Houston Specialty Insurance Company v. Titleworks of Southwest Florida, Inc.
2:15-cv-00219
M.D. Fla.Jun 15, 2017Background
- Houston Specialty issued a professional liability policy to Titleworks covering Wrongful Acts between Aug 2, 2005 and Aug 2, 2015, with a Policy Period Aug 2, 2014–Aug 2, 2015 and a prior-knowledge exclusion for Wrongful Acts known before Aug 2, 2014.
- Trakhtenberg alleged in an underlying state-court complaint (filed Aug 22, 2014) that Titleworks failed to disclose judgment liens discovered in a title search, and Titleworks tendered the suit to Houston (tender received Aug 29, 2014).
- Houston has defended Titleworks under a reservation of rights and filed this declaratory-judgment action seeking a declaration that the prior-knowledge exclusion (knowledge of a Wrongful Act that could reasonably give rise to a Claim) bars coverage and Houston’s defense/indemnity obligations.
- Defendants moved for summary judgment asserting waiver (Houston’s Second Amended Complaint alleges only knowledge of a Claim, not of a Wrongful Act) and estoppel (the court previously denied Houston leave to amend), and disputed factual applicability of the exclusion.
- Court reviewed competing summary-judgment motions and procedural history, including a prior denial of leave to file a Third Amended Complaint, and considered whether Houston may pursue a "prior knowledge of a Wrongful Act" theory despite the operative complaint’s phrasing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Houston may pursue a "prior knowledge of a Wrongful Act" theory though the Second Amended Complaint alleges only prior knowledge of a Claim | Complaint’s factual allegations (e.g., July 2014 call re: missed liens) give adequate notice of the theory; Rule 8 does not require perfect legal labels | Operative complaint omits the specific "Wrongful Act" phrasing, so Houston waived that theory | Court: Houston may pursue the Wrongful Act theory; the complaint’s facts supplied adequate notice and Rule 8 is satisfied |
| Whether the prior denial of leave to amend judicially forecloses Houston from asserting the Wrongful Act theory (estoppel) | Denial of leave addressed timeliness and prejudice, not the substantive question whether the theory can be litigated on summary judgment | Denial of leave to amend means Houston cannot change its theory now; amendment was previously refused | Court: Denial of leave does not estop Houston; the earlier order decided different questions and dictum cannot be used for estoppel |
| Whether summary judgment should be entered now on the coverage question | Houston: facts show Titleworks knew of the Wrongful Act pre-policy and reasonably believed it could give rise to a Claim, so no duty to defend/indemnify | Defendants: factual disputes exist and procedural issues (waiver/estoppel) preclude summary judgment | Court: Denied all summary-judgment motions as moot without prejudice; permitted limited further process rather than deciding coverage now |
| Whether leave to amend should be allowed and additional discovery taken | Houston sought leave to plead the Wrongful Act theory explicitly | Defendants opposed further amendment and late litigation of theory | Court: Granted leave to file a narrowly tailored Third Amended Complaint within 14 days and allowed limited discovery; reset dispositive-deadline schedule |
Key Cases Cited
- Johnson v. City of Shelby, 135 S. Ct. 346 (2014) (a complaint need not plead the specific legal theory so long as facts give notice)
- Hamilton v. Allen-Bradley Co., Inc., 244 F.3d 819 (11th Cir. 2001) (complaint must outline sufficient facts to put defendant on notice; failure to use specific labels does not waive claims)
- Brisk v. Shoreline Found., Inc., [citation="654 F. App'x 415"] (11th Cir. 2016) (complaint need not specify precise theory giving rise to recovery)
- Hatmaker v. Memorial Medical Center, 619 F.3d 741 (7th Cir. 2010) (district courts erred in finding waiver where complaint adequately raised alternate retaliation theory)
- Sams v. United Food & Commercial Workers Intl. Union, 866 F.2d 1380 (11th Cir. 1989) (complaint need not allege detailed legal theories when facts provide notice)