Lewis v. Allied World Specialty Ins. Co.

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GUY LEWIS, et al., Plaintiffs, v. ALLIED WORLD SPECIALTY INSURANCE CO., Defendant.

No. 20-cv-20677-ALTMAN/Reid

United States District Court, S.D. Florida

April 3, 2023

ORDER GRANTING MOTION FOR RECONSIDERATION

ROY K ALTMAN, UNITED STATES DISTRICT JUDGE

The Plaintiffs-Guy Lewis and Michael Tein-sued Jose M. Herrera and the Herrera Law Firm, P.A., in state court, asserting claims of civil conspiracy, aiding and abetting malicious prosecution, and abuse of process. After some litigation, the Plaintiffs settled their claims with Herrera for $22,097,987. As part of that settlement, the Plaintiffs agreed never to collect from Herrera, who then assigned to the Plaintiffs his right to sue his insurer, Allied World Specialty Insurance Company (our Defendant). With that Coblentz^[1]agreement in hand, the Plaintiffs filed this lawsuit, advancing two claims: a breach-of-contract claim (Count I) and a bad-faith claim (Count II)-both stemming from the Defendant's alleged refusal (1) to defend Herrera in the underlying lawsuit and (2) to offer the Plaintiffs the policy limits ($1,000,000). See Complaint [ECF No 1] at 5-7. The Defendant promptly moved to dismiss Count II, arguing that, under Florida law, “a cause of action for bad faith is not ripe as there has been no determination of coverage or that the Coblentz Agreement is enforceable.” Defendant's Motion to Dismiss Complaint Count II (“MTD”) [ECF No. 9] at 5. As the insurer explained in its MTD: “Because there has been no final determination as to coverage, liability, or damages, the bad faith count is premature, and should be dismissed for failing to state a cause of action on which relief can be granted.” Id. at 1. Citing two inapposite cases from Florida's District Courts of Appeal, the then-presiding Judge denied the MTD.^[2] See Order Denying MTD [ECF No. 31].

A couple weeks later, the Defendant filed this Motion for Reconsideration (“Motion”) [ECF No. 32]. In that Motion, the Defendant asks us to reconsider the prior Judge's Order Denying MTD because “fundamental and established principles relating to the enforceability of Coblentz agreements, and an insurer's potential liability for bad faith after a Coblentz agreement has been entered, have been conflated.” Id. at 1. According to the Defendant, “(1) coverage is not an element of a third party bad faith claim in the context of enforcing a Coblentz agreement, and (2) a bad faith claim is ripe only after there is a final determination of liability and damages against the insurer, not simply against the insured in the underlying action.” Id. at 4. As the Defendant correctly explains, the enforceability of a Coblentz agreement “proceeds in two separate parts.” Id. at 1. First, “the court determines the validity and enforceability of the Coblentz agreement.” Ibid. At this first step, the plaintiff must prove: “(1) coverage under the insurance policy, (2) that the insurer wrongfully refused to defend its insured, and (3) that the settlement was objectively reasonable and made in good faith.” Id. at 5. Second, and only after “all three of these elements have been finally decided, through final resolution in the appellate courts,” id. at 2, the plaintiff can allege “that Allied World acted in bad faith” and seek “damages in excess of the policy limit,” id. at 4.

In their Response to the Motion for Reconsideration (“Response”) [ECF No. 33], the Plaintiffs never really challenge the Defendant's positions (or citations) directly. They, instead, cite the standard for reconsideration under FED. R. CIV. P. 59(e) and quibble with whether-and to what extent-the Defendant has ignored that standard. See generally Response. On December 5, 2022, we held a hearing on the Motion, at which the parties presented their oral arguments. See Paperless Minute Entry for Proceedings Held Before Judge Roy K. Altman [ECF No. 65]. Having now carefully reviewed the parties' briefs-and for the reasons outlined below-we GRANT the Motion and DISMISS Count II of the Complaint without prejudice.

The Standard of Review

In their Response, the Plaintiffs contend that, “[w]hen, as here, a motion for reconsideration is served within twenty-eight days of the entry of the order at issue, [Rule 59(e)] applies.” Response at 2. “Rule 59(e) does not set forth specific criteria, but courts have delineated three grounds justifying reconsideration under the rule: ‘(1) an intervening change in controlling law; (2) the availability of new evidence; and (3) the need to correct clear error or prevent manifest injustice.” Ibid. According to the Plaintiffs, “[n]one of these criteria apply here.” Ibid.

