Articles Posted in Insurance Law

Insurance 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.”
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I have blogged here ad nauseam about the continual conflict between insurance companies and their insureds over claims. While carriers insist upon receiving premium payments timely, their all too common approach to the claims process is delay and deny.

Carriers have at their disposal a bag of tools designed to effectuate this delay/deny business model. Examination Under Oath (EUO) (an oral examination conducted under oath by an insurance company of an insured making a claim under a policy), Independent Medical Examination (IME), appraisal, policy application misrepresentation, refusal to cooperate are just some of the tools at their disposal. Some are statutorily prescribed, others are a matter of contract.

An insurance policy is a contract. While statutes control various rights and obligations between carriers and insureds, the terms of the insurance policy determine many others.

Courts frequently become embroiled in conflicts involving the application of contested policy provisions. One such conflict of significance was fought out in State Farm v. Curran, (Fla. 2014). The Florida Supreme Court framed the conflict as follows:

WHEN AN INSURED BREACHES A COMPULSORY MEDICAL EXAMINATION PROVISION IN AN UNINSURED MOTORIST CONTRACT, DOES THE INSURED FORFEIT BENEFITS UNDER THE CONTRACT WITHOUT REGARD TO PREJUDICE? IF PREJUDICE MUST BE CONSIDERED, WHO BEARS THE BURDEN OF PLEADING AND PROVING THAT ISSUE?

Curran, State Farm’s insured, sustained catastrophic injuries in a vehicle crash. Because the at-fault party’s insurance coverage was inadequate, Curran demanded from State Farm the $100,000 in UM available under his own policy. He gave State Farm thirty days to tender the money, estimating his damages to be $3.5 million because she suffered from reflex sympathetic dystrophy syndrome (RSD) type 1. On the 29th day, State Farm demanded that Curran undergo a Compulsory Medical Exam (CME) pursuant to the terms of the policy. Curran refused and proceeded to sue State Farm. A jury trial culminated in an award of $4,650,589 in damages to Curran.
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Florida Statute 624.155 provides a civil remedy for persons damaged by an insurer’s failure to settle claims in good faith. The remedy can include an award of damages in excess of the insured’s policy limits, attorney’s fees and litigation costs. This threat is the spur that motivates insurance companies to handle claims properly. (Side note: Insurance companies hate that their insureds have this stick at hand to keep them in line. Each legislative session for the past few years, Republican legislators friendly with the insurance industry have sponsored legislation to eliminate or water down the law. Thankfully, each effort has failed. Unfortunately, they will continue trying.)

The law was recently put to the test in Perdido Sun Condominium Association, Inc. v. Citizens Property Insurance Corporation, 129 So.2d 1210 (Fla. 1st DCA 2014).

Citizens is an insurer created by the legislature for the public purpose of providing “affordable property insurance to applicants who are in good faith entitled to procure insurance through the voluntary market but are unable to do so.” § 627.351(6)(a)1., Fla. Stat. As a creature of statute, Citizens’ operations, procedures, duties, and legal status are governed by section 627.351(6), Florida Statutes.

After its insured property was damaged by a hurricane in 2004, Perdido Sun made a claim on its insurance policy with Citizens. Perdido Sun was not satisfied with the amount of Citizens’ eventual payment on the claim and filed a breach of contract action to recover additional sums under the insurance contract. Perdido Sun prevailed on the breach of contract claim.

Based on the result in the breach of contract case, Perdido Sun filed a second lawsuit against Citizens for the civil remedy provided in section 624.155(1)(b)1., Florida Statutes, a statutory “bad faith” claim. Citizens asserted that it was immune from suit under section 627.351(6)(s)1., Florida Statutes, and that a statutory bad-faith action under section 624.155 was not among the specifically listed exceptions to this immunity. § 627.351(6)(s)1., a.-e., Fla. Stat.
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Many people, including some personal injury lawyers, believe that UM insurance always provides coverage when the insured is not at fault and there is no other insurance to cover the losses. This is wrong.

When the driver of an uninsured or underinsured (UIM) vehicle causes an accident, UM/UIM should kick in to compensate for losses such as wage loss, medical expenses, and pain and suffering. This is prescribed by Section 627.727(1) Florida Statutes, which provides, in pertinent part, as follows:

No motor vehicle liability insurance policy which provides bodily injury liability coverage shall be delivered or issued for delivery in this state with respect to any specifically insured or identified motor vehicle registered or principally garaged in this state unless uninsured motor vehicle coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. (Italics provided)

Crashes without the wrongdoing of another driver do occur. Our office was recently retained by a woman who struck a tree after swerving her car to avoid hitting a dog that had suddenly entered the roadway. She sustained severe whiplash and a blow to the head which caused her to lose consciousness. She was rushed to the hospital by ambulance and admitted for testing and overnight observation. Her car was totaled. The accident was not her fault.
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