Time Ins. Co., Inc. v. Burger

• Decision Date: 12 June 1998
• Docket Number: No. 90,869,90,869
• Citation: 712 So.2d 389
• Parties: 23 Fla. L. Weekly S309 TIME INSURANCE COMPANY, INCORPORATED, etc., Appellant, v. Harvey BURGER, et al., Appellees.
• Court: Florida Supreme Court

Page 389

712 So.2d 389

23 Fla. L. Weekly S309

TIME INSURANCE COMPANY, INCORPORATED, etc., Appellant, v. Harvey BURGER, et al., Appellees.

No. 90,869.

Supreme Court of Florida.

June 12, 1998.

Kevin P. O'Connor of O'Connor & Meyers, P.A., Coral Gables, and R. Fred Lewis of Kuvin, Lewis, Restani & Stettin, P.A., Miami, for Appellant.

Scott E. Perwin of Kenny, Nachwalter, Seymour, Arnold, Critchlow & Spector, P.A., Miami, and Brian S. Keif, Key Biscayne, for Appellee.

William F. Merlin, Jr., Tampa, for Amicus Curiae, The Merlin Law Group.

PER CURIAM.

We have for consideration Burger v. Time Insurance Co., 115 F.3d 880 (11th Cir.1997), in which the United States Court of Appeals for the Eleventh Circuit certified a question to this Court. We have jurisdiction under article V, section 3(b)(6) of the Florida Constitution.

In its opinion, the Court of Appeals set forth the following predicate for the question:

I. STATEMENT OF THE FACTS AND PROCEDURAL HISTORY

Sometime in 1991, Harvey Burger submitted for reimbursement a $500 medical bill for an endoscopy to his medical insurance carrier, Time Insurance, Inc. According to Burger, the bill he received from the doctor's office contained a "stray" mark, leading him to believe that he owed $1,500 for the endoscopy. Burger further contends that, once informed by the doctor of the correct amount owed on the bill, he immediately relayed the information to Time Insurance and resubmitted a corrected bill for reimbursement. Sometime later, Burger submitted the bill a third time, marking it "Paid $500." Two weeks later, in August of 1991, Burger was informed that Time's Special Investigations Unit (SIU) was investigating the possibility that he had attempted to defraud the company. Between August, 1991 and November, 1992, Time did not pay any of Burger's outstanding health care claims. (Burger did not submit any new claims during this period.)

In February, 1992, consistent with Florida law (Fla.Stat. § 624.155(2)(a)), Burger's counsel submitted notice of a civil remedy claim to Time, requesting its payment of the non-suspect claims. Time failed to respond to the notice within the 60-day period allowed by law. Time did not satisfy its payment obligations with respect to Burger's claims until November, 1992.

At trial, Burger alleged that, because of Time's failure to pay his medical bills between August, 1991 and November, 1992, and his lack of financial resources to pay for medical services, he felt he could not go to the doctor or otherwise obtain medical services. Thus, he claimed that as a direct result of Time's failure to pay his claims in a timely fashion, he could not obtain needed medical treatment. He also complained of depression and an inability to communicate with his family as a result of his dealings with Time. For its part, Time attempted to discredit Burger's claims that he could not obtain health care during the relevant period by insisting that Burger never submitted new claims for reimbursement; Time's failure to pay related only to claims that Burger submitted prior to August, 1991.1

A jury found that Time Insurance violated Florida Statute § 624.155 by not attempting in good faith to settle Burger's claims, awarding him $50,000 in compensatory damages and $1 in punitive damages.2 On appeal, Time argues that Burger presented only evidence of emotional distress, and no evidence of economic harm, to support his claim for damages. According to Time, Fla. Stat. § 624.155 only created a cause of action for first-party claims of bad faith failure to pay; it did not alter case law which recognized mental anguish damages only in cases of intentional infliction of emotional distress. The jury award of $50,000 to Burger was therefore improper. Burger insists that: (1) Florida law does not preclude an award of damages for emotional distress in this type of action; and (2) the damages he alleged qualify as non-emotional injury sufficient to support the award.

Burger, 115 F.3d at 881.

The question reads as follows:

(1) WHETHER THE DAMAGES ALLEGED BY APPELLEE QUALIFY AS COMPENSATORY DAMAGES UNDER FLA. STAT. § 624.155(7)? ALTERNATIVELY, WHETHER THE TYPE OF EMOTIONAL DISTRESS ALLEGED BY APPELLEE QUALIFIES AS DAMAGE THAT IS A "REASONABLY FORESEEABLE RESULT" OF A VIOLATION OF FLA. STAT. § 624.155, AND THUS SERVES AS AN APPROPRIATE BASIS FOR COMPENSATORY DAMAGES UNDER THE STATUTE?

