Camp v. St. Paul Fire and Marine Ins. Co., 91-3213

• Citation: 958 F.2d 340
• Decision Date: 16 April 1992
• Docket Number: No. 91-3213,91-3213
• Parties: Anna Rue CAMP and John E. Venn, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiffs-Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 340

958 F.2d 340

Anna Rue CAMP and John E. Venn, as Trustee of the Estate of Fariss D. Kimbell, Jr., M.D., Plaintiffs-Appellants, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant-Appellee.

No. 91-3213.

United States Court of Appeals, Eleventh Circuit.

April 16, 1992.

George W. Estess, Kerrigan, Estess, Rankin & McLeod, Pensacola, Fla., and Talbot D'Alemberte, and Adalber to Jordan, Steel, Hector & Davis, Miami, Fla., for plaintiffs-appellants.

Elmo R. Hoffman, J. Scott Murphy, Orlando, Fla., William James Reedy, G.H. Small, Jr., Small & White, Atlanta, Ga., and J. Dixon Bridgers, III, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Pensacola, Fla., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Florida; C. Roger Vinson, Judge.

Before KRAVITCH, ANDERSON and BIRCH, Circuit Judges.

BIRCH, Circuit Judge:

This diversity case involves the intersection of insurance bad faith law and bankruptcy law. The defendant, St. Paul Fire and Marine Insurance Company ("St. Paul"), is the insurer of Dr. Fariss Kimbell, a neurosurgeon who became bankrupt in late 1986. After the bankruptcy, Dr. Kimbell was found liable for medical malpractice in his treatment of plaintiff Anna Rue Camp. The jury returned a verdict of more than three million dollars, well in excess of Dr. Kimbell's $250,000 policy limits. After the verdict, Camp joined the trustee of Kimbell's bankruptcy estate, plaintiff John E. Venn, in suing St. Paul to recover the excess amount of the verdict. The basis of their lawsuit was St. Paul's alleged bad faith refusal to settle Camp's claim prior to the large judgment.

The United States District Court for the Northern District of Florida granted summary judgment to St. Paul. The court reasoned that because Dr. Kimbell's bankruptcy prior to the verdict prevented Dr. Kimbell's personal liability for any excess judgment, St. Paul's alleged bad faith did not harm its named insured. Therefore, the court concluded that St. Paul could not be sued for bad faith under Florida law. See Camp v. St. Paul Fire and Marine Ins. Co., 127 B.R. 879, 882-86 (N.D.Fla.1991).

We agree with the district court that the plaintiffs' lawsuit raises issues of first impression under Florida law. Id. at 884. We also believe that the resolution of these important questions of law will be determinative of their cause. Accordingly, we certify two questions to the Florida Supreme Court pursuant to Article V of the Florida Constitution. See Fla. Const. art. V, § 3(b)(6).

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT TO THE SUPREME COURT OF FLORIDA PURSUANT TO ARTICLE V, SECTION 3(b)(6) OF THE FLORIDA CONSTITUTION.

TO THE SUPREME COURT OF FLORIDA AND THE HONORABLE JUSTICES OF THAT COURT:

I. BACKGROUND

A. General Factual Background

The insurance policy issued by St. Paul's in favor of Dr. Kimbell covered the doctor for medical malpractice up to a limit of $250,000 per person injured. The policy also contained this language:

Once liability has been determined by judgement or by written agreement, the party making the claim may be able to recover under this policy, up to the limits of your coverage. But that party can't sue us directly or join us in a suit against the protected person until liability has been so determined. If the protected person or his or her estate goes bankrupt or becomes insolvent, we'll still be obligated under this policy.

While this policy was in force, Dr. Kimbell performed the procedures which resulted in Camp's injuries. Camp's lawyers threatened to sue Dr. Kimbell for medical malpractice. In July 1984, Dr. Kimbell notified St. Paul about Camp's claim.

St. Paul began the defense of Dr. Kimbell shortly thereafter. On December 10, 1984, Camp sued Dr. Kimbell for medical malpractice in Florida state court. Between the time that Camp's malpractice suit was filed at the end of 1984 and July of 1986, there were two important developments relevant to the present case. First, Dr. Kimbell's financial condition began deteriorating. He had large debts prior to Camp's lawsuit. In addition, the Camp lawsuit, as well as another medical malpractice suit, started to affect the doctor's ability to earn money. Specifically, an investigation of Dr. Kimbell, prompted by the two lawsuits, eventually led to the suspension of Dr. Kimbell's privileges at one of the hospitals where he practiced neurosurgery. That suspension led to fewer referrals, less income, and the concomitant financial instability.

