District Court Grants Summary Judgment in Favor of Insurer on Bad Faith Claim
Though Florida courts regularly deny summary judgment motions in bad faith cases on the basis that such claims present questions of fact appropriate only for jurors, the court in Shin Crest Pte, Ltd. v. AIU Ins. Co.¸605 F. Supp. 2d 1234 (M.D. Fla. 2009), boldly granted such a motion filed by AIU in a case involving a stipulated judgment of $12 million.
In 2001, Doreen Blair was sitting on a dock chair manufactured by Shin Crest and sold by Sam’s Club when the chair fell into a dry lake-bed and rendered Mrs. Blair paraplegic. Mrs. Blair filed suit against Sam’s Club only. AIU insured Shin Crest under a $2 million general liability policy. Sam’s Club was an additional insured under the policy.
Liability was bitterly contested with expert opinions in favor of both parties. After considering the full potential verdict and offsetting for plaintiff’s comparative negligence, AIU analyzed the settlement value of the case between $1 million and $1.5 million. Prior to the mediation Blair’s attorney made it clear that he was going to try to get as much as he could from Sam’s Club and then go up the line and sue everyone else including Shin Crest. At mediation, counsel for Mrs. Blair began with a $20 million demand. Through the course of the day he discussed a possibility of reducing his demand to $5 or $6 million. The highest offer made by AIU had a value of $650,000. Mediation concluded with an impasse.
Despite the impasse at mediation negotiations continued. When plaintiff offered to settle the claim against Sam’s for $4 million, AIU responded that it would pay $1 million but only for a global release of all parties. Thereafter Blair’s attorney offered to settle the claim against Sam’s for $2 million but would not agree to release Shin Crest. By that point the policy (which was eroding) had only $1.8 million remaining in limits. Once Blair’s attorney was informed of this he lowered his demand to $1.8 million. Plaintiff’s counsel again made it clear that Shin Crest would not be released. Sam’s club demanded that the case be settled. Backed into a corner with no way to win, AIU protected the interests of Sam’s club (to the exclusion of Shin Crest) and accepted the settlement demand.
Thereafter Mrs. Blair sued Shin Crest. AIU refused to provide a defense because the policy was exhausted. Shin Crest stipulated to a judgment of $12 million and then sued AIU for bad faith. The crux of the claim was that AIU should have offered its policy limits at mediation to protect the interests of both Sam’s and Shin Crest and that by failing to do so AIU acted in its own interests and failed to protect both its insureds. AIU filed a Motion for Summary Judgment arguing that under the facts there could be no bad faith as a matter of law.
When analyzing the case the court noted Florida precedent which holds that a lack of a formal offer to settle does not preclude a finding of bad faith, bad faith may be inferred from a delay in settlement negotiations, insurer has a duty to advise of settlement offers and consequences and that the ultimate tender of policy limits does not insulate an insurer from liability for bad faith. Id at 1210; See also Powell v. Prudential Prop. & Cas. Ins. Co., 584 So. 2d 12, 14-15 (Fla. 3d DCA 1991); Berges v. Infinity Ins. Co., 896 So. 2d 665 (Fla. 2005).
The court noted, however, that under the specific facts of the instant case, where liability was hotly contested and the insurer evaluated the claim under policy limits it had no obligation to make a policy limit offer at mediation. The court found that AIU’s offer at mediation was not de minimus, but rather reasonable and rationale. The court refused to permit a bad faith claim based solely on the timing of a settlement offer in a case without clear liability.
Finally, the court rejected the argument that it was bad faith to settle the claims against Sam’s Club to the exclusion of the claims against Shin Crest. AIU attempted to secure a release for both insureds. When it was unable to do so it had no alternative but to settle the claim against Sam’s Club only. Id.; See also Contreras v. U.S. Security Ins. Co., 927 So. 2d 16 (Fla. 4th DCA 2006).
In granting summary judgment the court quoted an earlier dissenting opinion authored by Justice Wells of the Florida Supreme Court:
I do not believe that it is acceptable for the Court to merely say that bad faith is a jury question. It is the Court’s responsibility to have logical, objective standards for bad faith and not to avoid setting definitive standards by declaring bad faith to be a jury question. The Court should recognize that it has the responsibility to reserve bad faith damages, which is limitless, court-created insurance, to egregious circumstances of delay and bad faith acts. The Court likewise has a responsibility to not allow contrived bad faith claims that are the product of sophisticated legal strategies and not the product of actual bad faith.
The judiciary and the legislature should heed these wise words. Perhaps more law-makers will join in this reasoning in the years to come.