The Week in Torts – Cases From the Week of June 18, 2021
No Setoff for UM or Bad Faith Settlements
FLORIDA LAW WEEKLY
VOLUME 46, NUMBER 24
CASES FROM THE WEEK JUNE 18, 2021
TRIAL COURT PROPERLY REJECTED DEFENDANT’S ARGUMENT FOR SETOFF FROM BAD FAITH/UM SETTLEMENT – QUESTION CERTIFIED REGARDING WHETHER A UM / BAD FAITH SETTLEMENT IS SUBJECT TO A SETOFF UNDER §768.041(2), OR AS A COLLATERAL SOURCE WITHIN §768.76
Ellison v. Willoughby, 46 Fla. L. Weekly D1361 (Fla. 2nd DCA June 11, 2021):
A man was seriously injured in a t-bone accident. The plaintiff sued the defendant driver for negligence and his wife as the co-owner of the vehicle. In the same complaint, plaintiff asserted claims against his UM carrier for UM benefits and bad faith damages.
Two years later, the plaintiff and the UM carrier executed a settlement agreement and agreed to release each other from all claims which could be asserted in the lawsuit, including all claims related to the accident or policy. The insurance company agreed to pay $4 million, and $1.735 million of that was specifically delineated as damages for personal injuries/sickness within the meaning of §104(a)(2) of the Internal Revenue Code.
No other person, firm, or corporation was released by the settlement agreement, and the plaintiff explicitly reserved all claims and causes of action against the driver and owner.
Shortly after the settlement agreement, the plaintiff dismissed his claims against the UM carrier with prejudice and dropped his negligence claim against the driver. Four years later, the owner admitted liability and stipulated that the past medical expenses were $147,020.00. The case then went to trial to determine the plaintiff’s remaining damages and the jury awarded him over $30 million for future medical expenses, past and future lost earnings, and past and future pain and suffering.
The owner then sought a setoff of the UM/bad faith settlement (the UM policy was $10,000.00).
All parties agreed that whether the remaining $3.99 million of the $4 million settlement was subject to a setoff was one of first impression. The owner/defendant argued that plaintiff would receive a windfall without a setoff, and the plaintiff maintained that the settlement was not subject to a setoff because (1) the insurer and the owner of the vehicle were not joint tortfeasors; and (2) UM settlement awards are generally not considered collateral sources.
The court looked at the setoff arguments under both §768.041(2) and §768.76(1). Section 768.041(2) presupposes the existence of multiple defendants who are jointly and severally liable for the same damages. Setoff statutes are predicated on the existence of other tortfeasors who are liable for the same injury as the settling party.
The court made it clear that the plaintiff’s claims against the insurance company were not and could not be asserted against the owner, and the settlement included elements of damages that were not part of the plaintiff’s claims against the owner. The court explained that faced with the very real risk of having the obviously inadequate $10,000 UM policy be converted into a limitless policy via the plaintiff’s bad faith claim, the insurance company chose to quantify and resolve its liability by settling with the plaintiff. Under those circumstances, the court found the windfall argument unavailing.
Section 768.76(1) was also not available because the insurance company’s settlement proceeds did not fall within the statutory definition of “collateral sources” as set forth in §768.76(2)(a). The collateral source rule rests on the principle that a tortfeasor should not benefit from collateral sources available to the plaintiff.
Also, whatever portion of the settlement was allocable to the plaintiff’s claim for UM benefits under the UM policy was not subject to setoff because the insurance company has a subrogation claim against the owner and driver for the amount of UM benefits paid to the plaintiff on account of the injuries he sustained in the crash, and uninsured motorist payments are not collateral sources that get deducted from jury verdicts. A punitive extra-contractual award of bad faith damages are also not “benefits” as set forth in the collateral source statute and therefore, not subject to setoff.
Because the case created a question of first impression on the allocation of liability vis a vis settlements of tort and bad faith actions, it presented a significant reoccurring concern to the citizens of Florida, leading the court to certify the following question as one of great public importance:
IS A SETTLEMENT PAYMENT MADE BY AN UNINSURED MOTORIST INSURER TO SETTLE A FIRST-PARTY BAD FAITH CLAIM SUBJECT TO SETOFF UNDER §768.041(2) OR COLLATERAL SOURCE WITHIN THE MEANING OF §768.76?
The court affirmed the jury’s verdict along with the denial of any setoff.
WHERE SUMMARY JUDGMENT WAS ULTIMATELY ENTERED IN DEFENDANTS’ FAVOR, DEFENDANTS WERE ENTITLED TO COSTS AS A MATTER OF LAW UNDER §57.041
Digiacomo v. Kogan & DiSalvo, 46 Fla. L. Weekly D1337 (Fla. 4th DCA June 8, 2021):
Section 57.041 provides that the party recovering judgment shall recover all of his or her legal costs. Under this section, there is no discretion to deny the party obtaining judgment its lawful costs. Because summary judgment was ultimately entered in the defendants’ favor in this case, they were entitled to their taxable costs as a matter of law.
