Macola v. Government Employees Ins. Co.

• Decision Date: 26 October 2006
• Docket Number: No. SC05-1021.,SC05-1021.
• Citation: 953 So.2d 451
• Parties: Michelle MACOLA, et al., Appellants, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellee.
• Court: Florida Supreme Court

953 So.2d 451

Michelle MACOLA, et al., Appellants, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellee.

No. SC05-1021.

Supreme Court of Florida.

October 26, 2006.

Rehearing Denied March 27, 2007.

Shea T. Moxon, Angela E. Rodante, and Dale M. Swope of Swope and Rodante, P.A., Tampa, FL, and Roy D. Wasson of Wasson and Associates, Miami, FL, Paul T. Cardillo, Tampa, FL, and Lefferts L. Mabie, III, Tampa, FL, for Appellants.

B. Richard Young and Stephen D. Gill of Young, Bill, Fugett and Roumbos, P.A., Pensacola, FL, for Appellee.

Philip M. Burlington and Bard D. Rockenbach of Burlington and Rockenbach, P.A., West Palm Beach, FL, on behalf of the Academy of Florida Trial Lawyers; Alyssa M. Campbell of Williams, Montgomery and John Ltd., Chicago, IL, on behalf of Property Casualty Insurers Association of America; Tracy R. Gunn of Fowler, White, Boggs, Banker, P.A., Tampa, FL, on behalf of Florida Defense Lawyers' Association; Paul L. Nettleton of Carlton Fields, P.A., Miami, FL, on behalf of State Farm Mutual Automobile Insurance Company; and Ronald L. Kammer and Andrew E. Grigsby of Hinshaw and Culbertson, LLP, Miami, FL, Laura A. Foggan, John C. Yang and Anthony E. Orr of Wiley, Rein and Fielding, LLP, Washington, D.C., on behalf of Complex Insurance Claims Litigation Association, as Amici Curiae.

PARIENTE, J.

We have for review two questions of Florida law certified by the United States Court of Appeals for the Eleventh Circuit.¹ Because both appellants have filed only common law third-party bad faith causes of action, we rephrase the certified questions into a single question:

DOES THE TENDERING OF THE POLICY LIMITS BY AN INSURER IN RESPONSE TO THE FILING OF A CIVIL REMEDY NOTICE UNDER SECTION 624.155, FLORIDA STATUTES (2005), BY THE INSURED AFTER THE INITIATION OF A LAWSUIT AGAINST THE INSURED BUT BEFORE ENTRY OF AN EXCESS JUDGMENT PRECLUDE A COMMON LAW BAD FAITH CAUSE OF ACTION BY THE INSURED AND INJURED THIRD PARTIES?

For the reasons that follow, we answer the rephrased certified question in the negative.²

FACTS AND PROCEDURAL HISTORY

This case arises out of a common law cause of action for third-party bad faith brought by Michelle Macola, the injured third party, and Inge Quigley, the insured, (jointly referred to as the appellants) against Government Employees Insurance Company (GEICO). On May 18, 1999, Inge's husband, Frances Quigley, negligently caused an automobile accident that resulted in personal injuries and property damage to Macola.³ At the time of the accident, Quigley was insured by GEICO under an insurance policy that contained a bodily injury liability limit of $300,000 and a property damage liability limit of $100,000. On May 19, 1999, Inge Quigley notified GEICO of the accident and informed the insurer that both her husband and Macola had suffered serious injuries in the accident. GEICO assigned an insurance adjuster to handle the claim.

On October 19, 1999, Macola's attorney, Michael Roe, sent GEICO a settlement offer seeking payment of the bodily injury liability limit under the insurance policy, and property damage in the amount of $1,377.81. This offer did not result in a settlement agreement. Roe filed suit on behalf of Macola against Quigley in Florida state court, asserting a claim for personal injuries but not for property damage. GEICO assigned counsel to defend Quigley in this suit. On July 11, 2000, after suit had been filed but before entry of an excess judgment, Paul Cardillo, Quigley's personal counsel, filed a statutory Civil Remedy Notice of Insurer Violation ("civil remedy notice") with the Department of Insurance against GEICO. Quigley alleged a statutory violation by GEICO's failure to settle with Macola for the policy limits when the insurer had an opportunity to do so.

