          Case: 12-11557   Date Filed: 03/12/2013   Page: 1 of 8

                                                        [DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                   FOR THE ELEVENTH CIRCUIT
                     ________________________

                           No. 12-11557
                       Non-Argument Calendar
                     ________________________

                D.C. Docket No. 5:10-cv-00334-RS-GRJ



LIBERTY MUTUAL INSURANCE COMPANY,

                                                          Plaintiff - Appellee,

                                versus

ROYAL AMERICAN MANAGEMENT, INC.,
PEOPLE'S FIRST PROPERTIES INC.,
ROYAL AMERICAN CONSTRUCTION OF NC INC.,
ROYAL AMERICAN DEVELOPMENT INC.,
ROYAL AMERICAN HOSPITALITY INC.,
RAFS OF PANAMA CITY INC.,
ROYAL AMERICAN FOOD SERVICES INC.,
BEACH LIQUORS OF PANAMA CITY INC.,
FIRST SERVICE CORPORATION OF PANAMA CITY INC.,
FIRST LINKS INC.,

                                                     Defendants - Appellants,

ROYAL AMERICAN CONSTRUCTION COMPANY INC.,

                                                                   Defendant.
                Case: 12-11557   Date Filed: 03/12/2013   Page: 2 of 8

                           ________________________

                    Appeal from the United States District Court
                        for the Northern District of Florida
                          ________________________

                                 (March 12, 2013)

Before CARNES, HULL, and JORDAN, Circuit Judges.

PER CURIAM:

      This case involves a dispute between Liberty Mutual Insurance Company

and its insured, Royal American Companies, over whether Royal American is

responsible for reimbursing Liberty Mutual for a claim Liberty Mutual settled for

less than the deductible amount of the insurance policy. Royal American contends

that Liberty Mutual materially breached the insurance contract by improperly

handling the claim and therefore it is excused from reimbursing Liberty Mutual for

what it paid.

                                         I.

      Royal American purchased an insurance policy from Liberty Mutual that

covered workers compensation claims made in 2001 by Royal American’s

employees. The policy had a deductible of $300,000 per occurrence and Royal

American was also responsible for reimbursing Liberty Mutual for all allocated

loss adjustment expenses that Liberty Mutual incurred with each claim, even if the




                                         2
                 Case: 12-11557       Date Filed: 03/12/2013        Page: 3 of 8

total amount was greater than the $300,000 deductible. 1 Whenever Liberty Mutual

paid a claim, it advanced the amount of the claim and billed Royal American for

the deductible and allocated loss adjustment expenses.

       In October 2001 Ricky Thomas, an employee of Royal American, hurt his

back and pinched a nerve in his hip when he “stepped wrong” off a ladder at work.

Royal American filed a report with Liberty Mutual detailing that injury, and

Liberty Mutual initially estimated the claim to be valued at around $10,000.

Thomas received a back surgery as treatment for that injury, and in May 2002 he

was medically cleared to go back to work. At that time, the doctors reported that

Thomas had reached maximum medical improvement even though he still had a

7% impairment rating. Based on that information, Liberty Mutual decided to close

Thomas’ claim.

       By December 2003, however, Liberty Mutual had reopened Thomas’ claim

because he was continuing to receive pain management treatment related to his

back injury. That treatment continued from 2003 to 2006. During that time,

Liberty Mutual continued to pay for Thomas’ pain treatments and Royal American

continued to reimburse Liberty Mutual for those amounts.




       1
          The policy defines allocated loss adjustment expenses as “claim adjustment expense[s]
directly allocated by [Liberty Mutual] to a particular claim,” which include attorney’s fees, court
costs, and expenses for medical examinations and medical diagnostic tests.
                                                 3
              Case: 12-11557     Date Filed: 03/12/2013    Page: 4 of 8

      In April 2006 Thomas’ leg gave out while he was at home, which caused

him to fall and injure his left shoulder. Liberty Mutual began to pay for injections

to treat his shoulder injury but did not initially order an independent medical

examination or otherwise question whether those injections were covered under the

policy. In February 2007 Thomas’ doctor told a Liberty Mutual claims adjuster

that Thomas’ shoulder injury was unrelated to his on-the-job back injury. In April

of that year an American Royal employee e-mailed the Liberty Mutual claims

adjuster who was handling Thomas’ claim and instructed him to “make sure we’re

not paying for the shoulder,” because American Royal believed that the shoulder

injury was not job-related. Even after Liberty Mutual received that e-mail,

however, it continued to pay for Thomas’ shoulder-treating injections.

      In December 2007 Thomas retained his own counsel who formally

petitioned Liberty Mutual for treatment from an orthopedic specialist for his

shoulder injury. Liberty Mutual took the position that the treatment was not

covered because Thomas’ shoulder injury was not work-related. To resolve the

coverage dispute, Liberty Mutual and Thomas entered into mediation. In February

2008 Liberty Mutual ordered an independent medical examination to determine

whether Thomas’ shoulder injury was related to his on-the-job back injury.

According to the report from the independent medical examination, Thomas’ back

injury caused his leg to give out and that caused him to fall and injure his shoulder,


                                          4
               Case: 12-11557     Date Filed: 03/12/2013   Page: 5 of 8

so Thomas’ shoulder injury and on-the-job back injury were “directly related.”

