even if Defendant had breached the Policy, Defendant correctly argues that Plaintiffs fail to establish damages—a necessary element of their claim. Plaintiffs cannot succeed on a breach of contract claim if the underlying breach was harmless. See Oconee Fed. Savings & Loan Ass'n v. Brown , 351 Ga.App. 561, 831 S.E.2d 222, 229 (2019). Plaintiff's corporate representative could not testify that Plaintiffs were injured by Defendant's nonrenewal. (Doc. 66-2, 122:6) ("I do not know today"). Furthermore, Plaintiffs’ Response to the Motion makes no mention of damages; instead, they focus exclusively upon Defendant's alleged breach. (Doc. 85, pp. 19–20). In the absence of evidence to support a necessary element, Plaintiffs’ claim must fail. See Brooks , 446 F.3d at 1162.
"The elements for a breach of contract claim in Georgia are the (1) breach and the (2) resultant damages (3) to the party who has the right to complain about the contract being broken." Kuritzky v. Emory Univ. , 294 Ga.App. 370, 669 S.E.2d 179, 181 (2008).
Thus, Defendant is entitled to summary judgment regarding Plaintiffs’ claim for breach of contract due to nonrenewal of the Policy.
8. Attorney's Fees
Finally, Defendant argues that Plaintiffs cannot recover attorney's fees pursuant to FLA. STAT. § 626.9373. (Doc. 63, p. 23). In a diversity action, a federal court must apply the choice-of-law rules of the forum state. Klaxon , 313 U.S. at 497, 61 S.Ct. 1020. Under Florida's choice-of-law principles, "the availability of attorney's fees should be determined under the state law which also governs the underlying claim." McMahan v. Toto , 256 F.3d 1120, 1132 (11th Cir. 2001). The Court has already determined that Georgia law governs Plaintiffs’ underlying claims, so the Court must also apply Georgia law on the issue of attorney's fees. Thus, Plaintiff's may not recover under FLA. STAT. § 626.9373.
The parties have not briefed the availability of attorney's fees under Georgia law.
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IV. CONCLUSION
For the aforementioned reasons, it is ORDERED and ADJUDGED that Defendant's Motion for Summary Judgement (Doc. 65) is GRANTED IN PART AND DENIED IN PART as follows:
1. Georgia law governs the dispute.
2. Plaintiffs’ remaining coverage for lost business income from Building C is $116,295.
3. Plaintiffs cannot assert a claim for a lost business opportunity.
4. Any recovery by Plaintiffs for repairs not yet performed must be limited to actual cash value without additional coverage for replacement costs or increased costs of construction, unless Plaintiffs first prove that:
a. Defendant breached the Policy by failing to remit the full actual cash value due;
b. This breach proximately caused Plaintiffs to be unable to repair the damaged property; and
c. Plaintiffs would have repaired the damaged property but for Defendant's breach.
5. Plaintiffs are not precluded from recovering the cost associated with replacing Building C's roof.
6. Defendant's nonrenewal of the Policy did not constitute a breach of contract.
7. Plaintiffs cannot recover attorney's fees pursuant to FLA. STAT. § 626.9373.
DONE AND ORDERED in Orlando, Florida on December 4, 2020.