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Despite allegations of fraud and padding of premiums, neither a Miami-based cargo insurance broker nor a Lloyd’s coverholder canvbe asked to pay punitive damages in a breach-of-contract dispute, a Florida appeals court decided last week.

“A plaintiff … may not recover damages for fraud that duplicate damages awarded for breach of contract,” Florida’s 3^rd District Court of Appeals wrote in overturning part of a Miami-Dade Circuit Court’s ruling, citing Florida statutes and previous court decisions.

It’s the second time in a month that an appeals court has underscored the limited path that insurers must stick to in seeking recovery of funds paid due to misrepresentation. Claims of unjust enrichment are barred, as well as punitive damages, the courts have now emphasized. Read more here about the federal appellate court decision published in July.

In the Miami case last week, Anova Marine Å©·òµ¼º½ Services and Chaucer Syndicates Ltd. had sued Ramon International Å©·òµ¼º½ Brokers and its president, Iris Arden. Anova, with offices in Miami, and Chaucer, a London-based Lloyd’s syndicate insurer, argued that Ramon and Arden had provided insurance coverage to a yacht service beyond what was explicitly allowed by the contract with Anova.

“Ramon repeatedly declared shipments and accepted commodities outside of the Chaucer House Policy terms, despite being notified that such shipments were outside of coverage,” Anova’s lawsuit complaint in Miami-Dade County contends.

Ramon also told the client that a riskier form of inland transportation for a yacht would be covered, even though it was not, the complaint alleges. While being transported from Maryland to Rhode Island in 2020, the insured yacht struck an overpass in New York.

In a separate coverage claim in 2020 involving the transport of earth-moving equipment, the Ramon brokerage and Arden had told Anova that the client had demanded a lower premium. But that wasn’t true, the underlying lawsuit alleges. The heavy-equipment client had already agreed to premiums, and Ramon was attempting to pocket the difference – as much as $263,051, the complaint charges.

“In fact, Ramon, through Arden, knowingly misrepresented (the client’s) position. Ramon in fact invoiced the higher premium …, but reported to Plaintiffs the reduced premium,” the suit argued. “Defendants made the misrepresentations because they intended for Ramon to invoice … for a premium based on the higher original rates quoted by Anova but actually pay Anova for a premium based on the lower rates and keep the difference.”

Still, in both instances, Anova agreed to pay most of the insurance claims, hoping to avoid a lawsuit from the insureds, then filed suit and sought reimbursement from Arden and Ramon.

“Although (Anova) believed the subject coverage(s) were unenforceable, they recognized that the assured was an innocent party that was misled by Ramon’s conduct into believing it had actual or apparent authority to provide coverage,” Anova’s attorneys wrote, citing court rulings that have held that an insurer may be held accountable for the actions of those whom it cloaks with apparent agency.

Arden, president of Ramon since 1995, and the broker have denied the allegations. They argued at trial that it was Anova that had fraudulently induced Arden to transfer all of Ramon’s cargo insurance business to Anova, and damages are due to the broker.

The underlying lawsuit was paused for more than a year while the 3^rd District appeals court considered the trial court’s decision to allow Anova and Chaucer to seek punitive damages, but denying Ramon and Arden the same type of compensation if the jury found in the broker’s favor. The Florida Supreme Court in 2022 for the first time allowed interlocutory appeals on whether lawsuits can include demands for punitive damages.

Last week, the 3rd District appellate judges stood firm on what other courts have found: That punitive damages are allowed only when it is shown that the actions of the defendant include a separate claim of wrongdoing.

“Punitive damages are generally not recoverable for a breach of contract unless it is accompanied by a separate and independent tort claim,” the appeals court said, quoting from appellate court decisions handed down in 1983, 2000, and 2017.

“It is well established that breach of contractual terms may not form the basis for a claim in tort,” the court noted, citing a 1994 case ruling. “Where damages sought in tort are the same as those for breach of contract a plaintiff may not circumvent the contractual relationship by bringing an action in tort.”

The lawsuit gives some insight into the world of cargo insurance and brokerage. While brokers can earn as much as 20% commission on policies, the premiums are remarkably low in some cases. In the yacht transport coverage, the premiums were about 0.03%, or $350 per $100,000 in coverage, the lawsuit explained.

Anova, in business since 2011, was sold this summer to Specialty Program Group. Established in 1980, Ramon International is a Lloyd’s broker and a Kastor Group company that offers marine, property, casualty and treaty re/insurance solutions.

The 3^rd District appeals court decision can be seen .

Topics Carriers Trucking