United States District Court, M.D. Florida, Jacksonville Division
HUGH A. CARITHERS and KATHERINE S. CARITHERS, As the assignee of Cronk Duch Miller & Associates, Inc., Cronk Duch Architecture, LLC, Cronk Duch Craftsman, Cronk Duch Partners, LLC, Cronk Duch Holdings, Inc., and Joseph S. Cronk, Plaintiffs,
MID-CONTINENT CASUALTY COMPANY, Defendant.
TIMOTHY J. CORRIGAN United States District Judge.
previous insurance coverage case, the Eleventh Circuit held
that insurer Mid-Continent Casualty Company's refusal to
defend its insured was incorrect. In this subsequent
insurance bad faith action, Defendant Mid-Continent seeks
summary judgment, arguing that although its decision to deny
a defense was incorrect, the greater weight of district court
cases at the time supported its decision, and therefore, that
decision cannot constitute bad faith as a matter of law. In
addition to Mid-Continent's Motion for Summary Judgment,
(Doc. 107), this case is also before the Court on
Mid-Continent's Motion to Exclude Expert Testimony of
Douglas McIntosh, (Doc. 106), and Plaintiffs Hugh and
Katherine Carithers' Motion to Compel Discovery, (Doc.
96). The motions have been fully briefed, (Docs. 99; 104;
111; 115; 121; 122; 124; 125), and on May 2, 2019, the Court
held a hearing on the motions, the record of which is
incorporated herein. (Doc. 126). After the hearing,
Mid-Continent filed the Carithers' mediation statement
from the underlying action in support of its Motion for
Summary Judgment. (Doc. 127). The Carithers, at the
Court's direction, responded, (Doc. 131), and then filed
a motion to strike the mediation statement. (Doc. 132).
2011, the Carithers filed an action in state court
(“Underlying Action”)against their homebuilder,
Cronk Duch,  for construction defects in their home.
(Doc. 107-1). In August 2011, Cronk Duch tendered the
Carithers' amended complaint to its insurance company,
Mid-Continent. (Doc. 107-2 at 193). After multiple levels of
review, Mid-Continent determined that based on the
allegations of the amended complaint, it was not required to
defend Cronk Duch. (Doc. 107 at 3-4). Cronk Duch then
provided Mid-Continent with the third amended complaint,
which was reviewed and similarly denied. (Docs. 107 at 5-7;
107-2 at 194-201, 204-205).
third amended complaint alleged that “[a]ll of the
foregoing defects were latent, and were discovered by the
Carithers in 2010. They could not have been discovered by
reasonable inspection in a prior year.” (Doc. 107-2 at
217). Mid-Continent had insured Cronk Duch beginning on March
9, 2005, with Cronk Duch's last policy expiring on
October 6, 2008. (Doc. 50-1 at 3). Relying on the
“manifestation” trigger-an insurance coverage
legal theory wherein damage does not “occur”
until it is evident-Mid-Continent determined that it had no
duty to defend Cronk Duch because the damage to the
Carithers' home did not “manifest” until
after Mid-Continent's final policy had expired. (Doc.
107-2 at 91); see also Doc. 50-1 at 4 (“Based
on the pleadings, all of the Plaintiff's loss and damages
occurred after the expiration of the last Mid-Continent
Duch hired its own counsel and consented to a judgment in the
Underlying Action of $91, 872 plus prejudgment interest of
$5, 856.84 and costs of $524, for a total of $98,
252.84. (Docs. 50-2; 50-3 at 5). Cronk Duch then
assigned its claims against Mid-Continent to the Carithers,
except for attorney's fees and costs of $12, 737.46-the
amount Cronk Duch had accrued in defending the Carithers'
suit against it. (Doc. 50-3). Hugh Carithers avers that
before the consent judgment was entered, he and his wife
would have settled for $25, 000 or less had Mid-Continent or
Cronk Duch ever made such an offer. (Doc. 115-3 at 3).
Cronk Duch's assignment of rights, the Carithers sued
Mid-Continent for breaching its duty to defend and indemnify,
and Mid-Continent removed the action to federal court
(“Coverage Action”). Amended Complaint,
Carithers v. Mid-Continent Cas. Co. (Coverage
Action), No. 3:12-CV-890-J-34TEM (M.D. Fla. Aug. 7,
2012), ECF No. 17. In that case, the Carithers advocated for
the injury-in-fact trigger-an alternative insurance coverage
legal theory where damage “occurs” when there is
actual damage irrespective of when it is discovered-while
Mid-Continent argued that the manifestation trigger applied.
Coverage Action, 2013 WL 11320043, at *2 (M.D. Fla.
Dec. 6, 2013). Judge Magnusson granted the Carithers'
motion for summary judgment on the duty to defend, holding
that damage “‘occurs' at the moment that
there is actual damage and the date of discovery is
irrelevant.” Id. (quotation marks omitted)
(quoting Axis Surplus Ins. Co. v. Contravest Constr.
