FLORIDA LAW WEEKLY

VOLUME 43, NUMBER 38

CASES FROM THE WEEK OF SEPTEMBER 21, 2018

THE FOCUS ON A BAD FAITH CASE IS NOT ON THE ACTIONS OF THE INSURED, BUT RATHER ON THE ACTIONS OF THE INSURER IN FULFILLING ITS OBLIGATIONS--THE DUTY TO ACT IN GOOD FAITH WAS NOT FULFILLED BY TENDERING THE POLICY LIMITS.

Harvey v. Geico, 43 Fla. L. Weekly S375 (Fla. September 20, 2018):

In this bad faith case, the supreme court concluded that the Fourth District erred in holding that the evidence was insufficient to show that the insurer acted in bad faith in failing to settle the insured’s claim. In reaching that erroneous conclusion, the Fourth District failed to properly apply the directed verdict standard, and misapplied the precedent in Boston Old Colony and Berges, where the supreme court set forth fiduciary duties of insurance companies toward their insureds.

The supreme court criticized the Fourth District for mistakenly relying on non-binding federal cases that cannot be reconciled with binding supreme court precedent.

In this case, a 51-year-old man was killed in a crash leaving behind a wife and three children. The insured’s vehicle was registered in both his name and his business’s name, and was covered under a $100,000 policy.

Two days after the accident, Geico resolved the liability issue adversely to the insured. Geico knew that there was a significant financial exposure to the insured because the victim had died leaving multiple survivors and the coverage was only $100,000. The next day, the claims adjuster sent the insured a letter explaining that the wrongful death claim could exceed the policy limits, and that he had the right to hire his own attorney.

A paralegal employed by the attorney for the estate called the claims adjuster several days later and requested a statement from the insured. The paralegal explained that a recorded statement from the insured was necessary to determine the extent of his assets, and whether he had any additional insurance and if he was in the course and scope of his employment at the time of the accident. The claims adjuster failed to immediately communicate the request to the insured, and then later denied the request.

Three days later, Geico tendered the full amount of the policy limits to the estate’s attorney, along with a release and an affidavit of coverage. In response, the attorney wrote a letter to the claims adjuster, acknowledging receipt of the check and the adjuster’s refusal to make the insured available for a statement. The adjuster received the letter a couple of weeks later, and faxed it to the insured who learned for the first time that the statement had been requested.

That same day, the adjuster contacted the attorney regarding the requested statement and then faxed a letter to the adjuster explaining the need for the statement.

The next day, the insured called the adjuster to discuss the attorney’s letter. He told the adjuster that he planned to meet with his attorney, whom he had hired at the adjuster’s suggestion to review the financial documents, and to provide the information requested but advised the attorney would not be available until a week later. The adjuster documented the call and was instructed by a supervisor to relay the insured’s message to the plaintiff’s attorney. The adjuster never did so.

Approximately a month after the request for a statement, the estate returned Geico’s check and filed a wrongful death suit. The jury found the defendant 100% at fault and awarded the estate $8.47 million in damages.

The plaintiff’s lawyer testified they never received any communication from Geico following his last letter explaining to the adjuster why he needed the statement of the insured. He also testified that had he known that the insured’s only asset was a business account with approximately $85,000, he would not have filed his suit, and instead would have advised the estate to accept the policy limits.

The insurance adjuster conceded during her testimony that it was reasonable for the attorney to request information about whether the insured had other insurance coverage, and the extent of his assets, testifying that plaintiffs’ attorneys ask for that information all the time.

At the conclusion of the insured’s case, Geico moved for a directed verdict which was denied. The trial court then entered final judgment for $9.2 million. Geico appealed, arguing that the insured offered insufficient evidence at trial to support his bad faith claim.

The Fourth District agreed and reversed, concluding that the evidence was insufficient as a matter of law to show that Geico acted in bad faith in failing to settle the claim against the insured. The court also concluded that even if the insurer’s conduct were deficient, the insurer’s actions did not cause the excess judgment rendered against the insured.

Bad faith law, as explained by the supreme court, was designed to protect insureds who have paid their premiums and who have fulfilled their contractual obligations, by cooperating fully with the insured in resolution of claims. Bad faith jurisprudence holds insurers accountable for failing to fulfill their obligations.

In handling the defense of claims against insureds, insureds have 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 or her own business. The duty arises from the nature of the insurer’s role in handling the claim on the insured’s behalf.

Because the insured has surrendered all control over the handling of the claim to the insurer including all decisions regarding litigation and settlement, the insurer must assume a duty to exercise such control and make decisions in good faith with due regard for the interest of the insured. The obligations set forth in Boston Old Colony are not a mere checklist. An insurer is not absolved of liability, for example, simply because it advises its insured of settlement opportunities, the outcome and the possibility of an excess judgment.

Rather, the critical inquiry in a bad faith case is whether the insurer diligently and with the same haste and precision as if it were in the insured’s shoes, worked on the insured’s behalf to avoid an excess judgment. The question of whether an insurer has acted in bad faith in handling claims against the insured is determined under the totality of circumstances standard. Further, it is for the jury to decide whether the insurer failed to act in good faith with due regard for the interest of the insured.

