Cotton States Mut. Ins. Co. v. Trevethan

• Decision Date: 27 June 1980
• Docket Number: No. NN-364,NN-364
• Parties: COTTON STATES MUTUAL INSURANCE COMPANY, Appellant, v. Jeanne H. TREVETHAN, Appellee. /T1-83.
• Court: Florida District Court of Appeals

Page 724

390 So.2d 724

COTTON STATES MUTUAL INSURANCE COMPANY, Appellant, v. Jeanne H. TREVETHAN, Appellee.

No. NN-364/T1-83.

District Court of Appeal of Florida, Fifth District.

June 27, 1980.

Rehearing Denied Aug. 28, 1980.

Monroe E. McDonald of Sanders, McEwan, Mims & McDonald, Orlando, for appellant.

Anthony I. Provitola, DeLand, for appellee.

ORFINGER, Judge.

We review an "excess judgment" entered against appellant following a jury trial.

Jeanne Trevethan was seriously injured when a motorcycle she was driving collided with an automobile driven by Diane Fowler and owned by her husband, Philip Fowler. She brought suit against the Fowlers and joined appellant as their insurer. A trial of that action resulted in a verdict for Trevethan for $525,000. Judgment was entered thereon against appellant for its policy limits of $100,000, and against the Fowlers for the remaining $425,000. That judgment was appealed and was affirmed, 358 So.2d 121 (Fla. 1st DCA), cert. den. 364 So.2d 883 (1978), prior to the creation of this court.

Appellee then commenced these proceedings against appellant insurer, ¹ contending that the insurer had acted in bad faith in refusing to settle the original claim for the policy limits despite appellee's frequent offers to settle her claim for such limits. A jury trial resulted in a verdict against the insurer for $425,000, and the insurer appeals the judgment entered on such verdict. Appellee cross appeals the refusal of the trial court to submit to the jury appellee's claim for punitive damages.

Appellant first contends that there was no evidence of bad faith on its part to sustain the jury verdict and that it was entitled to a directed verdict. The evidence reveals that the collision occurred on a curve, and that Trevethan and Fowler each contended that the other was on the wrong side of the road. Investigation disclosed two eye witnesses who placed the collision on Trevethan's side of the road. The insurance company soon became aware of the extensive and serious injury to the 21 year old claimant: the loss of her left leg above the knee, infection of the wound site by chronic osteomyelitis which might necessitate additional surgery, the need to fit a prosthetic device and the attendant rehabilitation that accompanies an artificial limb, the assertion by claimant that her marriage had terminated because her husband couldn't cope with the loss of her leg, her need for psychiatric assistance to help her cope with the emotional trauma, and the attendant medical expenses.

The home office advised the branch claims office that ". . . this looks like a bad one . . ." and wondered how they would get around the testimony of the two eye witnesses. At that time the memorandum also suggested that the reserve be raised to at least $25,000. After suit was filed, appellant's branch claims manager wrote to the Fowlers acknowledging receipt of the suit papers and advised them that the company had retained attorneys to defend the action at the company's expense (not the attorneys appearing in this case for appellant). He also advised them that because the damage request was drawn in such language as would make it possible for a verdict to be rendered in excess of their policy limits, they might wish to confer with their ". . . own personal attorney . . ." at their own expense, to advise them in this matter. The letter concluded with this statement: "At the present time, we believe that the claim against you does not exceed the limits of protection afforded by your policy."

More than a year following the accident and after extensive discovery, claimant's attorney wrote to the insurer's trial counsel and outlined his evaluation of the case, taking the position that the Fowlers' liability was clear and that the extensive injuries would produce a verdict for Trevethan in excess of $300,000. Nevertheless, because the policy limits had now been disclosed, he offered to settle the claim for the policy limits of $100,000. The reply was a sarcastic denunciation of the claim and of the claimant's attorney, flatly rejecting any settlement, indicating that liability was clearly 100% on the claimant and refusing to even give the claim nuisance value consideration. Copies of both letters were transmitted to and received by the insurer. Although the settlement offer had a time limit, it was renewed again, and the day following the commencement of the trial in the personal injury case the appellant's trial counsel advised appellant of claimant's continuing demand to settle for the policy limits.

Appellant's branch claims manager testified that he never corresponded with the insureds about the settlement demand, that he did not know if anyone had ever advised the Fowlers of the claimant's evaluation of the claim but that he did not, that he never authorized his trial counsel to attempt to negotiate a settlement of the claim nor did he attempt to negotiate such settlement, that the reserve of $25,000 was set on the consideration of the injuries, the damages and the liability. He stated that he never instructed his trial counsel to advise the insureds of the ". . . likelihood that an award could be made against them that was in an amount greater than $100,000," nor did he instruct anyone else to do so. The insurance policy introduced in evidence includes the provision that the company will defend a suit arising under the policy and may make such settlement of any claim or suit as it deems expedient.

This is a summary of the evidence at the close of plaintiff's case, and it was sufficient to withstand the motion for directed verdict. Many cases discuss the liability of an insurer for a verdict in excess of policy limits, and a good summary of those cases is found in Boston Old Colony Insurance Company v. Gutierrez, 386 So.2d 783 (Fla. 1980), where the Supreme Court thus reviewed the existing case law:

. . . 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. 1st DCA 1973), cert. discharged, 317 So.2d 725 (Fla.1975). Because the duty of good faith involves diligence and care in the investigation and evaluation of the claim against the insured,...