Third District Court of Appeal State of Florida
Opinion filed April 3, 2024. Not final until disposition of timely filed motion for rehearing.
________________
No. 3D22-1290 Lower Tribunal No. 20-13123 ________________
Seneca Specialty Insurance Company, Appellant,
vs.
Jade Beach Condominium Association, Inc., etc., et al., Appellees.
An Appeal from the Circuit Court for Miami-Dade County, David C. Miller, Judge.
Kennedys CMK LLP, and Josh Levy, Martin F. Harms, and Jedidiah Vander Klok, for appellant.
Boyle, Leonard, & Anderson, P.A., and Alexander Brockmeyer (Fort Myers), for appellees.
Before LOGUE, C.J., and SCALES and GORDO, JJ.
LOGUE, C.J.
Judge Gordo did not participate in oral argument. Seneca Specialty Insurance Company appeals the trial court’s order
dismissing its breach of contract action against Seneca’s insured, Jade
Beach Condominium Association, Inc. In the operative complaint, Seneca
alleged the Association violated the policy provisions requiring the
Association to refrain from impairing Seneca’s subrogation rights when the
Association settled with, and released, tortfeasors responsible for claims that
had been brought by third parties against the Association, and which Seneca
had paid on the Association’s behalf. The narrow issue on appeal is whether
Seneca sufficiently stated a breach of contract claim by alleging the
Association’s releases barred its subrogation rights and attaching the policy
and releases. The trial court ruled that the complaint failed to state a claim
because, in these circumstances, an insurer must allege it first sued the
responsible tortfeasors and suffered a judgment finding that the insured’s
releases barred its subrogation rights. For the reasons stated below, we
conclude that Seneca sufficiently pled its claim. Thus, we reverse the trial
court’s dismissal of Seneca’s breach of contract claim.1
1 We affirm the trial court’s dismissal with prejudice of Seneca’s remaining claims.
2 BACKGROUND
Seneca issued a liability insurance policy to the Association that
required the Association to refrain from impairing Seneca’s subrogation
rights against responsible tortfeasors. The policy stated:
If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring "suit" or transfer those rights to us and help us enforce them.
On August 1, 2014, the owners of Unit 4701 at Jade Beach
Condominium (“Unit 4701”) sued the Association, the owner of Unit 4904
(“Unit 4904"), and two construction companies, among others. Unit 4701
alleged that water flowing down from Unit 4904’s balcony and from limited
common areas appurtenant to Unit 4904 caused damage to their balcony.
Unit 4701 contended the Association had a non-delegable responsibility to
maintain the structural and mechanical elements of the Unit 4904 balcony,
which was a limited common element. Based on these allegations, Unit 4701
alleged claims against the Association for breach of the declaration of
condominium, trespass, and nuisance.
Unit 4904 then filed a crossclaim against the Association and alleged
claims for breach of the condominium’s declaration, contribution, common
law indemnification, and equitable subrogation (“Unit 4904’s Crossclaim”).
3 Unit 4904 argued the Association had a duty to maintain the condominium’s
common elements and to remedy any structural defects. As such, they
contended, the Association had a duty to remedy the water run-off from Unit
4904’s balcony and to remedy water intrusion into Unit 4904 because these
issues arose from underlying structural issues with common and limited
common elements.
When notified by the Association of the lawsuits, and as required by
the policy, Seneca provided the Association with a defense and ultimately
paid its liability policy limit of $1,000,000 on behalf of the Association to settle
Unit 4904’s Crossclaim.
Unbeknownst to Seneca, however, while these unit owner actions
were pending, the Association filed a separate construction defect lawsuit
against the condominium developer, general contractor, design
professionals, and subcontractors, including the concrete formwork
subcontractor, the mechanical subcontractor, and the caulking and
waterproofing subcontractor (collectively, “the Construction Defect
Defendants”). The Association’s lawsuit (the “Construction Defect Lawsuit”)
included allegations of defects in mechanical rooms causing leakage into
units below, defects in roofs, and defects in balcony slopes. In addition to
damages, the Association sought indemnification from the Construction
4 Defect Defendants for all unit owner claims brought against the Association
arising from the defects.