In a case where liability is clear, and the injury is so serious that a judgment in excess of the policy limits is likely, an insurer has an affirmative duty to initiate settlement negotiations. In such a case, where the financial exposure of the insured is a ticking financial time bomb, and suit can be filed at any time, a delay in making an offer where there was no assurance that the claim could be settled, could be used by the fact finder as evidence of bad faith.

The damages claimed by an insured in a bad faith case must be caused by the insurer’s bad faith. The focus in a bad faith case is not on the actions of the claimant, but rather on those of the insurer in fulfilling its obligations to the insured.

Federal case law does not always hit the mark, the supreme court said. The Fourth District had relied in part on Novoa v. Geico (an unpublished 11th Circuit opinion), where the 11th Circuit said that to fulfill the duty of good faith, an insurer does not have to act perfectly, prudently or even reasonably. That case merely said that insurers must refrain from acting solely on the basis of their own interest in settlement.

Though the 11th Circuit cherry-picked a single clause from the Florida Supreme Court’s opinion in Laforet, where the court addressed the narrow issue of the validity of retroactively applying a penalty to insurance companies for bad faith conduct in failing to settle uninsured motorist claims, the court failed to consider the opinion in Boston Old Colony where the supreme court made it clear that there is far more to the bad faith inquiry than whether the insurer acted in its own interest. The supreme court admonished that the Fourth District went astray.

Under the totality of the circumstances, the court found there was indeed competent substantial evidence to support the jury’s finding that Geico acted in bad faith in failing to settle the estate’s claim against the insured. In concluding otherwise, the Fourth District failed to properly apply the directed verdict standard, and also misapplied supreme court precedent in Boston Old Colony and Berges.

The court further concluded that the Fourth District misstated the law when it stated that an insurer could not be liable for bad faith where the insured’s own actions or inactions resulted--at least in part--in an excess judgment.

The supreme court wrote that nothing in its precedent could be read to suggest that an insurer cannot be found liable for bad faith merely because the insured could have attempted on its own to avoid the excess judgment. In fact, precedent states just the opposite. It is the insurer that owes a fiduciary obligation to the insured to exercise such control, and to make decisions in good faith and with due regard for the interest of the insured.

The court also took the Fourth District to task, finding that the insured’s own actions or inactions resulted in the excess judgment, thereby freeing the insurer from bad faith. The court said that the ruling statement contravened Berges, where the supreme court wrote that the focus in a bad faith case is not on the actions of the claimant but rather on those of the insurer in fulfilling the obligations to the insured.

SUPREME COURT REVERSES FOURTH DISTRICT, FINDING THE LAW DOES NOT ALLOW A BRIGHT LINE CAP ON THE AMOUNT OF NON-ECONOMIC DAMAGES A FINANCIALLY INDEPENDENT ADULT CHILD MAY RECOVER IN A WRONGFUL DEATH CASE.

Odom v. R.J. Reynolds, 43 Fla. L. Weekly S369 (Fla. September 20, 2018):

In this tobacco case, the Florida Supreme Court reversed the Fourth District which had essentially ruled to impose a bright line cap on the amount of non-economic damages recoverable by a financially independent adult surviving child on a wrongful death case. The supreme court stated that instead of properly applying the abuse of discretion standard, and well-established precedent which entitles both a jury’s verdict and a trial judge’s ruling on a motion for remittitur to great deference, the court made a sweeping statement that no matter what the evidence shows, an adult child who lives independent of a parent during the parent’s smoking-related illness and death is not entitled to a multimillion dollar compensation award.

The supreme court then detailed the evidence in Odom. There, the plaintiff’s deceased mother was a single mother to her, and was only 16-years-old when she was born. There was never a father in the picture. The two had an extremely close relationship and were more like sisters than mother and daughter. The daughter intermittently lived with the mother, and when the daughter’s own troubled marriage failed, she and her son spent a great deal of time with her mother, who treated her grandson almost like her own son.

The daughter testified regarding the devastation of her loss, and explained to the jury how her mother was really the only person in her life that she could ever depend on. She told the jurors that with her mother gone, she lacks the support she once had. Ms. Odom’s mother was only fifty-eight when she died.

The case is replete with detailed facts demonstrating why the supreme court affirmed the trial judge’s decision that the award--which was actually in excess of what plaintiff’s counsel had asked for in closing--did not shock the court’s judicial conscience in light of the evidence that had been presented.

The Fourth District, however, concluded that regardless of the evidence the relationship between an adult child living independent of their parent is simply not the type of relationship that can justify a multimillion dollar non-economic damage award.

The supreme court wrote that because the Fourth District’s cap on damages did not find support in either Florida Statutes or in the court’s precedent, such a conclusion was error.

This case presented the jury with extensive and undisputed evidence of a “very close and unique relationship” that the plaintiff and her mother shared, as well as the effect that the mother’s years long suffering and eventual death had on her daughter. The evidence established that there was not only a loss of parental companionship, instruction and guidance, but also mental pain and suffering from the date the mother was originally diagnosed until her death approximately three years later, during which time the plaintiff supported her mother every step of the way. The jury also heard evidence that at age fifty-eight, the mother had a life expectancy of an additional 24.5 years.

