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Scott, Blane, and Darren Recovery, LLC v. Auto-Owners Insurance Co.

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

May 26, 2017

SCOTT, BLANE, AND DARREN RECOVERY, LLC, et al., Plaintiffs,
v.
AUTO-OWNERS INSURANCE COMPANY, Defendant.

          ORDER

          STEVEN D. MERRYDAY UNITED STATES DISTRICT JUDGE

         Scott, Blane, and Darren Recovery, LLC, (SBD) and Anova Food, Inc., sue (Doc. 1) Auto-Owners Insurance Company for breach of an insurance policy and for bad-faith denial of coverage. Auto-Owners counterclaims (Doc. 43) for a declaratory judgment that Auto-Owners owed no duty under the insurance policy to defend and to indemnify Anova. SBD and Auto-Owners submit (Docs. 52, 56) cross-motions for summary judgment on Auto-Owners's duty to defend. Also, Auto-Owners moves (Doc. 73) to dismiss under Rule 12(b)(1), Federal Rules of Civil Procedure.

         BACKGROUND

         Auto-Owners issued Anova a policy of commercial general-liability insurance. (Docs. 1-2, 1-3) Auto-Owners delivered the policy to Anova's Florida agent, who delivered the policy to Anova's Florida headquarters. (Doc. 52 at 4) The policy covers “advertising injury” “caused by an offense committed in the course of advertising [one's] goods, products or services.” (Doc. 1-4 at 4-5; Doc. 1-7 at 30) “Advertising injury” means an injury arising from an “[o]ral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services.” (Doc. 1-4 at 11; Doc. 1-7 at 30) The policy excludes “advertising injury” that “aris[es] out of the failure of goods, products or services to conform with any statement or representation of quality of performance.” (Doc. 1-4 at 5)

         The policy requires Anova to notify Auto-Owners in writing as soon as practicable of any “suit or claim” against Anova; directs Anova to send Auto-Owners a copy of any “demands, notices, summonses, or legal papers received in connection with the claim or suit” (Doc. 1-4 at 8-9; Doc. 1-7 at 27-28); and requires Auto-Owners both to defend Anova from a lawsuit alleging “advertising injury” and to pay damages that Anova is “legally obligated to pay” for causing an “advertising injury.” (Doc. 1-4 at 4; Doc. 1-7 at 23)

         In July 2007, King Tuna sued Anova in federal court in Oregon (Doc. 1-13, 4-16) and alleged that “[i]n public marketing materials, Anova claims that its tuna products are superior to its competitors' offerings” because Anova uses the patented “Clearsmoke” treatment for tuna. (Doc. 1-13) The Oregon complaint alleges that the advertisements are “literally false” and that “in actual practice Anova sells raw tuna products which are treated and processed in a manner substantially different from the representations in Anova's advertising and marketing communications.” (Doc. 1-13) The Oregon complaint alleges that the labeling and the advertising violate the Lanham Act and violate Oregon law.

         In August 2007, Anova sent to Auto-Owners two letters about the Oregon suit, and each letter included a copy of the complaint. (Doc. 1-14 at 2) Auto-Owners responded and denied coverage. Auto-Owners stated that “[n]one of the claims made against Anova in the lawsuit seeks damages arising out of . . . advertising offenses as defined in the policy.” (Doc. 22-1 at 13-14) In November 2007, King Tuna voluntarily dismissed the Oregon action.

         Several weeks later King Tuna sued Anova for a similar claim in federal court in California. King Tuna alleged (1) that Anova falsely advertised that “its tuna products are superior to its competitors' offerings” due to Anova's use of a patented treatment and (2) that Anova falsely advertised that the patented treatment used “only one ingredient” to produce filtered wood smoke. (Doc. 1-8) Anova failed to notify Auto-Owners about the California action and failed to tender the California complaint to Auto-Owners. Anova eventually prevailed, but incurred an attorney's fee and costs of $3, 656, 484.93.

         SBD and Anova sued (Doc. 1) in January 2015 and asserted that Auto-Owners wrongfully denied coverage and wrongfully refused to defend Anova in the Oregon action and the California action. A May 23, 2016 order (Doc. 35) denies Auto-Owner's motion (Doc. 17) to dismiss and determines that “Florida law governs the parties' rights and liabilities under the policy.” (Doc. 35 at 8-9)

         ANALYSIS

         Standing

         Auto-Owners moves (Doc. 73) to dismiss under Rule 12(b)(1), and argues that SBD lacks standing. During discovery, Auto-Owners obtained a May 2010 closing document that transfers all of Anova's assets and liabilities to Anova Holding USA, LLC. (Doc. 73 at 2) Also, Auto-Owners found records showing that Scott, Blane and Darren Recovery LLC formed in April 2014, which leads Auto-Owners to conclude that SBD failed to exist in 2010 when Anova transferred all of Anova's assets to Anova Holding LLC. Auto-Owners argues that Anova incorrectly pleads that “Anova Food, Inc., has transferred to SBD the right to pursue the claims, ” (Doc. 1 at 1) and concludes that Anova Food, Inc., could not have transferred rights to the King Tuna Claim to SBD because Anova no longer owned the rights when SBD formed. (Doc. 56 at 9)

         Anova moves (Doc. 75) to “strike [the exhibits] accompanying Auto-Owners's motion to dismiss.” Auto-Owners attached several exhibits to the motion to dismiss but cites only a single page from Darren Zobrist's 133-page deposition, which Auto-Owners claims amounts to conclusive evidence that Anova Food, Inc., failed to transfer a right to the King Tuna claim to SBD.

         Zobrist's deposition confirms that Anova transferred an interest in the claim to SBD through a series of intermediary transfers. On May 31, 2010, Anova transferred all assets and claims to Anova Holding USA, LLC. On June 24, 2011, Anova Holding USA, LLC, transferred the claims to individual members, and on April 17, 2014, the individual members formed SBD and transferred their interests in the claims to SBD. (Doc. 74 at 4) The plaintiffs successfully establish standing. 1. Duty to Defend The duty to defend, triggered by some covered event, arises from the “eight corners” of the policy and the complaint. Mid-Continent Casualty Co. v. Royal Crane, LLC, 169 So.3d 174 (Fla. 4th DCA 2015). An insurer must defend the entire action if the complaint alleges any claim that might come within the indemnity obligation. A fair and reasonable doubt about whether an insurer is under the duty to defend is resolved in favor of the insured. Jones v. Florida Ins. Guar. Ass'n., 908 So.2d 435, 443 (Fla. 2005). An insurer must defend a claim even if the insurer lacks certainty whether the policy provides coverage. Mid-Continent Cas. Co. v. Am. Pride Bldg. Co., LLC, 601 F.3d 1143, 1149 (11th Cir. 2010). The duty to defend is triggered if the complaint alleges coverage under the ...


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