Brookins v. Goodson

• Decision Date: 20 July 1994
• Docket Number: No. 93-0717,93-0717
• Citation: 640 So.2d 110
• Parties: 19 Fla. L. Weekly D1535 Daniel C. BROOKINS, as Personal Representative of the Estate of Connie Marie Brookins, deceased, Appellant, v. Homer GOODSON, as Personal Representative of the Estate of Michael Joseph Goodson, deceased, and State Farm Mutual Automobile Insurance Company, Appellees.
• Court: Florida District Court of Appeals

Page 110

640 So.2d 110

19 Fla. L. Weekly D1535

Daniel C. BROOKINS, as Personal Representative of the Estate of Connie Marie Brookins, deceased, Appellant, v. Homer GOODSON, as Personal Representative of the Estate of Michael Joseph Goodson, deceased, and State Farm Mutual Automobile Insurance Company, Appellees.

No. 93-0717.

District Court of Appeal of Florida Fourth District.

July 20, 1994.

Michael J. Doddo of Michael J. Doddo, P.A., Fort Lauderdale, for appellant.

James K. Clark of Clark, Sparkman, Robb & Nelson, Miami, for appellee-State Farm.

PARIENTE, Judge.

The trial court dismissed appellant's (insured's) first party bad faith action for lack of subject matter jurisdiction because the underlying litigation of the underinsured motorist claim was settled without a trial. Because we hold that the resolution of the underlying underinsured motorist claim by payment of the policy limits does not preclude the insured from pursuing a first party bad faith claim against his insurer, we reverse the dismissal of the complaint.

The claim in this case arose out of the wrongful death of the insured's minor daughter who was killed when she was a passenger in an underinsured vehicle. The tortfeasor had policy limits of $10,000 and the insured had uninsured/underinsured motorist benefits of $100,000. The death occurred on October 1, 1988 and the insurer was notified of the claim three months later. In March 1989, the insured made a demand for payment of the policy limits, but the insurer failed to acknowledge coverage or failed to make any offer of settlement. As a result, the insured filed a Civil Remedy Notice of Violation pursuant to section 624.155, Florida Statutes (Supp.1988), alleging the insurer's bad faith failure to settle for the policy limits. The insurer responded that it denied payment because the settlement demand was premature. Thereafter, the insured commenced litigation against the insurer, and in September 1989, the insurer tendered its policy limits.

The insured alleges he preserved his right to pursue the bad faith claim as a condition of accepting the underinsured motorist policy limits. He claims that appellee's (insurer's) dilatory conduct in paying the policy limits constitutes a basis for a first party bad faith claim under section 624.155(1)(b)(1), Florida Statutes (Supp.1988). ¹

An insurer acts in bad faith in violation of section 624.155(1)(b)(1) by:

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 his interests.

Although section 624.155 does not distinguish between first party and third party bad faith, first party bad faith is entirely a statutory creation. McLeod v. Continental Co., 591 So.2d 621 (Fla.1992).

The supreme court has recently held that to state a cause of action for first party bad faith there must be an allegation that there has been a determination of the insured's damages. Imhof v. Nationwide Mut. Ins. Co., 19 Fla.L.Weekly S257, 1994 WL 178132 (Fla. May 12, 1994). The court did not, however, require that the damages be determined by litigation, that there be an allegation of a specific amount of damages or that the damages be in excess of the policy limits. The court was not faced with the circumstance presented here where the policy limits are subsequently tendered by the insurer. The insured in Imhof received an award of damages through arbitration of an amount less than the policy limits. The amount or extent of damages was held not to be determinative of whether an insured could bring a first party bad faith claim; the purpose of the allegation concerning a determination of damages was to show that "Imhof had a valid claim." Id. at S257, 1994 WL at * 2.

We hold that the payment of the policy limits by the insurer here is the functional equivalent of an allegation that there has been a determination of the insured's damages. It satisfies the purpose for the allegation--to show that the insured had a valid claim.

