Florida law imposes a duty on insurers to act reasonably in the discharge of the fiduciary duty they owe their policy holders. In the case of an injury claim against a policy holder (insured), the insurance company is duty bound to settle within the policy limits when it can and should do so. When the insurer fails and a final judgment is then entered against the insured in excess of the policy limits, the insurer will be responsible for satisfying the entire judgment if it is shown that it failed to act fairly and honestly towards its insured with due regard for her or his interest.
The law encourages insurance companies to settle claims that could and should be settled. The law reduces the number of cases that are forced to trial. The law protects policy holders from bearing the burden of excess judgments.
The law is important.
The law works.
The law does little to protect medical providers from excess judgments!
Florida Statute 766.1185 (2003) affords insurance carriers a safe harbor from excess judgments in medical malpractice cases. It provides that an insurer shall not be held in bad faith for failure to pay its policy limits if it tenders its policy limits by the 210th day after service of the complaint in the medical negligence action upon the insured.
The statute does not require the injured party to accept the tender. So long as the carrier tenders the limits, it is immune from any liability for an excess judgment.
Not so the medical provider.
Unless the insurance company’s tender is accepted, the medical provider remains personally liable for the excess judgment.
In essence, the insurer has relatively little to lose by having its tender declined. If the case proceeds to trial and an excess judgment is obtained, the excess is the responsibility of the medical provider rather than the insurance company. Good deal for the insurer, bad deal for the insured. When the most the insurer will ever have to pay is the policy limits, why not roll the dice? Who would not want to roll the dice with nothing on the table to lose?
Because of this, 766.1185 leaves medical providers far more vulnerable to excess judgments than insureds in non-medical malpractice cases.
Because of the costs and effort associated with cases, the longer a case proceeds in suit the more difficult it becomes to settle. Because of the time value of money (i.e., interest and earnings), insurance companies hold their money for as long as possible. The safe harbor period is an invitation too attractive for carriers to resist. By the end of the period, it is usually too late to settle within policy limits.
In the non-medical malpractice context, insurance companies do not have a similar absolute safe harbor protection. The standard in these cases is common sense and reasonableness.
In most cases, including medical negligence cases, insurance companies know full well within 210 days of an incident, much less 210 days from when the lawsuit has been served, whether or not a claim can and should be settled within policy limits. Looking back, if based on common sense and standards of reasonableness, it is determined that the insurer could have and should have settled within policy limits but did not, the insurer will very likely be responsible for satisfying the entire judgment, including the excess (of policy limits) portion.
This standard encourages insurance companies to deal fairly with their policy holders. They have no choice. A failure to deal fairly has serious consequences. Not so under FS 766.1185.
Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.
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