Jeffrey P. Gale, P.A. // Florida’s Bad Faith Law Supposed to Keep Insurance Companies in Line

scales.jpgInsurance companies selling coverage in Florida have a fiduciary obligation to protect their insureds from judgments exceeding the limits of their insurance policies. Berges v. Infinity Ins. Co., 896 So.2d 665 (Fla. 2004). The obligation was well articulated in Boston Old Colony Insurance Co. v. Gutierrez, 386 So.2d 783 (Fla.1980):

An insurer, in 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. For when the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, then the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured…. 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. Because the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured, negligence is relevant to the question of good faith.

Ordinarily, “[t]he question of failure to act in good faith with due regard for the interests of the insured is for the jury.” Gutierrez, 386 So.2d at 785; see also Campbell v. Gov’t Employees Ins. Co., 306 So.2d 525, 530-31 (Fla.1974) (“[R]easonable diligence and ordinary care [are] material in determining bad faith. Traditionally, reasonable diligence and ordinary care are considerations of fact — not of law.”).

In Florida’s civil justice system, unless a court is sitting as the trier of fact, which is the exception rather than the rule, the court’s role is typically limited to ruling on matters of law, leaving fact questions to be resolved by juries. Only when pleadings and evidence properly filed show that there is no genuine issue as to any material fact, is the court supposed to enter judgment as a matter of law. This is called Summary Judgment. See FRCP 1.510. Given the importance of juries in the civil justice system, the procedure is supposed to be used sparingly and with caution. (Citations omitted because they are so plentiful.)

Unfortunately, some Federal court trial judges have chosen to ignore this admonition. What follows is a discussion of some recent Federal Court insurance bad faith cases.

RULINGS FAVORING INSURANCE COMPANIES
Harris v. GEICO General Ins. Co., 961 F. Supp. 2d 1223 (S.D. Fla. 2013). The jury returned a verdict for Harris, the insured, concluding that Harris proved to a preponderance of the evidence that Geico acted in bad faith in failing to settle her claim during the 60-day safe harbor period (Fl. Stat. § 624.155(1)(a), (b)(1)). Geico moved for judgment as a matter of law during trial and renewed its motion subsequent to the jury verdict. Federal trial court judge Kenneth L. Ryskamp granted GEICO’s motion. He made the following points: (1) Fusion surgery was performed after the bad faith action was filed; (2) GEICO was not provided with evidence of a permanent impairment before the bad faith action was filed; and (3) the statutes (Fl. Stat. § 627.727(10) and § 624.155) do not say that the damages are what a jury awarded in an underlying liability action. See Geico General Ins. Co. v. Bottini, 93 So.3d 476 (Fla. 2d DCA 2012) (Altenbernd, J., concurring); King v. Government Employees Ins., Co., 2012 WL 4052271, No. 8-10-cv-977-T030-AEP (M.D.Fla. Sept. 13, 2012).

Coulter v. State Farm Mut. Auto Ins. Co., No. 4:12cv577-WS/CAS (N.D. Fla. 2014). The trial court entered Summary Judgment for State Farm. While the facts, which were convoluted, were not so much in dispute, the trial judge nevertheless took it upon himself to rule that the carrier’s actions did not amount to bad faith as a matter of law. The court’s action flies in the face of black letter law that “[t]he question of failure to act in good faith with due regard for the interests of the insured is for the jury.” The court’s opinion sets forth the facts in great detail. It’s an interesting read for how everyday issues are handled.

Houston v. Progressive American Ins. Co., No. 8:13-cv-194-T-35AEP (M.D. Fla. 2014). A multi-claimant case with limited insurance coverage involving varying degrees of injuries and a global settlement. The most seriously injured claimant alleged that Progressive acted in bad faith by scheduling a global settlement conference rather than tendering the policy’s $10,000 per person limit upon learning of her injuries. The court disagreed, granting Summary Judgment in Progressive’s favor. The court did, however, concede that there could be instances “in which the injuries to a specific victim are so grave, the injuries to the remaining potential claimants are so minor, and the concomitant documentation and information before the insurer of those injuries is so clear, that a duty arises on the part of the insurer to jettison the global settlement approach, which it unquestionably has the discretion to choose [italics added for emphasis], and make a full tender to the gravely injured victim.”