While the plaintiff had advocated for an award of $5 million, the defendant tobacco company chose not to suggest a specific amount or even a range. Instead, R.J. Reynolds left the question of how much to award to the “good judgment and common sense” of the jury. The jury awarded $6 million to the plaintiff, which was later reduced to $4.5 million in accordance with the jury’s finding that the mother was 25% at fault for her own death.

ERROR TO DENY MOTION TO QUASH SUBSTITUTE SERVICE WHEN PLAINTIFF FAILED TO EXERCISE DUE DILIGENCE IN ATTEMPTING TO LOCATE AND SERVE DEFENDANTS.

Societe Hellin, S.A. v. Valley Commercial Capital, 43 Fla. L. Weekly D2114 (Fla. 4th DCA September 12, 2018):

Section 48.181 authorizes substitute service on non-resident defendants. Before using the substitute service statutes, plaintiffs must demonstrate the exercise of due diligence in attempting to locate the defendant.

The court pointed out that there is a common theme in the cases which have held that a plaintiff failed to exercise due diligence. In those, the plaintiff failed to follow an obvious lead (versus those cases where the plaintiff tracked down any lead he or she had). Repeated attempts at service at the wrong location do not amount to due diligence.

In this case, the plaintiff had a Venezuelan address listed on a lease and even sent a demand letter there, but never made personal service attempts at the Venezuelan address or at the registered agent’s address in Panama.

Without efforts shown to locate and serve defendants in Venezuela or Panama, and a single-minded focus solely on a condo in Miami, the plaintiff failed to make the showing of due diligence needed for substituted service.

DEFENDANT WAIVED RIGHT TO COMPEL ARBITRATION IN PERSONAL INJURY ACTION BY ANSWERING INITIAL COMPLAINT AND ENGAGING IN DISCOVERY DIRECTED TO MERITS OF CASE--AMENDED COMPLAINT DID NOT REVIVE THE DEFENDANT’S RIGHT TO COMPEL ARBITRATION WHEN THE ISSUES WERE SIGNIFICANTLY THE SAME.

Stankos v. Amateur Athletic Union of the United States, 43 Fla. L. Weekly D2117 (Fla. 4th DCA September 12, 2018):

The plaintiffs’ minor son suffered a head injury during a taekwondo competition organized by the defendant. It was not until after plaintiffs filed an amended complaint that the defendant moved to compel arbitration based on the arbitration clause contained within its handbook.

However, the defendant waived its right to compel arbitration by answering the plaintiffs’ initial complaint and engaging in discovery directed to the merits of the case, and there is no Florida case that holds that the right to compel arbitration is revived by the filing of an amended complaint. Accordingly, the court reversed the trial court’s order compelling arbitration.

CIRCUIT COURT ERRED IN GRANTING PLAINTIFF’S MOTION TO AMEND COMPLAINT TO ADD PUNITIVE DAMAGE CLAIM WITHOUT MAKING AN AFFIRMATIVE FINDING THAT PLAINTIFF HAD MADE A “REASONABLE SHOWING BY THE EVIDENCE” THAT THERE EXISTED A “REASONABLE EVIDENTIARY BASIS FOR RECOVERING SUCH DAMAGES.”

United Automobile Insurance Co. v. Riverside Medical Associates, 43 Fla. L. Weekly D2120 (Fla. 4th DCA September 12, 2018):

The circuit court’s order failed to make an affirmative finding that the plaintiff made a reasonable showing by evidence which would provide a reasonable evidentiary basis for recovering such damages. Section 768.72 requires that a trial court make such an affirmative finding, before a defendant can be exposed to punitive damages and financial worth discovery.

NOTE: Be mindful, that any motion seeking to add a claim for punitive damages must attach the amended complaint, and--if successful--must have an order where the trial court makes “affirmative findings” to support the claim in the order granting the right to amend for punitive damages.

PLAINTIFF COULD PROPERLY AMEND COMPLAINT WITHOUT LEAVE OF COURT WHEN DEFENDANT HAD NOT SERVED A RESPONSIVE PLEADING--TRIAL COURT ERRED IN DENYING PLAINTIFF’S UNNECESSARY MOTION FOR LEAVE TO AMEND AND DISMISSING THE ORIGINAL COMPLAINT WITH PREJUDICE.

Albritton v. Barness, 43 Fla. L. Weekly D2142 (Fla. 2nd DCA September 14, 2018):

The plaintiff, whose estate was substituted after he died during the pendency of the appeal, brought an action to foreclose a mortgage. Defendant moved to dismiss. The trial court granted the motion without prejudice.

Plaintiff then filed an amended complaint, along with a motion for leave to amend which was unnecessary, because there had been no responsive pleading filed. Defendant characterized the amended complaint as unauthorized because it was filed without leave of court. Defendant also moved for sanctions.

In addition to reversing the case which should have never had to be appealed, the Second District also issued an order to show cause against the defendant to explain why the plaintiff’s appellate attorney’s fees and costs should not be assessed against them as a sanction pursuant to rule 9.410 and section 57.105.