Insurance
— Uninsured motorist — Coverage — Denial — Bad faith — Declaratory
judgment — Plaintiff who suffered injuries as result of automobile accident
with an uninsured or underinsured motorist, brought action against UM insurer
who refused to pay for plaintiff’s injuries, asserting claims for breach of
contract, statutory bad faith, and declaratory judgment; and insurer removed
case to federal court on basis of diversity jurisdiction — Bad faith —
District court, in exercising its discretion, would dismiss without prejudice,
rather than abate, plaintiff’s unripe bad faith claim — A statutory bad faith
claim that is filed prior to resolution of underlying insurance claim is
premature — Declaratory judgment — Claim for declaratory relief pursuant to
Chapter 86, Florida Statutes, treated as claim for relief under federal
Declaratory Judgment Act, because federal procedural law applies when a case is
removed to federal court on basis of diversity of citizenship and both federal
Declaratory Judgment Act and Chapter 86 are procedural — Claim for declaratory
judgment pursuant to Declaratory Judgment Act must be dismissed with prejudice
because no actual and definite controversy exists — Even if actual controversy
existed, relief sought is not proper subject of declaratory relief where
plaintiff is not seeking to resolve an issue as to his rights and other legal
relations as required by Declaratory Judgment Act

MARK GIANASSI, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, Defendant. U.S. District Court, Middle District of Florida,
Orlando Division. Case No. 6:14-cv-1078-Orl-31TBS. October 7, 2014. Gregory A.
Presnell, Judge.

ORDER

This matter comes before the Court without a hearing on the
Motion to Dismiss (Doc. 12) filed by the Defendant, State Farm Mutual
Automobile Insurance Company (“State Farm”), and the response in opposition (Doc.
26) filed by the Plaintiff, Mark Gianassi (“Gianassi”).

A. Background

According to the allegations of the Complaint (Doc. 2),
which are accepted in pertinent part as true for purposes of resolving the
instant motion, Gianassi suffered injuries as the result of an automobile
accident with an uninsured or underinsured motorist (henceforth, “UM”) in July
2013. Gianassi contends that State Farm is obligated to pay for his injuries
under a UM policy issued to Kathy Nicholson1 but has refused to do so. On May 30,
2014, Gianassi filed the instant case in state court, asserting three claims:
one for breach of the insurance contract (Count I): one for statutory bad faith
(Count II); and one in which he seeks a declaratory judgment (Count III). On
July 3, 2014, State Farm removed the case to this Court on the basis of
diversity jurisdiction. (Doc. 1 at 2). By way of the instant motion, State Farm
seeks dismissal of Count II and Count III.

B. Standards

Federal Rule of Civil Procedure 8(a)(2) requires “a short
and plain statement of the claim showing that the pleader is entitled to
relief,” so as to give the defendant fair notice of what the claim is and the
grounds upon which it rests, Conley v. Gibson, 35 U.S. 41, 47, 78 S.Ct.
99, 2 L.Ed.2d 80 (1957), overruled on other grounds, Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) [20
Fla. L. Weekly Fed. S267a]. A Rule 12(b)(6) motion to dismiss for failure to
state a claim merely tests the sufficiency of the complaint; it does not decide
the merits of the case. Milbum v. United States, 734 F.2d 762, 765 (11th
Cir. 1984). In ruling on a motion to dismiss, the Court must accept the factual
allegations as true and construe the complaint in the light most favorable to
the plaintiff. SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir.
1988). The Court must also limit its consideration to the pleadings and any
exhibits attached thereto. FED. R. CIV. P. 10(c); see also GSW, Inc. v. Long
County, Ga., 999 F.2d 1508, 1510 (11th Cir. 1993).

C. Analysis

1. Bad Faith Claim

In Count II, Gianassi asserts a first party bad-faith claim
against State Farm pursuant to Florida Statute § 624.155(1)(b)(1), which allows
anyone to bring suit against an insurer for “[n]ot attempting in good faith to
settle claims when, under all the circumstances, it could and should have done
so, had it acted fairly and honestly toward its insured and with due regard for
her or his interests”. Gianassi contends that State Farm exhibited bad faith by
failing to tender the policy limits within a reasonable time after receiving
notice of his claim.