But, as the Defendant rightly notes, our power to reconsider the MTD is “not derived from Federal Rule Civil Procedure 59, which applies to final judgments.” Reply [ECF No. 37] at 2. Since Judge Ungaro entered no judgment as to Count II-indeed, since no judgment has been entered in this case at all-Rule 59 doesn't apply here, which is reason enough to reject the Plaintiffs' principal contention. See Ryan v. Allstate Ins. Co., 2020 WL 7353898, at *2 (S.D. Fla. Dec. 15, 2020) (Altman, J.) (“As a preliminary matter, the Plaintiffs' wholesale reliance on the wrong legal standard-indeed, on the wrong jurisdiction's legal regime-provides sufficient grounds, standing alone, to deny the Motion.” (first citing Aldar Tobacco Grp. LLC v.Am. Cigarette Co., Inc., 2010 WL 11601994, at *1 (S.D. Fla. Dec. 29, 2010) (Jordan, J.) (“[The plaintiff cites] seven cases, arguing that they show that, even where the motion lacks legal authority, a court should consider the motion on the merits. But those cases state the opposite.”); and then citing Belony v. Amtrust Bank, 2011 WL 2297669, at *2 (S.D. Fla. June 8, 2011) (Marra, J.) (“Even if this were true, which depends on other factors Defendant does not address, Defendant's failure to cite any authority for this principle makes it difficult for the Court to rule in its favor. Defendant's deficient memorandum of law is itself a basis to deny its motion.”))).

But here's the thing: The Plaintiffs would lose even if they had cited the right legal rule- which, in this case, appears to be Rule 54(b). See FED R. CIV. P. 54(b) (“[A]ny order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . . may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.”). “Motions for reconsideration, whether considered under Rule 54(b) (like this one), Rule 59(b), or Rule 60(b), are generally all evaluated under the same standard.” Jones v. City of Palm Beach Gardens, 2022 WL 16745733, at *2 (S.D. Fla. Nov. 7, 2022) (Scola, J.) (citing Region 8 Forest Serv. v. Alcock, 993 F.2d 800, 805-06 (11th Cir. 1993) (“We see no reason to apply a different standard when the party seeks reconsideration of a non-final order.”)). To prevail under Rule 60(b), the movant must show: “(1) mistake, inadvertence, surprise, or excusable neglect; (2) newly discovered evidence that, with reasonable diligence, could not have been discovered in time to move for a new trial under Rule 59(b); (3) fraud . . . misrepresentation, or misconduct by an opposing party; (4) [that] the judgment is void; (5) [that] the judgment has been satisfied, released or discharged; [that] it is based on an earlier judgment that has been reversed or vacated; or [that] applying it prospectively is no longer equitable; or (6) any other reason that justifies relief.” FED. R. CIV. P. 60(b).

“In addressing a motion to reconsider a prior decision, two opposing policies must be balanced: on the one hand, the desirability of finality, and on the other, the public interest in reaching the right result.” Jones, 2022 WL 16745733, at *2 (citing Civ. Aero. Bd. v. Delta Air Lines, Inc., 367 U.S. 316, 321 (1961)). “To balance these competing principles, courts generally permit reconsideration where there is newly discovered evidence, a manifest error of law or fact, or where justice so requires.” Ibid. (first citing In re Kellogg, 197 F.3d 1116, 1119 (11th Cir. 1999); and then citing Vila v. Padron, 2005 WL 6104075, at *1 (S.D. Fla. Mar. 31, 2005) (Altonaga, J.)). Ultimately, we conclude that, whatever the standard, the Defendant has shown that reconsideration is necessary to prevent “a manifest error of law or fact[.]” Ibid.

Analysis

The parties agree that Florida law governs this case.^[3] And Florida law is clear that, in the context of a first-party insurance claim “[a]n insured's underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue.” Blanchard v. State Farm Mut. Auto. Ins. Co., 575 So.2d 1289, 1291 (Fla. 1991). As the Florida Supreme Court has explained:

If an uninsured motorist is not liable to the insured for damages arising from an accident, then the insurer has not acted in bad faith in refusing to settle the claim. Thus, an insured's underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. It follows that an insured's claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff's damages, a cause of action cannot exist for a bad faith failure to settle.

Ibid.; see also Vest v....