News Room

News Room

Special Bad Faith Update – March 2016

March 7, 2016

SPECIAL BAD FAITH UPDATE

Dear Ladies and Gentlemen:

This correspondence is to advise you of an important recent decision by the Florida Supreme Court which held that: (1) an insured is entitled to a determination of liability and the full extent of his or her damages in the UM action before filing a first-party bad faith action; (2) the determination of damages obtained in a UM action becomes a binding element of damages in a subsequent first-party bad faith action against the same insurer so long as the parties have the right to appeal any properly preserved errors in the verdict; and (3) a Court can retain jurisdiction over a UM action to determine an insured’s right to amend a complaint to add a bad faith cause of action.

FACTS AND PROCEDURAL HISTORY

This case arose from a lawsuit filed by an insured, Mr. Adrian Fridman, against his uninsured/underinsured (“UM”) motorist carrier, Safeco Insurance Company of Illinois (“Safeco”) after he was involved in a motor vehicle accident with an underinsured motorist in January 2007.  After the accident, Mr. Fridman filed a claim against Safeco for the $50,000 limits of his UM policy.  By October 2008, Mr. Fridman filed a Civil Remedy Notice pursuant to Florida Statute section 624.155(3)(a) alleging that Safeco failed to attempt in good faith to settle his UM claim.  After the 60-day safe harbor period expired, Mr. Fridman filed a complaint against Safeco to determine liability under the UM policy and the full extent of the damages he suffered in the accident.  In February 2010, Mr. Fridman filed a proposal for settlement in the amount of $50,000 which Safeco did not respond to.  In March 2011, a month prior to trial, Safeco tendered the $50,000 policy limits.  The check included a statement that $50,000 was the full and final settlement of any and all claims.  Mr. Fridman rejected the check with the language regarding “full and final settlement” and Safeco filed a motion to continue the trial.

Thereafter, Safeco reissued the check, without the language, and filed a “confession of judgment” and a separate motion for entry of confession of judgment.  Mr. Fridman opposed the entry of the confessed judgment, arguing, inter alia, that a jury verdict would determine the upper limits of Safeco’s potential liability under a future bad faith claim.  The trial court denied Safeco’s motion to confess judgment and the case proceeded to trial.  The jury found that the underinsured driver was negligent and determined Mr. Friedman’s damages to be $1,000,000.  Safeco filed a motion for a new trial alleging that the trial court committed several errors.  The trial court denied the post-trial motions and entered a final judgment which included the following: (1) the Plaintiff would recover from Safeco $50,000.00, that would bear interest, notwithstanding the excess jury verdict rendered in the matter; (2) the Court reserved jurisdiction to determine the Plaintiff’s right to amend his Complaint to seek and litigate bad faith damages from Safeco as a result of the jury verdict in excess of policy limits. If the Plaintiff should ultimately prevail in his action for bad faith damages against Safeco, then the Plaintiff would be entitled to a judgment, in accordance with the jury’s verdict, for his damages in the amount of $980,072.91 plus interest, fees and costs.

Safeco appealed the final judgment to the Fifth District arguing, inter alia, (1) the trial court should have granted its motion for entry of confession of judgment; (2) the final judgment was void because the trial court had no authority to reserve jurisdiction in the judgment to allow an amendment to the pleadings or establish Mr. Fridman’s damages to be awarded in a future bad faith action.  The Fifth District vacated the jury’s verdict and directed the trial court to enter an amended final judgment deleting any reference to the jury verdict and declining to reserve jurisdiction to consider a request to amend the complaint to add a claim seeking relief for bad faith under section 624.155.

FLORIDA SUPREME COURT DECISION

The Florida Supreme Court quashed the decision of the Fifth District and remanded for the Fifth District to consider other appellate issues raised in the appeal.[1]  The Florida Supreme Court held that an insured is entitled to a determination of liability and the full extent of his or her damages in a UM action before filing a first-party bad faith action. The determination of damages is then binding, as an element of damages, in a subsequent first-party bad faith action against the same insurer so long as the parties have the right to appeal any properly preserved errors in the verdict.  Further, the Court concluded that the trial court did not err in retaining jurisdiction to allow the filing of a bad faith cause of action.