A first party bad faith action is a separate and distinct
cause of action from the underlying claim for UM benefits. Allstate Ins. Co.
v. Jenkins, 32 So. 3d 163, 165 (Fla. 5th DCA 2010) [35 Fla. L. Weekly
D624b]. In contrast to a claim for UM benefits, an insured who prevails on a
bad faith claim may recover damages in excess of the policy limits. Fla. Stat.
§ 627.727(10). Under Florida law, a final determination as to coverage and
damages for the underlying insurance claim must be made before a statutory bad
faith claim can proceed. See, e.g., Progressive Select Ins. Co. v.
Shockley, 951 So. 2d 20, 20-21 (Fla. 4th DCA 2007) [32 Fla. L. Weekly
D380a].

Both parties recognize that a statutory bad faith claim that
is filed prior to resolution of the underlying insurance claim is premature.
However, they disagree as to what to do about the premature claim in the
instant case. Gianassi is willing to have the bad faith claim abated until his
claim for breach of the insurance contract is resolved; the Defendant, citing Vest
v. Travelers Ins. Co., 753 So. 2d 1270 (Fla. 2000) [25 Fla. L. Weekly
S177a; correction at 25 Fla. L. Weekly S242b], argues that dismissal without
prejudice is required.

It is true that, in Vest, the Florida Supreme Court
stated that a statutory bad faith claim that has been brought prior to the
determination of liability and damages on the coverage claim “should be
dismissed as premature.” Id. at 1276. The Defendant describes this
statement as a holding; the Court disagrees. In Vest, the trial court
had granted summary judgment to the defendant insurance company on the
premature bad faith claim. Id. at 1272. On appeal, the Florida Supreme
Court held that the bad faith claim, though premature, was not subject to
summary judgment. In vacating the trial court’s entry of summary judgment, the
Florida Supreme Court did not consider whether abatement would have addressed
the prematurity problem as well (or better) than dismissal without prejudice.
As such, its statement that the claim should have been dismissed is mere dicta.
See, e.g., Bunn v. Bunn, 311 So. 2d 387, 389 (Fla. 4th DCA
1975) (stating that “a purely gratuitous observation or remark made in
pronouncing an opinion and which concerns some rule, principle or application
of law not necessarily involved in the case or essential to its determination
is obiter dictum, pure and simple”).

The Florida appellate courts have not settled on a single
course of action for handling unripe bad faith claims. A number of appellate
courts have suggested that such claims may be either dismissed without
prejudice or abated. See, e.g., Safeco Ins. Co. of Illinois v.
Rader, 132 So. 3d 941, 948 (Fla. 1st DCA 2014) [39 Fla. L. Weekly D425c]
(stating that premature bad faith claim “should be either dismissed without
prejudice or abated”); and see State Farm Mut. Auto. Ins. Co. v. O’Hearn,
975 So. 2d 633, 635-36 (Fla. 2d DCA 2008) [33 Fla. L. Weekly D708a] (stating
that “[w]hen a plaintiff does not and cannot allege that there has been a final
determination of both the insurer’s liability and the amount of damages owed by
the insurer, the plaintiff’s bad faith claim is premature and should be either
dismissed without prejudice or abated.”). Within the Fourth District Court of
Appeal, abatement appears to be the preferred course. See State Farm Mut.
Auto Ins. Co. v. Tranchese, 49 So. 3d 809, 810 (quashing trial court’s
order denying motion to abate bad faith claim and stating that “[w]here causes
of action for both the underlying damages and bad faith are brought in the same
action, the appropriate step is to abate the bad faith action until coverage
and damages have been determined.”).

State Farm points out that, where mere passage of time will
cure a claim’s prematurity, Florida courts generally abate the claim, but where
the claim is contingent upon the occurrence of an event that may or may not
occur, Florida courts generally dismiss the claim without prejudice. See
Shuck v. Bank of America, N.A., 862 So. 2d 20, 24-25 (Fla. 2d DCA 2003) [28
Fla. L. Weekly D2191d]. Because the claim in this case is contingent upon
events that may or may not occur (e.g., determinations by factfinders
that, inter alia, Gianassi had coverage and that the other driver was at
fault), State Farm argues that, consistent with the general rule, the bad faith
claim should be dismissed. However, State Farm has not shown that Florida
courts have followed this general rule in the specific case of insurance bad
faith claims. Moreover, it is at least arguable that the cause of judicial
efficiency will be served by having the bad faith claim heard in a court that
is already familiar with the dispute as a result of having heard the contract
claim.

