Steven M. Shulman v. Liberty Mutual Fire Ins. Co.

• Court: Court of Appeals for the Eleventh Circuit
• Decided: April 13, 2006
• Docket: 04-16681
• Status: Unpublished

Opinion

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________ FILED No. 04-16681 U.S. COURT OF APPEALS ELEVENTH CIRCUIT Non-Argument Calendar April 13, 2006 ________________________ THOMAS K. KAHN CLERK D. C. Docket No. 04-21137-CV-JLK

STEVEN M. SHULMAN,

Plaintiff-Appellant,

versus

LIBERTY MUTUAL FIRE INSURANCE COMPANY, a foreign corporation,

Defendant-Appellee.

________________________

Appeal from the United States District Court for the Southern District of Florida _________________________

(April 13, 2006)

Before ANDERSON, BIRCH and RONEY, Circuit Judges.

PER CURIAM: Dissatisfied with the $24,386.03 payment by Liberty Mutual Fire Insurance

Company on his homeowner’s water and mold damage insurance claim, appellant

Steven M. Shulman filed a one-count breach of contract action against Liberty

Mutual in Florida state court. The contract action alleged that Liberty Mutual had

“failed and refused, and continues to refuse to pay the aforementioned damages

despite knowing that it is required to do so.” Liberty Mutual did not dispute

coverage of the claim but instead the amount to be paid on it. Shulman accepted

Liberty Mutual’s Proposal for Settlement of this lawsuit, resulting in the dismissal

with prejudice of the state court action. Shulman filed a second lawsuit alleging,

inter alia, a Florida Statute § 624.155 bad faith claim against Liberty Mutual

relating to this insurance claim. Shulman now appeals the district court’s grant of

Liberty Mutual’s motion to dismiss his bad faith claim on res judicata grounds.

Because Shulman neglected to raise the bad faith claim prior to settlement and

dismissal of his initial lawsuit where Liberty Mutual did not dispute coverage,

Shulman’s subsequent bad faith lawsuit relating to that claim is barred under the

doctrine of res judicata. Accordingly, we affirm.

In August 2002, Shulman contacted Liberty Mutual to report water and

mold damage in the closets next to his home’s fireplace, as well as the surrounding

living areas, caused by a roof leak (“First Loss”). Liberty Mutual assigned Daniel

2 Guilfoyle to adjust the loss. Guilfoyle hired an inspection company to determine

the extent of the damage to Shulman’s home. On August 22, the inspection

company evaluated the condition of the home but did not issue its report until six

weeks later. On August 23, Guilfoyle inspected the home, advising Shulman that

there would be no problem in repairing the structural damage to the home, as well

as replacing the damaged contents. Liberty Mutual then appointed a restoration

company to prepare a repair estimate. On October 4, 2002, the restoration

company visited the home. The company did not, however, return with an

estimate until weeks later. On October 28, Guilfoyle again visited Shulman’s

home, this time taking measurements. Guilfoyle then told Shulman that the

damaged contents of his home would not be covered. After not receiving any

repair estimates from the companies hired by Liberty Mutual, Shulman hired an

attorney to assist him in getting the claim paid.

On November 13, 2002, Shulman filed a Civil Remedy Notice of Insurer

Violation. On November 22, Shulman retained a restoration company to prepare

an independent estimate for repair of the damages to his home. That company

estimated the damages at $74,462.92. Five days later, Liberty Mutual sent

Shulman a check for $24,386.03.

3 Disagreeing with the $24,386.03 amount, Shulman submitted a Proof of

Loss to Liberty Mutual on January 17, 2003, seeking “payment for his actual

damages due to the First Loss.” This Proof of Loss was rejected by Liberty

Mutual on March 13, 2003, reasoning that the Proof of Loss had failed to comply

with the policy’s provisions. Liberty Mutual also invoked the policy’s appraisal

provisions, disputing the amount of the damages.

On April 8, 2003, Shulman filed a one-count breach of contract action

against Liberty Mutual in Florida state court. During the pendency of the state

court contract action, Liberty Mutual completed its appraisal process. On April

30, 2003, Shulman was awarded $41,747.67 for the damages to his home. Liberty

Mutual thus tendered payment to Shulman for the undisputed amounts of the loss

or damage on the claim, but a dispute remained as to additional amounts of loss

Shulman had believed were due to him under the policy.

While the state court contract claim was pending, Shulman discovered a

second water leak in his master bathroom on July 9, 2003 (the “Second Loss”).

Also on July 9, 2003, Shulman found what he deemed to be “hidden” water and

mold damage in his kitchen sustained as a result of the First Loss, which had

already been appraised and awarded to Shulman on April 30, 2003. Until July

2003, it was not known by either Shulman or Liberty Mutual that the water and

4 mold damage had spread to the kitchen area. Despite learning of the damage in

the kitchen in July 2003, Shulman never amended his contract action, which was

still pending in the state court, to specify the damage sustained by this “hidden”

damage in the kitchen.

