Cook v. XL Specialty Insurance Company, 9:21-cv-82186

Background

On Nov. 26, 2017 Christina Cook was injured by a vessel propeller while on a paid dive/snorkel charter owned by Deep Obsession LLC ("Obsession").
Obsession had an excess Commercial Wet Marine Insurance Policy issued by XL Specialty Ins. Co. (the "Policy") with a $1,000,000 per-occurrence limit; the Policy contains water/scuba exclusions and a broad mandatory arbitration clause.
Cook first settled (First Settlement Agreement) with certain released parties for $1,000,000; that release contains ambiguous language about the scope of insurers released.
Cook later obtained a $3,000,000 consent judgment against Obsession and, under a Second Settlement Agreement, received an assignment of Obsession’s rights under the XL Policy in exchange for covenants not to execute on the judgment.
Cook filed this suit to enforce the assigned policy rights against XL; XL moved to dismiss for lack of standing and failure to state a claim and alternatively to compel arbitration.
The magistrate judge recommended denying XL’s motion to dismiss (standing, coverage, and exclusion issues not resolved at pleadings stage), granting XL’s motion to compel arbitration, and abating Cook’s bad-faith claim pending resolution of coverage.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standing to sue on coverage/assignment	Cook alleges privity via assignment and that a live coverage controversy exists; settlement/assignment create a justiciable dispute	XL says Cook lacks Article III standing because she cannot show likelihood of future injury and the First Settlement made the Second Agreement illusory	Court rejects XL’s standing challenge at pleading stage; finds a justiciable coverage dispute and privity alleged
Enforceability/scope of Policy arbitration clause	Cook seeks to enforce policy benefits but argues coverage issues are for courts	XL contends the Policy’s broad arbitration clause covers all disputes "arising out of or relating to" the Policy and binds assignees	Court finds FAA/favorable policy for arbitration and Florida law binds assignees to arbitration; grants motion to compel arbitration
Coverage/exclusions and effect of prior release(s)	Cook contends Coblentz-type resolution and assignment permit her to press insurer rights and that exclusions’ applicability is factbound	XL argues exclusions ("in the water"/scuba) and the First Settlement release bar coverage and render the Second Agreement unenforceable	Court declines to resolve coverage or release issues on Rule 12; factual and contractual ambiguities preclude dismissal
Bad-faith claim ripeness	Cook concedes bad-faith is unripe and asks for abatement until coverage resolved	XL argues bad-faith is premature and should be dismissed	Court recommends abating the bad-faith claim pending resolution of coverage/indemnity issues

Key Cases Cited

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing elements)
Gardner v. Mutz, 962 F.3d 1329 (11th Cir. 2020) (court must ensure standing before addressing merits)
A&M Gerber Chiropractic LLC v. GEICO Gen. Ins. Co., 925 F.3d 1205 (11th Cir. 2019) (declaratory relief requires likelihood of future injury)
Malowney v. Federal Collection Deposit Group, 193 F.3d 1342 (11th Cir. 1999) (standards for declaratory relief standing)
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard under Rule 12(b)(6))
Hishon v. King & Spalding, 467 U.S. 69 (1984) (accept factual allegations as true at pleading stage)
AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA’s pro-arbitration policy)
Kong v. Allied Pro. Ins. Co., 750 F.3d 1295 (11th Cir. 2014) (assignees can be bound by an insurance policy’s arbitration clause)
Day v. Taylor, 400 F.3d 1272 (11th Cir. 2005) (when courts may consider documents attached to a Rule 12 motion)
Coblentz v. American Sur. Co. of N.Y., 416 F.2d 1059 (5th Cir. 1969) (framework for "Coblentz" assignment/release resolving underlying tort for insurer rights)