The Association resolved the Construction Defect Lawsuit through
various settlements totaling approximately $12,565,000. The settlement
amounts were not allocated to any particular claims. As part of the
settlement, the Association gave the Construction Defect Defendants
general releases of the Association’s claims. For example, one of the
releases provided:
[T]he Association, for themselves and each of their respective . . . insurers hereby mutually release and forever discharge [the general contractor] and each of their respective . . . insurers, . . . and any person or entity that provided labor, materials or services under a direct contract with [the general contractor] related to the construction of the [condominium], from any and all manner of past, present and future claims, actions, causes and causes of action, suits, lawsuits, debts, dues, duties, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, liabilities, statutory claims for damages, exemplary and/or punitive damages, claims for indemnity or contribution, controversies, expenses, assessments, penalties, charges, injuries, losses, fees, costs, damages, expenses, agreements, promises, variances, trespasses, judgments, executions, and demands whatsoever, in law or in equity, which they ever had, now have, will have, or may have in the future, against each other, both known and unknown, latent and patent, asserted and unasserted, suspected and unsuspected, discovered and undiscovered, whether now existing, or hereafter arising, that relate to, arise
5 out of, or are in any way connected with, the original construction of the [condominium], including but not limited to all claims which were or could have been asserted in the [Construction Defect Lawsuit].
(emphasis added).
The Association allegedly did not inform Seneca of these settlements
at any time before Seneca paid its liability policy limit to settle Unit 4904’s
Crossclaim, and Seneca was not a party to the Construction Defect Lawsuit
or the settlement agreements.
On June 22, 2020, Seneca filed the underlying action against the
Association. The operative complaint included a breach of contract claim
against the Association, arguing the Association impaired Seneca’s
subrogation rights by releasing the Construction Defect Defendants in the
Construction Defect Lawsuit. Attached to the complaint were copies of the
Association’s releases given to the Construction Defect Defendants. The
complaint alleged the Association’s releases barred Seneca’s subrogation
rights against the Construction Defect Defendants.
The Association moved to dismiss and argued that Seneca’s breach of
contract claim was premature because Seneca failed to first sue the
Construction Defect Defendants and suffer a judgment that found Seneca’s
subrogation rights had been impaired by the Association. The Association
also argued that dismissal was warranted because Seneca’s liability
6 payment in Unit 4904’s Crossclaim did not overlap with damage claims
asserted in the Construction Defect Lawsuit. The Association contended it
recovered for damages to the common elements, while Unit 4904’s
Crossclaim sought to recover different damages—damages to the interior of
an individual unit, for which the Association did not have standing to sue.
In opposition, Seneca argued its breach of contract claim was not
premature because it was not required to first file an unsuccessful
subrogation action against the Construction Defect Defendants as a
condition precedent to filing its breach of contract action against the
Association. Seneca further maintained that, because there was overlap
between the damages sought in Unit 4904’s Crossclaim (for which Seneca,
on behalf of the Association, paid its policy limits to settle) and the claims
made by the Association in the Construction Defect Lawsuit (which resulted
in the $12,565,000 settlement proceeds recovered by the Association),
Seneca would have been subrogated to the Association’s rights against the
Construction Defect Defendants based on its payment to Unit 4904, but for
the Association giving general releases to the Construction Defect
Defendants of the Association’s claims.
Following a hearing, the trial court granted the Association’s motion to
dismiss, ruling, as a matter of law, that Seneca’s breach of contract claim
7 against the Association was premature and that the damages Seneca paid
in Unit 4904’s Crossclaim did not overlap with the damages sought in the
Construction Defect Lawsuit. This appeal timely followed.
ANALYSIS
An order granting a motion to dismiss is reviewed de novo. Williams
Island Ventures, LLC v. de la Mora, 246 So. 3d 471, 475 (Fla. 3d DCA 2018).
