Farinas v. FLORIDA FARM BUREAU GENERAL INS.

• Court: Florida District Court of Appeals
• Writing for the Court: PER CURIAM.
• Citation: Farinas v. FLORIDA FARM BUREAU GENERAL INS., 850 So.2d 555 (Fla. App. 2003)
• Decision Date: 23 April 2003
• Docket Number: No. 4D02-96., No. 4D02-11
• Parties: Maribel FARINAS and Margarita Farinas, Susan Walker, individually, and as representative of the Estate of Margaux Schehr, Rochelle Slosberg, individually, Irving Slosberg, individually, and as representative of the Estate of Dori Slosberg, Emily Slosberg, individually, and Ligia Gallego, individually, and as representative of the Estate of Carolina Gil, Appellants, v. FLORIDA FARM BUREAU GENERAL INSURANCE COMPANY, Nicholas Frank Copertino and Nicholas T. Copertino, Appellees.

850 So.2d 555

Maribel FARINAS and Margarita Farinas, Susan Walker, individually, and as representative of the Estate of Margaux Schehr, Rochelle Slosberg, individually, Irving Slosberg, individually, and as representative of the Estate of Dori Slosberg, Emily Slosberg, individually, and Ligia Gallego, individually, and as representative of the Estate of Carolina Gil, Appellants, v. FLORIDA FARM BUREAU GENERAL INSURANCE COMPANY, Nicholas Frank Copertino and Nicholas T. Copertino, Appellees.

Nos. 4D02-11, 4D02-96.

District Court of Appeal of Florida, Fourth District.

April 23, 2003.

Order Denying Rehearing and Certifying Question July 9, 2003.

Gary E. Sherman of the Law Offices of Gary E. Sherman, P.A., Fort Lauderdale, for appellants Maribel Farinas and Margarita Farinas.

Marjorie Gadarian Graham of Marjorie Gadarian Graham, P.A., Palm Beach Gardens and Brian J. Glick of Glick Law Offices, Boca Raton, for appellants Susan Walker, Estate of Margaux Schehr, Rochelle Slosberg, Irving Slosberg, Estate of Dori Slosberg, Emily Slosberg, Ligia Gallego and Estate of Carolina Gil.

Louis K. Rosenbloum of Louis K. Rosenbloum, P.A., Pensacola, for Amicus Curiae The Academy of Florida Trial Lawyers.

Jane Kreusler-Walsh of Jane Kreusler-Walsh, P.A., West Palm Beach, J. Michael Burman of Burman, Critton, Luttier & Coleman, P.A., West Palm Beach, Greg M. Gaebe of Gaebe, Murphy, Mullen & Antonelli, Coral Gables, and Donald H. Partington of Clark, Partington, Hart, et. al., Pensacola, for appellee Florida Farm Bureau General Insurance Company.

Sylvia H. Walbolt, and F. Townsend Hawkes of Carlton Fields, P.A., Tallahassee, and Alfred J. Saikali of Carlton Fields, P.A., Miami, for Amicus Curiae Florida Defense Lawyers Association and American International Companies.

PER CURIAM.

This consolidated appeal arises from litigation regarding a February 23, 1996 car accident. Nicholas Copertino lost control of his car and crossed a median, hitting an oncoming car. This tragedy resulted in the unfortunate deaths of five teenagers and severe injuries to another seven, including Copertino and a 14-year-old girl rendered a quadriplegic. Copertino's liability for those resulting injuries was not in question.

Copertino was covered by his father's Florida Farm Bureau General Insurance Company ("Farm Bureau") policy with bodily injury limits of $100,000 per claim and $300,000 per accident. Consequently, with the five death claims and seven significant personal injury claims, the policy limits were plainly inadequate.

Farm Bureau settled for the limits with Lisa Boccia, the driver of the other car, and the Rashidian and Cordes estates, two of the death claims, by March 8, 1996. After exhausting the limits, Farm Bureau filed a declaratory judgment action in July 1996 against the insured, the Copertinos, to determine whether it had any further duty to defend the Copertinos after having paid the policy limits. Appellants intervened and ultimately all filed third-party bad faith actions alleging that Farm Bureau entered into settlements without due regard for the interests of the insured.

Farm Bureau moved for summary judgment against all appellants, and the Farinases moved for cross-summary judgment. The trial court granted summary judgment to Farm Bureau as to all the appellants and denied the Farinases' summary judgment. Now, all appellants seek review of the summary judgment granted to Farm Bureau, and the Farinases also seek review of the denial of their summary judgment.

We are confronted with three questions: 1) what was Farm Bureau's good-faith duty to the insured, the Copertinos, in a multiple claimant situation, 2) did Farm Bureau meet that duty and 3) are there any remaining issues of fact for a jury to determine.