State Farm also argues that the decision in Safeco Ins.
Co. Of Illinois v. Fridman, 117 So. 3d 16 (Fla. 5th DCA 2013) [38 Fla. L.
Weekly D1159c] requires dismissal rather than abatement of the bad faith claim.
State Farm contends that the Fridman court

disapproved
the practice of allowing a first-party statutory bad faith claim to be added to
an underlying action on the contract for UM benefits, holding that the bad
faith claim should be filed as a separate lawsuit at the conclusion of the
underlying action on the contract.

(Doc. 12 at 9). Fridman contains no such holding. In Fridman
the plaintiff had filed only a UM claim. Id. at 18. Shortly before trial
was scheduled to begin, the insurance company tendered the policy limits and
filed a motion for confession of judgment. Id. The trial court rejected
the motion and required the parties to go trial, after which the jury returned
a verdict exceeding the policy limits. Id. The appellate court reversed
on the grounds that the insurance company’s actions in tendering the policy
limits and offering a confessed judgment mooted the UM claim, leaving nothing
to be resolved at trial. Id. at 20. Although the appellate court did
describe it as “appropriate” for the insured to file the breach claim without
an accompanying bad faith claim, id. at 19, that assessment had nothing
to do with the reversal.

As the law now stands in Florida, trial courts have the
option of either abating or dismissing unripe bad faith claims. Because
abatement offers at least the possibility of increased judicial efficiency for
those bad faith claims that do become ripe, Count II will be abated rather than
dismissed.

2. Declaratory Judgment

In Count III, Gianassi seeks a declaratory judgment “finding
and determining liability and the total amount of damages the crash caused
Plaintiff.” (Doc. 2 at 6). Gianassi seeks this declaratory judgment to avoid
re-litigating the issue of damages in any subsequent bad faith action.2 He contends that there exists a “bona
fide, actual, present practical need for a determination of liability for the
crash and the total amount of damages the crash caused the Plaintiff,”
warranting the entry of summary judgment. (Doc. 2 at 6).

Gianassi seeks this declaratory judgment pursuant to Chapter
86, Florida Statutes. (Doc. 2 at 5). When a case is removed from state to
federal court on the basis of diversity of citizenship, the federal court
applies state substantive law and federal procedural law. See Gasperini v.
Ctr. for Humanities, Inc., 518 U.S. 415, 427, 116 S.Ct. 2211, 135 L.Ed.2d
659 (1996) (“[F]ederal courts sitting in diversity apply state substantive law
and federal procedural law.”). Both the federal Declaratory Judgment Act, 28
U.S.C. § 2201, and Chapter 86, Florida Statutes are procedural; they do not
create or change any substantive rights. See, e.g., Nirvana
Condominium Ass’n, Inc. v. QBE Ins. Corp., 589 F.Supp.2d 1336, 1343 n.1
(S.D.Fla. 2008) [21 Fla. L. Weekly Fed. D453a] (stating that Chapter 86 is “a
procedural mechanism within the Civil Practice and Procedures Chapters” and
does not “confer any substantive rights”). Accordingly, the Court is obligated
to treat Count III as if it sought relief under the federal Declaratory
Judgment Act rather than Chapter 86, Florida Statutes.

The Declaratory Judgment Act provides that, “[i]n any case
of actual controversy within its jurisdiction . . . any court of the United
States . . . may declare the rights and other legal relations of any interested
party seeking such declaration, whether or not further relief is or could be
sought.” 28 U.S.C. § 2201(a). The standard for determining whether an “actual
controversy” exists within the meaning of the Declaratory Judgment Act is the
same as that under the “case or controversy” requirement of Article III of the
Constitution. Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 239-40, 57
S.Ct. 461, 463, 81 L.Ed. 617 (1937). The Supreme Court has defined a
“controversy” in the Constitutional sense as

one
that is appropriate for judicial determination. . . . The controversy must be
definite and concrete, touching the legal relations of parties having adverse legal
interests. . . . It must be a real and substantial controversy admitting of
specific relief through a decree of a conclusive character, as distinguished
from an opinion advising what the law would be upon a hypothetical state of
facts.

