[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
FILED
____________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
MAY 22, 2006
No. 04-14258
THOMAS K. KAHN
Non-Argument Calendar
CLERK
____________________________
D.C. Docket No. 02-00924 CV-ORL-28-KRS
PHILADELPHIA INDEMNITY INSURANCE COMPANY,
a Pennsylvania insurance company,
Plaintiff-Appellee,
Cross-Appellant,
versus
MARGARET KOHNE,
Defendant-Appellant,
Cross-Appellee,
SEGUN AMUCHIENWA,
Defendant-Cross-
Appellee.
_________________________
Appeals from the United States District Court
for the Middle District of Florida
__________________________
(May 22, 2006)
Before EDMONDSON, Chief Judge, ANDERSON and FAY, Circuit Judges.
PER CURIAM:
Segun Amuchienwa struck and severely injured Plaintiff Margaret Kohne
while driving a rented car. A $1,000,000 supplemental liability insurance policy,
underwritten by Defendant Philadelphia Indemnity Insurance Company (“PIIC”),
was purchased along with the vehicle’s rental. The district court concluded that
PIIC was not liable under the policy because Amuchienwa breached the policy’s
coverage conditions. And despite a jury determination that PIIC was liable for
fraud and negligent misrepresentation, the court awarded Plaintiff $0 in damages
because of Amuchienwa’s breach. We now affirm the district court in part,
reverse in part, and remand for further proceedings.
I. Background
Twenty-three year old Segun Amuchienwa and his friend, Oshioma
Okomilo, rented cars from Budget-Rent-A-Car while visiting Orlando. The renter
of Amuchienwa’s car -- presumably Amuchienwa -- also purchased an optional
$1,000,000 supplemental liability insurance policy underwritten by PIIC. The
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policy purported to cover only authorized drivers.1 The rental agreement for
Amuchienwa’s car did not list Amuchienwa as an authorized driver; instead, the
agreement bears the name and signature of Angela Panks, Okomilo’s mother. But
the agreement does list Amuchienwa’s date of birth, address, and driver’s license
number. Some evidence indicates that Panks could not have signed the agreement
because she was not in Orlando at the time of the transaction.
On 31 December 1999, Amuchienwa was driving the rented vehicle when
he struck and severely injured Plaintiff while she was loading the trunk of her van.
About one month later, PIIC received a notice of loss describing the accident and
Plaintiff’s injuries and requesting coverage. PIIC determined that Amuchienwa
was not an authorized driver and denied coverage under the supplemental policy.2
Later, Plaintiff’s counsel continued to assert that Amuchienwa was covered under
the policy because his personal information appeared on the rental contract; but
PIIC again denied coverage for “any claims” resulting from the accident.3
1
The policy defines an “authorized driver” as either: “a. A driver whose name is listed on the
original ‘rental agreement’; b. A driver designated by description, if any, in the ‘rental agreement’;
or c. A driver designated by description, if any, in item 6 of the Declarations.”
2
In a letter dated 8 May 2000, PIIC wrote to Amuchienwa: “The rental vehicle was operated by
you, an unauthorized driver, who violated the rental agreement. As an unauthorized driver, you are
not covered under the [supplemental] policy. As such, . . . coverage will not be afforded. . . . [Y]ou
may wish to contact personal counsel, at your own expense, to insure your interests are protected.”
3
In a letter to Plaintiff’s counsel dated 3 May 2001, PIIC wrote: “Based on our [previous] denial
of coverage, we must continue to deny any claims presented on behalf of your client, Ms. Kohne.”
3
After these coverage denials, Plaintiff sued Amuchienwa in Florida state
court. Plaintiff and Amuchienwa entered into a settlement agreement through
which Amuchienwa agreed to $4,000,000 in liability and assigned his rights under
the supplemental policy to Plaintiff. Plaintiff agreed not to execute the judgment
against Amuchienwa if he assisted her in pursuing an action against PIIC. The
state court entered a consent judgment reflecting these terms.
Amuchienwa never informed PIIC of Plaintiff’s suit nor of the settlement
agreement. The supplemental policy contains a cooperation condition which
requires the insured to (1) “immediately” notify PIIC “[w]henever it appears that
an ‘accident’ is likely to involve [the] policy,” (2) cooperate “in the investigation,
settlement or defense of the claim or suit,” and (3) assume no obligation without
PIIC’s consent.
