United Specialty Ins. Co. v. Ken Creel Stucco & Stone Inc.

1

UNITED SPECIALTY INSURANCE COMPANY, Plaintiff, v. KEN CREEL STUCCO AND STONE, INC. Defendant.

No. 8:22-cv-02635-KKM-AEP

United States District Court, M.D. Florida, Tampa Division

June 28, 2023

Kathryn Kimball Mizelle, Counsel of Record

REPORT AND RECOMMENDATION

Anthony E. Porcelli, United Spates Magistrate Judge

Plaintiff United Specialty Insurance Company (“USIC”) brought this action against Defendant Ken Creel Stucco and Stone Inc., (“Ken Creel” or “Defendant”) seeking declaratory relief regarding insurance coverage and Plaintiff's duty to defend and indemnify Defendant related to an underlying lawsuit in state court (Doc. 1). After Ken Creel failed to appear, USIC moved for entry of default against Ken Creel (Doc. 12), which the Clerk of Court subsequently entered (Doc. 13). USIC now moves for entry of a default declaratory judgment against Ken Creel (Doc. 14). For the following reasons, it is recommended that USIC's Motion for Default Judgment (Doc. 14) be granted.

I. Background

USIC, a surplus lines insurer, is a Delaware corporation with its principal place of business in Texas (Doc. 1, ¶ 5). Ken Creel, a Florida corporation with its principal place of business in Florida, purchased a surplus lines commercial liability policy from USIC under Policy No. DCI00151-00, for the period of July 12, 2016 to July 12, 2017 (“the Policy”) (Doc. 1, ¶ 19). The Policy includes multiple endorsements changing the Policy, including a Condominium, Townhouse, Tract or Track Exclusion which states:

A. This insurance does not apply to “bodily injury”, “property damage” or “personal and advertising injury” arising out of:

1. “New construction” operations performed on any work on, for or involving condominium townhomes, or single-family tract homes . . . .

3. For the purpose of this endorsement “new construction” operations shall mean:

a. Design, supervision, project management, construction of, or work performed by you or on your behalf on the original construction of a condominium, townhome, tract or track home.

Tract or track home means any one of a group of similar homes built in the same area, project or subdivision, by the same or different builder.

This insurance does not apply to “bodily injury,” “property damage,” or “personal and advertising injury” arising out of the operations described above even if other causes contribute to or aggravate the “bodily injury,” “property damage,” or “personal and advertising injury”. It is the intent of this endorsement to exclude from this insurance all claims, demands, or suits as above described. There shall therefore be no duty or obligation on our part under this insurance to defend, respond to, investigate or indemnify anyone, including but not limited to you, your agents, servants, or employees, or any third parties for any such claim, demand or suit.

(Doc. 1-7, at 68).

In early 2022, two homeowners, Ingrid Vazquez and Jose Caraballo, filed suit in the Circuit Court of Hillsborough County, Florida naming Ken Creel as a defendant - Ingrid Vazquez, et al., v. NVR, Inc., et al., Case No. 2021-CA-004548. (Doc. 1, ¶¶ 7-8; Doc. 1-1). The homeowners also sued NVR, Inc. (“NVR”), whom they hired to construct their house (Doc. 1, ¶ 10). According to the Complaint, NVR hired Ken Creel to install the house's stucco exterior (Doc. 1, ¶ 11). The homeowners sued Ken Creel and NVR for damages arising out of Ken Creel's work on the original construction of the house (Doc. 1, ¶ 23). The homeowners alleged that Ken Creel and NVR are liable for Ken Creel's “inadequate and improper installation of the various components of the stucco system and exterior envelope on the Home” (Doc. 1, ¶¶ 6, 12) (citing Doc. 1-1, ¶ 22). Additionally, NVR filed a third-party complaint and a crossclaim against Ken Creel for contractual indemnity, violation of the applicable building code, breach of contract, and negligence (Doc. 1, ¶ 13).

According to USIC, the subject house, which is located in Wimauma, Florida, is in a subdivision known as the “Ayersworth Glen Phase 3A” (Doc. 1, ¶ 15). All of the houses in the Ayersworth Glen Phase 3 A subdivision are singlefamily tract homes built by NVR as a tract development (Doc. 1, ¶ 16). The subject house in the underlying lawsuit is a single-family tract house (Doc. 1, ¶ 17).

USIC initiated the instant action seeking a declaratory judgment that it has no duty to defend or indemnify Ken Creel because the Policy's Condominium, Townhouse, Tract or Track Exclusion bars coverage based on the allegations against Ken Creel in the underlying lawsuit (Doc. 1).

