In Wachovia Ins. Serv., Inc. v. Toomey, No. 06-1110, 2008 WL 4379587 (Fla. Sept. 29, 2008), the Florida Supreme Court answered two interrelated, certified questions from the Eleventh Circuit by holding: (1) a settlement agreement between two parties that explicitly contains both an assignment of causes of action against a third party insurance broker and an immediate release of the insured on the same causes of action is valid and not barred by Fidelity & Casualty Co. of New York v. Cope, 462 So. 2d 459, 461 (Fla. 1985); (2) the claim that an insurance broker breached its fiduciary duty to the insured by failing to provide insurance coverage is analogous to a bad faith claim and is therefore assignable; and (3) negligence and breach of fiduciary duty claims can be pled in the alternative against an insurance broker.
In Toomey, two employees sued their employer for breach of their respective, written employment contracts. Because the employer’s insurance policy was due to expire during the litigation, through its insurance broker, the employer extended the policy for several months to cover potential claims by the two employees. During the course of litigation, the employer learned that it did not have coverage for breach of employment contract claims, allegedly because the broker had summarily removed that coverage without the employer’s knowledge.
The employer assigned its claims against the insurance broker to the employees in a settlement agreement that also released the employer from all tort liability. As the employer’s assignees, the employees then sued the insurance broker for breach of fiduciary duty and negligence. The employees also brought direct claims, including negligence, against the insurance broker. The district court granted summary judgment in favor of the insurance broker on all counts except the assigned breach of fiduciary duty claim. At trial, the jury awarded $1.1 million to the employees. Both parties appealed to the Eleventh Circuit, which certified the following two questions to the Florida Supreme Court:
(1) whether a settlement agreement between two parties that explicitly contains an assignment of causes of action against a third party and an immediate release allows the assignee to bring a cause of action for breach of fiduciary duty against the third party; and
(2) whether a claim for breach of fiduciary duty against an insurance broker may be assigned.
The Florida Supreme Court rejected the broker’s argument that Fidelity & Casualty Co. of New York v. Cope, 462 So. 2d 459, 461 (Fla. 1985), barred enforcement of the assigned breach of fiduciary duty claim. In Cope, the Court had held that the injured party could not maintain its bad faith claim against the insurer because it had released the insured tortfeasor without a prior or contemporaneous assignment of the insured’s bad faith claim.
In Toomey, the Court found that the assignment did not explicitly extinguish the broker’s liability, and noted that Cope did not involve either the assignment of a claim or an assignment and simultaneous release. The Court held that the claim assigned to the employees was enforceable because, when entering into the agreement, neither party intended to release the broker from liability.
The Toomey court also held that the assignability of a breach of fiduciary duty claim depends on the nature of the relationship between the parties and the type of fiduciary duty at issue. Here, the court found that the claim was assignable because the relationship between the insurance broker and the employer was not confidential. The court also noted that the breach of fiduciary duty claim was analogous to a bad faith claim, which can be assigned under Florida law.
Additionally, the Toomey court exercised its discretion to address the employees’ cross appeal of the dismissal of their negligence claim. The court found that the district court erred by relying on Moss v. Appel, 718 So. 2d 199 (Fla. 4th DCA 1998), and that Moss misstated Florida law by implying that negligence and fiduciary duty claims cannot be maintained simultaneously. The court held that the employees’ negligence claim and the assigned breach of fiduciary duty claim against the broker were separate causes of action that could be pled in the alternative.