Plaintiff presented the consent judgment to PIIC and demanded payment.
PIIC denied her claim and sought a declaratory judgment in federal district court
that Amuchienwa was not covered under the policy and that PIIC was not bound
by the settlement agreement. Plaintiff filed a three-count counterclaim in which
she alleged breach of contract, fraud, and negligent misrepresentation.
(Emphasis added.)
4
The district court granted summary judgment for PIIC on its complaint and
on Plaintiff’s breach of contract claim. Without reaching the question of whether
Amuchienwa was an “authorized driver” under the policy, the court concluded
PIIC’s performance was excused by Amuchienwa’s breach of the policy’s
cooperation condition. The district court further declared that PIIC was not bound
by the settlement agreement.
Plaintiff’s other claims were tried before a jury. The jury found that PIIC --
through its agent, Budget -- fraudulently induced Amuchienwa to purchase the
supplemental insurance by misrepresenting that he would be covered under the
policy. But because the district court found that Amuchienwa breached his duty to
cooperate, the court concluded he would have received no benefit from his
bargain. The court therefore awarded Plaintiff -- standing in Amuchienwa’s shoes
-- $0 in damages. The court further denied Plaintiff’s claim for punitive damages.
II. STANDARD OF REVIEW
We review de novo the district court’s grant of summary judgment. Gibson
v. Resolution Trust Corp., 51 F.3d 1016, 1020 (11th Cir. 1995). We review de
novo the district court’s ruling that Plaintiff was entitled to no damages. National
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R.R. Passenger Corp. v. Rountree Transp. & Rigging, Inc., 286 F.3d 1233, 1244
(11th Cir. 2002). We also review de novo the district court’s order granting
judgment as a matter of law to PIIC on Plaintiff’s claim for punitive damages.
Snapp v. Unlimited Concepts, Inc., 208 F.3d 928, 932 (11th Cir. 2000).
III. DISCUSSION
Despite a jury determination that PIIC was liable to Plaintiff for committing
fraud and negligent misrepresentation, the district court awarded $0 in damages on
account of Amuchienwa’s purported breach of the cooperation condition. We
conclude that Amuchienwa, as a matter of Florida law, did not violate the
cooperation condition. Because Amuchienwa did not breach the cooperation
condition, Plaintiff is accordingly entitled to damages as a result of the jury’s
verdict.4 We also conclude the district court correctly dismissed Plaintiff’s claim
for punitive damages.
4
PIIC asserts on appeal that Plaintiff lacked standing to sue because the settlement agreement
through which she gained Amuchienwa’s position could not be authenticated. We disagree. As the
district court noted in admitting the agreement, both parties relied on its authenticity in their
pleadings and at trial. In the “admitted facts” of the parties’ Joint Pretrial Statement, both parties
stipulated that “[Plaintiff] is the assignee of any rights that Amuchienwa may have had against
[PIIC].”
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A. Cooperation Condition
Critical to the district court’s disposition was its conclusion that
Amuchienwa breached the policy’s cooperation condition by not alerting PIIC of
Plaintiff’s suit or the settlement agreement. Amuchienwa, according to the district
court, breached the condition by not giving PIIC an opportunity to defend
Plaintiff’s suit. The district court concluded that “[b]ecause [PIIC] only denied
coverage, but did not refuse to defend, Amuchienwa’s breach of the duty of
cooperation remains unexcused.”
Under Florida law, for Amuchienwa’s failure to cooperate to excuse PIIC
from its obligations under the policy, PIIC must prove that: (1) Amuchienwa failed
to cooperate; (2) the lack of cooperation was material; (3) PIIC suffered
substantial prejudice as a result of Amuchienwa’s failure to cooperate; and (4)
PIIC exercised diligence and good faith in trying to bring about Amuchienwa’s
cooperation. Ramos v. Northwestern Mut. Ins. Co., 336 So. 2d 71, 75 (Fla. 1976).
Despite PIIC’s repeated denial of coverage, the district court concluded that PIIC
satisfied the Ramos requirements as a matter of law. We disagree. Even accepting
as true that Amuchienwa materially failed to cooperate, PIIC has not shown
substantial prejudice or diligence sufficient for PIIC to prevail as a matter of law.