On August 25, 2000, within sixty days after the civil remedy notice was filed, GEICO sent Cardillo a letter that stated in part:

Enclosed is a check in the amount of $300,000.00 which represents the entirety of the Quigley's policy limits, and a policy release which we request our insured sign and return to us. By the tender of our policy limits, we have cured the Civil Remedies Complaint. Mr. and Mrs. Quigley are now free to use the $300,000.00 in order to settle all claims brought against them as a result of this accident.

Cardillo acknowledged receipt of the check and the release but stated that his acknowledgment did not constitute acceptance. Cardillo did not deposit or cash the check. Macola's civil suit against Quigley proceeded to trial and on July 9, 2002, the trial court entered a final judgment against Quigley in the amount of $1,541,941.61 for Macola's personal injuries. The trial court also awarded Macola attorney's fees in the amount of $212,500.

Thereafter, Macola filed a common law third-party bad faith suit against GEICO in Florida state court, alleging that GEICO breached its duty of good faith to Quigley by failing to settle with Macola when the insurer had the opportunity to do so. Macola further alleged that GEICO failed to timely inform Quigley of Macola's settlement offer, and failed to timely advise Quigley of the likelihood of a judgment exceeding the policy limits and what actions could be taken to avoid an excess judgment. GEICO removed the case to federal court and filed an answer denying liability and raising eight affirmative defenses.

Quigley then filed a separate common law third-party bad faith action against GEICO in federal court, asserting the same allegations as Macola. Because both causes of action were based on the same underlying facts, the district court consolidated the two cases. As its fifth affirmative defense to both complaints, GEICO asserted that it had cured any statutory third-party bad faith by tendering the bodily injury liability limit within sixty days of the filing of the civil remedy notice. The appellants filed motions for partial summary judgment in which they alleged that GEICO's cure argument was legally insufficient. GEICO filed a consolidated motion for summary judgment against the appellants in which it contended that the cure theory was legally controlling. The district court denied the appellants' motion for partial summary judgment and granted GEICO's motion for summary judgment based on the insurer's theory that the tender of the $300,000 cured any statutory third-party bad faith.⁴ The district court also concluded that under the election of remedies doctrine, Quigley's filing of the civil remedy notice estopped the appellants' common law third-party bad faith action, and, in the alternative, that GEICO's tender of the policy limits constituted a full satisfaction of the common law claim.

On appeal, the appellants argued two issues: (1) GEICO's tender of the policy limits did not constitute an adequate cure under the circumstances of this case, and (2) even if GEICO's tender did cure the statutory third-party bad faith claim, it did not bar a common law third-party bad faith action. The Eleventh Circuit determined that "because the statutory and common law bad-faith claims . . . depend upon substantially similar factual allegations, they appear to be consistent under Florida law." Macola v. Gov't Employees Ins. Co., 410 F.3d 1359, 1364 (11th Cir. 2005). The Eleventh Circuit therefore concluded that the district court erred in holding that Quigley's filing of the civil remedy notice constituted an election of remedies that estopped Quigley from pursuing a common law third-party bad faith action. See id.⁵

The Eleventh Circuit also addressed both issues raised by the appellants but certified them to this Court for resolution.

ANALYSIS

The rephrased certified question involves a pure question of law that arises from undisputed facts and is therefore subject to de novo review. See Global Travel Mktg., Inc. v. Shea, 908 So.2d 392, 396 (Fla.2005).

A. Common Law Third-Party Bad Faith Claim

When handling claims against its insured, an insurer "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." Boston Old Colony Ins. Co. v. Gutierrez, 386 So.2d 783, 785 (Fla. 1980). More specifically, the Court explained in Gutierrez that

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. 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. 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. at 785 (citations omitted); see also Allstate Indem. Co. v. Ruiz, 899 So.2d 1121, 1125 (Fla.2005) ("Under liability policies . . . insurance companies took on the obligation of defending the insured, which, in turn, made insureds dependent on the acts of the insurers . . . . This placed insurers in a fiduciary relationship with their insureds . . . [and] 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.'") (first alteration in original) (quoting State Farm Mut. Auto. Ins. Co. v. Laforet, 658 So.2d 55 (Fla.1995)); Berges v. Infinity Ins. Co., 896 So.2d 665, 672 (Fla.2004) ("It has long been the law of this State that an insurer owes a duty of good faith to its insured. See Gutierrez, 386 So.2d at 785. Thus, `[t]he insurer must investigate the facts, give fair consideration to a...