II. Legal Standard

“When a defendant has failed to plead or defend, a district court may enter judgment by default.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1244 (11th Cir. 2015) (citing Fed.R.Civ.P. 55(b)(2)). Following entry of a default under Rule 55(a), a defendant is deemed to admit a plaintiff's well-pleaded allegations of fact, and, therefore, before entering a default judgment under Rule 55(b), a district court must ensure that the well-pleaded allegations in the complaint actually state a substantive cause of action and that a substantive, sufficient basis exists in the pleadings for the particular relief sought. Tyco Fire & Sec., LLC v. Alcocer, 218 Fed.Appx. 860, 863 (11th Cir. 2007) (citation omitted).^[1] If the allegations of the complaint, accepted as true, establish the defaulted defendant's liability, then the court should enter judgment against the defendant. See generally Chanel, Inc. v. besumart.com, 240 F.Supp.3d 1283, 1288-89 (S.D. Fla. 2016). Although a defaulted defendant is deemed to admit the well-pleaded allegations of fact, the defaulted defendant “is not held to admit facts that are not well-pleaded or to admit conclusions of law.” Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th Cir. 2005) (citation and quotation omitted). Rather, entry of a default judgment is only warranted where a sufficient basis exists in the pleadings for the judgment entered. Surtain, 789 F.3d at 1245 (citation omitted).

Courts assess pleadings in conjunction with a default judgment by a standard “akin to that necessary to survive a motion to dismiss for failure to state a claim.” Id. (citation omitted). Namely, a court may enter a default judgment only where a pleading contains “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility exists “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). In addition to the pleadings, the court may also consider evidence presented in support of the motion for default judgment, including testimony and affidavits. Equal Emp't Opportunity Comm'n v. Titan Waste Servs. Inc., No. 3:10-cv-379-MCR-EMT, 2014 WL 931010, at *6 (N.D. Fla. Mar. 10, 2014); cf. Super Stop No. 701, Inc. v. BP Prod. N. Am. Inc., No. 08-civ-61389, 2009 WL 5068532, at *2 n.4 (S.D. Fla. Dec. 17, 2009) (noting that “unchallenged affidavits are routinely used to establish liability and damages” for default judgment). At all times, the decision to enter a default judgment remains within the discretion of the district court. Hamm v. Dekalb County, 774 F.2d 1567, 1576 (11th Cir. 1985).

III. Discussion

A. Subject Matter and Personal Jurisdiction

The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 because there is diversity of citizenship and the amount in controversy exceeds $75,000 (Doc. 1, ¶ 2). The Court also has personal jurisdiction over Ken Creel because it is incorporated in and has its principal place of business in Florida (Doc. 1, ¶ 6). See Fed.R.Civ.P. 4(k); Fla. Stat. § 48.193.

B. Service of Process

In seeking a default judgment, Plaintiff bears the burden of establishing proper service of the complaint. See Rajotte v. Fabco Metal Prod., LLC, No. 6:12-cv-372-ORL-28, 2012 WL 6765731, at *2 (M.D. Fla. Dec. 13, 2012), report and recommendation adopted, No. 6:12-cv-372-ORL-28, 2013 WL 57722 (M.D. Fla. Jan. 4, 2013) (denying motion for default judgment without prejudice due to improper service). Even if a defaulting defendant has actual notice of the action, “[insufficient or improper service cannot support the entry of a default judgment.” Opella v. Rullan, No. 10-civ-21134, 2011 WL 2600707, at *4 (S.D. Fla. June 29, 2011), report and recommendation adopted, No. 10-civ-21134, 2011 WL 13220496 (S.D. Fla. Aug. 9, 2011) (citing Albra v. Advan, Inc., 490 F.3d 826, 829 (11th Cir. 2007)); see Murphy Bros. v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999) (“In the absence of such service (or waiver of service by the defendant), a court ordinarily may not exercise power over a party the complaint names as defendant.”).

Here, Ken Creel was properly served through service on Kenneth Creel at Ken Creel's registered address (Doc. 10). See also Fla. Stat. § 48.081. Despite being served on December 15, 2022, Ken Creel failed to respond or file an answer to the Complaint by January 5, 2023. As more than twenty-one days expired since service of the summons and Complaint, a clerk's default was properly entered against Ken Creel.

C. Declaratory Judgment

A party seeking declaratory relief must demonstrate “at an ‘irreducible minimum,' that at the time the complaint was filed, he has suffered some actual or threatened injury resulting from the defendant's conduct that the injury fairly can be traced to the challenged action, and that the injury is likely to be redressed by favorable court disposition.” Atlanta Gas Light Co. v....