7
When an insurer unequivocally denies coverage, Florida law provides that
the insurer cannot later also fall back on breach of the cooperation condition to
deny coverage. See Paz v. Allstate Ins. Co., 478 So. 2d 849, 849 (Fla. Dist. Ct.
App. 1985) (“Having breached the contract [by denying coverage, the insurer]
cannot attempt to avoid liability by relying on a provision prohibiting the insured
from settling with the tortfeasor without its consent.”); Infante v. Preferred Risk
Mut. Ins. Co., 364 So. 2d 874, 875 (Fla. Dist. Ct. App. 1978) (“[W]here an insurer
has denied coverage which actually exists, the insurer has breached the contract
and therefore cannot be allowed to rely upon a contractual provision prohibiting
the insured from settlement of the claim with a responsible party in order to relieve
itself from liability.”).
PIIC twice flatly denied coverage under the policy -- once in response to
Amuchienwa’s initial claim and the second time in response to Plaintiff’s inquiry
before she filed suit against Amuchienwa. In each denial, PIIC clearly renounced
coverage for injuries stemming from the accident. PIIC’s first denial went so far
as to suggest that Amuchienwa “contact personal counsel, at [his] own expense” to
protect his interests.
In granting summary judgment for PIIC, the district court relied on First
American Title Ins. Co. v. National Union Fire Ins. Co. of Pittsburgh, Pa., 695 So.
8
2d 475, 477 (Fla. Dist. Ct. App. 1997), in which the Florida appeals court
concluded that an insured’s failure to notify its insurer of suit constituted a breach
of the policy’s cooperation conditions and excused the insurer’s performance. The
First American court did not discuss the Ramos requirements in reaching its
conclusion. But unlike the present case it was clear that the insurer in First
American exercised diligence in trying to bring about its insured’s cooperation.
Seemingly critical to the First American court’s decision was that in its initial
letter denying coverage the insurer specifically instructed the insured to notify it of
any lawsuit filed in the matter so that the insurer could determine if it owed a duty
to defend the suit. Id. at 476. PIIC made no similar statement in the present case.
We do not interpret Florida law to say that an insurer must include some
magic words when denying coverage to preserve its rights under a cooperation
condition. But unequivocal denials of coverage such as those PIIC made here
forfeit an insurer’s right to invoke cooperation conditions against its insured. Had
PIIC made some effort to ensure that Amuchienwa knew he was still bound by the
policy’s conditions, then a question of fact might remain about whether PIIC’s
efforts were sufficiently diligent. But because PIIC made no effort whatsoever,
we conclude that Amuchienwa did not breach the cooperation condition.
9
Given the posture of this case, we do not need to decide whether
Amuchienwa was covered under the PIIC policy as an authorized driver. A jury
has determined that Plaintiff stands in the shoes of a rightful policyholder by
virtue of the fraud and misrepresentation attributed to PIIC. The district court,
however, awarded Plaintiff $0 in damages because it concluded Amuchienwa
breached the cooperation condition. Because we conclude that Amuchienwa did
not breach the cooperation condition, the remaining issue for us to determine is the
measure of damages to which Plaintiff is entitled.5
B. Jury Verdict and Damages
Plaintiff -- standing in Amuchienwa’s shoes -- prevailed in her suit against
PIIC for fraudulently inducing Amuchienwa to purchase the policy, and the jury
determined that Plaintiff was entitled to damages as a result of Amuchienwa’s
5
We agree with the district court that PIIC was not entitled to a directed verdict on Plaintiff’s
fraud claim. We may reverse the denial of a directed verdict only if the evidence, when viewed in
the light most favorable to Plaintiff, is such that reasonable jurors could not have arrived at a
contrary verdict. Stuckey v. Northern Propane Gas Co., 874 F.2d 1563, 1567 (11th Cir. 1989). Even
without Amuchienwa’s testimony, Plaintiff presented sufficient evidence to support the jury’s
verdict; specifically, testimony from Okomilo and the Budget rental agent. Perhaps the most
important fact supporting the jury’s verdict is that Amuchienwa purchased the optional supplemental
insurance policy. From this a jury could reasonably conclude Amuchienwa justifiably relied on
representations he would be covered under the policy.
