Abbey L. Kaplan v. Nautilus Insurance Company
19-14820
| 11th Cir. | Jun 28, 2021Background
- KKSKL (new law firm formed by Kaplan and Silverman) obtained professional liability insurance from Nautilus in March 2011 after prior representation of Okun and settlement of related malpractice claims.
- Cordell sued Kaplan, Silverman, and KPKB alleging participation in a Ponzi scheme; Nautilus denied defense/indemnity, claiming the alleged acts predated its policy.
- Kaplan and Silverman personally funded their defense; arbitration of the insurer-coverage dispute (Underlying Arbitration) awarded the insureds some attorneys’ fees using the lodestar method but less than requested.
- Appellants then sued Nautilus under Fla. Stat. § 624.155 for statutory bad faith seeking (a) unrecovered fees/costs from the Cordell defense, (b) lost return on investment for funds spent defending, and (c) lost profits for KKSKL.
- The district court denied Nautilus’s initial dismissal motion but later granted summary judgment: collateral estoppel barred the claim for unrecovered fees litigated in arbitration, and Appellants’ lost-profit/ROI claims failed for lack of causation and were speculative.
- The Eleventh Circuit affirmed: the bad-faith claim for the same fees was contractual in effect and barred by collateral estoppel, and lost-profits/ROI claims lacked the required proof of causation and certainty.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars the bad-faith claim for unrecovered fees that were litigated in the arbitration | The bad-faith claim is extra-contractual and could not be litigated in arbitration, so collateral estoppel should not apply | The fees issue was already litigated in arbitration; relitigation would give a second bite at the apple | Barred: claim for the same fees is precluded by collateral estoppel because it effectively seeks the same damages litigated in arbitration |
| Whether the bad-faith claim is contractual or extra-contractual in character | The claim is extra-contractual (statutory bad faith) and thus different from the breach-of-contract/coverage claims | The statutory bad-faith claim here seeks identical damages previously litigated and so is substantively contractual for collateral-estoppel purposes | Contractual in effect: recharacterizing damages as bad faith does not avoid collateral estoppel |
| Applicable causation/standard for lost-profits and lost-ROI damages under § 624.155 | Section 624.155 requires only “reasonable foreseeability,” a lower standard than the reasonable-certainty lost-profits standard | Lost-profits claims must satisfy established tort/economic proof standards requiring proof of causation and amount with reasonable certainty | § 624.155 does not displace lost-profits law; plaintiff must prove causation and extent of lost profits with reasonable certainty |
| Whether Appellants met evidentiary burden to prove lost profits/ROI caused by Nautilus’s conduct | Testimony about historical investments and assertions that they would have invested funds had Nautilus paid is sufficient to create a factual dispute | Evidence is speculative, self-serving, lacking investment plans, expert analysis, or other corroboration | Not met: claims speculative and unsupported; summary judgment for Nautilus affirmed |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (summary-judgment standard)
- Castleberry v. Goldome Credit Corp., 408 F.3d 773 (11th Cir. 2005) (de novo review on summary judgment and view evidence for nonmoving party)
- Blanchard v. State Farm Mut. Auto. Ins. Co., 575 So. 2d 1289 (Fla. 1991) (underlying liability must be resolved in insured’s favor before bad-faith claim accrues)
- Dadeland Depot, Inc. v. St. Paul Fire & Marine Ins. Co., 945 So. 2d 1216 (Fla. 2006) (collateral estoppel applies to issues litigated in prior arbitration in bad-faith suits)
- Fridman v. Safeco Ins. Co., 185 So. 3d 1214 (Fla. 2016) (prevents relitigation of issues decided in prior proceedings)
- Nebula Glass Int’l, Inc. v. Reichhold, Inc., 454 F.3d 1203 (11th Cir. 2006) (elements and proof required for lost-profits damages)
- W.W. Gay Mech. Contractor, Inc. v. Wharfside Two, Ltd., 545 So. 2d 1348 (Fla. 1989) (lost-profits proof requires economic studies or expert testimony to show causation and extent)
- Messer v. E.F. Hutton & Co., 833 F.2d 909 (11th Cir. 1987) (investment-plan evidence necessary to support lost-return-on-investment claims)
- GEICO Gen. Ins. Co. v. Paton, 150 So. 3d 804 (Fla. Dist. Ct. App. 2014) (damages awarded in underlying proceedings are binding as elements of damages in bad-faith litigation)