Auto-Owners Insurance Company v. Richard Kjellander

• Court: Court of Appeals for the Eleventh Circuit
• Decided: September 6, 2018
• Docket: 18-10401
• Status: Unpublished

Opinion

Case: 18-10401 Date Filed: 09/06/2018 Page: 1 of 7

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 18-10401 Non-Argument Calendar ________________________

D.C. Docket No. 3:14-cv-00326-MCR-CJK

AUTO-OWNERS INSURANCE COMPANY,

Plaintiff - Appellee,

versus

RALPH GAGE CONTRACTING, IINC., et al.,

Defendants.

RICHARD KJELLANDER, KRESLEY KJELLANDER,

Defendants - Appellants.

________________________

Appeal from the United States District Court for the Northern District of Florida ________________________

(September 6, 2018) Case: 18-10401 Date Filed: 09/06/2018 Page: 2 of 7

Before MARCUS, FAY, and EDMONDSON, Circuit Judges.

PERCURIAM:

In this declaratory judgment action, Richard and Kresley Kjellander appeal

the district court’s denial of their motion for relief from final judgment, filed

pursuant to Fed. R. Civ. P. 60(b). This appeal is the Kjellanders’ second appeal in

this civil action; in an earlier appeal we affirmed the district court’s grant of

summary judgment in favor of Auto-Owners Insurance Company (“Auto-

Owners”). See Auto-Owners Ins. Co. v. Ralph Gage Contracting Inc., 685 F.

App’x 820 (11th Cir. 2017) (“Auto-Owners I”). No reversible error has been

shown; we affirm.

Briefly stated, this civil action arises from an alleged negligent home

inspection performed by Ralph Gage Contracting, Inc. (“Gage”) on a home under

contract for purchase by the Kjellanders. After closing on the property, the

Kjellanders discovered several property defects -- including water and mold

damage and a faulty HVAC system -- not identified in Gage’s inspection report.

The Kjellanders filed a lawsuit against Gage in Florida state court, seeking

damages of over $1.7 million for repair costs, diminution in value, and for loss of

use.

2 Case: 18-10401 Date Filed: 09/06/2018 Page: 3 of 7

At the time of the home inspection, Gage was insured under a Commercial

General Liability insurance policy (“Policy”) issued by Auto-Owners. Auto-

Owners filed this declaratory judgment action, seeking a declaration that it owed

no duty to defend or to indemnify Gage in the underlying suit. The district court

granted summary judgment in favor of Auto-Owners.

In Auto-Owners I, we affirmed the district court’s grant of summary

judgment. In particular, we concluded that the Kjellanders had “failed to establish

a causal connection between an occurrence -- Gage’s negligence -- and the alleged

property damage” as required to demonstrate coverage under the Policy. Auto-

Owners I, 685 F. App’x at 823.

The Kjellanders later filed the Rule 60(b) motion at issue in this appeal. The

Kjellanders contend they are entitled to Rule 60(b) relief based on newly-asserted

allegations in their Fourth Amended Complaint filed in the underlying state court

case against Gage. In particular, the Fourth Amended Complaint in state court

includes allegations that Gage’s negligent home inspection “directly caused some

or all of the Conditions to worsen after Closing due to the continuous and repeated

exposure of the Conditions to the weather, operation of the equipment at the

Property and other elements, which caused damage to the Property and to

3 Case: 18-10401 Date Filed: 09/06/2018 Page: 4 of 7

Plaintiffs.” The Kjellanders say these new allegations change the district court’s

coverage analysis such that Rule 60(b) relief is warranted.

The district court denied the Kjellanders’ motion. The district court first

determined that the motion was not filed “within a reasonable time,” as required by

Rule 60(c).* In the alternative, the district court also denied the motion on the

merits concluding that the Fourth Amended Complaint asserted no “significant

factual changes” warranting relief under Rule 60(b)(5) and that no exceptional

circumstances existed to warrant relief under Rule 60(b)(6).