TRIAL COURT ERRED IN RULING THAT IT LACKED JURISDICTION TO DETERMINE WHETHER THERE WAS A VALID ARBITRATION AGREEMENT BETWEEN THE PARTIES – THE TRIAL COURT IS RESPONSIBLE FOR DETERMINING WHETHER A VALID ARBITRATION AGREEMENT EXISTS WHEN THE ARBITRATION CLAUSE ITSELF IS BEING CHALLENGED
Russell v. Hydroprocessing Associates, LLC, 46 Fla. L. Weekly D1352 (Fla. 1st DCA June 10, 2021):
An employee challenged the existence of an arbitration agreement between himself and his employer, which related only to the arbitration provision of the agreement, and not the agreement in general. The employment agreement with one entity had an arbitration provision, but the other employment agreement did not.
The agreement with the employer without the arbitration agreement also had an integration clause stating that the agreement was the entire agreement between the parties, and that said agreement superseded all prior agreements.
When there are multiple documents containing conflicting arbitration provisions, the court will determine whether a valid arbitration agreement exists. As a result, the trial court erred in failing to determine whether a valid arbitration agreement existed between the employee and the defendant without an arbitration provision, before ordering that the claims be determined through arbitration.
TRIAL COURT ERRED IN SIGNIFICANTLY REDUCING PLAINTIFF’S ATTORNEYS’ HOURLY RATE AND AMOUNT OF HOURS WITHOUT MAKING SPECIFIC FINDINGS TO SUPPORT THE DETERMINATION – ABSENCE OF A TRANSCRIPT DOES NOT REQUIRE AFFIRMANCE OF TRIAL COURT’S ORDER WHEN ORDER WAS FUNDAMENTALLY ERRONEOUS ON ITS FACE BECAUSE IT FAILED TO MAKE THE REQUISITE FINDINGS – TRIAL COURT ALSO ERRED IN FAILING TO AWARD PREJUDGMENT INTEREST ON FEE AWARD
Lizardi v. Federated National Insurance Co., 46 Fla. L. Weekly D1368 (Fla. 2nd DCA June 11, 2021):
This appeal involved an award of attorneys’ fees on a case where the plaintiffs settled their claim with their insurance company prior to trial. The trial court conducted an evidentiary hearing on fees. The contract provided that the attorney would seek fees at $425.00 per hour from the opposing party upon being successful, and the hours were 331.20.
At the conclusion of the hearing, the trial court awarded taxable costs and the paralegal time but reduced the plaintiffs’ counsel’s requested rate from $425.00 to $350.00 and reduced the hours from 331.20 to 200. The court provided no explanation for these reductions.
In rendering the fee award, trial courts are required to make specific findings to support their conclusions regarding the number of hours reasonably expended, a reasonable hourly rate, and the appropriateness of the reduction of enhancement figures. Here the lodestar amount was $70,000.00. That figure was arrived at by multiplying the number of hours that the trial court deemed were reasonably expended, by the hourly rate the trial court charged.
The appellants did not challenge the reduction or the lodestar. However, they did challenge the figures used by the trial court to arrive at the lodestar amount, contending that the reduction in hourly rate was inexplicable and not explained. Had the trial court made specific findings as to why it was reducing the number of hours and their hourly rate, the order would likely have satisfied Rowe’s mandates. Without doing so, the order is deficient on its face. In the face of no specific findings, as required by Rowe, the lack of a transcript was not fatal.
The trial court also erred in failing to award the plaintiffs’ prejudgment interest on the fee award. Prejudgment interest begins to accrue when entitlement is determined and becomes a part of a single total sum adjudged to be due and owing. It is undisputed that entitlement was determined in this case back in November of 2018 when notice of settlement in the underlying dispute was filed.
Thus, there was a date certain as to the issue of entitlement and the trial court was obligated to perform its ministerial duty of computing the appropriate amount and adding it to the judgment.
ORDER COMPELLING DEPOSITION OF DEFENDANT’S CORPORATE REPRESENTATIVE QUASHED TO THE EXTENT THAT THE TRIAL COURT OVERRULED CERTAIN PRIVILEGE OBJECTIONS RAISED BY THE DEFENDANT, WITHOUT ANY ACCOMPANYING FINDINGS OR ANALYSIS
Majab Development, LLC v. Petro Welt Trading, 46 Fla. L. Weekly D1373 (Fla. 2nd DCA June 11, 2021):
In connection with a corporate representative’s deposition, various disagreements arose regarding the adequacy of the privilege objections. The plaintiff filed a motion to compel asserting that the defendant’s representative was unprepared to testify as to a number of noticed topics, and that defendant’s counsel had raised inappropriate privilege objections and instructed the witness not to answer.
The court made a blanket recommendation to overrule all the privilege objections without differentiating between them, which the appellate court quashed because the trial court’s order left it to guess as to whether the trial court even considered the statutory objections that were raised before overruling them.