Liberty Mutual then concluded that Thomas’ claim for treatment of the shoulder

injury was covered under the policy and settled the claim for $185,000.

      Royal American refused to reimburse Liberty Mutual for the amounts that it

had paid and the allocated loss adjustment expenses associated with Thomas’

shoulder injury claim. Liberty Mutual filed a lawsuit against Royal American to

recover those amounts, alleging one count of breach of contract. Royal American

asserted as an affirmative defense that Liberty Mutual had breached “the implied

covenant of good faith and fair dealing” by failing to investigate whether Thomas’

injury was job-related and settling his claim for an unreasonably high amount.

After a bench trial, the district court entered a final judgment in favor of Liberty

Mutual in the amount of $195,243. This is Royal American’s appeal of that final

judgment.

                                          II.

      We review for clear error the district court’s factual findings after a bench

trial, and we review de novo the district court’s conclusions of law. Commodity

Futures Trading Comm’n v. Levy, 541 F.3d 1102, 1110 (11th Cir. 2008). Royal

American contends that Liberty Mutual materially breached the insurance

contract’s implied duty of good faith by failing to timely investigate Thomas’

claim for treatment of his left shoulder injury and by settling the claim for much


                                           5
               Case: 12-11557     Date Filed: 03/12/2013    Page: 6 of 8

more than Royal American thought it was worth. According to Royal American,

those breaches were material and excuse the duty it would otherwise have to

reimburse Liberty Mutual.

      The insurance contract between Liberty Mutual and Royal American

obligated Liberty Mutual to defend Royal American against all claims made under

the policy. As part of that obligation, Liberty Mutual also had the “right to

investigate and settle” claims made under the policy. It stated in the policy:

      We have the right and duty to defend at our expense any claim,
      proceeding or suit against you for benefits payable by this insurance.
      We have the right to investigate and settle these claims, proceedings
      or suits.

Under Florida law, when an insurance contract gives an insurer that right, the

“insurer, handling the defense of claims against its insured, has a duty to use the

same degree of care and diligence as a person of ordinary care and prudence

should exercise in the management of his own business.” Boston Old Colony Ins.

Co. v. Gutierrez, 386 So. 2d 783, 785 (Fla. 1980). As part of that duty, the insurer

must “investigate the facts, give fair consideration to a settlement offer that is not

unreasonable under the facts, and settle, if possible, where a reasonably prudent

person, faced with the prospect of paying the total recovery, would do so.” Id.

      Royal American contends that Liberty Mutual breached that duty by paying

for Thomas’ injections without first investigating whether his shoulder injury was

related to his on-the-job back injury and by continuing to pay for Thomas’
                                           6
               Case: 12-11557     Date Filed: 03/12/2013   Page: 7 of 8

injections even though Thomas’ doctor had told a Liberty Mutual claims adjuster

in February 2007 that the shoulder injury was unrelated to the on-the-job back

injury and even though Royal American had asked Liberty Mutual in an April

2007 e-mail to stop paying for Thomas’ shoulder treatment. Royal American also

complains that by continuing to make those payments, Liberty Mutual waived the

right to contest coverage for Thomas’ shoulder injury, which waiver resulted in a

settlement that was higher than the claim warranted.

      Even if Liberty Mutual’s handling of Thomas’ claim was unreasonable and a

breach of its duty to Royal American, the district court did not err by entering

judgment in favor of Liberty Mutual on its breach of contract claim. Royal

American was excused from its contractual duty to pay the deductible only if

Liberty Mutual’s breach was material. See State Farm Mut. Auto Ins. Co. v.

Curran, 83 So. 3d 793, 813–14 (Fla. 5th DCA 2011) (stating that in determining

whether a breach of an insurance contract excuses performance, “Florida courts

focus on the materiality and willfulness of the breach”). A material breach is “a

breach causing prejudice.” Id. at 803; see also Bankers Ins. Co. v. Macias, 475 So.

2d 1216, 1218 (Fla. 1985) (holding that neither an insured’s failure to timely report

a claim nor breach of its duty to cooperate with the insurer is a material breach

unless there is prejudice to the insurer).




                                             7
              Case: 12-11557     Date Filed: 03/12/2013    Page: 8 of 8

      There is no evidence that Royal American was prejudiced by the way

Liberty Mutual handled Thomas’ claim. Liberty Mutual ordered an independent

medical examination that concluded that Thomas’ shoulder injury was related to

his on-the-job back injury. Under Florida law, an independent medical

examination is binding on the insurer and the employee. See Fla. Stat. § 440.13(5).

Liberty Mutual was therefore obligated to pay expenses related to Thomas’

shoulder injury and neither its failure to conduct an investigation before it began

paying those expenses nor its continued payments after Thomas’ doctor informed

the claims adjuster that the shoulder injury might not be covered caused any

prejudice to Royal American. There is also no evidence that if the independent

medical examination had been performed when Thomas first injured his shoulder

in 2006 the conclusion would have been any different, and therefore there is no

evidence that Liberty Mutual would have been able to settle the claim for a lower

amount if it had handled the claim differently. Accordingly, the district court did

not err by entering judgment in favor of Liberty Mutual.

      AFFIRMED.




                                          8