We review the denial of a Rule 60(b) motion for an abuse of discretion.

Griffin v. Swim-Tech Corp., 722 F.2d 677, 680 (11th Cir. 1984). The decision

about “whether to grant the requested relief is . . . a matter for the district court’s

sound discretion.” Cano v. Baker, 435 F.3d 1337, 1342 (11th Cir. 2006). That a

grant of a Rule 60(b) motion “might have been permissible or warranted” is not

enough; instead, the denial of the motion “must have been sufficiently unwarranted

as to amount to an abuse of discretion.” Id. In other words, a party seeking relief

bears a heavy burden of demonstrating “a justification so compelling that the

district court was required to vacate its order.” Id. (alteration omitted).

* Because we conclude that the Kjellanders’ Rule 60(b) motion was denied properly on the merits, we do not address the district court’s alternative ruling on timeliness. 4 Case: 18-10401 Date Filed: 09/06/2018 Page: 5 of 7

Rule 60(b)(5), in pertinent part, provides that a court may relieve a party

from a final judgment if “applying [the judgment] is no longer equitable.” Fed. R.

Civ. P. 60(b)(5). Under Rule 60(b)(6) -- the “catchall provision” -- a court may

relieve a party from a final judgment for “any other reason that justifies relief.”

Fed. R. Civ. P. 60(b)(6). We have said that Rule 60(b)(6) relief “is an

extraordinary remedy which may be invoked only upon a showing of exceptional

circumstances.” Griffin, 722 F.2d at 680. A party seeking relief under Rule

60(b)(6) “has the burden of showing that absent such relief, an ‘extreme’ and

‘unexpected’ hardship will result.” Id.

The Kjellanders have failed to satisfy their burden of demonstrating that the

district court abused its broad discretion in denying their Rule 60(b) motion. First,

we agree with the district court’s determination that the newly-asserted allegations

in the Fourth Amended Complaint in state court constitute no “significant factual

change” affecting the district court’s coverage analysis. As we explained in Auto-

Owners I, to establish coverage under the Policy, the Kjellanders must demonstrate

a causal connection between Gage’s negligent inspection and the “property

damage.” There, we concluded the Kjellanders failed to show that Gage’s

negligence itself caused physical damage to the property and, thus, that Auto-

5 Case: 18-10401 Date Filed: 09/06/2018 Page: 6 of 7

Owners owed Gage no duty to defend or to indemnify in the underlying state court

action.

The Kjellanders have now alleged that Gage’s negligent inspection “caused”

the property defects to worsen after closing. Even if we accept that Gage’s failure

to identify the pre-existing property defects resulted in a delay of repairs, that

allegation still demonstrates no causal connection between the inspection and the

ongoing property damage. The Kjellanders have asserted no allegation that Gage

acted to change the nature of the exposure of the property defects to harmful

conditions or to otherwise hasten the resulting property damage. Thus -- as the

district court noted -- “the damages would have continued to worsen in the same

manner due to the existence of the prior conditions regardless of whether Gage had

discovered and disclosed them or not.”

The Policy itself defines an “occurrence” as “an accident, including

continuous or repeated exposure to substantially the same general harmful

conditions.” Gage’s failure to identify the pre-existing and continuing conditions

(which may or may not have triggered the repair of the property defects) simply

constitutes no new “occurrence” under the Policy.

The Kjellanders also assert that, but for Gage’s negligence, they would not

have purchased the property and thus would not have personally suffered damages.

6 Case: 18-10401 Date Filed: 09/06/2018 Page: 7 of 7

We have already rejected that argument for the reasons described in Auto-Owners

I.

The Kjellanders have failed to demonstrate a “significant factual change”

that would demand relief under Rule 60(b)(5). Nor have they demonstrated

“extraordinary circumstances” that would compel relief under Rule 60(b)(6). The

district court committed no abuse of discretion in denying the Kjellanders’ Rule

60(b) motion for relief.

AFFIRMED.