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Montpelier U.S. Insurance Co. v. Portofino of St. Augustine, LLC

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

August 15, 2019

MONTPELIER U.S. INSURANCE COMPANY and MESA UNDERWRITERS SPECIALTY INSURANCE COMPANY, a foreign corporation, Plaintiffs,
v.
PORTOFINO OF ST. AUGUSTINE, LLC., JOHNSON-GRAHAM-MALONE, INC., OLD TOWN VILLAGES CONDOMINIUM ASSOCIATION, INC., A.J. JOHNS, INC., BRADCORP FLORIDA II, LLC., BUILDER SERVICES GROUP, INC., HWZ, LLC, STRANGE LATHING & PLASTERING, INC., STANLEY SMITH DRYWALL, INC., and JLH ELECTRIC SERVICES, LLC, Defendants.

          ORDER

          Timothy J. Corrigan United States District Judge.

         This declaratory judgment action is before the Court on Defendant Old Town Villages Condominium Association, Inc.'s Motion to Dismiss, Or In the Alternative, Motion to Stay the First Amended Complaint for Declaratory Relief (Doc. 26); Defendant Johnson-Graham-Malone, Inc.'s (“JGM”) Motion to Dismiss, Or In the Alternative, Motion to Stay the First Amended Complaint for Declaratory Relief (Doc. 57); and Defendant A.J. Johns, Inc.'s Motion to Dismiss Count V of Plaintiffs' Amended Complaint (Doc. 72). Responses and supplemental authority were filed. (Docs. 39, 60, 84, 86).

         First, the Court has reviewed the briefing and determined that the suit should proceed on Plaintiffs' claims in Counts I through V regarding whether they have a duty to defend.[1] However, the suit will be stayed as to the claims involving the duty to indemnify and other claims regarding coverage pending resolution of the Underlying Action, as defined in paragraph 29 of the First Amended Complaint.[2] (Doc. 14).

         Next, A.J. Johns, a subcontractor, moves to dismiss Count V of Plaintiffs' Amended Complaint, (Doc. 14 ¶¶ 66-74), in which Plaintiffs seek a declaration as to whether the subcontract agreements between JGM, the general contractor, and the subcontractors obligate those subcontractors to defend and indemnify Portofino, the owner/developer, in the underlying action. (Doc. 84). Plaintiffs allege that the subcontractors agreed to provide defense and indemnification to JGM in relation to their work at the project. (Doc. 14 ¶ 67). Under a master contract, JGM agreed to defend and indemnify Portofino for its work, including the subcontractors' work, at the project. (Id. ¶ 68). Accordingly, Plaintiffs allege that the subcontractors' defense and indemnity obligations “ultimately pass through JGM to Portofino, ” which is entitled to defense and indemnification from each of the subcontractors in the underlying action. (Id. ¶ 69). Further, Plaintiffs, as insurers of Portofino, allege that they are third party beneficiaries of the foregoing contracts and are defending Portofino in the underlying action when they may have no obligation to do so. (Id. ¶ 70). As such, Plaintiffs ask the Court to declare whether the subcontracts and the master contract obligate the subcontractors to defend and indemnify Portofino. (Id. ¶ 72). In response, A.J. Johns argues that Plaintiffs lack standing to seek declaratory judgment in Count V, and the contract between A.J. Johns and JGM demonstrates that they struck the language which would have perhaps obligated A.J. Johns to defend and indemnify Portofino. (Doc. 72).

         Whether a non-party to a contract has a legally enforceable right therein for standing purposes is a matter of state law. See Miree v. DeKalb Cnty., 433 U.S. 25, 29-33 (1977). “Under Florida law, a third party is an intended beneficiary of a contract between two other parties only if a direct and primary object of the contracting parties was to confer a benefit on the third party.” Bochese v. Town of Ponce Inlet, 405 F.3d 964, 982 (11th Cir. 2005). Without such a purpose, any benefit reaped by the third party is merely incidental, and that party has no legally enforceable rights under the contract. Id. Courts examine “the terms of the contract as a whole, construed in the light of the circumstances under which it was made and the apparent purpose that the parties are trying to accomplish” to understand the parties' intent. Id. (quotations and citation omitted). Intent must be “specific” and “clearly expressed” to confer a legally enforceable right. Id. (citation omitted).

         Here, Plaintiffs lack standing as alleged third party beneficiaries to bring a declaratory judgment action regarding a contract that was not intended to benefit them.[3] Plaintiffs proclaim that not only Portofino, but they, too, are third party beneficiaries of the subcontract between A.J. Johns and JGM. (Doc. 14 ¶ 70; Doc. 84 at 8). However, the Contract Terms provision in A.J. Johns and JGM's contract struck the language that arguably might have obligated A.J. Johns to Portofino. (Doc. 14-5 at 5). Specifically, the parties struck the following language:

         (Image Omitted)

         (Doc. 14-5 at 5). Rather than confirm A.J. Johns and JGM's intent to benefit Portofino, these terms demonstrate the opposite: that they intended to disclaim A.J. Johns's purported obligations to Portofino. And regardless, the provision certainly does not establish that the parties intended to benefit Portofino's insurers-the Plaintiffs here.

         Plaintiffs argue that “even in its modified form, ” the contract “unequivocally intended to confer a benefit on Portofino as it explicitly provides that the Subcontractors shall assume the requirements and conditions set forth in the Master Contracts, including but not limited to, the obligations of the Master Contracts as they concern the scope and quality of Subcontractor's work.” (Doc. 84 at 9). However, Plaintiffs' argument makes little sense in light of the very modifications they acknowledge: that the responsibilities assumed in that provision obligate A.J. Johns to JGM only and strike any reference to Portofino. Moreover, Plaintiffs are not mentioned in the contract, and given that there is no evidence that the parties intended to benefit them, the Court cannot find that the contracting parties “clearly expressed a direct or primary intent to benefit” Plaintiffs, as Portofino's insurers. Bochese, 405 F.3d at 983-84.

         Plaintiffs also argue that in the master contract, JGM has agreed to indemnify Portofino on behalf of itself and its subcontractors for all claims arising out of the work performed.[4] (Doc. 84 at 7, 9).

3.18 INDEMNIFICATION
3.18.1 To the fullest extent permitted by law, the Contractor Shall indemnity and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury,
sickness, disease or death, or (o injury to or destruction of tangible property (other than the Work itself) including loss of use resulting therefrom, but only to the extent caused m whole or in part by negligent acts or omissions of the Contractor, a Subcontractor anyone tally or directly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. Such obligation shall not be construed to negate, abridge, or reduce other rights or obligations of indemnity which would otherwise exist as to a party or person described in this Paragraph 3, 18,

(Doc. 14-3 at 96). On this basis, Plaintiffs extrapolate that “Portofino is a third-party beneficiary of the subcontract agreements because the obligations assumed therein include the defense and indemnity obligations that are contained in the Master Contracts and that form the basis of the relief sought in Count V.” (Doc. 84 at 9). This conclusion is simply too attenuated, particularly given that A.J. Johns and JGM's agreement struck A.J. Johns's obligations to Portofino. The remaining language obligates A.J. Johns to JGM but does not extend to Portofino. The Indemnification ...


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