On appeal, Safeco agreed that an element of damages in a first party bad faith case would be any damages in excess of the policy limits.  However, Safeco contended that the determination of the full extent of the damages should be adjudicated in the subsequent bad faith case, rather than in the UM action, since Safeco’s decision to tender the policy limits rendered the UM action moot at that point.  The Florida Supreme Court analyzed Blanchard v. State Farm Mutual Automobile Insurance, 575 So.2d 1289 (Fla. 1991), Imhof v. Nationwide Mut. Ins. Co., 643 So.2d 617 (Fla. 1994); Vest v. Traveler’s Insurance Co., 753 So.2d 1270 (Fla. 2000); and State Farm Mutual Auto Ins. Co. v. Laforet, 658 So.2d 55, 63 (Fla. 1995) and concluded that the insured was entitled to a jury determination of the amount of damages in a UM action prior to filing a first-party bad faith action. Additionally, the Court stated that the referenced cases did not indicate that by tendering the policy limits, the UM case was moot.

With respect to the second issue, Safeco argued that the determination of damages reflected in the UM verdict could not fix the amount of damages in the subsequent bad faith cause of action because the determination of damages in excess of the policy limits was not and could not be subject to appellate review of trial court errors.  The Florida Supreme Court rejected this argument and stated that in this case, the final judgment including the determination of the full extent of damages was properly within the jurisdiction of the Fifth District.  Further, if Mr. Fridman had to relitigate the issue of damages, it would be unduly burdensome to him and would award Safeco for its conduct in delaying the tender of the policy limits.  Therefore, the determination of damages obtained in the UM action became a binding element of damages in the subsequent bad faith litigation against the same insurer and that the parties had the opportunity to appeal timely-raised errors in the UM verdict.  Fridman v. Safeco Ins. Co. of Illinois, No. SC13-1607, 2016 WL 743258, at *13 (Fla. Feb. 25, 2016).

Lastly, the Florida Supreme Court held that the trial court did not err by retaining jurisdiction to determine Mr. Fridman’s right to amend the complaint to add a claim for bad faith.  The Court indicated that abatement was permitted as an appropriate step until coverage and damages have been determined.  As such, “if abatement is permitted when the bad faith action is brought simultaneously as the UM claim, then it follows that a trial court may also reserve jurisdiction to allow an insured to formally amend his or her complaint to add the bad faith claim after the conclusion of the UM proceedings.”  Fridman, No. SC13-1607, 2016 WL 743258, at *15 (Fla. Feb. 25, 2016)

RECOMMENDATIONS

            This decision indicates that it is appropriate for a Plaintiff to bring a UM action and a  first-party bad faith action in the same lawsuit and the trial court can stay or abate the bad faith action and retain jurisdiction to allow for amendment of the complaint to add the insurance carrier.

Our recommendation for insurance carriers going forward is to analyze each matter on a case by case basis and consider the potential for early removal to federal court where: 1) the insurance carrier is a foreign corporation with its principal place of business outside of Florida; and 2) the tortfeasor is not a Defendant to the lawsuit or, if a Defendant, not a citizen of Florida.  Where federal diversity jurisdiction exits the policy limits of an insurance policy are not the only amount at issue to determine the amount in controversy.  The full extent of damages sought in the lawsuit and the potential attorney’s fees and costs are also considered.  Clarendon Am. Ins. Co. v. Miami River Club, Inc., 417 F.Supp.2d 1309, 1316 (S.D.Fla.2006))

We hope you find the above-referenced case helpful and insightful.  Should you have any questions with respect to the foregoing, please do not hesitate to contact the undersigned at your earliest convenience.

[1] The two trial-related errors raised by Safeco before the Fifth District and this Court, were not addressed here, were: (1) whether the trial court erred in denying Safeco’s motion for remittitur; and (2) whether the trial court erred in denying Safeco’s motions for mistrial and a new trial for improper arguments made by Mr. Fridman’s trial counsel.

Very truly yours,

John Bond Atkinson

Veronica Rubio