Co., 921 F.Supp.2d 1338, 1346 (M.D. Fla. 2012)). After a
bench trial on the duty to indemnify, Judge Magnusson held
that the damage occurred in 2005, “almost immediately
after construction was complete, ” and therefore,
Mid-Continent had a duty to indemnify Cronk Duch.
Coverage Action, 2014 WL 11332308, at *2-4 (M.D.
Fla. Mar. 11, 2014). The court entered judgment in favor of
the Carithers, with damages of $98, 252.83 and attorney's
fees incurred by Cronk Duch of $13, 342.46, both plus
prejudgment interest. Judgment, Coverage Action,
appealed the rulings on the duty to defend and indemnify. The
Eleventh Circuit affirmed on the duty to defend, stating:
Given the uncertainty in the law at the time, Mid-Continent
did not know whether there would be coverage for the damages
sought in the underlying action because Florida courts had
not decided which trigger applies. Mid-Continent was required
to resolve this uncertainty in favor of the insured and offer
a defense to Cronk Duch.
Carithers v. Mid-Continent Cas. Co., 782 F.3d 1240,
1246 (11th Cir. 2015). Further, the Eleventh Circuit held
that injury-in-fact was the appropriate trigger for this
case. Id. at 1247. However, the court reversed Judge
Magnusson's damages calculation and remanded for a new
determination of damages. Id. at 1251.
the Eleventh Circuit rendered its opinion but before the
mandate issued, the Carithers filed a Civil Remedy Notice
(“CRN”) in accordance with Florida Statute §
624.155, alleging bad faith by Mid-Continent, and other
violations of Florida law. (Doc. 50-8). Mid-Continent did not
pay the amounts allegedly owed but responded to the CRN by
claiming it had not acted in bad faith. Id.
the mandate issued, Judge Magnusson entered an amended
judgment for property damage of $26, 684.77 plus interest,
and attorneys' fees incurred by Cronk Duch in the
Underlying Action of $13, 342.46 plus interest. Coverage
Action, Doc. 163. On September 14, 2015, Mid-Continent
paid the amended final judgment in full. Id., Doc.
175. The district court then granted the Carithers'
motion for attorney's fees in the Coverage Action,
awarding a total of $323, 047.35 in fees and costs, which
Mid-Continent timely paid. Id., Docs. 173 & 175.
August 3, 2016, the Carithers filed this action, alleging
multiple violations of Florida Statute § 624.155,
including a claim for bad faith and that Mid-Continent's
actions in denying coverage for the Underlying Action were
part of a general business practice-making it liable for
punitive damages. (Doc. 1). Mid-Continent moved to dismiss
the complaint, (Doc. 14), which the Court granted without
prejudice, (Doc. 44). In its ruling, the Court limited
discovery to the Cronk Duch claim only, and requested
briefing on damages. Id. On September 25, 2017, the
Carithers filed an Amended Complaint, (Doc. 50), and
Mid-Continent again moved to dismiss, (Doc. 62). The Court
denied this motion but maintained its bifurcation of
discovery. (Doc. 76).
MOTION FOR SUMMARY JUDGMENT
virtue of the assignment from Cronk Duch to the Carithers,
the Carither stand in the shoes of Cronk Duch,
Mid-Continent's insured. Insurers in Florida are
obligated to act in good faith toward their insureds in
handling claims. Bos. Old Colony Ins. Co. v.
Gutierrez, 386 So.2d 783, 785 (Fla. 1980). Statutory bad
faith is “[n]ot attempting in good faith to settle
claims when, under all the circumstances, [the insurance
company] could and should have done so, had it acted fairly
and honestly toward its insured and with due regard for her
or his interests.” § 624.155(1)(b)1, Fla. Stat.
(2018). In determining whether an insurer acted fairly and
honestly toward its insured, the fact finder considers:
(1) whether the insurer was able to obtain a reservation of
the right to deny coverage if a defense were provided; (2)
efforts or measures taken by the insurer to resolve the
coverage dispute promptly or in such a way as to limit any
potential prejudice to the insureds; (3) the substance of the
coverage dispute or the weight of legal authority on the
coverage issue; (4) the insurer's diligence and
thoroughness in investigating the facts specifically
pertinent to coverage; and (5) efforts made by the insurer to
settle the liability claim in the face of the coverage
Laforet, 658 So.2d at 63 (citing Robinson v.
State Farm Fire & Cas. Co., 583 So.2d 1063, 1068
(Fla. 5th DCA 1991)).
Mid-Continent raises several potentially convincing
arguments, a determination of bad faith is made by analyzing
the totality of the circumstances, and the Florida Supreme
Court has said time and again, “it is for the jury to
decide whether the insurer failed to ‘act in good faith
with due regard for the interests of the insured.'”
Harvey v. GEICO Gen. Ins. Co., 259 So.3d 1, 7 (Fla.
2018) (quoting Bos. Old Colony, 386 So.2d at 785);
see also, e.g., Berges v. Infinity Ins.
Co., 896 So.2d 665, 680 (Fla. 2004); Campbell v.
Gov't Emps. Ins. Co., 306 So.2d 525, 530 (Fla.