Boston Old Colony Ins. Co. v. Gutierrez

Decision Date10 April 1980
Docket NumberNo. 54769,54769
PartiesBOSTON OLD COLONY INSURANCE COMPANY, Petitioner, v. Raul GUTIERREZ, Respondent.
CourtFlorida Supreme Court

James E. Tribble of Blackwell, Walker, Gray, Powers, Flick & Hoehl, Miami, for petitioner.

Murray Sams, Jr. and Francis W. Sams of Sams, Gerstein & Ward, Miami, for respondent.

PER CURIAM.

We have for review the decision of the District Court of Appeal, Third District, in Boston Old Colony Ins. Co. v. Gutierrez, 360 So.2d 464 (Fla.3d DCA 1978). That court has certified the following question as passing upon a question of great public interest: "Does the law as enunciated in Thompson v. Commercial Union Ins. Co. of New York, 250 So.2d 259 (Fla.1971), authorize a bad faith action against an insurance company when that company has refused to settle a claim at the express direction of its own insured who obtains a settlement of his claim and the insurance company thereafter offers to settle for its policy limits before trial?" Although we hold that Thompson may, in some circumstances, authorize such a suit, we find the evidence in this case legally insufficient to show bad faith on the part of Boston Old Colony Insurance Company.

Brown and Gutierrez were involved in a head-on collision. Both men claimed that they had been travelling east and that the other's car, headed west, crossed the center line of the highway and caused the collision. The officer who investigated at the scene concluded that Brown was responsible. Gutierrez brought an action against Brown for his injuries which action was defended by Brown's liability insurance carrier, Boston Old Colony. Brown's liability policy covered him up to a limit of $10,000.

In view of Brown's version of the facts and some corroborating evidence, Boston Old Colony retained an accident reconstruction expert. The expert examined the accident site and the wrecked vehicles and concluded that Brown's account was correct, that Gutierrez was west-bound and on the wrong side of the road at the point of impact.

Despite this favorable expert opinion evidence, Boston Old Colony's adjustor knew there was a question of liability. He knew also that Gutierrez's injuries were extensive and that there was a possibility of an excess judgment. He warned Brown of these matters and suggested an offer to settle for the policy limits. Brown was opposed to a settlement. He had counterclaimed against Gutierrez for his own injuries and apparently did not want to make the admission of fault implied by an offer to settle. So Boston Old Colony asked for, and Brown executed, a "hold harmless" agreement, in which Brown assumed responsibility for any excess judgment.

Before the trial, with the claim and the counterclaim pending, Gutierrez offered to take the policy limits in settlement of his claim against Brown. Boston Old Colony responded by denying liability. Subsequently, Brown reached a settlement of his counterclaim against Gutierrez and his insurer. With the counterclaim no longer pending, Boston Old Colony offered Gutierrez the policy limits in settlement. By this time, however, Gutierrez preferred to proceed to trial. The trial resulted in a judgment for Gutierrez against Brown for $1,400,000. Gutierrez then brought the present action against Boston Old Colony, alleging bad faith on the part of the insurance company because of its failure to settle the claim for policy limits when it had the opportunity. Gutierrez prevailed and obtained a judgment against Boston Old Colony for $1,400,000.

On appeal, Boston Old Colony argued that its motion for a directed verdict should have been granted since the evidence showed that Brown at all times contested liability and had evidence to support his position; that he requested that his insurer not settle the suit since he was pursuing his counterclaim against Gutierrez; and that after settlement of the counterclaim, Boston Old Colony offered the policy limits before trial. The district court affirmed, holding that there was sufficient evidence upon which a jury could base a verdict of bad faith failure to settle.

Boston Old Colony contends that Gutierrez, the injured tort plaintiff, should not be allowed to bring this action directly against it for its alleged bad faith in failing to settle his claim against Brown, its insured. We previously rejected a similar contention in Thompson v. Commercial Union Ins. Co. of New York. The fact that such an action may be brought does not mean, however, that Gutierrez is entitled to an excess judgment. He must first establish by legally sufficient evidence that the insurance company acted in bad faith.

This brings us to Boston Old Colony's second contention that there was no evidence sufficient to support the jury's finding of liability for bad faith in not settling the claim. An insurer, in handling the defense of claims against its insured, has 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 own business. Auto Mutual Indemnity Co. v. Shaw, 134 Fla. 815, 184 So. 852 (1938). For when the insured has surrendered to the insurer all control over the handling of the claim, including all decisions with regard to litigation and settlement, then the insurer must assume a duty to exercise such control and make such decisions in good faith and with due regard for the interests of the insured. Liberty Mutual Ins. Co. v. Davis, 412 F.2d 475 (5th Cir. 1969). This good faith duty obligates the insurer to advise the insured of settlement opportunities, to advise as to the probable outcome of the litigation, to warn of the possibility of an excess judgment, and to advise the insured of any steps he might take to avoid same. Ging v. American Liberty Ins. Co., 423 F.2d 115 (5th Cir. 1970). The insurer must investigate the facts, give fair consideration to a settlement offer that is not unreasonable under the facts, and settle, if possible, where a reasonably prudent person, faced with the prospect of paying the total recovery, would do so. Government Employees Ins. Co. v. Grounds, 311 So.2d 164 (Fla. 1st DCA 1975), cert. discharged, 332 So.2d 13 (Fla.1976); Government Employees Ins. Co. v. Campbell, 288 So.2d 513 (Fla. 1st DCA 1973), quashed, 306 So.2d 525 (Fla.1974); Baxter v. Royal Indemnity Co., 285 So.2d 652 (Fla....

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