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reliance on the misrepresentations. On the proper measure of damages, Florida
follows the “flexibility theory,” under which a defrauded party is entitled to the
measure of damages that will fully compensate her. Nordyne, Inc. v. Florida
Mobile Home Supply, Inc., 625 So. 2d 1283, 1286 (Fla. Dist. Ct. App. 1993)
(“The ‘flexibility theory’ permits the court to use either the ‘out-of-pocket’ or the
‘benefit-of-the-bargain’ rule, depending opon which is more likely fully to
compensate the injured party.”). The district court correctly concluded that
Plaintiff was entitled to the benefit of her bargain. Damages under the “benefit-of-
the-bargain” rule are calculated by taking the difference between the actual value
of the policy and its value had the contested facts -- here, that Amuchienwa was an
authorized driver and covered under the policy -- been true. Martin v. Brown, 566
So. 2d 890, 891 (Fla. Dist. Ct. App. 1990).
Amuchienwa bargained for $1,000,000 in supplemental insurance
coverage.6 The purpose of compensatory damages in tort cases such as this one is
to restore the injured party to the position she would have occupied had the wrong
not been committed. Glades Oil Co., Inc. v. R.A.I. Mgmt., Inc., 510 So. 2d 1193,
6
In an alternative argument, Plaintiff contends that an “out-of-pocket” damages calculation
entitles her to the amount of her settlement agreement with Amuchienwa, or $4,000,000. We agree
with the district court that the true value of out-of-pocket damages would likely compensate the
defrauded party for only the amount paid in premiums for the policy, in this case $9.95. Regardless,
we do not think PIIC can be liable for an amount in excess of the policy’s upper limits.
11
1195 (Fla. Dist. Ct. App. 1987). The district court concluded that Amuchienwa’s
position as an authorized driver would have yielded him $0 under the policy
because he breached the cooperation condition. Because we conclude
Amuchienwa did not breach the cooperation condition, it follows that PIIC was
not relieved of its duties to Amuchienwa. Plaintiff is accordingly entitled to the
full value of the policy.
We remand to the district court for the limited purpose of entering judgment
for Plaintiff with a measure of compensatory damages calculated in an amount
based on the policy limits.7
C. Punitive Damages
The district court granted PIIC’s motion for directed verdict on Plaintiff’s
request for punitive damages. We review de novo the district court’s order.
Snapp, 208 F.3d at 932.
7
We further conclude the district court did not abuse its discretion in dismissing without prejudice
PIIC’s claims against Amuchienwa for failure to prosecute within the time limits specified by local
rule. See Dynes v. Army Air Force Exch. Serv., 720 F.2d 1495, 1499 (11th Cir. 1983) (finding no
abuse of discretion when court dismissed claim without prejudice for party’s failure to timely file
brief).
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The Florida Supreme Court has written that “the justification for a punitive
award is to punish the offender and to deter others from committing similar
wrongs.” Fisher v. City of Miami, 172 So.2d 455, 457 (Fla. 1965). In limited
situations, Florida law provides that a principal may be assessed punitive damages
for the acts of its agent. But such exemplary damages may only be assessed
against the principal when the principal bears some fault. Mercury Motors
Express, Inc. v. Smith, 393 So.2d 545, 549 (Fla. 1981) (concluding that plaintiff
must “prove some fault on the part of the [principal] which foreseeably
contributed to the plaintiff’s injury to make him vicariously liable for punitive
damages”). See also Life Ins. Co. of North America v. Del Aguila, 417 So. 2d
651, 652-53 (Fla. 1982) (reiterating conclusion in Mercury Motors and finding
insufficient proof of principal’s fault).
The present case presents such a principal/agent arrangement: That the
Budget rental-counter employee was acting as PIIC’s agent when she sold
Amuchienwa the supplemental policy is uncontroverted. PIIC accordingly cannot
be assessed punitive damages unless PIIC exhibited fault. We conclude that
Plaintiff has not presented sufficient evidence to show that PIIC bore fault for the
Budget employee’s acts. The district court therefore correctly dismissed
Plaintiff’s claim for punitive damages.
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IV. CONCLUSION
For the foregoing reasons we REVERSE the district court’s grant of
summary judgment to PIIC. We conclude that Amuchienwa did not breach the
policy’s cooperation condition. We REMAND to the district court for the limited
purpose of determining the proper measure of damages to be afforded Plaintiff
under the policy. And we AFFIRM the district court’s grant of directed verdict to
PIIC on Plaintiff’s request for punitive damages.
AFFIRMED in part, REVERSED in part, and REMANDED with instructions.
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