Moore v. GEICO, No. 8:13-cv-1569-T-24 AEP (M.D. Fla. 2014). After GEICO’s tender of its insured’s full $20,000 liability policy limits was rejected, a $4,000,000 excess verdict obtained. Plaintiff argued that GEICO acted in bad faith by 1) failing to advise the insured of the demand and conditions of settlement; submitting a release that included more than only the named tortfeasors; 3) submitting a release that stated the check would be sent within 20 days of GEICO’s receipt of the executed release; and 4) submitting affidavits that were not tailored to the facts of the case. The trial judge entered summary judgment for GEICO.

The problem with these rulings is not in the findings that the carriers did not act in bad faith. Rather, the error is that by entering summary judgment (or, in the Harris case, overriding the jury verdict), the courts improperly prevented juries from performing their role as the system’s arbiters of fact. Had the cases gone to [jury] verdict, it may well have been determined that the carriers did not act in bad faith. Unless the rulings are reversed on appeal, we’ll never know.

SUMMARY JUDGMENT DENIED
Merrett v. Liberty Mutual Ins. Co., No. 3:10-cv-1195-J-12MCR (M.D. Fla. 2013). This case involves a $50,000 liability policy, clear accident fault, loss of part of a leg, and a $3.25 consent judgment. The court denied Liberty Mutual’s motion for summary judgment, finding that the jury should be allowed to decide if the following facts constitute bad faith:

  • Liberty Mutual’s adjuster delivered the settlement check to Merrett’s hospital room, without any prior notice, while Merrett was under the influence of medication and struggling to cope with the loss of his leg. When he declined to accept the check, the adjuster allegedly advised Merrett that he could not take the check back and simply left it there. Plaintiff Merrett provided expert testimony to support his position that these actions violate several statutory ethical rules applicable to insurance adjusters and demonstrate Defendant Liberty Mutual’s bad faith in its attempt to settle the claim
  • The check, as well as a proposed release that was mailed to him separately, refer to the purported release of Legacy Construction of Jax., Inc., a party not insured by Liberty Mutual, from liability for the accident
  • The check was made out to co-payee Shands Hospital, which had filed a lien in the public record, rendering it non-negotiable. Liberty Mutual knew at the time the check was issued that worker’s compensation insurance was involved in the case which would nullify any lien filed by Shands Hospital under applicable law, therefore, Shands Hospital was not a proper party for inclusion on the check from the date if its issuance
  • Merrett claims that these issues with the tender of the check raised concerns in his mind and in the minds of attorneys with whom he consulted, resulting in a lack of trust in dealing with Liberty Mutual to resolve issues with the check. He argues it was this mistrust sown by its conduct, and not his unwillingness to settle or pursuit of any legal strategy to avoid the insurance policy limits, that resulted ultimately in the filing of the lawsuit in state court and obtaining the excess judgment against the insureds Bamping and Franklin.

Diperna v. GEICO, No. 6:12-cv-687-Orl-36KRS (M.D. Fla. 2013). A rear-end motor vehicle crash case. $10,000 bodily injury policy, fractured neck, $625,000 consent judgment. Each side filed respective motions for summary judgment. The court denied both motions, concluding rightfully that “genuine issues of material fact exist for determination by a jury and neither party is entitled to judgment in their favor as a matter of law.” This is an informative case for legal practitioners because the facts are so commonplace and most of the leading bad faith cases are cited.

Government Employers Ins. Co. v. Prushansky. Factual disputes regarding indemnity language in the release and plaintiff’s willingness to settle upon discovering that the insured was drunk at the time of the loss precluded summary judgment.

In conclusion, summary judgment should always be used sparingly and with caution. This proposition is especially applicable where determinations concerning reasonable diligence and ordinary care, the material issues in bad faith cases, are so subjective and subject to factual considerations.

For the most part, juries know best.

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