THE WEEK IN TORTS

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More Bad Faith “Erosion”

FLORIDA LAW WEEKLY

VOLUME 39, NUMBER 37

CASES FROM THE WEEK OF SEPTEMBER 12, 2014

THE FIFTH DISTRICT HOLDS EN BANC THAT ATTORNEY-CLIENT PRIVILEGE APPLIES TO DISCOVERY SOUGHT BY THE INJURED PARTY IN A THIRD-PARTY BAD FAITH ACTION WHERE THERE HAS BEEN NO ASSIGNMENT FROM THE INSURER TO THE INJURED PARTY–QUESTION CERTIFIED.

Boozer v. Stalley, 39 Fla. Weekly D1907 (Fla. 5th DCA September 5, 2014):

Plaintiff’s guardian filed an auto negligence case against the defendant, an Allstate insured, and Allstate retained counsel to defend her. The insured was covered by two policies totalling $1.1 million. The plaintiff recovered a judgment in excess of $11 million which was not appealed. The plaintiff filed a bad faith action.

During the third-party bad faith litigation, the guardian plaintiff sought to depose the insured’s attorney, and subpoenaed his original files in the underlying action. The attorney moved for protective order, arguing that the insured’s interests were not aligned with the guardian because the insured had no assigned any of her rights to him. However, relying on Dunn Continental Casualty Co. v. Aqua Jet Filter, andBaxley v. Geico, the trial court denied both the attorney’s motion, as well as his request to stay the deposition pending appellate review.

The attorney and the insured filed a petition for cert., and the plaintiff responded by asserting that longstanding Florida precedent holds that in the context of third-party bad faith litigation, the plaintiff victim stands in the shoes of the insured and may obtain discovery of materials that would have been available to the insured, which includes those otherwise protected by the attorney-client privilege.

The Fifth District noted how prior case law supported plaintiff’s argument. However, the court observed that several decisions since those required it to “re-think” its discovery of attorney-client privilege information in bad faith actions. Citing first toAllstate v. Ruiz, where the Florida Supreme Court held that work-product materials were discoverable in first party bad faith actions, Ruiz moved away from past case law distinguishing first and third-party bad faith, explaining that the statutory action ushered out a distinction between the two. The court said that any distinction with regard to discovery issues is unjustified.

While Ruiz concerned work-product, a later Fifth District case, West Bend v. Higginsnoted that in the context of first party bad faith proceedings, Ruiz did not extend to materials protected by the attorney-client privilege.

Several other cases decided as of late, according to the Fifth District, have also acknowledged that courts do not have independent authority to abrogate the attorney-client privilege even in the context of bad faith claims. Adopting the holdings and more recent precedent from Dunn, the fact that the plaintiff may stand in the insured’s shoes or have an independent right to bring a bad faith action does notmean that an insured give up the statutory attorney-client privilege. As there was no indication that the plaintiff obtained an assignment from the insured, it was clear that their interests were still adverse.

Recognizing the uncertainty of the law, the Fifth District did certify a question asking whether the decisions of Ruiz and Genovese shield the attorney-client privilege communications from discovery in third- party bad faith litigation.

A TRIAL COURT PROPERLY DENIED DEFENDANT’S MOTION FOR ATTORNEY’S FEES PURSUANT TO A PROPOSAL FOR SETTLEMENT THAT WAS FILED PREMATURELY (LESS THAN 90 DAYS AFTER THE ACTION HAD BEEN COMMENCED AGAINST THE DEFENDANT).

Design Home Remodeling Corp. v. Santana, 39 Fla. Weekly D1862 (Fla. 3rd DCA September 3, 2014):

WITHOUT SUFFICIENT EVIDENCE THAT SUPERVISORS ACT WITH CULPABLE NEGLIGENCE WITHIN THE MEANING OF §440.11(1)(b), THE COURT HELD (PROVIDING NO FACTS) THAT SUMMARY JUDGMENT WAS PROPERLY ENTERED FOR THE DEFENDANT THOUGH CITING A CASE WHERE THE 5TH DISTRICT HELD THE SUPERVISOR’S REMOVAL OF THE SAFETY SWITCH DID NOT AMOUNT TO A CRIME OF CULPABLE NEGLIGENCE.

Arvizu v. Heights Roofing, Inc., et al., 39 Fla. Weekly D1863 (Fla. 3rd DCA September 3, 2014)

BAD FAITH ACTION IS RIPE WHERE INSURER’S LIABILITY FOR COVERAGE AND EXTENT OF THE INSURANCE DAMAGE HAS BEEN DETERMINED BY AN APPRAISAL AWARD, ALTHOUGH THERE HAS BEEN NO DETERMINATION OF WHETHER THE INSURER FOR BREACHED THE INSURANCE CONTRACT.

Cammarata v. State Farm, 39 Fla. Weekly D1880 (Fla. 4th DCA September 3, 2014):

In this en banc opinion, the Fourth District found that only an insurer’s liability for coverage and the extent of damages (not necessarily the insurer’s liability for breach of contract) must be determined before a bad faith action becomes ripe.

In cases arising out of breach of contract claims arising between State Farm and its insureds over damage in Hurricane Wilma, the court addressed conflicts in its own opinions, and had to recede from a decision where the court had held that an insurer’s liability for breach of contract must be determined before a bad faith action becomes ripe, even though the insurer’s liability for coverage and the extent of the insured’s damages, had been determined by the appraisal award favoring the insured.

In a concurring opinion, Judge Gerber (endorsed by several other judges) observed that the majority opinion could open the door to allowing an insured to sue an insurer for bad faith any time the insurer “dares” to dispute a claim, but then pays the insured just a penny more than the insurer’s initial offer to settle without a determination that the insurer breached the contract. The court also made clear that when an insurer’s liability for coverage and the extent of damages has not been determined in any form, an insurer’s liability for the underlying claim and the extent of damages has to be determined before a bad faith action becomes ripe.