The U.S. Eleventh Circuit Court of Appeals recently held that a class of Florida insureds could not assert a claim against a group of local and foreign insurers for selling allegedly worthless surplus line policies because the Florida Insurance Code provisions relied on by the insureds do not permit a private right of action against insurers. Lemy v. Direct Gen. Fin. Co., 2014 WL 903371 (11th Cir. Mar. 10, 2014).
Class representatives filed suit against a group of local and foreign insurers alleging that the insurers acted in concert to sell the insureds worthless surplus line policies and that the policies are the result of a scheme to avoid and violate Florida insurance laws and regulations. The insurers removed the action under the Class Action Fairness Act (“CAFA”), and the insureds moved to remand the case under CAFA’s local controversy exception to federal jurisdiction, which withdraws federal jurisdiction where the class seeks “significant relief” from a local defendant. The district court held that the insureds failed to establish the applicability of the local controversy exception and denied the motion. The district court also dismissed the complaint in its entirety, holding that the Florida Insurance Code provisions do not provide for private enforcement and that, even if they did, the insurers’ conduct did not materially violate those provisions. The insureds appealed.
The Eleventh Circuit affirmed, finding that only one of the insurance code provisions cited by the insureds provided a private right of action. The Eleventh Circuit considered the sole code provision cited by the insureds that did allow for a private right of enforcement and stated that the district court correctly determined that there was no merit to the insureds’ claim that the insurers violated this code provision. The Eleventh Circuit agreed with the district court’s finding that the text and structure of the code provisions signal a deliberate intention by the Florida legislature not to create a private cause of action and do not render the policies void.