United States District Court, M.D. Florida, Jacksonville Division
Timothy J. Corrigan, Judge
diversity insurance coverage dispute is before the Court on
Defendant Phoenix Insurance Company's
(“Phoenix”) Motion to Dismiss Count III of
Plaintiff's Complaint with Prejudice and Incorporated
Memorandum of Law (Doc. 17). Plaintiff Raynor Marketing, LTD.
(“Raynor”) responded (Doc. 25), Phoenix replied
(Doc. 34), and Raynor filed a sur-reply (Doc. 35).
October 16, 2012, James Lee fell and injured his back when
the Real Space Pro 9000 Quantum Chair (“Quantum
Chair”) he was sitting on broke. (Doc. 1 ¶
Raynor, a New York corporation, manufactures, markets, sells,
and distributes wholesale office seating products, including
the Quantum Chair. (Doc. 1 ¶ 4, 7, 18). Previously, in
June, 2008, Raynor and Office Depot entered into a Vendor
Agreement, which includes a provision requiring Raynor to
indemnify Office Depot for lawsuits arising from Raynor
products sold to Office Depot. (Doc. 1 ¶ 16). Then in
August, 2011, Raynor and Office Depot entered into a Purchase
Order Agreement wherein Office Depot agreed to purchase and
sell Raynor products. (Doc. 1 ¶ 17).
period of April 7, 2012 through April 7, 2013, Phoenix issued
a Commercial General Liability Policy, number
Y-630-7075X381-PHX-12, to Raynor. (Doc. 1 ¶ 8). The
policy has a $1 million per occurrence limit. (Doc. 1 ¶
9). The Policy contains an endorsement that purports to add
vendors as an additional insured for bodily injury or
property damage arising out of Raynor's products. (Doc. 1
¶ 10). For this same period, Liberty Mutual issued an
umbrella liability policy to Raynor providing coverage up to
$5 million per occurrence in excess of the Phoenix policy.
(Doc. 1 ¶ 11).
one week after being injured, Lee contacted Raynor and Office
Depot concerning the broken Quantum Chair. (Doc. 1 ¶
20). Several days later, Raynor informed Lee that his
information was provided to Phoenix, and Raynor notified
Phoenix of Lee's claim. (Doc. 1 ¶ 22). Phoenix
assigned an adjuster to handle the claim. (Doc. 1 ¶ 24).
Around April 10, 2014, Lee sent a settlement demand letter to
Phoenix seeking $2 million. (Doc. 1 ¶ 25). Phoenix
appointed a lawyer to defend Raynor for the Lee claim and
Raynor requested that Phoenix appoint a separate lawyer to
defend Office Depot. (Doc. 1 ¶ 2-30). Around May 23,
2014, Lee filed suit in Duval County against Raynor and
Office Depot. (Doc. 1 ¶ 31). Around October 30, 2015,
Lee offered to settle the suit for $6 million. (Doc. 1 ¶
the settlement discussions were ongoing, Raynor, Office
Depot, Phoenix, and Liberty Mutual disputed how the claim
should be handled. (Doc. 1 ¶ 36-45). Phoenix believed
that fact discovery was necessary before settlement, but
Raynor and Office Depot believed that a quick settlement
without fact discovery was in everyone's best interest.
(Doc. 1 ¶ 36-45). The parties continue to dispute the
extent to which Phoenix is responsible for covering Office
Depot-Phoenix believes that it is only required to cover
Office Depot to the extent of Raynor's fault, whereas
Raynor and Office Depot believe that Phoenix is required to
completely indemnify Office Depot for the Lee claim. (Doc. 1
Phoenix participated in mediation, at which Phoenix stated
that it valued Lee's claim at $1, 500, 000, but only
would contribute $750, 000 “because Phoenix attributed
50% of the negligence to Raynor and the remaining 50% to
Office Depot.” (Doc. 1 ¶ 52). Raynor and Office
Depot dispute Phoenix's position and expressed this to
Phoenix several times. (Doc. 1 ¶ 53-65). On March 24,
2016, the parties held a second mediation at which Phoenix
tendered the same offer. (Doc. 1 ¶ 66-68). On May 13,
2016 Lee's claim was settled for $2, 100, 000, but
Phoenix only contributed $850, 000 and Raynor tendered the
remainder. (Doc. 1 ¶ 74). Liberty Mutual did not
contribute to the settlement, claiming that its policy did
not come into effect until the Phoenix policy limits were
exhausted. (Doc. 1 ¶ 67, 74).
April 13, 2017, Raynor filed a three count Complaint alleging
breach of contract (Count I) and bad faith in violation of
section 624.155, Florida Statutes (Count III) against
Phoenix, and breach of contract (Count II) against Liberty
Mutual. (Doc. 1). Phoenix seeks dismissal only for Count
III-Raynor's bad faith claim. (Doc. 17).
Choice of Law
courts sitting in diversity apply the forum state's
choice of law rules. Rando v. Gov't Emps. Ins.
Co., 556 F.3d 1173, 1176 (11th Cir. 2009). For
contracts, Florida follows the lex loci contractus
standard, meaning that the place of contracting is the law
that governs interpretation of the contract. Id.
However, “questions related to the manner or method of
performance under a contract are determined by the law of the
place of performance.” Higgins v. W. Bend Mut. Ins.
Co., 85 So.3d 1156, 1158 (Fla. 5th DCA 2012) (citing
Gov't Emps. Ins. Co. v. Grounds, 332
So.2d 13, 14 (Fla. 1976)). Contract choice of law principles
apply to bad faith actions. Grounds, 332 So.2d at
14-15. Since this is a third party bad faith claim, the law
of the place of performance will control. MI Windows
& Doors, LLC. v. Liberty Mut. Fire Ins. Co., 88
F.Supp.3d 1326, 1328-31 (M.D. Fla. 2015).
law governs the substantive bad faith claim. See
Grounds, 332 So.2d at 14. The insurance adjuster was
located in Florida, the coverage determinations took place in
Florida, the Underlying Action was filed in Florida, the
settlement discussions took place in Florida, both mediations
took place in Florida, and the settlement transpired in
Florida. (Docs. 17 at 5; 25 at 7). As the performance at
issue took place in Florida, Florida law applies. See
Grounds, 332 So.2d at 14; (Docs. 17 at 5; 25 at 7).