The focus in first party bad faith actions is whether the insured's failure to promptly settle constitutes bad faith. Justice Harding noted the purpose of section 624.155:

Section 624.155 follows longstanding public policy and promotes quick resolution of insurance claims. In the instant case, the record indicates that Nationwide ignored Imhof's attempts to settle for about one year. The amount of the arbitration award shows that Imhof had a valid claim. Imhof thus had a legitimate interest in a speedy resolution of his claim. By failing to respond to Imhof, Nationwide flouted the very purposes of section 624.155.

Id.

The only way for an insurer to avoid an action being brought for statutory bad faith is set forth in section 624.155(2)(d), Florida Statutes (Supp.1988) which provides:

No action shall lie if, within 60 days after filing notice, the damages are paid or the circumstances giving rise to the violation are corrected.

It follows that an insurer cannot escape liability for a violation of section 624.155 by the simple expedient of a belated payment of the policy limits after the 60 day time period provided in section 624.155(2)(a) has expired. The belated payment by the insurer neither automatically proves nor disproves first party bad faith. The insured must still establish that the insurer's failure to pay the policy limits by the expiration of the 60 day window period constituted bad faith as defined by statute.

In requiring a determination of damages as a predicate to a first party bad faith cause of action, the Imhof court reaffirmed the principles of Blanchard v. State Farm Mut. Auto. Ins. Co., 575 So.2d 1289 (Fla.1991), which required resolution of the underlying claim for uninsured motorist benefits before a bad faith claim accrued. In Blanchard, the issue was whether the plaintiffs had "split their cause of action" by not asserting the bad faith claim in the original suit for contractual uninsured motorist benefits. In rejecting the notion advanced by the insurer that the two causes of action should be brought simultaneously, the court held that resolution of the underlying claim in favor of the insured was a necessary predicate to a bad faith claim:

If an uninsured motorist is not liable to the insured for damages arising from an accident, then the insurer has not acted in bad faith in refusing to settle the claim. Thus, an insured's underlying first-party action for insurance benefits against the insurer necessarily must be resolved favorably to the insured before the cause of action for bad faith in settlement negotiations can accrue. (Emphasis supplied.)

Id. at 1291. It was in this context that the court stated:

It follows that an insured's claim against an uninsured motorist carrier for failing to settle the claim in good faith does not accrue before the conclusion of the underlying litigation for the contractual uninsured motorist insurance benefits. Absent a determination of the existence of liability on the part of the uninsured tortfeasor and the extent of the plaintiff's damages, a cause of action cannot exist for a bad faith failure to settle.

Id.

Neither in Blanchard nor more recently in Imhof does the supreme court suggest that the required resolution of the insured's underlying claim must be by trial or arbitration. The bad faith statute imposes no requirement of a prior judgment as a condition precedent to a bad faith claim. Securing a judgment or an excess judgment is not directly related to the basis of an insurer's liability for first party bad faith. However, as noted in Blanchard, a resolution of some kind in favor of the insured is a prerequisite. There was a favorable resolution here.

Unlike statutory first party bad faith, third party common law bad faith consists of conduct by a liability insurer which exposes its insured to an excess judgment when the insurer could have and should have settled the claim against its insured within the policy limits. If the insurer effects a settlement with the injured plaintiff on behalf of its insured, which includes a release, a third party cause of action is eliminated. See Fidelity and Cas. Co. of New York v. Cope, 462 So.2d 459 (Fla.1985). The excess judgment is against the tortfeasor and thus the tortfeasor is in effect damaged as a result of the excess judgment in common law third party bad faith.

In a first party bad faith claim, the "insured is not injured by the excess judgment amount." McLeod, 591 So.2d at 624. First party actions consist of the insurer's wrongful refusal to settle a claim accruing directly to its own insured, such as a PIP claim or an uninsured/underinsured motorist claim. For this reason, the supreme court in McLeod would not permit an insured to recover the amount of the excess judgment as an element of damages in a first party bad faith case, but recognized the insured's right to recover other consequential damages resulting from the insurer's bad faith. These damages include interest, court costs and reasonable attorney's fees...