To determine whether the trial court erred in concluding that Seneca’s
claim for breach of contract failed to state a cause of action, we must answer
two questions. First, whether Seneca’s breach of contract claim was
premature because Seneca was first required to sue the Construction Defect
Defendants and suffer a judgment finding that the Association’s releases
barred Seneca’s subrogation rights. Second, whether Seneca’s claimed
damages, namely those it paid to settle Unit 4904’s Crossclaim, overlapped
with the damages claimed and recovered by the Association in the
Construction Defect Lawsuit. We address each below.
I. Premature Filing
At the outset we note that the parties do not dispute that where (1) an
insurer honored a claim under an insurance policy; (2) the insurer became
subrogated to its insured’s rights pursuant to the terms of the policy as a
result of honoring the claim; and (3) the insured settled with or released the
8 tortfeasor, then the subrogated insurer may have a remedy against the
insured under a breach of contract theory. See generally Annotation, Rights
and Remedies of Insurer Paying Loss As Against Insured Who Has
Released or Settled with Third Person Responsible for Loss, 51 A.L.R.2d
697 (1957) (noting that “the right of a property insurer who has honored a
claim under the policy to recover back from the insured the payments made,
where the insured has settled with or released a third person allegedly
responsible for his loss, are discernible in the cases” including cases that
have found “that the action of the insured in settling with or releasing the
alleged wrongdoer constitutes a breach of the express contract between the
insured and the insurer contained in either the original policy or in some
collateral undertaking, such as a subrogation agreement, an assignment, or
a loan receipt executed by the insured in connection with the payment of the
policy claim”); Allied Mut. Ins. Co. v. Heiken, 675 N.W.2d 820, 826 (Iowa
2004) (“Thus, an insurer who has lost subrogation rights due to the release
of the responsible tortfeasor by the insured has a means to seek
reimbursement from the insured for its loss based on breach of contract . . .
.”).
Instead, the issue before us is whether, as the trial court concluded,
Seneca was first required to unsuccessfully sue the Construction Defect
9 Defendants as a condition precedent to suing its insured for breach of the
policy’s transfer of rights provision, which prohibited the insured from
impairing the rights transferred to the insurer for recovery of indemnification
payments from tortfeasors. Cf. Arch Ins. Co. v. Kubicki Draper, LLP, 318 So.
3d 1249, 1255 (Fla. 2021) (“[S]ubrogation exists to hold premium rates down
by allowing the insurers to recover indemnification payments from the
tortfeasor who caused the injury.”).
Seneca contends its claim was not premature because at the time it
filed suit all the elements of a breach of contract claim existed. Specifically,
Seneca maintains that (1) the insurance policy was a valid contract that
required the Association not to impair Seneca’s recovery rights after a loss;
(2) the Association breached the insurance policy by entering into
settlements with the Construction Defect Defendants and releasing them
from any further liability; and (3) Seneca was damaged by this breach
because it could no longer pursue claims against the Construction Defect
Defendants on the released claims and thus could not recover the amounts
it paid on the Association’s behalf to settle Unit 4904’s Crossclaim. See
Grove Isle Ass’n, Inc. v. Grove Isle Assocs., LLLP, 137 So. 3d 1081, 1094–
95 (Fla. 3d DCA 2014) (“The elements of a breach of contract action are: (1)
10 a valid contract; (2) a material breach; and (3) damages.” (quoting Schiffman
v. Schiffman, 47 So. 3d 925, 927 (Fla. 3d DCA 2010))).
The Association, in turn, contends that Seneca’s claim failed because
it did not, prior to filing suit against the Association, take the “required” step
of first unsuccessfully suing the Construction Defect Defendants. The
Association argues that absent such a failed attempt, Seneca could not plead
that the Association had breached the insurance policy by impairing its
recovery rights or that it suffered damages. The Association argues that,
since no court had entered a judgment finding that the releases the
Association gave to the Construction Defect Defendants barred Seneca’s
subrogation claims against those Defendants, Seneca could not allege that
the Association breached the policy.