Hendrix v. Poonai, 662 F.2d 719, 721 (11th
Cir. 1981) (citing Haworth, 300 U.S. at 240-41, 57 S.Ct. at 464).

As things now stand, no actual controversy exists that would
support entry of a declaratory judgment. Gianassi’s damages as to his contract
claim are limited to the amount of the policy. The question of whether he
suffered damages in excess of policy limits will only become relevant if he
prevails on the contract claim so as to be able to proceed on a bad faith
claim. If Gianassi loses the contract claim, or if he obtains a judgment in an
amount less than the policy limits, the damages issue which this judgment would
address never arises. Because of this, the controversy is insufficiently
“definite and concrete” to satisfy the requirements of the Constitution.

Moreover, even if that threshold had been cleared, what
Gianassi seeks is not a proper subject of declaratory relief. Gianassi is not
seeking to resolve an issue as to his “rights and other legal relations,” as
required by the Declaratory Judgment Act. 28 U.S.C. § 2201(a). What he seeks is
a determination that any finding as to damages by the jury in the first trial
will be afforded res judicata effect in any subsequent trial on his bad
faith claim. This is not a question as to his rights vis-a-vis State
Farm, it is a question of his rights under the legal system.

In addition, the underlying controversy to which this
declaratory judgment would be addressed is whether State Farm exhibited bad
faith in attempting to settle Gianassi’s UM claim.3 Were the Court to enter the requested
declaratory judgment as to Gianassi’s damages, it would not resolve the
controversy, as damages are just one element of a bad faith claim. Regardless
of the treatment afforded the jury’s damages determination from the first
proceeding, Gianassi would still have to prove that State Farm acted in bad
faith to prevail in the second one. See, e.g., Vest, 753 So. 2d at 1275
(“Even when it is later determined by a court or arbitration that the insurer’s
denial was mistaken, there is no cause of action [for bad faith] if the denial
was in good faith.”). Declaratory judgments are intended to provide complete
relief as to a particular controversy, not to carve out a discrete legal issue
for advance resolution. Calderon v. Ashmus, 523 U.S. 740, 748-49, 118
S.Ct. 1694, 1699-1700, 140 L.Ed.2d 970 (1998) (finding declaratory judgment not
appropriate in case where class of plaintiffs sought to determine which chapter
of federal law would govern their habeas proceedings because “[a]ny judgment in
this action would not resolve the entire case or controversy as to any [class
member], but would merely determine a collateral legal issue governing certain
aspects of their pending or future suits.”). Accordingly, Gianassi cannot
properly seek declaratory relief here.

IV. Conclusion

In consideration of the foregoing, it is hereby

ORDERED that the Motion to Dismiss (Doc. 12) is GRANTED IN
PART AND DENIED IN PART. Count II is ABATED pending resolution of Count I, and
Count III is DISMISSED WITH PREJUDICE. In all other respects, the motion is
DENIED.

__________________

1Gianassi does not describe the
relationship between himself and Nicholson or explain why State Farm would be
obligated to pay for his injuries pursuant to Nicholson’s policy. As far as the
Court can tell, the policy itself has not been made a part of the record in
this case.

2Should Gianassi prevail on his breach
of contract claim, any damages award would be reduced to the policy limit. See
Nationwide Mut. Fire Ins. Co. v. Voigt, 21 So. 3d 895 (Fla. 2d DCA 2009)
[34 Fla. L. Weekly D2285a]. Although the issue is unsettled, there is at least
some Florida case law holding that, because of this reduction, the jury’s
determination as to the total amount of damages is not entitled to preclusive
effect in the subsequent bad faith action — i.e., that the issue of
damages must be relitigated in a second trial. See King v. Government
Employees Ins. Co., 2012 WL 4052271 (M.D.Fla. Sept. 13, 2012).

3Or, more precisely, this will be the
controversy if Gianassi prevails on his breach of contract claim so as to
proceed on his bad faith claim.

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