NO CAUSE OF ACTION FOR THIRD-PARTY BAD FAITH AGAINST AN INSURER WHEN THE INSURER’S ACTIONS ARE NOT THE CAUSE OF DAMAGES TO THE INSURED OR WHEN THE INSURER’S ACTIONS DID NOT RESULT IN EXPOSURE TO LIABILITY IN EXCESS OF THE POLICY LIMITS

Perera v. USF&G, 35 Fla. L. Weekly S235 (Fla. May 6, 2010):

The plaintiff’s husband was crushed to death by a piece of equipment during the course of his employment with Estes Express.  At the time of his death, the employer maintained three policies.  One of them was issued by USF&G and had a limit of a million dollars which was an excess work comp liability policy. 

USF&G denied coverage based on a coverage exclusion.  The plaintiff formally demanded $12 million dollars to settle the case.  USF&G was asked to leave mediation when it advised it would not tender its limits due to its coverage defense. 

In the months that followed there were many settlement negotiations.  The plaintiff, the employer and the employees entered into a stipulation to settle for $10 million dollars.  The stipulation provided that the defendant and the employees would pay $5 million dollars and provide a written waiver of the work comp. lien.  Although not stated in the stipulation, the negotiated settlement also provided that $750,000 would come from the employer, $500,000 from another insurer, and $3.75 from a third insurer.  The remaining $5 million was to be sought in a lawsuit against USF&G. 

The trial court found the settlement was in good faith and reasonable, the court approved the stipulation.  Thereafter, the $5 million dollars was paid, and the plaintiff sued USF&G for the remaining $5 million dollars.  One cause of action was for breach of contract, and the other was for bad faith. 

USF&G removed the case to Federal court, and the Federal court granted summary judgment in favor of the plaintiff on the breach of contract claim, requiring it to pay its policy limits of $1 million.  That left $4 million dollars from the consent judgment outstanding.  The Federal court found there was no bad faith because the employer still had millions of dollars in insurance coverage from another insurer at the time of the settlement.  The district court entered summary judgment in favor of USF&G, stating that without an excess judgment, there could be no bad faith. 

The Eleventh Circuit reversed.  It found the determination regarding bad faith had the potential to moot the case and remanded to the Federal court for a jury to consider that issue. 

After the case returned to the Eleventh Circuit subsequent to the bad faith finding, the court found there could be no excess judgment because the employer had additional coverage, and the stipulation was for less than that.  The Eleventh Circuit then said that even in situations where an excess judgment is not required, the bad faith claim was barred, because the insured was never exposed to liability in excess of the limits of the policies.  The Eleventh Circuit found that the employer was never exposed to liability, because any exposure above USF&G’s limits was covered by the policy with $25 million dollars in coverage.

Ultimately, the court concluded that USF&G’s actions did not cause the employer to sustain the damages claimed, nor did it expose the employer to liability in excess of its limits.  Accordingly, the plaintiff as the assignee was not entitled to recover the unpaid portion of the consent judgment.

NEW TRIAL REQUIRED WHEN TRIAL JUDGE ERRONEOUSLY FAILED TO GIVE PLAINTIFF’S REQUESTED JURY INSTRUCTION THAT DEFENDANTS WERE RESPONSIBLE FOR ANY DAMAGES RESULTING FROM NEGLIGENT OR IMPROPER MEDICAL TREATMENT

Nason v. Shafranski, 35 Fla. L. Weekly D943 (Fla. 4^th DCA April 28, 2010):

Defendants admitted negligence in causing an accident, but disputed the amount of damages.  Plaintiff argued on appeal that the trial judge erred by allowing defendants to present expert medical testimony regarding unnecessary surgeries, which thereby shifted the blame for plaintiff’s damages from the defendants, to plaintiff’s treating physician.  The plaintiff argued that the trial judge compounded the error, by refusing to give plaintiff’s requested jury instruction that defendants were responsible for any damages resulting from negligent or improper medical treatment.

The defense doctor was allowed to testify over the plaintiff’s objection that he would not have recommended plaintiff undergo reconstructive surgery, and that the plaintiff had disk bulges like everybody does.  Defendant hammered the point of the unnecessary surgeries home during closing.  During jury deliberations, the juror asked whether the defendant would be relieved of liability if the plaintiff was a victim of “unscrupulous” medical treatment. 

The Fourth District rejected defendants’ argument that the defendants were merely contesting the reasonableness of the medical expenses.  Instead, the defense medical expert was allowed to focus on the treating physician’s lack of skill and judgment and poor results, and the denial of the special jury instruction amounted to reversible error.

In the special concurring opinion, Judge Farmer proposed a “draft” of a jury instruction.  Obviously, I would suggest everyone use this until such time as the Jury Instruction Committee approves one of its own.  (THL – You should use this on a rehearing of your denied Motion in Limine).

*Available to handle appellate and trial support matters for attorneys throughout the state.

This entry was posted on Monday, May 24th, 2010 at 12:16 pm and is filed under The Week in Torts. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.