In what appears to be a case of first impression, we are reluctant to
conclude that, for an insurer to successfully plead a claim against its insured
for breach of contract based on the impairment of recovery rights, the insurer
must first unsuccessfully sue the parties to whom the insured granted
releases. Such a condition precedent to suit is not contained in the insurance
policy at issue. Nor has the Association pointed us to any case setting forth
such a requirement in this context.
11 The Association invites us to establish a rule based on an analogy to
the professional malpractice cases of Blumberg v. USAA Casualty Insurance
Company, 790 So. 2d 1061 (Fla. 2001) and Peat, Marwick, Mitchell & Co. v.
Lane, 565 So. 2d 1323 (Fla. 1990). It asserts that a broad rule can be
fashioned from these cases, namely that “before a plaintiff can file suit, the
plaintiff must first receive an adverse determination on the underlying claim.”
We do not read these professional malpractice cases as supporting such a
broad rule. Rather, we read Blumberg and Peat, Marwick as addressing, in
the professional malpractice context, the effect of a collateral legal
proceeding on the calculation of when the statute of limitations begins to run.
In Blumberg, the Florida Supreme Court evaluated when the date of
accrual was for negligence and malpractice causes of action against an
insurance agent based on the agent promising coverage that was ultimately
unavailable to the insured. 790 So. 2d at 1062-63. The Court concluded the
cause of action accrued when the insured incurred damages at the
conclusion of a judicial proceeding where it was found that there was no
coverage or when the client’s right to sue expired. Id. at 1065. The Court
further explained that, when a party asserts that collateral legal proceedings
will determine the amount, if any, of a plaintiff’s damages, that party should
seek an abatement of the main action. Id.
12 In Peat, Marwick, the Court was called on to determine when a cause
of action accrued for accounting malpractice relating to income tax
preparations. 565 So. 2d at 1325. The Court, analogizing the case to one of
legal malpractice, held that the cause of action did not accrue until the United
States Tax Court made a final determination regarding the IRS’s deficiency
determination. Id. at 1327.
While each of these cases involved collateral legal proceedings, the
Court’s focus was not on whether the plaintiff was required to initiate the
collateral proceeding to successively plead the elements of the cause of
action. Indeed, in each of these cases, the Court’s rationale centered on the
statute of limitations issue of “when the redressable harm or injury occurred.”
In both cases, the Court ultimately concluded that the statute of limitations
did not begin to run until the resolution of the related or underlying judicial
proceeding. Id. at 1325. This is because only then could it be determined
that there was actionable error by the professional. Id. at 1325-27; Blumberg,
790 So. 2d at 1065. In neither case did the Court hold, as the Association
suggests, that, to successfully plead its case, the plaintiff must first file the
collateral legal action.
Our own review of Florida law also did not yield any such “sue and lose
first” rule, but we note that on at least two prior occasions this Court did rule
13 on the merits of an insurer’s breach of contract claim against its insured
without a prior adverse determination of the underlying subrogated claims.
See, e.g., Russak v. State Farm Mut. Auto. Ins. Co., 281 So. 2d 541 (Fla. 3d
DCA 1973) (appeal of final summary judgment in favor of insurer in action
against insured for breach of contract following insurer’s voluntary dismissal
of subrogation action upon discovering insured settled with tortfeasor and
executed a general release); Ortega v. Motors Ins. Corp., 552 So. 2d 1127
(Fla. 3d DCA 1989) (appeal of final summary judgment in favor of insurer on
insurer’s claim for breach of contract against insured, which was brought as
an alternative claim in insurer’s subrogation action against tortfeasor after
tortfeasor raised affirmative defense that a release executed by insured
barred subrogation action). Both cases therefore call into question the
Association’s contention that “before a plaintiff can file suit, the plaintiff must
first receive an adverse determination on the underlying claim.”