Burger, 115 F.3d at 882.

In order to address this question properly, it is necessary to review the evolution of the applicable Florida law. Historically, Florida has long permitted so-called third-party bad faith claims in which an insured sues his liability insurance company for bad faith in failing to settle a claim which ultimately results in a third-party judgment against him in excess of the policy limits. Auto Mut. Indem. Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938); American Fire & Cas. Co. v. Davis, 146 So.2d 615 (Fla. 1st DCA 1962).

In Butchikas v. Travelers Indemnity Co., 343 So.2d 816 (Fla.1976), this Court considered the propriety of a jury award for punitive damages and mental anguish in a third-party bad faith claim. Butchikas, the insured, had been involved in an accident with Mr. and Mrs. Tompkins. Butchikas' liability insurer, Travelers Indemnity Company, declined to settle the Tompkins' claim against Butchikas. The Tompkins ultimately obtained a judgment in excess of the limits of the Travelers policy. Butchikas then sued Travelers and obtained a verdict awarding him damages for (1) the liability to the Tompkins in excess of the policy limits, (2) mental anguish as a result of problems caused by Travelers, and (3) punitive damages. This Court upheld the award of damages for the excess liability. However, we reasoned that Travelers' conduct was not so egregious as to support a claim for punitive damages. We also rejected the claim for mental anguish, pointing out that the rule in Florida was that absent a physical injury, a plaintiff can recover damages for mental anguish only where it is shown that the defendant acted with such malice that punitive damages would be justified.

In contrast to third-party bad faith claims, Florida common law did not permit first-party claims in which an insured contends that his insurance company is acting in bad faith for refusing to pay for benefits under the policy. Baxter v. Royal Indem. Co., 285 So.2d 652 (Fla. 1st DCA 1973). As Judge Wigginton explained, unlike the fiduciary relationship existent in a third-party claim, the relationship between the parties in a dispute over the insurance contract is that of debtor and creditor. Id.

The prohibition against first-party bad faith claims was lifted in 1982 by the enactment of section 624.155, which reads in pertinent part:

(1) Any person may bring a civil action against an insurer when such person is damaged:

....

(b) By the commission of any of the following acts by the insurer:

1. Not attempting in good faith to settle claims when, under all the circumstances, it could and should have done so, had it acted fairly and honestly toward its insured and with due regard for her or his interests[.]

§ 624.155(1)(b)1., Fla. Stat. (1991). This is the section under which Burger brought his present action against Time Insurance Company.

This Court addressed the damages recoverable in first-party claims under section 624.155 in McLeod v. Continental Insurance Co., 591 So.2d 621 (Fla.1992). Relying upon section 624.155(1)(b)1, McLeod sued his uninsured motorist carrier for failing to settle within the limits of his policy. He sought to recover the excess of the verdict he obtained against the uninsured motorist over the payments received from the tort-feasor's insurance carrier and another uninsured motorist carrier. At the outset, we acknowledged that the statute now authorized first-party bad faith claims against insurance companies. However, we rejected McLeod's claim for recovery of the "excess judgment" because even though the amount of that judgment represented damages sustained by him, it was the tort-feasor rather than the insurance company that caused those damages. We held that the damages recoverable in a first-party bad faith action under the statute "may include, but are not limited to, interest, court costs, and reasonable attorney's fees incurred by the plaintiffs." Id. at 626. Of significance to the instant case, we went on to state in footnote 10:

Nothing in this decision affects the holding in Butchikas v. Travelers Indemnity Co., 343 So.2d 816, 819 (Fla.1976), which restricted the award of damages for mental anguish in bad faith insurer cases to instances in which the defendant acted with sufficient malice to support an award of punitive damages.

McLeod, 591 So.2d at 626 n. 10.

Time Insurance relies upon footnote 10 of McLeod for the proposition that we have already answered the certified question adversely to Burger's position. In response, Burger contends that McLeod is no longer controlling authority because its holding was overturned by the legislature through the enactment of section 627.727(10), Florida Statutes (1997). Burger also points out that section 624.155(7), which provides that the damages recoverable for violation of the statute "shall include those damages which are a reasonably foreseeable result of a specified violation of this section," places no limitation on the recovery of damages for emotional distress.

We do not agree that the enactment of section 627.727(10) diminished the effect of footnote 10 of the McLeod opinion. That legislation merely overturned the holding of McLeod by authorizing the recovery of the "excess judgment" in first-party bad faith actions against uninsured motorist insurance carriers. On the other hand, we must acknowledge that footnote 10 was clearly obiter dictum. The specific issue of whether damages for emotional distress can be recovered in first-party actions against health insurers under section 624.155(1)(b)...