In Seneca Specialty Ins. Co. v. Jade Beach Condo. Ass’n, Inc., 388 So. 3d 292, 294 (Fla. 3rd DCA, 2024), the Appeals Court reversed the trial court’s ruling that an insurance company must first attempt to sue the original tortfeasor before it can file against its insured who originally settled its claim.
Seneca Specialty Insurance Company issued a liability insurance policy to the Jade Beach Condominium Association that included subrogation rights against any responsible tortfeasors. On August 1, 2014, one of the condo owners, Unit 4701, filed suit against the Association, two construction companies, the owner of Unit 4904, and others for alleged water damage caused by the balcony of Unit 4904. Unit 4701 claimed the Association had a non-delegable duty to common areas and that the structural and mechanical elements of the balconies were part of their responsibilities. Unit 4904 also filed crossclaims against the Association for breach of the condominium’s declaration, common law indemnity, and equitable subrogation. The Association notified Seneca of the lawsuits and the claims were eventually settled for the policy limits of $1 million.
The Association then filed a separate suit on behalf of all the units against the condominium developer, general contractor, design professionals, and subcontractors, including the concrete formwork subcontractor, the mechanical subcontractor, and the caulking and waterproofing subcontractor (collectively, “the Construction Defect Defendants”). The claim listed defects in the roofs, mechanical rooms, and balcony slopes leading to water damage. Additionally, the Association sought indemnification for all unit claims against the Association arising from the defects. However, the Association did not inform Seneca of this action.
Ultimately, the Association resolved its claims against the Construction Defect Defendants for over $12 million. As part of the settlement, the Association granted the Defendants general releases from future claims that directly impacted Seneca’s subrogation rights:
“[T]he Association, for themselves and each of their respective … insurers hereby mutually release and forever discharge [the general contractor] and each of their respective … insurers, … and any person or entity that provided labor, materials or services under a direct contract with [the general contractor] related to the construction of the [condominium], from any and all manner of past, present and future claims, actions, causes and causes of action, suits, lawsuits, debts, dues, duties, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, liabilities, statutory claims for damages, exemplary and/or punitive damages, claims for indemnity or contribution, controversies, expenses, assessments, penalties, charges, injuries, losses, fees, costs, damages, expenses, agreements, promises, variances, trespasses, judgments, executions, and demands whatsoever, in law or in equity, which they ever had, now have, will have, or may have in the future, against each other, both known and unknown, latent and patent, asserted and unasserted, suspected and unsuspected, discovered and undiscovered, whether now existing, or hereafter arising, that relate to, arise out of, or are in any way connected with, the original construction of the [condominium], including but not limited to all claims which were or could have been asserted in the [Construction Defect Lawsuit].”
When Seneca became aware of the settlement, it filed an action on June 22, 2020, against the Association for breach of contract, claiming the Association’s settlement barred its subrogation rights by releasing the Construction Defect Defendants.
In its motion to dismiss, the Association argued that the Seneca claim was premature because it had failed to first sue to the Defendants and received an adverse judgment such that it can then claim its rights had been impaired. Additionally, the Association asserted the damages paid to Unit 4904 were for interior issues, which were not part of the larger settlement and, therefore, no standing existed for the damages paid by Seneca. The trial court granted the motion to dismiss.
In considering the issue of premature filing, the Appeals Court reviewed whether Seneca met all the elements of a breach of contract in its cause of action: 1) a valid contract, 2) a material breach, and 3) damages. The Appeals Court noted the insurance policy was valid, required the Association not to impair Seneca’s recovery rights after a loss and the Association’s settlement was a material breach in that it prevented Seneca from seeking subrogation rights against the Construction Defect Defendants.
The Association countered that, much like a professional malpractice claim, the insurer must first seek its recovery from the tortfeasor and fail before it can assert a claim against the Association. However, the Court rejected such a broad rule.
This ruling underscores the importance of reviewing a settlement and release agreement carefully and understanding the impact of the language on potential subrogation claims in order to avoid additional litigation.