“Florida case law consistently holds that a cause of action for breach
of contract accrues and the limitations period commences at the time of the
breach.” Grove Isle Ass'n, Inc., 137 So. 3d at 1095 (quoting Clark v. Estate
of Elrod, 61 So. 3d 416, 418 (Fla. 2d DCA 2011)). Seneca pled that the
Association breached the insurance policy when it entered into settlements
with the Construction Defect Defendants and released them from any further
14 liability. Seneca alleged this breach caused it damages because it could no
longer recover the amounts it paid on behalf of the Association through
subrogation. While the fact that Seneca did not first unsuccessfully sue the
Construction Defect Defendants may ultimately result in a proof problem for
Seneca, at this stage of the proceedings, it does not defeat Seneca’s
otherwise well pled breach of contract action. Raney v. Jimmie Diesel Corp.,
362 So. 2d 997, 998 (Fla. 3d DCA 1978) (“[T]he function of a motion to
dismiss a complaint is to raise as a question of law the sufficiency of the facts
alleged to state a cause of action. A court is not permitted to speculate as to
whether a plaintiff will be able to prove the allegations, rather a court is
required to accept all well pleaded allegations contained in the complaint as
true.”).
Accordingly, we conclude Seneca sufficiently pled a cause of action for
breach of contract against the Association. Because the Association has
failed to identify any authority requiring Seneca to first obtain an adverse
determination in an action against the Construction Defect Defendants
before bringing the action, we reverse the trial court’s ruling that Seneca’s
breach of contract claim was premature.
15 II. Overlapping Damages
The trial court also concluded Seneca failed to state a cause of action
for breach of contract because “the damages Seneca paid in [Unit 4904’s
Crossclaim] did not overlap with damages in the Construction Defect
Lawsuit.” Indeed, if the damages sought by the Association (and, therefore
the settlement proceeds the Association received from the Construction
Defect Defendants) in the Construction Defect Lawsuit were different from
the damages paid by Seneca to settle Unit 4904’s Crossclaim, then, the
Association’s release of the Construction Defect Defendants would not have
impaired Seneca’s recovery rights.
In its operative complaint, Seneca alleged that, because of its liability
payment on behalf of the Association (to settle Unit 4904’s Crossclaim) it
was subrogated to the Association’s right to recover from the Construction
Defect Defendants. Seneca further alleged that the Association’s release of
the Construction Defect Defendants in the Construction Defect Lawsuit
impaired Seneca’s ability to recover from these parties, resulting in Seneca
suffering damages, i.e. those damages against the Construction Defect
Defendants that it would have recovered but for the Association’s release of
the Construction Defect Defendants.
16 The Association contends that the facts alleged do not establish that
the Association actually impaired Seneca’s rights because the facts do not
show that Seneca’s liability settlement payments overlapped with the
damages the Association sought or recovered in the Construction Defect
Lawsuit. In other words, the Association argues its Construction Defect
Lawsuit alleged damages distinct from those paid by Seneca to settle Unit
4904’s Crossclaim.
Again, while Seneca may encounter hurdles to ultimately proving its
claim, Seneca adequately alleged that at least a portion of the $1,000,000 it
paid to settle Unit 4904’s Crossclaim was recovered by the Association as
part of the Association’s $12,565,000 settlement of the Construction Defect
Lawsuit. For purposes of a motion to dismiss, the trial court was, and we are,
required to accept this allegation as true. See Town of Miami Lakes v. Miami-
Dade Cnty., 337 So. 3d 868, 870–71 (Fla. 3d DCA 2022) (“A motion to
dismiss is designed to test the legal sufficiency of the complaint, not to
determine factual issues[.] When ruling on a motion to dismiss, a trial court
must accept all factual allegations as true.” (internal citations omitted)). The
trial court erred by concluding, as a matter of law, to the contrary and we
reverse on these grounds as well.
17 CONCLUSION
Regardless of whether Seneca will ultimately be successful in proving
that (a) the releases are fatal to its right to recover from the Construction
Defect Defendants, and (b) overlap exists between the settlement monies it
paid and the damages it would have sought in an action against the
Construction Defect Defendants, Seneca has met the burden of pleading
these issues. We therefore hold that Seneca sufficiently pled a breach of
contract claim against the Association. Seneca pled facts establishing all
elements of a breach of contract claim, including damages arising from the
Association’s alleged breach of the insurance policy, and the Association
failed to set forth any legally cognizable basis for why such a claim should
be deemed premature.
Reversed.