In October 2012, James Lee fell and injured his back when the Real Space Pro 9000 Quantum Chair he was sitting on broke. Mr. Lee filed suit against Raynor Marketing, LTD. and Office Depot. Raynor sold the chair to Office Depot pursuant to a Purchase Order Agreement under which Office Depot purchases and sells Raynor products. Raynor and Office Depot previously entered into a Vendor Agreement, which requires Raynor to indemnify Office Depot for lawsuits arising from Raynor products sold to Office Depot. During the relevant time, Raynor had a Commercial General Liability Policy issued by Phoenix Insurance Company, as well as an umbrella liability policy from Liberty Mutual providing coverage in excess of the Phoenix policy. The parties dispute whether the Phoenix policy, which contains an endorsement purporting to add vendors as additional insureds, requires Phoenix to completely indemnify Office Depot for Mr. Lee’s claim, or requires Phoenix to cover Office Depot only to the extent of Raynor’s fault. Mr. Lee’s claim was settled for $2,100,000, but Phoenix only contributed $850,000; Raynor tendered the remainder. Liberty Mutual did not contribute, claiming that its policy does not come into effect until the limits of the Phoenix policy are exhausted. Raynor filed a complaint asserting claims for breach of contract and statutory bad faith against Phoenix, and breach of contract against Liberty Mutual. With respect to its bad faith claim, Raynor alleged that Phoenix’s coverage position for Mr. Lee’s suit and arbitrary allocation of fault constituted bad faith. Phoenix moved to dismiss Raynor’s bad faith claim as premature because it depends upon unresolved coverage issues.

As the court explained, “[i]n Florida, issues of coverage, liability, and damages in the underlying action must be resolved before the court can adjudicate the merits of the bad faith claim.” However, the court determined that “this case is different from the typical premature bad faith claim because the underlying case has been resolved and the unsettled coverage issues constitute the basis for the bad faith claim.” Although a bad faith claim normally should be dismissed when a case has an unresolved coverage issue, the court concluded that “doing so in this case would be inefficient—making discovery and depositions duplicative and creating the need for a third suit arising out of this one incident.” The court therefore denied Phoenix’s motion to dismiss the bad faith claim.

Raynor Marketing, Ltd. v. Phoenix Insurance Co., No. 3:17–cv–436–J–32PDB (M.D. Fla. Jan. 2, 2018)