Insurance companies operating in Florida are under a legal duty to adjust claims in good faith to prevent their insureds from being subject to excess judgments (a court judgment in excess of a policy’s liability limit). A carrier that fails to act in good faith may be forced to satisfy an excess judgment as punishment for breaching the duty.
Most individuals do not maintain adequate policy limits to cover the full consequences of a serious accident. For example, the minimum and least expensive limit for motor vehicle bodily injury (BI) insurance is $10,000 per person/$20,000 per accident. For those individuals who even carry BI coverage at all — it is not mandatory in Florida — this is the limit level most frequently chosen. BI insurance is expected to cover past and future medical expenses, past and future lost income, property damage, and non-economic damages such as pain and suffering. Nor do most individuals have enough private money to cover damages above policy limits. In cases involving serious injuries, $10,000 does not go far.
Liability insurance companies have an affirmative duty to gather damages information. They cannot sit idle when information is at their disposal. Evidence such as vehicle property damage and the police crash report, often indicators of the seriousness of a crash and fault, are usually readily available. This information, alone, can be enough for the carrier to make the decision to tender policy limits. For example, in a case involving a $10,000 policy, evidence of a high speed crash resulting in significant property damage should be enough for the carrier to tender.
When a claimant is represented by a lawyer, the carrier is not allowed to communicate directly with the claimant. In those instances, some of the damages information, usually relating to injuries and income loss, comes from the lawyer. This evidence often weighs heavily in how much a carrier should offer to settle.
The variables, from policy limits (limits can be $25k/$50k, $100/$200, and higher) to fault, property damage and injures, are wide ranging and fluid. Each case is different. When the carrier was adequately informed and the correctness of its decision are issues frequently contested in court.
In cases where, in our view, damages, from the outset, clearly exceed policy limits, we will typically provide the carrier with information in bits and pieces as we receive it. We may be the first to get the police report. We send it to the carrier. As we receive medical bills, such as a large hospital bill for care provided during the days after the accident, we forward it to the carrier. Property damage photos, treating doctor reports and bills, MRI reports and CDs are other examples of evidence we feed to the carrier as we get it. The idea is to tip the scale enough to get the carrier to tender or be comfortable filing suit for an excess judgment.
In cases not so clearly worth in excess of policy limits or maybe not worth policy limits at all, we sometimes wait until we’ve gathered all of the records, including final medical reports, before putting together a “Demand Package” for the insurance company. The damage package includes our detailed position letter, discussing liability and damages, and the records substantiating our position. For example, in the case of a motor vehicle accident, we typically include:
- Florida Long Form Crash Report
- Property damage photographs
- Injury photographs
- Fire Rescue report
- Medical records and bills (in chronological order)
- Diagnostic images (e.g., MRIs, CT Scans) copied to disc (we do not want the carrier to be able to say that its expert didn’t have the opportunity to review the images)
- Vehicle repair or salvage bills
We bind and tab the demand package for easy review by the adjuster.
If the carrier fails to tender the policy limits within a reasonable period of time after receiving sufficient evidence, we will file suit against its insured. The lawsuit seeks full damages, not just policy limit damages. If we get a final judgment in excess of the policy limit and can prove that the carrier should have settled before suit for the policy limit, we may be successful in making the insurer, rather than the insured, pay the policy plus the excess.
The threat of excess judgments is what motivates carriers to handle claims in good faith. Without this threat, carriers would never settle any cases. They would force every case to trial. This would deny full and speedy justice to the overwhelming majority of accident victims. It is why, year after year, the insurance companies seek elimination of the good faith/bad faith laws that require proper claim handling.
While there is no magic formula for handling these cases pre-suit, one thing to keep in mind is to keep the carrier from being able to argue that, due to the claimant’s lawyer’s oversight or unwillingness to provide evidence, it could not make a fully informed decision. If the carrier tenders the policy limit timely, even if the amount is not full compensation, so be it. If the carrier does the right thing, it should not and cannot be punished. The lawyer’s job is to cooperate fully, but also to know when enough is enough and to file suit.
(Caveat: First party bad faith insurance law, such as that involving UM/UIM or Homeowner’s Casualty Insurance, operates somewhat differently than what was explained above, which pertains to third party bad faith law.)
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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.
While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.