A brief background of insurance good-faith law is necessary to provide context for our analysis. Good-faith law in Florida evolved as liability insurance policies began to replace traditional indemnity policies.

Under liability policies, however, insurance companies took on the obligation of defending the insured, which, in turn, made insureds dependent on the acts of the insurers; insurers had the power to settle and foreclose an insured's exposure or to refuse to settle and leave the insured exposed to liability in excess of policy limits. This placed insurers in a fiduciary relationship with their insureds similar to that which exists between an attorney and client. Consequently, courts began to recognize that insurers "owed a duty to their insureds to refrain from acting solely on the basis of their own interests in settlement." This duty became known as the "exercise of good faith" or the "avoidance of bad faith." Under this new standard of culpability, if an insurer was found to have acted in bad faith, the insurer would have to pay the entire judgment entered against the insured in favor of the injured third party, including any amount in excess of the insured's policy limits. This type of claim became known as a third-party bad faith action.

State Farm Mut. Ins. Co. v. Laforet, 658 So.2d 55, 57-58 (Fla.1995).

Even though the bad faith occurs between the insurer and its named insured, Florida law allows the injured third party insured to bring an action directly against the insurer. See Thompson v. Commercial Union Ins. Co., 250 So.2d 259 (Fla.1971). The rationale behind this procedure is that the injured party, as the beneficiary of any successful bad faith claim, is the real party in interest as a sort of judgment creditor. See id. at 264.

In 1982, the Florida legislature enacted section 624.155, which created a statutory bad faith claim and extended the claim to the first-party insureds. See § 624.155, Fla. Stat. (Supp.1982). A 1990 amendment noted the existence of common-law bad faith and added that a person may obtain a judgment under either the common law remedy or the statutory remedy, but not both. See § 624.155, Fla. Stat. (Supp. 1990). The third district has determined that this statutory obligation did not change the common law obligation of good faith or the measure of damages. See Hollar v. Int'l Bankers Ins. Co., 572 So.2d 937, 939 (Fla. 3d DCA 1990). All the appellants in the present case, except the Farinases, grounded their claims on both the common law and statutory standards. The Florida Supreme Court announced the case law standard for insurer good faith in Boston Old Colony Insurance Co. v. Gutierrez, 386 So.2d 783 (Fla.1980). The general standard of care that the insurer must exercise when handling claims against the insured is "the same degree of care and diligence as a person of ordinary care and prudence should exercise in the management of his own business." Id. at 785 (citation omitted). Because the insured has relinquished control of all decisions regarding claims to the insurer, the insurer's standard of care requires the insurer to act "in good faith and with due regard for the interests of the insured." Id. (citation omitted). The extent of this good faith duty is explicitly defined in detail by the court:

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 the same. 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.

Id. (citations omitted). The determination of whether an insurer has satisfied this standard is one for the jury. Id. (citation omitted).

This standard of care is further reflected in the applicable Florida Statute, which states that an insured has a cause of action for bad faith, when the insurer did not attempt "in good faith to settle claims when, under all circumstances, it could and should have done so, had it acted fairly and honestly towards its insured and with due regard for her or his interests." § 624.155(b)(1), Fla. Stat. (2002).

Both prior and subsequent to the Florida Supreme Court's decision in Boston Old Colony, courts have recognized attendant duties of good faith under Florida law. The United States Court of Appeals for the Fifth Circuit, when interpreting Florida bad faith law in a diversity action, concluded that the jury is to decide whether an insurer has given inappropriate primary regard to his own interests over those of the insured in making a settlement determination. Liberty Mut. Ins. Co. v. Davis, 412 F.2d 475, 480 (5th Cir.1969). Additionally, when there are multiple claimants and minimal policy limits, "it follows that, insofar as the insureds' interest governs, the fund should not be exhausted without an attempt to settle as many claims as possible." Id. at 481. More recently, the Florida Supreme Court augmented its decision in Boston Old Colony, by specifically addressing a multiple claimant situation involving a "deems expedient" clause, much like the present case. Shuster v. S. Broward Hosp. Dist. Physicians' Prof'l Liab. Ins. Trust, 591 So.2d 174 (Fla.1992).

For example, when there are multiple parties to a suit, we do not believe a "deems expedient" clause will protect an insurer who, in bad faith, indiscriminately settles with one or more of the parties for the full policy limits, thus exposing the insured to an excess judgment from the remaining parties. Clearly, the intent of the parties would not have been to allow the insurer to escape its primary duty to defend and indemnify the insured merely by paying out the full sum of the policy limits in bad faith.

Id. at 177 (citations omitted). Although Shuster approves of an insurance company settling claims within policy limits, there is nothing in Shuster that states the insurer is not subject to a good faith duty to the insured. Shuster states that "an...