Second, Camp twice offered to settle with St. Paul for Dr. Kimbell's policy limits of $250,000. The settlement requests were made on June 3 and November 5 of 1985. St. Paul rejected both settlement offers. At the time the second offer was rejected, St. Paul was at least aware of Dr. Kimbell's financial difficulties.

In July of 1986, Dr. Kimbell filed a Chapter 7 bankruptcy case in the United States Bankruptcy Court for the Northern District of Florida. Pursuant to the automatic stay of 11 U.S.C. § 362 (1988), Camp's state lawsuit was halted. While Dr. Kimbell's bankruptcy case was proceeding, Camp offered to settle with St. Paul for the policy limits for the third time. On September 19, 1986, St. Paul again rejected settlement. One month later, on November 24, 1986, Dr. Kimbell was granted a discharge order in bankruptcy court, shielding him from any personal liability for claims pending against him as of the date of his bankruptcy filing. During all of this time, St. Paul was researching the question of whether or not Dr. Kimbell's bankruptcy would impact the company's exposure to a potential bad faith suit by Mrs. Camp.

On April 13, 1987, the bankruptcy court modified the stay in Dr. Kimbell's case so as to allow Camp to liquidate her claim against the doctor. However, the bankruptcy court specifically ruled that any judgment obtained by Camp in her state court lawsuit would not be enforceable against Dr. Kimbell personally. In May 1987, St. Paul rejected a fourth offer by Camp to settle for the $250,000 policy limits. Although after this fourth rejection St. Paul offered to settle for amounts lower than the policy limits, the parties could not agree and Camp's case proceeded to trial. Mrs. Camp won a verdict of more than three million dollars on June 25, 1987. This judgment was affirmed on appeal. Kimbell v. Camp, 532 So.2d 1061 (Fla.Dist.Ct.App.1988) (table).

Subsequent to the verdict, the bankruptcy court in December of 1988 entered an order allowing the excess of the judgment as a general, non-priority unsecured claim against Dr. Kimbell's bankruptcy estate. Once again, the bankruptcy court stated that Camp's judgment could not be enforced against Dr. Kimbell personally. In the Florida state trial court, Dr. Kimbell moved for an order canceling and discharging the three million dollar judgment pursuant to Fla.Stat. ch. 55.145 (1991). On January 11, 1989, the lower state court discharged the judgment against Dr. Kimbell in accordance with this provision of Florida law.

B. Procedural Background of the Bad Faith Lawsuit

On February 3, 1989, the bad faith lawsuit filed by Camp and Venn at the end of 1988--the lawsuit that is the subject of this appeal--was removed to the United States District Court for the Northern District of Florida. After discovery, the parties briefed and argued cross-motions for summary judgment. St. Paul's motion for summary judgment relied heavily upon Fidelity and Casualty Co. v. Cope, 462 So.2d 459 (Fla.1985), and Clement v. Prudential Property & Casualty Ins. Co., 790 F.2d 1545 (11th Cir.1986) (interpreting Florida law).

According to St. Paul, Cope and Clement make it clear that the essence of an insurance bad faith claim in Florida is the named insured's liability for an excess judgment following the insurance company's bad faith failure to settle. The reason that some extant exposure to liability in the insured is the sine qua non of a Florida bad faith claim, St. Paul contended, is that the insurer's duty runs to the insured, not to any injured third party. In Cope and Clement, the named insured was not responsible for an excess verdict, because either the injured third party executed a release of his claims against the named insured (Cope ) or agreed not to execute on the assets of the named insured (Clement ). Both cases held that the injured party could not sue the insurance company for bad faith under Florida law, because the named insured had not been harmed by an enforceable excess judgment. See Cope, 462 So.2d at 459, 461; Clement, 790 F.2d at 1547-48. Evidently, an insurance company's bad faith liability is extinguished once an insured is released from liability for a judgment in favor of an injured third party.

St. Paul contended that Cope and Clement required dismissal of the plaintiffs' bad faith claim in this case. Because Dr. Kimbell received his discharge in bankruptcy well before Camp's state court lawsuit proceeded to trial, the doctor was never liable for the adverse judgment in favor of Mrs. Camp. Moreover, the judgment rendered against Dr. Kimbell was subsequently canceled and discharged by the Florida circuit court, a discharge which had "the same effect as a satisfaction of judgment." Fla.Stat. ch. 55.145 (1991). Accordingly, St. Paul argued that under Cope and Clement, it could not be sued by Mrs. Camp or Mr. Venn for bad faith because its named insured was never liable for an excess verdict.

In their motion for summary judgment, the plaintiffs first relied upon the language of Dr....