On July 15, 2003, Shulman filed a second claim under the insurance policy

relating to the Second Loss. An estimate for these repairs was forwarded to

Liberty Mutual on September 16, 2003. Shulman disagreed with this estimate,

arguing that it did not include an estimate for mold remediation to the master

bedroom, hall, office, living room or dining room, which he claimed had been re-

contaminated by the leak in the master bathroom.

On October 31, 2003, Liberty Mutual served a Proposal for Settlement

seeking to resolve the pending Florida state court contract action addressing the

First Loss. Shulman accepted that proposal on November 6, 2003, and the state

court action was dismissed with prejudice on January 21, 2004. The Proposal for

Settlement stated, “Acceptance of this Proposal relieves all claims between these

parties that have been asserted in the pending action.” Shulman accepted this

settlement and never amended his breach of contract action to include the

“hidden” damage found in the kitchen in July 2003 as a result of the First Loss.

5 On December 18, 2003, after accepting Liberty Mutual’s settlement offer,

Shulman submitted additional sworn statements of Proofs of Loss to Liberty

Mutual for the hidden damage in the kitchen. Liberty Mutual rejected these Proofs

of Loss, stating that the damages attributable to the roof leak were settled in the

contract action.

Liberty Mutual issued $37,814.83 as full and final payment for the Second

Loss, reflecting damages sustained to the master bedroom. Again dissatisfied with

the amount, Shulman, on February 4, 2004, filed a second Civil Remedy Notice of

Insurer seeking settlement of the second claim. Since then, Liberty Mutual has

invoked its right to appraisal of the Second Loss.

On May 13, 2004, Shulman filed a two-count statutory bad faith claim in the

district court. The first count alleged that Liberty Mutual did not in good faith

attempt to settle claims set forth in his first civil remedy notice relating to the First

Loss, and the second count alleged similar allegations as to the second civil

remedy notice relating to the Second Loss. Shulman alleged, “By paying a portion

of Shulman’s claims, Liberty Mutual has conceded coverage under the Policy for

both claims, and a bad faith action is accordingly ripe.”

Liberty Mutual moved to dismiss the statutory bad faith claim as barred by

the doctrine of res judicata and the action for the Second Loss as premature,

6 pending appraisal. The district court granted the motion to dismiss, holding that

because “Plaintiff failed to assert a bad faith claim in his state court breach of

contract action filed approximately five months after Defendant’s payment on the

First Loss, Defendant is precluded from litigating the issue again, after the parties

already settled the case.”

Shulman only appeals the dismissal of Count 1 of his bad faith complaint.

He argues the doctrine of res judicata does not operate to bar a Florida

policyholder from litigating a bad faith claim separately from, and subsequent to,

establishing coverage in an action on the policy.

The district court did not err by granting Liberty Mutual’s motion to dismiss

on Shulman’s bad faith claim. Shulman correctly notes in his initial brief that a

Florida statutory bad faith claim cannot be brought at the same time as a claim

disputing insurance coverage. See Blanchard v. State Farm Mut. Auto. Ins. Co.,

575 So. 2d 1289, 1291 (Fla. 1991) (explaining that one prerequisite of a bad faith

claim under Florida law is “a determination of the existence of liability”).

The Florida state court contract action brought by Shulman on April 8,

2003, did not, however, dispute coverage but instead disputed the amount of the

claim paid Liberty Mutual. Liberty Mutual never disputed coverage in this case.

In fact, prior to filing that state law contract case, Shulman had already received a

7 $24,386.03 payment by Liberty Mutual on the First Loss. The gravamen of his

lawsuit was thus not addressing coverage under the policy but instead the amount

of money due to be received under the policy. Shulman’s bad faith lawsuit itself

asserts, “By paying a portion of Shulman’s claims, Liberty Mutual has conceded

coverage under the Policy for both claims, and a bad faith action is accordingly

ripe.” By Shulman’s own allegation, therefore, his bad faith action as to the First

Loss was ripe at the time he had received Liberty Mutual’s $24,386.03 in

November 2002, whereby so paying, Liberty Mutual had admitted coverage

liability. See, e.g., Blanchard, 575 So. 2d at 1291 (explaining that a claim for bad

faith accrues once the underlying contract action is resolved). Furthermore, by

agreeing to the settlement, Shulman also “resolve[d]” all claims between the

parties regarding the First Loss.

Because the facts underlying the bad faith claim were known to Shulman at

the time he filed his state contract claim lawsuit and certainly before he had

accepted Liberty Mutual’s settlement offer and the state court case was dismissed

with prejudice, it was impermissible for him to split his causes of action under the

doctrine of res judicata. See, e.g., Saboff v. St. John’s River Water Mgmt. Dist.,

200 F.3d 1356, 1360 (11th Cir. 2000) (applying Florida law’s doctrine of res

judicata); see Florida Dep’t of Transp. v. Juliano, 801 So. 2d 101, 105 (Fla. 2001)

8 (explaining that the doctrine of res judicata “precludes consideration of issues that

could have been raised but were not raised in the first case”).

AFFIRMED.